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BUSINESS COMBINATIONS | 3 Months Ended
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Mar. 31, 2025
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS On January 2, 2025, the Company completed its acquisition of Northway Financial, Inc. (“Northway”) in an all-stock transaction in which Northway merged with and into the Company, with the Company surviving (the “Merger”). The Company acquired 100% of Northway’s outstanding common stock. Additionally, Northway Bank, a wholly owned subsidiary of Northway, merged with and into Camden National Bank, with Camden National Bank continuing as the surviving bank. The Merger qualified as a tax-free reorganization for federal income tax purposes. At the effective time of the Merger, each share of Northway’s common stock was converted into the right to receive 0.83 shares of the Company’s common stock, with cash paid in lieu of any fractional shares. Each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the Merger remained outstanding and was unchanged by the Merger. The total consideration payable by the Company was $96.5 million, based on the Company’s January 2, 2025 (acquisition date) closing price of $42.25, as reported by Nasdaq. In total, the Company issued 2.3 million shares of its common stock, representing 14% of the outstanding shares of the Company’s common stock at the time of issuance. The Merger expanded the Company’s presence in New Hampshire by adding 17 branches, and increased the Company’s size and scale. This expansion provides the opportunity to build a greater recognition and awareness of the Company’s brand with its increased presence in New Hampshire. The expanded presence of the Company is expected to drive profitability and shareholder value through opportunities for growth, broader product offerings, higher lending limits and anticipated efficiencies. As of March 31, 2025, the combined Company had 73 branches and $7.0 billion in assets. The Company accounted for the Northway acquisition as a business combination under the acquisition method of accounting. The acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the acquisition date (with limited exceptions). Additionally, the acquisition method does not provide for acquisition expenses to be capitalized as part of the transaction. The Company incurred $7.5 million of certain non-recurring, Merger- related costs during the three months ended March 31, 2025. These non-recurring expenses are presented as merger and acquisition costs within non-interest expense on the consolidated statements of income. The Company generated $59.1 million of provisional goodwill in connection with the Northway acquisition that has been allocated to the Company's banking reporting unit (Camden National Bank). The goodwill generated represents the synergies expected from combining operations of the two organizations, including, but not limited to, systems conversion, consolidation of certain locations, and reduced headcount across operation teams. The goodwill generated from the transaction is not deductible for tax purposes. The Company’s calculation of goodwill is subject to change for up to one year after the closing date of the transaction as additional information relative to estimates becomes available. As the Company finalizes its analysis of acquired assets and liabilities, there may be adjustments to the recorded carrying values. The following table summarizes the consideration paid for Northway and the estimated fair value of the assets acquired and liabilities assumed as of the date of the Northway acquisition:
(In thousands except shares) |  | As Acquired |  | Purchase Accounting Adjustments |  | As Recorded at Acquisition
Consideration Paid: |  |  |  |  |  |
Company common stock (2,283,782 shares at $42.25 per share) |  |  |  |  |  | $ | 96,490 |
Recognized Identified Assets Acquired and Liabilities Assumed, at Fair Value: |  |  |  |  |  |
Assets |  |  |  |  |  |
Loans and loans held for sale(1) |  | $ | 864,031 |  |  | $ | (91,439) |  |  | $ | 772,592 |
Investments |  | 229,222 |  |  | 732 |  |  | 229,954 |
Cash and due from banks |  | 48,261 |  |  | — |  |  | 48,261 |
Deferred tax assets |  | 14,006 |  |  | 4,644 |  |  | 18,650 |
Premises and equipment |  | 9,303 |  |  | 7,547 |  |  | 16,850 |
Core deposit intangible assets |  | — |  |  | 48,058 |  |  | 48,058 |
Bank-owned life insurance |  | 4,372 |  |  | — |  |  | 4,372 |
Other assets |  | 14,394 |  |  | 1,059 |  |  | 15,453 |
Total Assets |  | 1,183,589 |  |  | (29,399) |  |  | 1,154,190 |
Liabilities |  |  |  |  |  |
Deposits |  | 971,899 |  |  | (226) |  |  | 971,673 |
Short-term borrowings |  | 65,499 |  |  | — |  |  | 65,499 |
Long-term borrowings |  | 45,000 |  |  | 184 |  |  | 45,184 |
Junior subordinated debentures |  | 20,620 |  |  | (3,736) |  |  | 16,884 |
Other liabilities |  | 17,940 |  |  | (407) |  |  | 17,533 |
Total Liabilities |  | 1,120,958 |  |  | (4,185) |  |  | 1,116,773 |
Total identified assets acquired and liabilities assumed, at fair value |  | $ | 62,631 |  |  | $ | (25,214) |  |  | 37,417 |
Goodwill |  |  |  |  |  | $ | 59,073 |
(1) The purchase accounting adjustment on loans and loans held for sale is net of the acquired allowance for credit losses (“ACL”) on loans of $10.2 million and acquired net deferred origination costs of $2.0 million, as these balances were eliminated in purchase accounting. Additionally, the Company established an ACL on acquired loans designated as purchase credit deteriorated (“PCD”) of $3.1 million and this has been included in the loan and loans held for sale fair value adjustment. The purchase accounting adjustment on loans and loans held for sale before the adjustments for ACL on acquired loans and net deferred origination costs was a discount on the acquired loan balance of $96.7 million. Purchase accounting adjustments to assets acquired and liabilities assumed generally are amortized using an effective yield, straight-line basis, or other reasonable method consistent with the expected benefit over periods consistent with the estimated useful life or contractual term of the related assets and liabilities. Fair values of the major categories of assets acquired and liabilities assumed were determined as follows: Loans and loans held for sale — The acquired loans were recorded at fair value. The fair value of the acquired loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. Management retained a third-party valuation specialist to assist with the determination of the fair value of loans acquired and the results were reviewed by management. The overall discount on the acquired loans was primarily the result of market interest rates as of the acquisition date being higher than the stated interest rates of the acquired loans. For the three months ended March 31, 2025, the Company recorded $4.3 million of net loan accretion attributable to the fair value discount for interest rate marks on all the acquired loans and the credit marks for all non-PCD loans since the acquisition date. The acquired loan portfolio was segmented into two segments: (1) PCD loans and (2) non-PCD loans. PCD Loans. The Company is required to record PCD assets, defined as a more-than-insignificant deterioration in credit quality since origination or issuance, at the purchase price plus the credit losses expected at the time of acquisition. The Company determined criteria to designate loans that had seen a more-than-insignificant deterioration in credit quality, such as loans in default, extensive delinquency issues, and risk rating downgrades to determine the PCD segment. Any non-credit discount resulting from the acquired pool of PCD financial assets is allocated to each individual asset. At the acquisition date, the initial ACL determined on a collective or individual basis is allocated to individual assets to appropriately allocate any non-credit discount. For PCD loans, an ACL is recognized at acquisition date by allocating the fair value of the determined credit marks to the ACL. The following table provides details related to the fair value of acquired PCD loans:
(In thousands) |  | As of January 2, 2025
Unpaid principal balance of acquired PCD loans |  | $ | 103,048 |
Interest and liquidity discount |  | (9,407) |
ACL on PCD loans |  | (3,071) |
Fair value of acquired PCD loans |  | $ | 90,570 |
Non-PCD Loans. Acquired loans that are not designated as PCD loans are designated as non-PCD loans. For loans designated as non-PCD, in determining the fair value of the acquired loans, the credit risk component is accounted for within the reported loan balance as of the acquisition date. For non-PCD loans, the associated interest and credit marks are recognized within net interest income over the life of the acquired loan using the effective-yield method, as appropriate. The following table provides details related to the fair value of acquired non-PCD loans:
(In thousands) |  | As of January 2, 2025
Unpaid principal balance of acquired non-PCD loans |  | $ | 769,036 |
Interest and liquidity discount |  | (80,771) |
Credit risk discount |  | (6,243) |
Fair value of acquired non-PCD loans |  | $ | 682,022 |
As of the acquisition date, the acquired non-PCD loans are accounted for within the Company’s ACL model and an ACL on loans is established within a corresponding charge to provision for credit losses on the statements of income. The non-PCD loans were pooled based on similar characteristics to the Company’s segmentation. On acquisition date, the Company established an ACL on loans and recognized a $6.3 million provision for credit losses associated with the acquisition of non-PCD loans. Investments — The Company acquired bond investments as part of the Northway acquisition. The fair value of the acquired bond investments at the acquisition date was estimated using quoted broker pricing for identical securities and an independent third-party pricing service. Cash and due from banks — The fair values of cash and due from banks approximate the respective carrying amounts as the instruments are payable on demand or have short-term maturities. Deferred tax assets — The Company acquired deferred tax assets and assumed deferred tax liabilities as part of the Northway acquisition. Deferred tax assets and liabilities are presented on a net basis on the consolidated statements of condition and are not recorded at fair value in accordance with GAAP. The Merger qualified as a stock transaction for tax purposes, and, accordingly, the tax basis of the assets acquired and liabilities assumed was not adjusted, creating temporary timing differences for the various fair value adjustments. Premises and equipment — The fair value of acquired bank premises was determined utilizing independent third-party appraisals and other methods. Core deposit intangible assets — Core deposit intangible assets were determined using the discounted cash flow method, plus the tax amortization benefit. The fair value of core deposit intangible assets was derived by comparing the interest rate and servicing costs that the Company pays on the core deposit liability versus the current market rate for alternative sources of financing. The intangible asset represents the stable and relatively low cost source of funds that the deposits and accompanying relationships provide the Company when compared to alternative funding sources. Refer to Note 6 for further discussion of the Company’s core deposit intangible assets and amortization. Deposits —The fair value of acquired checking, savings, and money market accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of CDs was determined based on the present value of the contractual cash flows over the remaining period to maturity using a market interest rate. Borrowings — The fair value of trust preferred securities was determined based on the present value of the contractual cash flows over the remaining period to maturity using a market interest rate. The fair value on the FHLBB advances was based on the actual selling price at or near the acquisition date. The fair value of acquired retail repurchase agreements was assumed to approximate its carrying value. The following table presents selected unaudited pro forma financial information reflecting the acquisition of Northway and assuming it was completed as of January 1, 2024. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the combined financial results of the Company and Northway had the transaction actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period. Information for the three months ended March 31, 2025 reflects the actual results of the Company excluding merger costs, provision for credit losses on non-PCD loans, and the benefit from a deferred tax rate change. Information for the three months ended March 31, 2024 includes Northway’s calculated results for the three months ended March 31, 2024. The calculated results reflect adjustments related to the amortization or accretion of purchase accounting fair value adjustments, merger and acquisition costs, provision for credit losses on non-PCD loans, and the benefit from a deferred tax rate change. The unaudited pro forma information below does not reflect management’s estimate of any revenue-enhancing opportunities or anticipated cost-savings.
|  | Pro Forma (Unaudited) Three Months Ended March 31,
(In thousands) |  | 2025 |  | 2024
Total revenues(1) |  | $ | 60,054 |  |  | $ | 56,538 |
Net income |  | 16,047 |  |  | 7,558 |
(1) Revenue is defined as the sum of net interest income plus non-interest income.

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