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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The discussion below focuses on the factors affecting our consolidated results of operations for the year ended

December 31, 2020, 2019 and 2018 and financial condition at December 31, 2020 and 2019 and, where appropriate, factors that may affect our future financial performance, unless stated otherwise. This discussion should be read in conjunction with the consolidated financial statements, notes to the consolidated financial statements and selected consolidated financial data.

ACRONYMS AND ABBREVIATIONS

The acronyms and abbreviations identified below are used throughout Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The following is provided to aid the reader and provide a reference page when reviewing this section of the Form 10-K:

AFS: Available-for-sale FRBB: Federal Reserve Bank of Boston

ACL: Allowance for credit losses GDP: Gross domestic product

ASC: Accounting Standards Codification HTM: Held-to-maturity

ASU: Accounting Standards Update IRS: Internal Revenue Service

BOLI: Bank-owned life insurance LIBOR: London Interbank Offered Rate

CDs: Certificate of deposits MSPP: Management Stock Purchase Plan

CECL: Current Expected Credit Losses N/A: Not applicable

Company: Camden National Corporation N.M.: Not meaningful

DCRP: Defined Contribution Retirement Plan OREO: Other real estate owned

EPS: Earnings per share OTTI: Other-than-temporary impairment

FASB: Financial Accounting Standards Board PD: Probability of default

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Table of Contents

FRB: Federal Reserve System Board of Governors U.S.: United States of America

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 return on average tangible equity; the efficiency ratio; net interest income (fully-taxable equivalent); pre-tax, pre-provision earnings; ACL on loans to total loans, excluding SBA PPP loans; adjusted yield on interest-earning assets and adjusted net interest margin (fully-taxable equivalent); tangible book value per share; tangible common equity ratio; and core deposits and average core deposits. We utilize these non-GAAP financial measures for purposes of measuring our performance against our peer group and other financial institutions and analyzing our internal performance. We also believe these non-GAAP financial measures help investors better understand the Company’s operating performance and trends and allow for better performance comparisons to other banks. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions.

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

For The Year EndedDecember 31,

Add: amortization of intangible assets, net of tax(1) 539 557 573

Less: average goodwill and other intangible assets (97,880) (98,570) (99,287)

(1) Assumed a 21% income tax rate.

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

For The Year EndedDecember 31,

Less: legal settlement (1,200) — —

Add (Less): net loss (gain) on sale of securities — 105 (275)

Ratio of non-interest expense to total revenues(2) 53.52 % 56.15 % 57.98 %

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

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

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

For The Year EndedDecember 31,

(1) Reported on a tax-equivalent basis using a 21% income 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 income tax expense and provision for credit losses. 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 COVID-19 on a company's provision for credit losses, as well as the differences in accounting methodology for the allowance for credit losses currently across financial institutions as the CARES Act provided financial institutions the option to delay adoption of ASU No. 2016-13, Financial Instruments - Credit Losses(Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), as amended, commonly referred to as "CECL." as further described in "– Critical Accounting Policies" and Note 1 of the consolidated financial statements.

For The Year EndedDecember 31,

Add: provision for credit losses, as presented 12,418 2,861 847

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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.

For The Year EndedDecember 31,

Yield on interest-earning assets, as presented 3.56 % 4.15 % 3.97 %

Less: effect of PPP loans on yield on interest-earning assets (0.06) % — % — %

Adjusted yield on interest-earning assets 3.59 % 4.16 % 3.97 %

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.

For The Year EndedDecember 31,

Adjusted net interest margin (fully-taxable equivalent) 3.10 % 3.16 % 3.16 %

Allowance for Credit Losses ("ACL") on Loans to Total Loans, excluding SBA PPP Loans. ACL on loans to total loans, excluding SBA PPP loans, is calculated as (i) ACL on loans, adjusted for the ACL allocated to SBA PPP loans, to (ii) total loans, adjusted to exclude SBA PPP loans. SBA PPP loans were provided to qualifying businesses as part of the federal government stimulus package issued in response to the COVID-19 pandemic. These loans are fully-guaranteed by the SBA, and may even be forgiven in full or in part, and, thus, present little to no credit risk to the Company. By excluding the impact of the SBA PPP loans, the ratio attempts to be more comparable with prior periods and demonstrates the level of loan loss reserves established on the Company's loans originated as part of its core operations and credit underwriting standards.

(In thousands) December 31,

Less: ACL on loans allocated to SBA PPP loans (69) —

Less: SBA PPP loans (135,095) —

ACL on loans to total loans 1.18 % 0.81 %

ACL on loans to total loans, excluding SBA PPP loans 1.23 % 0.81 %

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

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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 our industry to assess whether or not a company is highly leveraged.

(In thousands, except number of shares and per share data) December 31,

Tangible Book Value Per Share:

Less: goodwill and other intangible assets (97,540) (98,222)

Tangible book value per share $ 28.96 $ 24.77

Tangible Common Equity Ratio:

Less: goodwill and other intangibles (97,540) (98,222)

Tangible common equity ratio 8.99 % 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.

December 31,

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

For The Year EndedDecember 31,

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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 our current estimates, as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near-term change, including (i) the ACL, including the ACL on loans, off-balance sheet credit exposures and investments; (ii) accounting for acquisitions and the subsequent review of goodwill and intangible assets generated in an acquisition for impairment; (iii) income taxes; and (iv) accounting for defined benefit and postretirement plans.

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

Allowance for Credit Losses ("ACL"). Effective January 1, 2020, but applied to reporting periods on or after October 1, 2020, the Company adopted the new accounting standard for credit losses, ASU No. 2016-13, Financial Instruments - Credit Losses(Topic 326):Measurement of Credit Losses on Financial Instruments, as amended ("ASU 2016-13). This new accounting standard, commonly referred to as "CECL," significantly changed our methodology for accounting for reserves on loans, unfunded off-balance sheet credit exposures, including certain unfunded loan commitments and standby guarantees, as well as introduced the consideration for establishing an allowance on HTM debt investments. ASU 2016-13 replaced the "incurred loss" methodology used to establish an allowance on loans and off-balance sheet credit exposures, with an "expected loss" approach. Under CECL, the ACL at each reporting period serves as our best estimate of projected credit losses over the contractual life of certain assets, adjusted for expected prepayments, given an expectation of economic conditions and forecasts as of the valuation date.

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

CECL may create more volatility in our ACL, particularly our ACL on loans and ACL on off-balance sheet credit exposures. Under CECL, our ACL may increase or decrease period to period based on many factors, including, but not limited to: (i) macroeconomic forecasts and conditions; (ii) forecast period and reversion speed; (iii) prepayment speed assumption; (iv) loan portfolio volumes and changes in mix; (v) credit quality; and (vi) various qualitative factors outlined in ASU 2016-13.

ASU 2016-13 also changed our methodology and accounting for credit losses within our investment portfolio designated as AFS. To the extent the fair value of a security designated as AFS is less than its amortized cost and we either (i) intend to sell the security or (ii) it is more-likely-than-not we will be required to sell the security before recovery of its amortized cost basis, then the investment is permanently impaired and the amortized cost basis is written down to fair value and a corresponding impairment charge is recorded within the consolidated statements of income. If neither of the above is true, but the fair value of the investment is below its amortized cost basis at the reporting date, then an allowance is established on the AFS investment for the portion of the impairment that is due to credit reasons (e.g. credit rating downgrades, past due receivables, and/or other macro- or micro-adverse trends). The allowance established on an AFS investment due to credit losses is limited to the amount the fair value of the investment is below its amortized cost basis as of the reporting date. If the fair value of the investment is below its amortized cost basis for non-credit-related reasons (e.g. interest rate environment), then the impairment continues to be recognized within shareholders' equity through AOCI, as it did prior to the adoption of ASU 2016-13.

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

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The significant key assumptions used with the ACL calculation at December 31, 2020 using the CECL methodology, included:

•Macroeconomic factors (loss drivers): We monitor and assess Maine unemployment, changes in Maine GDP, changes in National GDP, changes in Maine’s Retail Sales and changes in Maine's Housing Price Index at least annually to determine if these macroeconomic factors continue to be the most predictive indicator of losses within our loan portfolio. Factors we consider in determining the ACL may change from time to time.

•Forecast Period and Reversion speed: ASU 2016-13 requires a company to use a reasonable and supportable forecast period in developing the ACL, which represents the time period that management believes it can reasonably forecast the identified loss drivers. Generally, the forecast period management believes to be reasonable and supportable is set annually and validated through an assessment of economic leading indicators. In periods of greater volatility and uncertainty, such as that seen across the global markets and global economies throughout 2020 due to the COVID-19 pandemic and political matters, we are likely to use a shorter forecast period, whereas when markets, economies, interest rate environment, political matters, and other factors are considered to be more stable and certain, we are likely to use a longer forecast period. Also, in times of greater uncertainty, we may consider a range of possible forecasts and evaluate the probability of each scenario. Generally, we expect our forecast period to range from one to three years. Once the reasonable and supportable forecast period is determined, ASU 2016-13 requires a company to revert its loss expectations to the long-run historical mean for the remainder of the contract life of the asset, adjusted for prepayments. In determining the length of time over which the reversion will take place (i.e. "reversion speed"), we consider such factors such as, but not limited to, historical loan loss experience over previous economic cycles, as well as where we believe we are within the current economic cycle.

•Prepayment speeds: Prepayment speeds are determined for each loan segment utilizing our own historical loan data, as well as consideration of current environmental factors. The prepayment speed assumption is utilized with the discounted cash flow model (i.e. the CECL model) to forecast expected cash flows over the contractual life of the loan, adjusted for expected prepayments. A higher prepayment speed assumption will drive a lower ACL, and vice versa.

•Qualitative factors: As within previous accounting guidance used for the "incurred loss" model, ASU 2016-13 requires companies to consider various qualitative factors that may impact expected credit losses. We continue to consider qualitative factors in determining and arriving at our ACL each reporting period.

As of December 31, 2020, the recorded ACL was $37.9 million and represented our best estimate. However, 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 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. The ACL is reviewed and approved on a quarterly basis by the Company's Audit Committee, and later reviewed and ratified by the Bank's Board of Directors.

Refer to Note 1 of the consolidated financial statements for further details on the Company's policies and accounting elections made.

ACL on Off-Balance Sheet Credit Exposures. We consider the ACL on off-balance sheet credit exposures to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses on expected future loan fundings of, primarily, unfunded loan commitments for those that are not unconditionally cancellable by the Company. The expected credit loss factors for each loan segment determined using the ACL on loans methodology described above, as well as within Note 1 of the consolidated financial statements, is used to calculate the ACL on off-balance sheet credit exposures for each applicable loan segment, and, thus, are subject to the same level of estimation risk and volatility previously described. In addition, one other key assumption is used to derive the ACL on off-balance sheet credit exposures and that is the expected funding rate. The expected funding rate is derived using historical loan-level data for credit line usage, and is applied to total off-balance sheet credit exposures at each reporting date, excluding any that are unconditionally cancellable by the Company, to determine the expected funding amount. As unfunded loan commitments are funded, the allowance migrates from that provided for off-balance sheet credit exposures to the ACL on loans. If the expected funding rate or any other key assumption used is not reasonable, then this could have an adverse impact on the total ACL upon funding.

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As of December 31, 2020, the recorded ACL on off-balance sheet credit exposures of $2.6 million is presented within accrued interest and other liabilities on the consolidated statements of condition. Increases (decreases) to the allowance are presented within provision (credit) for credit losses on the consolidated statements of income. The allowance at December 31, 2020, represented our best estimate, however, we may adjust our assumptions to account for differences between expected and actual losses from period to period. A future change to our assumptions will likely alter the level of allowance required and may have a material impact on future results of operations and financial condition. The ACL on off-balance sheet credit exposures is approved on a quarterly basis by the Company's Audit Committee, and later reviewed and ratified by the Bank's Board of Directors.

ACL for HTM Debt Securities. The estimate of expected credit losses on our HTM investment portfolio is based on the expected cash flows of each individual CUSIP over its contractual life and considers historical credit loss information, current conditions and reasonable and supportable forecasts. Given the rarity of municipal defaults and losses, we utilize external third party loss forecast models as the sole source of municipal default and loss rates. Investment cash flows are modeled over a reasonable and supportable forecast period and then revert to the long-term average economic conditions on a straight line basis (similar to that of our ACL on loans policy). Management may exercise discretion to make adjustments based on various environmental factors.

At December 31, 2020, the Company held three securities in its HTM portfolio with an amortized cost basis of $1.3 million and no allowance was carried given the immaterial nature of such, noting the investments are all investment-grade municipal securities and two of the three securities also carried credit enhancements. Should our HTM portfolio grow in size, change its mix and/or experience credit deterioration, an allowance may be recorded at that time.

ACL on AFS Debt Securities. We consider the allowance for credit losses on AFS debt securities to be a critical accounting policy given the size of the investment portfolio and level of estimation used to determine the allowance, as appropriate. As of December 31, 2020, the Company's AFS portfolio is entirely made up of assets that are fair valued using level 2 valuation techniques in accordance with ASC 820, Fair Value Measurement. We engage a third party pricing agency to assist with the valuation of such debt securities and the assets are carried at fair value at each reporting period. An allowance is recorded on an AFS debt security to the extent an event has occurred that suggests receipt of full contractual payments are at risk. When such an event has been identified, a discounted cash flow model is used to determine the expected losses due to credit risk, and an allowance is recorded to reduce the carrying value of the debt security by the calculated expected loss amount, limited to the amount by which the fair value of the debt security is below its amortized cost basis.

As of December 31, 2020, the Company had not identified indications of credit risk and did not carry any allowance for credit losses on its AFS portfolio, nor did it record any permanent impairments during 2020.

Purchase Price Allocation and Impairment of Goodwill and Identifiable Intangible Assets. We record all acquired assets and liabilities at fair value, which is an estimate determined by the use of internal valuation techniques. We also may engage external valuation services to assist with the valuation of material assets and liabilities acquired, including, but not limited to, loans, core deposit intangibles and/or other intangible assets, real estate and time deposits. As part of purchase accounting, we typically acquire goodwill and other intangible assets as part of the purchase price. These assets are subject to ongoing periodic impairment tests under differing accounting models. We did not acquire any other company or assets during 2020 or 2019.

Goodwill impairment evaluations are required to be performed at least annually, but may be required more frequently if certain conditions indicate a potential impairment may exist. Our policy is to perform the goodwill impairment analysis annually as of November 30th, or more frequently as warranted. The goodwill impairment evaluation is required to be performed at the reporting unit level. Effective January 1, 2020, we no longer determine the implied fair value of goodwill to measure impairment of goodwill. Instead, goodwill is now impaired by the amount the book value of the reporting unit exceeds its fair value, and an impairment charge is recorded for the lesser of this amount or the amount to write-down goodwill to zero.

We may use a qualitative analysis to evaluate goodwill for impairment when it is believed that it is not more-likely-than-not that the fair value of the reporting unit is below its book value, or if a quantitative analysis was recently used to estimate the fair value of the reporting unit, and there are not any indications of events that would suggest such conclusions for impairment have changed. In the second quarter of 2020, we determined that the turmoil in the global markets and economy spurred by COVID-19 and the sustained depression of the Company's share price was a triggering event, in accordance with ASC 350-20, Goodwill, and a quantitative analysis was performed using various valuation techniques, including a discounted cash flow model and market valuation models. With each valuation technique used, a variety of key inputs and assumptions were used to estimate fair value, including, but not limited to, internal forecasts of future earnings and cash flows, discount rates, and control premiums. Through our analysis, we concluded that goodwill was not impaired as of May 31, 2020. We later performed our

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annual goodwill impairment assessment as of November 30, 2020, using a qualitative analysis and concluded that it was not more-likely-than-not that goodwill was impaired. The Company did not recognize any impairment of goodwill in 2020 or 2019.

The Company's core deposit intangible assets have a finite life and are amortized over their estimated useful lives. Core deposit intangible assets are subject to impairment tests if events or circumstances indicate a possible inability to realize the carrying amount. Core deposit intangible assets are measured for impairment utilizing a cost recovery model. We did not identify any events or circumstances that occurred in 2020 or 2019 that would indicate that our core deposit intangible assets may be impaired and should be evaluated for such.

Income Taxes. We account for income taxes by deferring income taxes based on the estimated future tax effects of differences between the book and tax bases of assets and liabilities, considering the provisions of enacted tax laws. These differences result in deferred tax assets and liabilities, which are included in the consolidated statements of condition. We must also assess the likelihood that any deferred tax assets will be recovered from future taxable income and establish a valuation allowance for those assets determined not likely to be recoverable. Judgment is required in determining the amount and timing of recognition of the resulting deferred tax assets and liabilities, including projections of future taxable income. Although we have determined a valuation allowance is not required for our deferred tax assets, there is no guarantee that these assets will be realized.

As of December 31, 2020, our federal and state income tax returns for 2019, 2018 and 2017 were open to audit by federal and various state authorities. If, as a result of an audit, we were to be assessed interest and penalties, the amounts would be recorded through other non-interest expense on the consolidated statements of income.

Defined Benefit and Postretirement Plans. We use a December 31stmeasurement date to determine the expenses for the Company's defined benefit and postretirement plans and related financial disclosure information. Postretirement plan expense is sensitive to changes in the number of eligible employees, changes in the discount rate, mortality rate, and other expected

rates, such as medical cost trends rates and salary scale assumptions.

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EXECUTIVE OVERVIEW

2020 Overview. The challenges and uncertainty stemming from the COVID-19 pandemic began in mid-March 2020, continued throughout the remainder of the year, and continue to affect global, national and local economies and markets through the date of this Annual Report on Form 10-K. We continue to be cautiously optimistic while understanding markets and economies are still fragile, and that these times are truly unprecedented. The Company, with the full support of its Board of Directors, continues to use its best efforts to respond to the pandemic and to support its employees and customers where possible, while also continuing to strengthen the Company's financial position and resiliency through our actions.

Operating Results. Net income for the year ended 2020 was $59.5 million, representing an increase of $2.3 million, or 4%, over 2019. Pre-tax, pre-provision earnings (non-GAAP) for the year ended 2020 was $86.8 million, representing an increase of $12.4 million, or 17%, over 2019.

The key drivers of the increase in net income between periods include:

•An increase in net interest income of $8.7 million, or 7%, driven by fees of $7.8 million earned on SBA PPP loans in 2020. During 2020, we originated over 3,000 SBA PPP loans totaling $244.8 million, to qualifying small businesses impacted by COVID-19.

•An increase in provision for credit losses of $9.6 million due to the COVID-19 pandemic and its inherent risk and uncertainty on credit quality, particularly with the adoption of the new CECL accounting standard and its requirement to consider expected losses over the expected life of our loan portfolio.

•An increase in mortgage banking income of $10.7 million, or 136%, driven by record residential mortgage production of $1.0 billion for 2020, an increase of 79% over 2019, largely driven by the historically low interest rate environment through 2020.

•An increase in non-interest expense of $4.7 million, or 5%, of which $1.2 million of the increase was driven by a legal settlement. Our ratio of non-interest expense to total revenue2 was 53.52% for 2020, compared to 56.15% for 2019, or on a non-GAAP-basis our efficiency ratio was 52.56% and 55.77% for the same periods, respectively.

Other key financial metrics between years included:

•Diluted EPS for the year ended 2020 was $3.95, an increase of $0.26, or 7%, over 2019.

•Return on average assets for the year ended 2020 was 1.23%, compared to 1.30% for 2019.

•Return on average equity for the year ended 2020 was 11.81%, compared to 12.44% for 2019.

•Return on average tangible equity (non-GAAP) for the year ended 2020 was 14.79%, compared to 15.99% for 2019.

Asset Quality. As of December 31, 2020, the Company's asset quality was strong and stable, however, we recognize that conditions remain volatile and uncertain due to COVID-19, and its impact on our markets and borrowers may be masked by the various governmental stimulus programs and short-term temporary debt relief programs provided to borrowers.

•Non-performing assets were 0.22% of total assets at December 31, 2020, compared to 0.25% at December 31, 2019.

•Past due loans were 0.10% of total loans at December 31, 2020, compared to 0.17% at December 31, 2019.

•Net charge-offs for the year ended 2020 were 0.02% of average loans, compared to 0.08% for 2019.

COVID-19 Short-Term Loan Deferment Program. In March 2020, we began offering short-term temporary debt relief to business and retail customers impacted by the COVID-19 pandemic for periods up to 180 days, including full and partial principal and/or interest payment relief. This program was created in accordance with the terms of the CARES Act and bank regulatory guidance, and, as such, none of these participating loans qualified as TDRs. At December 31, 2020, loans operating under short-term temporary debt relief programs totaled $26.5 million, or 0.8% of total loans at December 31, 2020, compared to $546.7 million, or 16.4% of total loans at June 30, 2020.

ACL on Loans. At December 31, 2020, the ACL on loans was 1.18% of total loans, and 3.6 times non-performing loans, compared to 0.81% of total loans and 2.3 times non-performing loans, respectively, at December 31, 2019.

CECL. In the fourth quarter of 2020, the Company adopted the CECL accounting methodology for the allowance for credit losses, effective as of January 1, 2020, after initially delaying the adoption as permitted under the terms of the CARES Act.

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

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Upon the adoption of CECL, a net cumulative-effect adjustment was recorded that decreased retained earnings by $2.8 million. This adjustment was the net result of: (1) a $233,000 increase in the ACL on loans, (2) a $3.3 million increase in other liabilities related to the ACL on off-balance sheet credit exposures, and (3) a $769,000 increase in deferred tax assets. Interim period financial statements for 2020 were not restated for CECL adoption, but rather continue to be reported under the incurred loss methodology.

Capital Position. At December 31, 2020, the Company's capital position remained well in excess of regulatory requirements, including a Total risk-based capital ratio of 15.40% and a Tier 1 leverage ratio of 9.13%. Additionally, at December 31, 2020, the Company's common equity ratio was 10.81% and tangible common equity ratio (non-GAAP) was 8.99%. In March 2021, the Company announced its intent to call its $15.0 million of subordinated debt at par, plus accrued and unpaid interest, on April 16, 2021. At December 31, 2020, the $15.0 million of subordinated debt was 37 basis points of the Total risk-based capital ratio. Upon exercise of the call, the Company's capital position will continue to remain well in excess of regulatory capital requirements.

The company declared cash dividends of $1.32 for the year ended 2020, which resulted in a dividend payout ratio for the year of 33% and a dividend yield of 3.69% based on the Company's closing share price of $35.78, as reported by NASDAQ.

In mid-March 2020, we temporarily suspended the Company's share repurchase program in response to the COVID-19 pandemic as we looked to preserve capital until the impact of the COVID-19 pandemic on the Company's current and future financial position was better understood. In September 2020, we lifted the suspension and began to actively repurchase shares of the Company's common stock in the market. For the year ended 2020, we repurchased 274,354 shares, or approximately 2% of our common shares outstanding. We will continue to evaluate the use of the share repurchase program as the impact of and our response to the COVID-19 pandemic continues to develop.

In January 2021, the Company's existing share repurchase program expired and was terminated. In February 2021, a new share repurchase program was approved by the Company's Board of Directors, for the purchase of up to 750,000 shares of the Company's common stock over the next year.

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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 net loan fees, origination costs and fair value marks on loans and/or time deposits created in purchase accounting, less the interest paid on interest-bearing deposits and borrowings. Net interest income, which is our largest source of revenue, accounted for 73% and 75% of total revenues for the year ended 2020 and 2019, respectively. Net interest income is affected by factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies and competitive conditions, loan prepayment speeds, the volume and mix of interest-earning assets and interest-bearing liabilities, and the level of non-performing assets. Net interest margin is calculated as net interest income, on a fully-taxable equivalent basis, as a percentage of average interest-earning assets. Our net interest margin on a fully-taxable equivalent basis for 2020 and 2019 was 3.09% and 3.15%, respectively.

Net Interest Income. Net interest income on a fully-taxable equivalent basis for the year ended 2020 was $137.5 million, an increase of $8.8 million, or 7%, over 2019. The increase was driven by a $20.0 million decrease in interest expense between periods that offset the decrease in interest income on a fully-taxable equivalent basis of $11.2 million between periods. The decrease in interest expense between periods was the result of a 56 basis point decrease in our average cost of funds during 2020 driven by the lower interest rate environment and the change in funding mix as average deposits grew to 87% of total funding for the year ended 2020, compared to 83% for 2019. The decrease in interest income on a fully-taxable equivalent basis between periods was the result of a 59 basis point decrease in our yield on average interest-earning assets during 2020, again, driven by the lower interest rate environment, but was partially offset by average loan growth of $181.2 million, or 6%, which was predominantly due to SBA PPP loan originations of $244.8 million during the year that contributed $146.9 million to average loan growth and $7.8 million in interest income for the year ended 2020.

Net Interest Margin. Net interest margin on a fully-taxable equivalent basis decreased 6 basis points over the year to 3.09% for the year ended 2020. The Company's yield on average interest-earning assets compressed 59 basis points over the year to 3.56% for the year ended 2020, while its cost of funds decreased 56 basis points over the year to 0.49% for the year ended 2020. 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, we took actions throughout 2020 to reduce deposit costs to help mitigate asset yield pressures.

•SBA PPP loans originated during 2020 in response to COVID-19 provided a 6 basis point lift to our year ended 2020 average interest-earning asset yield and a 7 basis point lift to net interest margin on a fully-taxable equivalent basis for the same period.

•Deposits grew $467.5 million, or 13%, and average deposits grew $432.9 million, or 13%, during 2020 driven by government stimulus provided to retail and business customers in response to the COVID-19 pandemic. Deposit growth occurred within core deposits (non-GAAP), highlighted by an increase in balances of $539.0 million, or 19%, over the year to $3.4 billion at December 31, 2020, and an increase in average core deposits (non-GAAP) of 18% during 2020. Over the same period, average loans grew $181.2 million and average investments grew $71.4 million, or 8%. 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 fully-taxable equivalent basis. For the year ended 2020, excess cash/liquidity reduced the Company's average interest-earning asset yield 9 basis points and net interest margin 8 basis points.

The Company's adjusted net interest margin on a fully-taxable equivalent basis (non-GAAP) for the year ended 2020 was 3.10%, compared to 3.16% for 2019.

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

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Average Balance, Interest and Yield/Rate Analysis

For The Year Ended December 31,

ASSETS

Interest-earning assets:

Loans(2):

LIABILITIES & SHAREHOLDERS’ EQUITY

Deposits:

Borrowings:

Less: fully-taxable equivalent adjustment (1,155) (1,029) (1,022)

Net interest rate spread (fully-taxable equivalent) 3.07 % 3.10 % 3.12 %

Net interest margin (fully-taxable equivalent) 3.09 % 3.15 % 3.16 %

(1) Reported on a 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.

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

(In thousands) Volume Rate Volume Rate

Interest-earning assets:

Interest-bearing liabilities:

Net interest income included the following for the periods indicated:

Income Statement Location For The Year EndedDecember 31,

Loan fees (cost)(1) Interest income $ 5,648 $ (923) $ (317)

Recoveries on previously charged-off acquired loans Interest income 258 216 348

(1) For the year ended 2020, the Company recognized $6.2 million of fees associated with SBA PPP loan originations. As of December 31, 2020, there were $2.2 million of SBA PPP loan origination fees yet to be recognized.

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Provision for Credit Losses

Effective January 1, 2020, but applied to reporting periods on or after October 1, 2020, the Company adopted ASU 2016-13, commonly referred to as "CECL," to account for the ACL. CECL requires the measurement of expected lifetime credit losses for financial assets measured at amortized cost, including loans and HTM debt investments, as well as certain off-balance sheet credit exposures. CECL requires that the ACL be calculated based on current expected credit losses over the remaining expected life of the financial asset and also considers expected changes in macroeconomic conditions. For reporting periods prior to January 1, 2020, the provision for credit losses was based on the incurred loss model, which relied on management's periodic assessment of the adequacy of the ACL.

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

For the Year EndedDecember 31, Change from2020 to 2019

(ASU 2016-13) (Incurred Loss) (Incurred Loss)

Provision for loan losses. The increase in 2020 compared to 2019 was driven by an increase in reserve level between periods in response to the COVID-19 pandemic and the adverse impact it had on the Company's macroeconomic and qualitative factors within its calculation of the ACL on loans. Net charge-offs for the year ended 2020 totaled $754,000, or 0.02% of average loans, compared to $2.4 million, or 0.08% of average loans for 2019.

Provision for credit losses on off-balance credit exposures. Upon adoption of CECL, the Company's ACL on off-balance sheet credit exposures increased from $21,000 to $3.3 million as we now consider expected credit losses on those loan commitments and certain other guarantees that we anticipate will be funded. At December 31, 2020, the ACL on off-balance sheet credit exposures decreased to $2.6 million as our expected loan commitment fundings decreased, driven by a decrease in total loan commitments and a reduced expected funding rate based on our own historical funding experience. This was partially offset by an increase in our expected credit loss factor between periods driven by the COVID-19 pandemic.

Non-Interest Income

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

For the Year EndedDecember 31, Change from2020 to 2019

Net (loss) gain on sale of securities — (105) 275 105 (100) %

Non-interest income as a percentage of total revenues(1) 27 % 25 % 24 %

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

Mortgage banking income, net is generated through the sale of residential mortgage loans to secondary market investors and also includes income recognized upon the sale of a residential mortgages in which we maintain the servicing rights creating a mortgage servicing asset, net of related amortization of the capitalized mortgage servicing asset. Our current practice has been

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to sell the servicing rights for residential mortgages originated, except for certain third party relationships that require the Company to service the loan.

The increase in mortgage banking income, net for 2020 over 2019 was driven by the Company setting a new milestone in 2020, reaching $1.0 billion in residential mortgage originations. The increase in originations was largely due to the historically low interest rate environment as benchmark interest rates responded to the COVID-19 pandemic. In 2020, we sold $625.8 million of residential mortgage loans, representing an increase of 113% over 2019 and drove an increase in income between periods of $9.3 million. The increase in originations also led to the creation of elevated servicing assets driving an increase in servicing fee income between periods of $1.4 million.

Debit card income represents theinterchange fees earned from debit card transactions of our business and consumer checking account customers, and the annual incentive bonus received from our network provider. The increase for 2020 over 2019 was driven by an increase in customer spend volume of 11% as our average customer spend rate increased as consumer spending habits changed, likely due to COVID-19 and government stimulus, and was able to offset the decrease in the number of customer transactions. Also, for the year ended 2020, the Company received an annual incentive bonus of $555,000, compared to $579,000 for 2019.

Service charges on deposit accounts represents the fees earned from providing various services to deposit customers, including non-sufficient funds fees, normal fees for servicing deposit accounts, and cash management fees for business customers. The decrease in fees earned for 2020 compared to 2019 was largely driven by lower non-sufficient funds fees of $1.6 million, which was primarily driven by elevated deposit balances across our customers from government stimulus issued in response to the COVID-19 pandemic.

Income from fiduciary services represents the fees earned for investment advisory and trust services provided by Camden National Wealth Management. The fees earned are primarily a percentage of our clients' assets under management. Assets under management were $957.0 million and $1.0 billion as of December 31, 2020 and 2019, respectively.

Brokerage and insurance commissions represent the fees earned for brokerage services, investment advisory and insurance services provided by the Bank, doing business as Camden Financial Consultants. The increase for 2020 over 2019 was driven by fees for brokerage and advisory services.

Bank-owned life insurance represents the change in cash surrender value of the Company's various BOLI policies in place for certain current and former officers of the Company and Bank. The change in cash surrender value reflects the performance of the underlying investments of the policies. The increase in income for 2020 compared to 2019 was due to the change in cash surrender value of our BOLI policies.

Customer loan swap fees represents fees earned from the counterparty upon execution of a back-to-back commercial loan swap with our customers. The decrease in customer loan swap fees for 2020 compared to 2019 reflects a decrease in commercial real estate loan volumes between periods as the COVID-19 pandemic disrupted lending activities in 2020 and our appetite changed for back-to-back loan swaps given the historically low interest rate environment. Refer to "—Contractual Obligations and Off-Balance Sheet Commitments" and Note 12 of the consolidated financial statements for further discussion of our back-to-back commercial loan swap program.

Net (loss) gain on sale of securities represents the realized (loss) gain upon sale of our debt investments. In 2020, we did not execute any debt investment sales or execute any restructure strategies, particularly in light of the historically low interest rate environment. Whereas, in 2019, we executed various debt investment portfolio restructure strategies to improve our investment yield.

Other Income includes third party merchant and credit card commissions, other miscellaneous fees and net gains on equity securities. In 2019, we recognized a $928,000 unrealized gain on another bank stock. In 2020, the bank stock was redeemed and a realized gain of $38,000 was recognized. The Company no longer holds any equity securities as of December 31, 2020.

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Non-Interest Expense

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

For The Year EndedDecember 31, Change from2020 to 2019

Amortization of core deposit intangible assets 682 705 725 (23) (3) %

Ratio of non-interest expense to total revenues 53.52 % 56.15 % 57.98 %

Salaries and employee benefits includes employee wages, commissions, incentives, equity compensation, employer-related taxes, insurance benefits, and other certain employee-related costs, net of direct employee-related costs incurred for loan originations. The increase in 2020 over 2019 was driven by: (i) an increase in wages and related taxes of 5%, (ii) increased health insurance costs of 3%, and (iii) an increase in bonuses and incentives of $1.3 million, based on annual performance to budget.

Furniture, equipment and data processing includes depreciation expense of capitalized furniture, equipment and data-related costs, and ongoing system and other data processing costs, including outsourced solutions. The increase in 2020 over 2019 was driven by our continued investment in technology and data processing, which included transitioning our items' processing to an outsourced solution during the year, as well as an increase in online banking costs of $125,000 between periods as the pace of customers migrating to electronic banking has accelerated in response to the COVID-19 pandemic.

Net occupancy costs include building and property costs associated with the operation of our branches, loan production offices and service centers, including, but not limited to, rent, depreciation, maintenance and related taxes, net of rental income earned from the lease of office space. The increase in 2020 over 2019 was driven by an increase in rent and related-expenses of $495,000 and an increase in cleaning costs of $331,000 due to the COVID-19 pandemic, partially offset by lower utility costs of $289,000 as many of our employees worked remotely through much of 2020 due to the COVID-19 pandemic.

Consulting and professional fees include third party consulting services and other professional fees, such as audit and tax services, legal services, and Company and Bank director fees.

Debit card expense is the cost incurred for the generation of debit card income, including third party switch network provider fees and related data transmission costs, and plastic card costs for the generation of debit cards for checking account customers. Debit card expenses increased 4% in 2020 compared to 2019, while debit card income increased 7% over this period. Debit card expenses increased at a slower rate than debit card income between periods as the increase in income was driven by a higher average customer spend rate per transaction. Many of the associated costs associated with a debit card expense are fixed per unit.

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

OREO and collection costs, net include the costs associated with OREO, collection and foreclosure efforts for the Company's loans. The Company's asset quality trends were very strong throughout 2020, including at December 31, 2020, however should our asset quality metrics begin to deteriorate, the associated costs with OREO, collection and foreclosure efforts may increase by a significant amount.

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Amortization of core deposit intangible assets represents the amortization expense on core deposit intangible assets.

Other expenses include employee-related costs, such as certain SERP and other postretirement benefits expenses; hiring, training, education, meeting and business travel costs; donations and marketing costs; postage, freight and courier costs; and other expenses.

Income Tax Expense

Income tax expense for the year ended 2020 and 2019 was $14.9 million and $14.4 million, respectively, which resulted in an effective income tax rate of 20.0% for the year ended 2020 and 20.1% for 2019.

Our effective income tax rate for the year ended 2020 of 20.0% was lower than our marginal tax rate of 22.2%, which includes our 21.0% federal income tax rate and 1.2% state income tax rate, net of federal tax benefit, primarily due to non-taxable interest income from municipal bonds and certain qualifying loans, non-taxable BOLI, and tax credits received on qualifying investments.

At December 31, 2020 and 2019, we had $44.4 million and $48.2 million, respectively, of acquired federal net operating losses. Due to Internal Revenue Code Section 382(g) limitations, our use of the acquired federal net operating losses is limited to $3.9 million annually. These acquired federal net operating losses will expire between 2030 and 2034, and we expect to fully utilize them prior to expiration, as we have a history of generating taxable income well in excess of this usage limitation.

We continuously monitor and assess the need for a valuation allowance on our deferred tax assets. At December 31, 2020 and 2019, we determined that no valuation allowance was necessary.

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

2019 Operating Results as Compared to 2018 Operating Results

The Company's net income for the year ended 2019 was $57.2 million, an increase of $4.1 million, or 8%, over 2018. Over the same period, diluted EPS increased $0.30, or 9%, to $3.69 per share for the year ended 2019. The Company's year ended 2019 operating results compared to 2018 are summarized as follows:

Net Interest Income and Net Interest Margin. Net interest income on a fully-taxable equivalent basis for the year ended 2019 was $128.7 million, an increase of $7.2 million, or 6%, over 2018. The increase was driven by average loan growth of $223.3 million, or 8%, but was partially offset by a decline in the net interest margin on a fully-taxable equivalent basis of 1 basis point to 3.15% for the year ended 2019.

The interest rate environment in 2019 was the tale of two halves. Interest rate momentum in 2018 carried forward into the first half of 2019, highlighted by an average federal funds effective rate of 2.40% and 10-year U.S. Treasury rate of 2.48%. In the second half of 2019, the federal funds rate was cut three times for a total of 75 basis points – by the end of 2019, the federal funds effective rate was 1.55% – and the 10-year U.S. Treasury rate averaged 1.79%.

Provision for Credit Losses. The provision for credit losses for the year ended 2019 was $2.9 million, an increase of $2.0 million compared to 2018. In 2018, we saw favorable resolution of a significant commercial credit relationship that resulted in a large recovery. The ratio of net charge-offs to average loans for the year ended 2018 was 0.01%, compared to 0.08% for 2019.

Non-Interest Income. Non-interest income for the year ended 2019 was $42.1 million, and increased $3.9 million, or 10%, over 2018. The net increase was driven by:

•An increase in mortgage banking income of $1.9 million, or 33%, primarily driven by an increase in residential mortgage loan sales of 32%, in part due to higher refinance activity as interest rates fell in the second half of 2019.

•An increase in other income of $880,000, or 27%, primarily driven by an increase in unrealized gains recognized on our investment in another bank's stock of $928,000 upon the announcement of its intent to merge with another bank in 2020.

•An increase in debit card income of $634,000, or 7%, was driven by an increase in customer transactions of 8%.

•An increase in income from fiduciary services of $525,000, or 10%, as assets under management increased 20% during the year to $1.0 billion as of December 31, 2019.

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Non-Interest Expense.Non-interest expense for the year ended 2019 was $95.3 million, an increase of $3.4 million, or 4%, over 2018. The net increase was driven by:

•An increase in salaries and employee benefits of $3.0 million, or 6%, primarily due to a 5% increase in wages and related taxes, a 10% increase in health insurance costs, and higher bonus and incentives, including a $750 special bonus to certain non-executive, non-senior management employees, based on annual performance to budget.

•A decrease in regulatory assessment costs of $676,000, or 35%, driven by receipt of a Small Bank Assessment Credit from the FDIC for our second and third quarter 2019 assessment periods.

•An increase in furniture, equipment and data processing costs of $522,000, or 5%, driven by continued technology and data-related investments made over the past several years (and continues to be made) in support of our strategic initiatives and to enhance the customer experience.

For the year ended 2019, the Company's ratio of non-interest expense to total revenues was 56.15%, and on a non-GAAP basis adjusted for certain items, was 55.77% compared to 57.98% and 57.71%, respectively, for 2018.

Income Tax Expense. Income tax expense for the year ended 2019 was $14.4 million, with an effective tax rate of 20.1%, compared to $12.7 million for 2018, with an effective tax rate of 19.3%. The increase in our effective tax rate between periods was driven by a decrease in windfall tax benefits recognized upon vesting of equity awards and exercise of stock options, offset by an increase in our state income tax rate, net of federal benefit, as we continue to expand our presence outside of Maine into states with higher tax rates for financial institutions, including Massachusetts and New Hampshire.

Impact of Inflation and Changing Prices

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

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FINANCIAL CONDITION

Cash and Cash Equivalents

Total cash and cash equivalents at December 31, 2020 were $145.8 million, compared to $75.6 million at December 31, 2019. The increase in cash and cash equivalents balances of $70.1 million between periods was primarily driven by an increase in deposits of $467.5 million, or 13%, resulting from 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 returns without undue risk. At December 31, 2020, the Company’s investment portfolio generally consists of MBS, CMO, municipal and corporate debt securities, FHLBB and FRB common stock, and mutual funds held in a rabbi trust for purposes of Company executive and director nonqualified retirement plans. We designate our debt securities as AFS or HTM based on our intent and investment strategy, FHLBB and FRB common stock is carried at cost, and mutual funds are trading securities.

At December 31, 2020, the Company's investments portfolio totaled $1.1 billion, an increase of $195.9 million, or 21%, over December 31, 2019. The increase was primarily attributable to periodic debt security purchases throughout the year totaling $433.4 million and a $32.1 million increase in the fair value of certain securities based on changes in market interest rates, partially offset by paydowns, calls and sales of $264.1 million. Our debt securities designated as AFS, which comprised 99% and 98% of our investment portfolio at December 31, 2020 and 2019, respectively, are carried at fair value using level 2 valuation techniques. Refer to Note 21 of the consolidated financial statements for further details on fair value. At December 31, 2020 and 2019, investments were 23% and 21% of total assets, respectively.

The AFS and HTM debt securities portfolio has limited credit risk due to its composition, which includes highly rated debt securities by nationally recognized rating agencies, and securities backed by the U.S. government and government sponsored agencies. At December 31, 2020 and 2019, these investments represented approximately 88% and 85%, respectively, of the investment portfolio. The majority of the municipal bonds, which represented 11% and 13% of the investment portfolio at December 31, 2020 and 2019, respectively, had a credit rating of "AA" or higher.

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

Our investments in mutual funds are designated as trading securities and carried at fair value. These investments are held within a rabbi trust and will be used for future payments associated with the Company’s Executive and Director Deferred Compensation Plan. These investments are carried at fair value using level 1 valuation techniques.

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 AFS debt securities that are in an unrealized loss position are assessed to determine if an allowance should be recorded or if a write-down is required. We did not record any allowances or write-down any of our AFS debt securities in an unrealized loss position as of December 31, 2020. Refer to "—Critical Accounting Policies" and Note 1 of the consolidated financial statements for further discussion of our practices and policies, and refer to Note 2 of the consolidated financial statements for additional details of our allowance assessments for the year ended 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 December 31, 2020. Refer to "—Critical Accounting Policies" and Note 1 of the consolidated financial statements for further discussion of

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our practices and policies, and refer to Note 2 of the consolidated financial statements for additional details of our allowance assessments for the year ended 2020.

Prior to the implementation of ASU 2016-13, the Company monitored its investment securities for the presence of OTTI. There was no OTTI recorded on investments in 2019 or 2018.

The following table sets forth the carrying value of AFS and HTM debt securities along with the percentage distribution:

December 31,

Trading Securities (carried at fair value):

AFS Debt Investments (carried at fair value):

Private issue collateralized mortgage obligations — — % — — % — — %

HTM Debt Investments (carried at amortized cost):

Obligations of states and political subdivisions 1,297 — % 1,302 — % 1,307 — %

Other Investments:

Equity securities - bank stock (carried at fair value) — — % 1,674 — % 746 — %

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

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

December 31,

Debt investments (amortized cost):

Other investments(1):

Equity securities - bank stock (fair value) — 1,674 746

(1) There is no scheduled maturity date.

Loans

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

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

December 31,

SBA PPP 135,095 4 % — — % — — % — — % — — %

Loan portfolio mix:

(1) Commercial real estate was segmented into non owner-occupied properties and owner-occupied properties upon adoption of CECL, effective January 1, 2020. At December 31, 2020, total commercial real estate – non owner-occupied loans and owner-occupied loans were $1.1 billion and $271.5 million, respectively, and each represented 34% and 9% of the total loan portfolio, respectively.

Commercial Real Estate. Commercial real estate loans consist of loans secured by income and non-income producing commercial real estate. We focus on lending to financially sound business customers primarily within our geographic marketplace, as well as offering loans for the acquisition, development and construction of commercial real estate.

The most significant industry concentration within our commercial real estate loan portfolio at December 31, 2020 and 2019 was the non-residential building operators industry (operators of commercial and industrial buildings, retail establishments, theaters, banks and insurance buildings). At December 31, 2020, the non-residential building operators' industry concentration was 32% of our total commercial real estate portfolio and 14% of total loans. At December 31, 2020, there were no other industry concentrations within our loan portfolio that exceeded 10% of total loans.

Commercial. Commercial loans consist of loans secured by various corporate assets, as well as loans to provide working capital in the form of lines of credit, including syndication loans, which may be secured or unsecured. Commercial loans also consist of municipal loans which are primarily short-term tax anticipation notes made to municipalities for fixed asset or construction-related purposes.

In response to the COVID-19 pandemic, we instituted daily monitoring of commercial working capital line utilization by our commercial customers in early-2020 to identify possible areas of risk and constraints from our borrowers, and we continue to do so through the date of this Annual Report on Form 10-K. Through this period, we have not seen elevated utilization rates as other larger financial institutions saw and reported at the early onset of the COVID-19 pandemic.

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 have terms of two or five years and 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.

In late-December 2020, another round of SBA PPP loans was announced as part of the Consolidated Appropriations Act of 2021. The terms and structure of this program are similar to those issued under the CARES Act. The Company continues to participate in SBA PPP lending to customers and borrowers in need of funding due to the COVID-19 pandemic.

Residential Real Estate. Residential real estate loans consist of loans secured by one-to four-family properties, including for investment purposes. We generally retain in our portfolio adjustable rate mortgages, fixed rate mortgages with original terms of 30 years or less, and jumbo/non-conforming residential mortgages.

For the year ended 2020, we originated record residential mortgage production of $1.0 billion, an increase of 79% over 2019. In 2020, we sold 61% of our residential mortgage production to secondary market investors, compared to 50% for 2019. The historically low interest rate environment throughout much of 2020 drove elevated originations volume, and in particular

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higher refinance activity. Refinance activity was 55% of our residential mortgage originations for the year ended 2020, compared to 37% for 2019.

As part of our overall asset/liability management strategy, we will sell residential mortgages we originate to secondary market participants to manage our interest rate risk position and generate non-interest income. Factors we consider in determining which loans to sell, include, but are not limited to, current and future outlook of the interest rate environment; loan terms, including loan size, interest rate, fixed or variable and maturity date; and estimated prepayment speed.

Consumer and Home Equity. Consumer and home equity loans are originated for a wide variety of purposes designed to meet the needs of our customers. Consumer loans include overdraft protection, automobile, boat, recreational vehicle, and mobile home loans, home equity loans and lines, and secured and unsecured personal loans.

At December 31, 2020 and 2019, 35% and 36% of the consumer loan portfolio was unsecured, respectively.

At December 31, 2020 and 2019, 47% and 46% were secured by junior lien positions, respectively.

Related Party Transactions

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

Asset Quality

Asset quality continues to be of the upmost importance to the Company, and is of great focus 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, concentration levels, and the ACL on loans methodology under the incurred loss accounting methodology for December 31, 2019 and periods prior to; and (ii) the Audit Committee, effective January 1, 2020, 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. Effective for annual and interim periods beginning January 1, 2020, 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 addition, the Company continuously reassesses its underwriting standards in response to credit risk posed by changes in economic conditions.

We believe our most significant exposure to COVID-19 impacted industries is within: (i) lodging, which is 14% of our commercial real estate and commercial loan balances at December 31, 2020; (ii) senior living and care facilities, which is 8% of our commercial real estate and commercial loan balances at December 31, 2020; (iii) restaurants, which is 2% of our commercial real estate and commercial loan balances at December 31, 2020; and (iv) travel and recreation, which is 1% of our commercial real estate and commercial loan balances at December 31, 2020.

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In response to the COVID-19 pandemic, we 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 or 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 either the CARES Act or interagency guidance, and, therefore, were not individually assessed, designated or accounted for as a TDR. Also, these loans that were granted temporary debt relief were not automatically downgraded into lower credit risk ratings. Instead, we have, 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 under the terms of the CARES Act or bank regulatory guidance, these loans were required to be current with terms of payments in accordance with the CARES Act or bank regulatory guidance. At December 31, 2020, the payment status of these 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 December 31, 2020, the amortized cost of loans operating under a short-term temporary debt relief program was $26.5 million, or 0.8% of loans. Under the terms of the Consolidated Appropriations Act of 2021, we are allowed to again provide temporary debt relief to those impacted by COVID-19 under similar terms as those issued under the CARES Act. At this time, any additional temporary debt relief will be made 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 renegotiated loans, and OREO. The level of our non-performing assets over the past five years is shown in the table below.

December 31,

Non-accrual loans:

SBA PPP — — — — —

Accruing loans past due 90 days — — 14 — —

(1) Commercial real estate was segmented into non owner-occupied properties and owner-occupied properties, upon adoption of CECL, effective January 1, 2020. At December 31, 2020, the amortized cost basis of non-accrual commercial real estate – non owner-occupied properties and owner-occupied properties was $366,000 and $146,000, respectively.

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

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circumstances, when it is determined that the borrower is performing under the modified terms and (i) the loan is subsequently restructured and re-written in a new agreement at an interest rate greater than or equal to an acceptable market rate for a comparable new loan at the time of the restructuring, and (ii) there has been no principal forgiveness.

The following table highlights the interest income that would have been recognized if loans on non-accrual status had been current in accordance with their original terms ("foregone interest income") and the interest income recognized on non-performing loans and performing TDRs for the periods indicated.

For The Year EndedDecember 31,

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 our 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 some amount of loss. These loans are not included in the above analysis of non-accrual loans. At December 31, 2020, no loans were identified as potential problem 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 dates indicated:

December 31,

Loans 30 – 89 days past due:

Commercial real estate(1) $ 50 $ 1,582

SBA PPP — —

Consumer and home equity 440 750

Loans 30 – 89 days past due to total loans 0.10 % 0.17 %

(1) Commercial real estate was segmented into non owner- occupied properties and owner-occupied properties, upon adoption of CECL, effective January 1, 2020. At December 31, 2020, the balance of past due commercial real estate – non owner- occupied properties and owner-occupied properties was $50,000 and $0, respectively.

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ACL.

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

At or For the Year EndedDecember 31,

(CECL) (Incurred Loss) (Incurred Loss) (Incurred Loss) (Incurred Loss)

Impact of CECL adoption(1) 233 — — — —

Charge-offs:

SBA PPP — — — — —

Recoveries:

SBA PPP — — — — —

Components of ACL:

Provision for loan losses to average loans 0.40 % 0.09 % 0.03 % 0.11 % 0.21 %

(1) Effective January 1, 2020, the Company adopted ASU 2016-13, commonly referred to as "CECL." Refer to "—Critical Accounting Policies" and Note 1 of the consolidated financial statements for further details.

(2) Commercial real estate was segmented into non owner-occupied properties and owner-occupied properties upon adoption of CECL, effective January 1, 2020. At December 31, 2020, charge-offs of commercial real estate – non owner- occupied properties and owner-occupied properties was $82,000 and $21,000, respectively.

(3) Commercial real estate was segmented into non owner-occupied properties and owner-occupied properties upon adoption of CECL, effective January 1, 2020. At December 31, 2020, recoveries of commercial real estate – non owner-occupied properties and owner-occupied properties was $107,000 and $13,000, respectively.

(4) Effective January 1, 2020, the Company adopted ASU 2016-13 and a $3.3 million increase to the ACL on off-balance sheet credit exposures was recorded. Refer to Note 1 of the consolidated financial statements for further details.

There was no ACL on AFS or HTM debt securities as of December 31, 2020.

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For further discussion of ACL, refer to “—Critical Accounting Policies”, as well as Note 1 and Note 3 of the consolidated financial statements.

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

December 31,

(CECL) (Incurred Loss) (Incurred Loss) (Incurred Loss) (Incurred Loss)

SBA PPP 69 4 % — — % — — % — — % — — %

(1) Commercial real estate was segmented into non owner-occupied properties and owner-occupied properties upon adoption of CECL, effective January 1, 2020. At December 31, 2020, the ACL on loans on the commercial real estate – non owner- occupied and owner-occupied segments was $21.8 million and $2.8 million, respectively, and each segment represented 34% and 9% of the total loan portfolio, respectively.

Refer to “—Critical Accounting Policies” and Note 1 of the consolidated financial statements for further details of our CECL model macroeconomic factors (i.e. loss drivers), and refer to Note 3 of the consolidated financial statements for discussion of the risk characteristics for each portfolio segment considered when evaluating the ACL, as well as factors driving the change in the ACL on loans at December 31, 2020 compared to December 31, 2019.

Goodwill and Core Deposit Intangible Assets

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

At December 31, 2020 and 2019, goodwill totaled $94.7 million. We performed two goodwill impairment tests for the Company's single reporting unit during the year ended 2020, as we identified in the second quarter that a triggering event occurred requiring an interim goodwill impairment test, and as of November 30, 2020 we performed our annual goodwill impairment test. As a result of the impairment testing, we determined goodwill was not impaired for the year ended 2020. Refer to “—Critical Accounting Policies” and Note 4 of the consolidated financial statements for further details of the testing performed.

At December 31, 2020 and 2019, core deposit intangible assets totaled $2.8 million and $3.5 million, respectively, and related amortization was $682,000, $705,000, and $725,000 for 2020, 2019 and 2018, respectively. There were no indications of potential risk of impairment of core deposit intangible assets for any of the aforementioned years.

Investment in BOLI

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

BOLI was $94.9 million and $92.3 million at December 31, 2020 and 2019, respectively. The increase year-over-year reflects the increase in the cash surrender value. BOLI provides a means to mitigate increasing employee benefit costs. We expect to benefit from the BOLI contracts as a result of the tax-free growth in cash surrender value and death benefits that are

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expected to be generated over time. The largest risk to the BOLI program is credit risk of the insurance carriers. To mitigate this risk, annual financial condition reviews are completed on all carriers. BOLI is invested in the “general account” of quality insurance companies or in separate account products, 94% of the insurance carriers had an A.M. Best rating of "B++" or better at December 31, 2020.

Deposits

The Company receives checking, savings and time deposits primarily from customers located within our geographic market area. Other forms of deposits include brokered deposits and deposits with the Certificate of Deposit Account Registry System ("CDARS"). Total deposits at December 31, 2020 were $4.0 billion, which included brokered deposits of $283.6 million. Total deposits at December 31, 2020 increased $467.5 million, or 13%, over December 31, 2019. The increase was primarily within core deposits (non-GAAP), which grew $539.0 million, or 19%, over this period, primarily due to Federal government stimulus provided to our depositors in response to the COVID-19 pandemic. Over the same period, CDs decreased $164.1 million, or 31%, as we actively managed non-relationship deposits in an effort to lower our cost of funds.

At December 31, 2020, the Company had no customer relationships that exceeded 10% of total deposits.

The following table presents certain average deposits information for the periods indicated:

For the Year EndedDecember 31,

Deposits:

Borrowings and Advances

We utilize a variety of funding sources to manage our borrowings, including, but not limited to, FHLBB and correspondent bank overnight borrowings, FHLBB advances, customer and wholesale repurchase agreements, and subordinated debentures. We proactively monitor our borrowings through Management and Board ALCO as part of prudent balance sheet, earnings, and liquidity management. As part of our liquidity management, we use internal designations of "short-term" and "long-term" borrowings, and manage our borrowings within each designation:

•Short-term borrowings include, but are not limited to, FHLBB and correspondent bank overnight borrowings, FHLBB advances with maturity within one year of origination, and customer repurchase agreements.

•Long-term borrowings include, but are not limited to, FHLBB advances with maturity greater than one year, wholesale repurchase agreements, and subordinated debentures.

At December 31, 2020, short-term borrowings were $162.4 million, representing a decrease of $106.4 million, or 40%, since December 31, 2019. The decrease in short-term borrowings was due to our deposit growth during the year ended 2020.

At December 31, 2020, long-term borrowings, including subordinated debentures, totaled $84.3 million, an increase of $15.3 million, or 22%, since December 31, 2019. In 2020, we entered into a new long-term borrowing contract with the FHLBB for $25.0 million that matures in 2025, and in February 2021 we terminated this borrowing contract given excess liquidity levels and incurred a one-time prepayment penalty of $514,000.

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

December 31,

FHLBB and correspondent bank overnight borrowings:

Balance outstanding at end of year $ — $ 5,825 $ —

Weighted average interest rate for the year 1.37 % 2.20 % 2.06 %

Weighted average interest rate at end of year — % 1.85 % — %

FHLBB advances (less than one year):

Balance outstanding at end of year $ — $ 25,000 $ 25,000

Weighted average interest rate for the year 0.59 % 1.85 % 1.90 %

Weighted average interest rate at end of year — % 1.77 % 2.71 %

Customer repurchase agreements:

Weighted average interest rate for the year 0.64 % 1.25 % 1.02 %

Weighted average interest rate at end of year 0.34 % 1.21 % 1.30 %

Long-Term Borrowings. As of December 31, 2020, we had $25.0 million of FHLBB advances outstanding at an interest rate of 0.98% that were scheduled to mature in March of 2025. In February 2021, we terminated this contract with the FHLBB.

As of December 31, 2019, we had $10.0 million of FHLBB advances outstanding at an interest rate of 1.87% that matured in April 2020.

As of December 31, 2020 and 2019, we had $15.0 million of subordinated debt issued and outstanding that qualified as Tier 2 regulatory capital, subject to a 20% haircut each year after its five year anniversary. The interest rate on the subordinated debt is 5.50% per annum, fixed for the ten-year term and payable semi-annually. The subordinated debt is scheduled to mature on October 15, 2025. As of October 15, 2020, we have the ability to exercise our call option on the subordinated debt. In March 2021, the Company announced its intent to call its $15.0 million of subordinated debt at par, plus accrued and unpaid interest, on April 16, 2021.

In connection with the formation of CCTA and UBCT, and the issuance and sale of trust preferred securities to the public, we received and have outstanding at December 31, 2020 and 2019, junior subordinated debentures totaling $44.3 million.

We carry interest rate swaps components of our borrowings to mitigate interest rate risk on variable debt. These interest rate swaps have been designated as cash flow hedges. Refer to “—Critical Accounting Policies” and Note 12 of the consolidated financial statements for details of the Company's interest rate swaps.

FHLBB Collateral. FHLBB short-term and long-term borrowings are collateralized by a blanket lien on qualified collateral consisting primarily of loans with first mortgages secured by one- to four-family properties, certain commercial real estate loans, certain pledged investment securities and other qualified assets. The carrying value of residential real estate and commercial loans pledged as collateral was $1.3 billion and $1.4 billion at December 31, 2020 and 2019, respectively. The carrying value of securities pledged as collateral at the FHLBB was $38,000 and $150,000 at December 31, 2020 and 2019, respectively.

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Shareholders’ Equity

Total shareholders’ equity at December 31, 2020 was $529.3 million, which was an increase of $55.9 million, or 12%, since December 31, 2019. The increase was driven by normal operating activities.

For the year ended 2020, the Company's Board of Directors declared aggregate cash dividends of $1.32 per share, compared to $1.23 per share for 2019. At December 31, 2020 and 2019, the Company and the Bank exceeded all regulatory capital guidelines, and, specifically, the Bank met the capital ratios necessary to be considered "well capitalized" under prompt corrective action provisions for each period. There were no changes to the Company or the Bank's capital that occurred subsequent to December 31, 2020 that would change the Company or Bank's regulatory capital categorization.

In January 2020, the Company's Board of Directors authorized the repurchase of up to 750,000 shares of the Company's common stock, representing approximately 5.0% of the Company's issued and outstanding shares of common stock as of December 31, 2019. This program replaced the 2019 program and was open for 12 months. For the year ended 2020, the Company purchased 274,354 shares of its common stock at a weighted-average price of $35.36. The program subsequently terminated in January 2021.

In February 2021, the Company's Board of Directors approved a new share repurchase program for up to 750,000 shares of the Company's common stock, or approximately 5% of shares outstanding at December 31, 2020, as the Company's current share repurchase program expired in January 2021. Repurchases under the new program may be made at the Company's discretion from time to time in the open market, through block trades or otherwise, and in privately negotiated transactions, subject to market conditions and other factors, and in accordance with applicable legal and regulatory requirements. If any share repurchases are made, they will be over a period of not greater than 12 months.

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

The following table presents certain information regarding shareholders’ equity as of and for the year ended:

December 31,

Financial Ratios

Tangible common equity ratio (non-GAAP) 8.99 % 8.66 % 8.02 %

Per Share Data

Tangible book value per share (non-GAAP) $ 28.96 $ 24.77 $ 21.61

Dividends declared per share $ 1.32 $ 1.23 $ 1.15

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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. At December 31, 2020 and 2019, 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 2020, average deposits (excluding brokered deposits) of $3.7 billion increased $432.9 million, or 13%, compared to 2019. The increase in average deposit balances (excluding brokered deposits) during the year was driven by Federal government stimulus in response to the COVID-19 pandemic. Included within average money market deposits for 2020 and 2019 were $81.8 million and $70.9 million, respectively, of deposits from 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 year ended 2020, average total borrowings, including brokered deposits, decreased $79.8 million to $566.7 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 $54.2 million as of December 31, 2020. The Company also has a $10.0 million line of credit with a correspondent bank that matures on December 17, 2021.

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

The maturity dates of CDs, including brokered CDs, in denominations of $100,000 or more as of December 31, 2020 are set forth in the table below. We did not hold any other time deposits in denominations of $100,000 or more at December 31, 2020. These deposits are generally considered to be more interest rate sensitive than other deposits and, therefore, more likely to be withdrawn to obtain higher yields elsewhere if available.

(In thousands)

Time remaining until maturity: December 31,2020

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Loan demand also affects our liquidity position. The following table presents the maturities of loans at the date indicated:

Maturity Distribution:

Fixed Rate:

Variable Rate:

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

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CAPITAL RESOURCES

As part of our goal to operate a safe, sound and profitable financial organization, we are committed to maintaining a strong capital base. Shareholders’ equity totaled $529.3 million and $473.4 million at December 31, 2020 and December 31, 2019, respectively, which amounted to 11% of total assets. Refer to "— Financial Condition — Shareholders' Equity" for discussion regarding changes in shareholders' equity since December 31, 2019.

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 $19.8 million, $18.9 million and $18.0 million for the year ended December 31, 2020, 2019 and 2018, respectively. The Company's Board of Directors approves cash dividends on a quarterly basis after careful analysis and consideration of various factors, including the following: (i) capital position relative to total assets, (ii) risk-based assets, (iii) total classified assets, (iv) economic conditions, (v) growth rates for total assets and total liabilities, (vi) earnings performance and projections and (vii) strategic initiatives and related capital requirements. All dividends declared and distributed by the Company will be in compliance with applicable regulatory requirements and state corporate law.

We are primarily dependent upon the payment of cash dividends by the Bank, our wholly-owned subsidiary, to service our commitments. We, as the sole shareholder of the Bank, are entitled to dividends, when and as declared by the Bank's Board of Directors from legally available funds. For the year ended December 31, 2020, 2019, and 2018, the Bank declared dividends payable to the Company in the amount of $39.4 million, $36.9 million, and $28.1 million, respectively. Under OCC regulations, the Bank generally may not declare a dividend in excess of the Bank’s undivided profits or, absent OCC approval, if the total amount of dividends declared by the Bank in any calendar year exceeds the total of the Bank's retained net income for the current year plus its retained net income for the prior two years. If we are required to use dividends from the Bank to service unforeseen commitments in the future, we may be required to reduce the dividends paid to our shareholders going forward.

Please refer to Note 14 of the consolidated financial statements for discussion and details of the Company and Bank's capital regulatory requirements. At December 31, 2020 and 2019, the Company and Bank met all regulatory capital requirements and the Bank continues to be classified as "well capitalized" under prompt corrective action provisions.

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CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET COMMITMENTS

Off-Balance Sheet Financial Instruments

Credit Commitments and Standby Letters of 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. Many of the commitments 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.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.

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

Refer to Note 12 of the consolidated financial statements for further discussion of our derivatives and hedge instruments.

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

(In thousands) Total Amount Committed Commitment Expires in:

Interest rate swap on loans – notional value 100,000 — — 100,000 —

Forward delivery commitments – notional value 40,499 40,499 — — —

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Contractual Obligations and Commitments

We are a party to several contractual obligations through lease agreements on a number of branches. Renewal options within the various lease contracts, as applicable, were considered to determine the lease term and estimate the contractual obligation and commitment for the Company's operating and finance leases. Furthermore, certain lease contracts of the Company contain language that subject its rent payment to variability, such as those tied to an index or change in an index. As a result, the future contractual obligation and commitment may materially differ from that estimated and disclosed within the table below. The Company's estimated lease liability for its various operating and finance leases was reported within other liabilities on our consolidated statements of condition. Please refer to Notes 1 and 6 of the consolidated financial statements for discussion and details of our leases.

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

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

(In thousands) Total Amount Committed Payments Due Per Period

Other contractual obligations 1,375 1,375 — — —

(1) In February 2021, we terminated the contract with the FHLBB and incurred a prepayment penalty of $514,000. Refer to "— Financial Condition — Borrowings and Advances" for further details.

(2) The Company has a call option on its $15.0 million of subordinated debentures available on or after October 15, 2020. In March 2021, the Company announced its intent to call all the outstanding subordinated debentures at par, plus accrued and unpaid interest, on April 16, 2021.

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.

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RISK MANAGEMENT

The Company’s Board of Directors and management have identified significant risk categories which affect the Company. The risk categories include: credit; liquidity; market; interest rate; capital; operational; technology, including cybersecurity; vendor and third party; people and compensation; compliance and legal; and strategic alignment and reputation. The Board of Directors has approved an Enterprise Risk Management ("ERM") Policy that addresses each category of risk. The direct oversight and responsibility for the Company's risk management program has been delegated to the Company's Executive Vice President 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 temporary loan relief programs; (vi) rolled out the SBA PPP loan program; (vii) developed and executed our branch network plan, including determinations of which branches should be closed in order to best allocate resources; (viii) developed a plan for, and oversaw the re-opening of branches throughout June 2020, which included ensuring health and safety protocols and practices were in place for our employees and customers; (ix) monitored the COVID-19 resurgence closely throughout November and December 2020 (i.e. holiday season), and responded as necessary to support our teams working in the branches to meet customers' needs while maintaining appropriate health and safety protocols for our employees and customers; and (x) continues to formulate 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.

The Company is, and may become, subject to other risks, refer to Item 1A. Risk Factors for further description.

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

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

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

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Certain of the Company's revenues are asset-based and determined as a percentage of the value of a client's assets under management. Such values are affected by changes in financial markets, such as interest rate risk, equity prices, and foreign exchange rates, and, accordingly, declines in the financial market may negatively impact its revenue. At December 31, 2020, client assets under management by Camden National Wealth Management were $957.0 million. It is estimated that a 1% increase or decrease in client assets under management would have resulted in an annualized increase or decrease in reported 2020 income from fiduciary services of $61,000.

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 have resulted in negative rates as of December 31, 2020 and 2019 as many deposit and funding rates were below 2.00%. In this case, a downward shift of 100 basis points was the only down scenario performed. A parallel and pro rata shift in rates over a 12-month period is assumed. Using this approach, we are able to produce simulation results that illustrate the effect that both a gradual change of rates and a “rate shock” have on earnings expectations. In the down 100 and 200 basis points scenario, Federal Funds and Treasury yields are floored at 0.01% while Prime is floored at 3.00%. All other market rates are floored at the lesser of current levels or 0.25%.

As of December 31, 2020, 2019 and 2018, 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 inNet Interest Income

As of December 31,

Year 1

-200 basis points(1) Not measured Not measured (1.63) %

Year 2

-200 basis points(1) Not measured Not measured (7.74) %

(1) The down 200 basis points scenario was not performed as of December 31, 2020 and 2019 as part of net interest income sensitivity analysis given market interest rates at that time.

The preceding sensitivity analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including, among others, the nature and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits and reinvestment/replacement of asset and liability cash flows. While assumptions are developed based upon current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences might change.

If rates remain at or near current levels, net interest income is projected to trend downward as asset yields replace into lower assumed rates with limited opportunity for funding cost reductions. If rates decrease 100 basis points, net interest income is projected to decrease as loans reprice into lower yields and funding costs have limited capacity for reduction in the first year. In the second year, net interest income is projected to continue to decrease as loan and investment cash flow reprice into lower

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yields as prepayments increase while reduction in the cost of funds remains limited. If rates increase 200 basis points, net interest income is projected to increase in the first year due to the repricing of assets outpacing funding cost increases. In the second year, net interest income is projected to increase as loan and investment yields continue to reprice/reset into higher yields and the cost of funds lags.

Periodically, if deemed appropriate, we use interest rate swaps, floors and caps, which are common derivative financial instruments, to hedge our interest rate risk position. The Board of Directors has approved hedging policy statements governing the use of these instruments. As of December 31, 2020, we had interest rate swap agreements with a total notional of $53.0 million related to our junior subordinated debentures, $100.0 million of notional interest swap agreements on variable rate loans to mitigate exposure to falling interest rates, $50.0 million of notional interest rate swap agreements on variable rate deposits to mitigate exposure to rising rates, $50.0 million of notional interest rate swap agreements on short term funding to mitigate exposure to rising rates, and $376.3 million of notional interest rate swap agreements related to commercial loan level derivative program with both our commercial customers and a corresponding swap dealer. The Board and Management ALCO monitor derivative activities relative to their expectations and our hedging policies.

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, the Company has an internal project team that is focused on an orderly transition from LIBOR to alternative reference rates. The markets for alternative rates are developing. The Company will continue to assess the use of alternative rates, and expects to transition to alternative rates as the markets and best practices further develop. Refer to Note 1 of the consolidated financial statements.

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

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

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

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

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

The Company manages technology and cybersecurity risks through its internal programs, as well as through the assistance of third parties. These programs include various internal and external audit programs, internal committees to oversee compliance with programs and remedial actions, if necessary, and various documented policies, procedures and framework for addressing such risks. Additionally, the Board actively oversees risks related to cybersecurity through various committees that are responsible for developing a comprehensive technology plan and monitoring and testing the Company's information

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security. The Company has also developed a Cybersecurity Incident Response Team ("CSIRT") that is responsible for monitoring, detecting, responding to and reporting cybersecurity incidents. The CSIRT uses a variety of monitoring and testing techniques to protect the integrity of the Company's systems and the security of confidential information.

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

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

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

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

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

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

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

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

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Item 8. Financial Statements and Supplementary Data

CONSOLIDATED STATEMENTS OF CONDITION

December 31,

(In thousands, except number of shares) 2020 2019

ASSETS

Total cash, cash equivalents and restricted cash 145,774 75,636

Investments:

Less: allowance for credit losses on loans (37,865) (25,171)

Core deposit intangible assets 2,843 3,525

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Deposits:

Commitments and contingencies

Shareholders’ Equity

Accumulated other comprehensive income (loss):

Net unrealized gain on available-for-sale securities, net of tax 29,310 3,250

Net unrecognized loss on postretirement plans, net of tax (3,944) (3,470)

Total accumulated other comprehensive income (loss) 20,740 (6,268)

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

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CONSOLIDATED STATEMENTS OF INCOME

For The Year EndedDecember 31,

(In thousands, except number of shares and per share data) 2020 2019 2018

Interest Income

Interest Expense

Non-Interest Income

Net (loss) gain on sale of securities — (105) 275

Non-Interest Expense

Amortization of core deposit intangible assets 682 705 725

Other real estate owned and collection costs, net 382 480 935

Per Share Data

Diluted earnings per share $ 3.95 $ 3.69 $ 3.39

Cash dividends declared per share $ 1.32 $ 1.23 $ 1.15

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

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For The Year EndedDecember 31,

Other comprehensive income (loss):

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

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Other comprehensive loss, net of tax — — — (4,673) (4,673)

Stock-based compensation expense — 1,688 — — 1,688

Common stock repurchased (750) (27) — — (27)

Other comprehensive income, net of tax — — — 18,152 18,152

Stock-based compensation expense — 1,885 — — 1,885

Other comprehensive income, net of tax — — — 27,008 27,008

Stock-based compensation expense — 1,785 — — 1,785

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Year EndedDecember 31,

Operating Activities

Investment securities amortization and accretion, net 4,803 2,997 3,206

Amortization of core deposit intangible assets 682 705 725

Net (increase) decrease in derivative collateral posted (26,540) (26,240) 7,750

Increase (decrease) in other liabilities 2,568 (342) 875

Investing Activities

Proceeds from maturities of held-to-maturity securities — — 750

Proceeds from the sale of premises and equipment — — 749

Proceeds from other investments 1,712 — 1,593

Recoveries of previously charged-off loans 1,084 310 1,944

Proceeds from sale of other real estate owned 110 554 72

Financing Activities

Proceeds from Federal Home Loan Bank long-term advances 25,000 — —

Repayments of Federal Home Loan Bank long-term advances (10,000) — —

Finance lease payments (142) (106) —

Supplemental information

Transfer from loans to other real estate owned 236 543 55

Transfer from premises to other real estate owned 24 — —

Unsettled common stock repurchase 11 — —

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

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CAMDEN NATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Acronyms and Abbreviations.The acronyms and abbreviations identified below are used in the notes to the consolidated financial statements. The following is provided to aid the reader and provide a reference page when reviewing the notes to the consolidated financial statements.

AFS: Available-for-sale FRBB: Federal Reserve Bank of Boston

ACL: Allowance for credit losses GDP: Gross domestic product

ASC: Accounting Standards Codification HTM: Held-to-maturity

ASU: Accounting Standards Update IRS: Internal Revenue Service

BOLI: Bank-owned life insurance LIBOR: London Interbank Offered Rate

CDs: Certificate of deposits MSPP: Management Stock Purchase Plan

CECL: Current Expected Credit Losses N/A: Not applicable

Company: Camden National Corporation N.M.: Not meaningful

DCRP: Defined Contribution Retirement Plan OREO: Other real estate owned

EPS: Earnings per share OTTI: Other-than-temporary impairment

FASB: Financial Accounting Standards Board PD: Probability of default

FRB: Federal Reserve System Board of Governors U.S.: United States of America

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General Business.Camden National Corporation, a Maine corporation (the "Company"), is the bank holding company for Camden National Bank (the "Bank") and is headquartered in Camden, Maine. The primary business of the Company is to attract deposits from, and to extend loans to, consumer, institutional, municipal, non-profit and commercial customers. The Company, through the Bank, offers commercial and consumer banking products and services, and through Camden Financial Consultants, a division of the Bank, and Camden National Wealth Management, a department of the Bank, offers brokerage and insurance services as well as investment management and fiduciary services. The Bank's deposits are insured by the FDIC, subject to regulatory limits.

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company and the Bank (which includes the consolidated accounts of HPFC and Property A, Inc. as of and for the year ended December 31, 2020, 2019 and 2018, and HPFC, Property A, Inc. and Property P, Inc. as of and for the year ended December 31, 2019 and 2018). All intercompany accounts and transactions have been eliminated in consolidation. Assets held by the Bank in a fiduciary capacity, through Camden National Wealth Management, 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 CCTA and UBCT. These entities are unconsolidated subsidiaries of the Company.

Reclassifications. Certain reclassifications have been made to prior year amounts, without impact to net income or total shareholders' equity, to conform to the current year's presentation.

Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could vary from these estimates as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near-term change, including the ACL, including the allowance for loan losses, off-balance sheet credit exposures, and AFS and HTM debt securities (effective for periods on or after January 1, 2020, upon adoption of ASU No. 2016-13, Financial Instruments - Credit Losses(Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), as amended), the accounting for business combinations including subsequent impairment analyses for goodwill and other intangible assets, accounting for income taxes, postretirement benefits, and asset impairment assessments, including the assessment of OTTI of investment securities (for periods prior to January 1, 2020).

Subsequent Events. The Company has evaluated events and transactions subsequent to December 31, 2020 for potential recognition or disclosure as required by GAAP.

Significant Concentration of Credit Risk.The Company makes loans primarily to customers in Maine, Massachusetts and New Hampshire. Although it has a diversified loan portfolio, a large portion of the Company's loans are secured by commercial or residential real estate and are subject to real estate market volatility within these states. Furthermore, the debtors' ability to honor their contracts is highly dependent upon other economic factors throughout Maine, Massachusetts and New Hampshire. The Company does not generally engage in non-recourse lending and typically will require the principals of any commercial borrower to obligate themselves personally on the loan.

Cash, Cash Equivalents and Restricted Cash. For the purposes of reporting, cash and cash equivalents consist of cash on hand and amounts due from banks. During the first quarter of 2020, the Company was required by the FRB to maintain cash reserves equal to a percentage of deposits. In response to the COVID-19 pandemic, in March 2020, the FRB reduced reserve requirement ratios to 0%, effectively eliminating cash reserve requirements for the reserve maintenance period beginning March 26, 2020.