Camden National Corporation (CAC) 2016年年度報告「NASDAQ」.pdf

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1、2016ANNUAL REPORTManchesterYorkWinthropWiscassetBraintreeSacoTopshamBoothbay HarborBrunswick(2)CalaisFalmouthHallowellMachiasOaklandRandolphRichmondBinghamMadisonGreenvilleDover-FoxcroftMiloKennebunkPortlandLewistonDamariscottaWaldoboroThomastonRocklandUnionCamden(2)Belfast(2)CastineCorinthBangor(2)

2、BrewerHermonHampdenBucksportEllsworth(2)Blue HillBar HarborTown HillMilbridgeJonesportStoningtonVinalhavenAugusta(4)GardinerAuburnWaterville(2)NewportOld TownManchesterBathCamden National BankCamden National Wealth Management LOCATION KEYDear Fellow Shareholders:One of the highest compliments we rec

3、eive from customers,shareholders and our communities is that Camden National makes things simple.Recently,a new customer shared his story of why he chose Camden National Bank after moving to Maine from a large city.He was initially attracted by our mobile banking capabilities,but what amazed him was

4、 our highly personal and responsive customer service.He called our Customer Assistance team on two occasions,two weeks apart,and during the second call our specialist mentioned,“I helped you a few weeks ago.”The customer was elated to find a bank that offered cutting-edge mobile services along with

5、a simple,high-quality personal experience.It seems that only a few years ago,remembering a customer by name at a banking center or by voice on the phone would be the most basic expression of service,but in todays digital world,it is a point of differentiation.While we pride ourselves on our Customer

6、 Assistance team,what created this stand out experience is the support our specialist received from our recently introduced customer relationship management(CRM)technology.The implementation of this technology took several months and many complicated stepsall to make individual customer interactions

7、 simple.Today,our Customer Assistance Center supports over 100,000 customers and answers approximately 190,000 calls per year with the average specialist handling 62 calls per day.Its just as important for us to find quick and easy loan solutions.For example,during a commercial lenders meeting with

8、a local business customer in our Bangor market,the customer indicated he was considering a major facility expansion in the next 30 days.The customer wondered how long it would take to obtain financing.We collected financials at the meeting and came back to the client that afternoon with a commitment

9、,subsequently closing the loan within a week.Its this type of flexibility and responsiveness that makes doing business at Camden National Bank appear seamless to the customer,even though behind the scenes,the loan process can be complex.In this years annual report,we will share examples of our effor

10、ts to manage the complexity of banking and meeting our customers needs in an ever-changing environmentall while making it look simple.For You 24/7Customers can call any time day or night.Simple BankingSuperior TechnologyWhether a customer is a young professional or retiree,an individual or sophistic

11、ated business,we are dedicated to simplifying their banking experience by constantly modernizing and improving our technology capabilities.In this arena,we have always competed with large multinational banks that have the resources to experiment with cutting-edge technologies.In 2016,we witnessed th

12、e emergence of small,technology-based,non-bank organizationscommonly referred to as“Fintech”companies.Typically unburdened by regulation,these firms are highly innovative and nimble,but not all that personal or customer focused.We are staying ahead of the curve in this changing environment,with upgr

13、ades to our mobile banking technology and the offering of several mobile payment solutions including Apple Pay,Android Pay and Samsung Pay.Previously,we introduced Touch ID,a secure technology for iPhone users.Our digital banking offerings have been expanded to include the delivery of online loan st

14、atements,notifications and year-end tax information.At Camden National Bank,customers truly can bank anywhere,anytime.Moreover,our new website now serves as the online portal for all of our banking,brokerage and wealth management services and provides insightful articles to help our customers succee

15、d at any stage of their financial journey.Additionally,were leveraging technology to offer customers greater security than ever before.In 2016,we were the first community bank in Maine to issue EMV,or“chip”debit cards.Weve enhanced our round-the-clock debit card fraud monitoring service to include r

16、eal-time notification by text,email or phone of suspicious activity so that customers can immediately verify with us whether a transaction was authorized or not.In the fourth quarter,we successfully completed the combination of Acadia Trust,N.A.and Camden National Bank and launched a new brand,“Camd

17、en National Wealth Management.”Acadia Trust,N.A.had been operating as a wholly-owned subsidiary of Camden National Corporation since 2001.This combination leverages the technology,capital and resources of both companies to better serve our valuable clients.We can now seamlessly offer clients access

18、to a comprehensive range of deposit SecurityFirst Maine-based bank to offer EMV chip-enabled debit cards.and loan products,complimented by our brokerage services,which will significantly enhance our wealth management clients experience.Finally,we are the only Maine bank to offer live 24/7 customer s

19、ervicegiving customers a highly personal banking experience at any timeday or night.We approach every opportunity with creative,forward-thinking strategies to help meet our customers evolving banking needs.Whether its banking in person,online or by phone,we are committed to making it convenient and

20、simple.GrowingAnd GivingIt is our belief that giving back to the community drives shareholder value by building goodwill and customer loyalty.Highlighting this contribution were three major efforts that demonstrated our leadership in the communities we serve.Our HopeHome program achieved a major mil

21、estone with over$140,000 in donations to homeless shelters throughout the state of Maine.Every time a customer finances the purchase of a home through Camden National Bank,an unrestricted$100 donation is made to a local shelter that supports individuals,families,children,veterans,victims of domestic

22、 violence and many others.Our Leaders and Luminaries program recognizes individuals who volunteer their time to support nonprofit boards across the state and culminates in an annual celebration which acknowledges their effective use of inspiration,creativity and ingenuity in board governance.This ye

23、ar we recognized six nonprofit board members and donated a total of$22,000 to their respective nonprofit organizations.Lastly,we donated five historic buildings in downtown Gardiner to the nonprofit organization,Gardiner Main Street.This seemed like a simple transfer to the community,but in reality

24、it was a partnership between Camden National Bank,city officials and Gardiner Main Street to transform empty and unused building space into a source of economic development for the city.$140,000Donations to homeless shelters throughout the state of Maine.Financial Performance In recent years,weve fo

25、cused on delivering strong financial results by growing our core franchise while pursuing new opportunities through acquisitions and expansion.It is a major effort to manage the complexity of daily business while also taking on major projects such as acquiring other companies or branch networks.Our

26、financial results for 2016 show our ability to manage the acquisition of SBM Financial,Inc.,the parent company of The Bank of Maine,while also delivering on our long-term financial and strategic commitments.We reported record net income of$40.1 million for 2016,compared to$21.0 million for 2015 whic

27、h included acquisition related expenses.Diluted earnings per share,adjusted for merger costs and security gains,increased 12%year over year to$2.61 for 2016 compared to$2.33 in 2015.Adjusted return on assets for the twelve months ending December 31,2016 was 1.06%,compared to 0.94%last year,while our

28、 adjusted return on tangible equity was 14.95%and 13.20%,respectively,for the same time periods.One of the key areas of focus in 2016 was the full integration of The Bank of Maine and realizing the synergies of combining two organizations,through both revenue and cost saving opportunities.Total reve

29、nues grew 34%to$152.7 million in 2016,compared to$113.9 million in 2015 which reflects our first full year after merging with The Bank of Maine.Our efficiency ratio for 2016 of 57.5%beat the 58.0%target since we can generate higher revenue with moderate increases in operating expenses.This strong fi

30、nancial performance provided the basis for two important events directed at rewarding our shareholders.On September 30,2016,a 3-for-2 stock split occurred which better aligned the trading price of our shares with those of our peers and improved the liquidity of our stock.This was followed by the ann

31、ouncement on December 20,2016 of a 15%increase in our quarterly cash dividend to shareholders payable on January 31,2017.This results in an annualized dividend of$0.92 per share on a post-split basis.The culmination of strong financial performance and the heightened interest in community bank stocks

32、 post-election resulted in a totalreturn to Camden National shareholders of 55%in 2016,surpassing the SNL US Bank$1 to$5 Billion Index of 44%.At year-end,the Companys market capitalization reached a record$687.9 million and represents approximately 15.5 million shares at a stock price of$44.45 as of

33、 December 30,2016(the last trading day of 2016).$687,900,000 Market capitalization at year-end.Governance Balancing complexity and simplicity takes leadership and strong corporate governance.Our corporate Board of Directors consists of experienced business and community leaders.We have 11 independen

34、t directors including our non-executive Chair,Karen Stanley.Our Companys President and CEO also serves as a director.These individuals ensure the companys practices and strategies align with shareholder expectations.On December 31,2016,shares owned by directors and executive officers totaled 346,000

35、,up from 308,000 shares on December 31,2015.In December 2016,we announced the appointment of board member Lawrence“Larry”Sterrs to the position of Vice Chair.Larry has significant executive level experience in the telecom industry as an executive and Chairman of the Board of Unitek,a Maine-based tel

36、ecommunications provider.Additionally,he is Board Chair and CEO of the Unity Foundation which invests in building the capacity of nonprofits that serve both local Maine communities and statewide needs.Making the complex appear simple has been a principle of Camden National that weve carried from our

37、 founding in 1875 to the present day.We combine cutting-edge mobile and online services with a genuine customer focus,and work tirelessly to provide the best customer experiencewhether at a banking center,online or on the phone.This success has been possible through the dedication of our employees,l

38、oyalty of our customers and support of our shareholders.Sincerely,Karen W.StanleyChair,Board of Directors Gregory A.Dufour President and Chief Executive OfficerExecutive ManagementPictured left to right:Gregory A.Dufour,Deborah A.Jordan,CPA,Timothy P.Nightingale,June B.Parent,Edward C.Walbridge,Rene

39、 D.Smyth,Edmund M.Hayden III,Mary Beth Haut,and Joanne T.CampbellCamden National Corporation Board of DirectorsPictured from left to right(back row):John W.Holmes,Carl J.Soderberg,Lawrence J.Sterrs,David C.Flanagan,David J.Ott,John M.Rohman,James H.Page,Ph.D.,and Craig S.Gunderson;(front row):Gregor

40、y A.Dufour,Karen W.Stanley(Chair),S.Catherine Longley,and Ann W.BresnahanCamden National Bank Board of DirectorsPictured from left to right(back row):John W.Holmes,Carl J.Soderberg,David J.Ott,John M.Rohman,Lawrence J.Sterrs,Robert D.Merrill,David C.Flanagan,and James L.Markos,Jr.,Esq.;(front row):G

41、regory A.Dufour,Karen W.Stanley(Chair),William P.Dubord,Ann W.Bresnahan,and Rosemary B.WeymouthCamden National Corporation is the largest publicly traded bank holding company in Northern New England with$3.9 billion in assets and nearly 650 dedicated employees.Camden National Bank,its subsidiary,is

42、a full-service community bank that offers an array of consumer and business financial products and services,accompanied by the latest in digital banking technology to empower customers to bank the way they want.The Bank provides personalized service through a network of 61 banking centers,84 ATMs,an

43、d lending offices in New Hampshire and Massachusetts,all complimented by 24/7 live phone support.Comprehensive wealth management,investment,and financial planning services are delivered by Camden National Wealth Management.Since its founding in 1875,the Bank has enjoyed a well-established reputation

44、 for financial stability,consistent growth and strong community impact.Financial Highlights(Dollars in thousands,except per share data)2015(1)2014Earnings and DividendsTotal revenues(2)$113,934$100,627Total operating expenses$81,139$62,397Net income$20,952$24,570Adjusted net income(3)$28,186$24,277D

45、ividends declared on common shares$10,602$8,251Per Share Data(4)Diluted earnings per share$1.73$2.19Adjusted diluted earnings per share(3)$2.33$2.16Cash dividends declared per share$0.80$0.74Book value at end of period$23.69$22.00Tangible book value at end of period(3)$16.89$17.68Closing stock price

46、$29.39$26.56At Year EndTotal assets$3,709,344$2,789,853Total investment securities$855,995$803,633Total loans and loans held for sale$2,501,164$1,772,610Total deposits$2,726,379$1,932,097Total sharesholders equity$363,190$245,109Financial RatiosReturn on average assets0.70%0.92%Adjusted return on av

47、erage assets(3)0.94%0.90%Return on average equity7.54%10.37%Return on average tangible equity(3)9.91%13.46%Adjusted return on average tangible equity(3)Net interest margin13.20%3.19%13.30%3.11%Efficiency ratio(3)61.13%61.58%Tier I leverage capital ratio8.74%9.26%Non-performing assets to total assets

48、0.66%0.82%(1)2015 includes SBM Financial,Inc.s acquired assets and liabilities,at fair value.(2)Includes net interest income and non-interest income.(3)This is a non-GAAP measure.Refer to the Companys 2016 Annual Report on Form 10-K for detailed calculation.(4)Per share data has been adjusted to ref

49、lect the 3-for-2 stock split effective September 30,2016,for all periods presented.For a complete set of Consolidated Financial Statements,refer to the Companys 2016 Annual Report on Form 10-K.2016201534%13%11%30%91%-15%44%16%22%28%49%-21%12%8%4%8%7%8%11%-4%51%11%4%33%5%7%4%41%4%41%8%48%Year-over-Ye

50、ar Change2016$152,693$89,896$40,067$40,597$12,909$2.57$2.61$0.83$25.30$18.74$44.45$3,864,230$897,679$2,609,400$2,828,529$391,5471.04%1.06%10.47%14.76%14.95%3.32%57.53%8.83%0.67%201614.95%201413.30%201513.20%Return on AverageTangible EquityAdjusted Net Income($Millions)$40.62016$28.22015$24.32014$29.

51、39$26.56$44.45Closing Stock Price2016 2015 2014$113.9$100.6$152.7Total Revenue($Millions)2016 2015 2014Total Assets($Billions)$3.920162014$2.82015$3.7Adjusted Diluted EarningsPer Share$2.612016$2.332015$2.162014Personal Banking(Deposits)Business Banking(Deposits)TreasuryManagementResidentialLending

52、Investment Management Trust Services Small Business&CommercialLending BrokeragePersonalLending Wealth ManagementPersonal Banking ServicesSophisticated Products&ServicesBusiness Banking ServicesCamden National CorporationFiscal Year 2016 Form 10-K Annual ReportUNITED STATESSECURITIES AND EXCHANGE COM

53、MISSIONWashington,D.C.20549FORM 10-K?ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31,2016TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Commission File No.0-28190CAMDEN NATIONAL CORPORATI

54、ON(Exact Name of Registrant As Specified in Its Charter)Maine01-0413282(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S.EmployerIdentification No.)2 Elm Street,Camden,ME04843(Address of Principal Executive Offices)(Zip Code)Registrants Telephone Number,Including Area Code:(207)236

55、-8821Securities registered pursuant to Section 12(b)of the Act:Title of Each ClassName of Exchange on Which RegisteredCommon Stock,without par valueThe NASDAQ Stock Market LLCSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known season

56、ed issuer,as defined in Rule 405 of the SecuritiesAct.Yes?No?Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of theAct.Yes?No?Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15

57、(d)of theSecurities Exchange Act of 1934 during the preceding 12 months(or for such shorter periods that the registrant was required to filesuch reports),and(2)has been subject to such filing requirements for the past 90 days.Yes?No?Indicate by check mark whether the registrant has submitted electro

58、nically and posted on its corporate Website,if any,everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(orfor such shorter period that the registrant was required to submit and post such files).Yes?No?Indicate by check m

59、ark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,andwill not be contained,to the best of registrants knowledge,in definitive proxy or information statements incorporated by reference inPart III of this Form 10-K or any amendment to this Form 10-K.

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

61、ted filer Accelerated filer?Non-accelerated filer Smaller reporting company(Do not check if a smallerreporting company)Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes?No?The aggregate market value of the voting and non-voting common

62、equity held by non-affiliates computed by reference to theprice at which the common equity was last sold,or the average bid and asked price of such common equity,as of the last businessday of the Registrants most recently completed second fiscal quarter:$316,376,401.Shares of the Registrants common

63、stock held byeach executive officer,director and person who beneficially own 5%or more of the Registrants outstanding common stock have beenexcluded,in that such persons may be deemed to be affiliates.This determination of affiliate status is not necessarily a conclusivedetermination for other purpo

64、ses.The number of shares outstanding of each of the registrants classes of common stock as of March 1,2017 was 15,493,927.Certain information required in response to Items 10,11,12,13 and 14 of Part III of this Form 10-K is incorporated byreference from Camden National Corporations Definitive Proxy

65、Statement for the 2017 Annual Meeting of Shareholders pursuant toRegulation 14A of the General Rules and Regulations of the Commission.This page intentionally left blank.CAMDEN NATIONAL CORPORATION2016 FORM 10-K ANNUAL REPORTTABLE OF CONTENTSPagePART IItem 1.Business.2Item 1A.Risk Factors.12Item 1B.

66、Unresolved Staff Comments.20Item 2.Properties.21Item 3.Legal Proceedings.21Item 4.Mine Safety Disclosures.21PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and IssuerPurchases of Equity Securities.22Item 6.Selected Financial Data.24Item 7.Managements Discussion and Ana

67、lysis of Financial Condition and Results ofOperations.25Item 7A.Quantitative and Qualitative Disclosures about Market Risk.65Item 8.Financial Statements and Supplementary Data.66Item 9.Changes in and Disagreements With Accountants on Accounting and FinancialDisclosure.140Item 9A.Controls and Procedu

68、res.140Item 9B.Other Information.140PART IIIItem 10.Directors,Executive Officers and Corporate Governance.141Item 11.Executive Compensation.141Item 12.Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters.141Item 13.Certain Relationships,Related Transactions a

69、nd Director Independence.141Item 14.Principal Accounting Fees and Services.141PART IVItem 15.Exhibits and Financial Statement Schedules.142Item 16.Form 10-K Summary.144Signatures.145i This page intentionally left blank.FORWARD-LOOKING STATEMENTSThe discussions set forth below and in the documents we

70、 incorporate by reference herein contain certainstatements that may be considered forward-looking statements under the Private Securities Litigation ReformAct of 1995,including certain plans,exceptions,goals,projections,and statements,which are subject tonumerous risks,assumptions,and uncertainties.

71、Forward-looking statements can be identified by the use of thewords believe,expect,anticipate,intend,estimate,assume,plan,target,or goal orfuture or conditional verbs such as will,may,might,should,could and other expressions whichpredict or indicate future events or trends and which do not relate to

72、 historical matters.Forward-lookingstatements should not be relied on,because they involve known and unknown risks,uncertainties and otherfactors,some of which are beyond the control of the Company.These risks,uncertainties and other factorsmay cause the actual results,performance or achievements of

73、 the Company to be materially different from theanticipated future results,performance or achievements expressed or implied by the forward-lookingstatements.The following factors,among others,could cause the Companys financial performance to differmaterially from the Companys goals,plans,objectives,

74、intentions,expectations and other forward-lookingstatements:weakness in the United States economy in general and the regional and local economies within theNew England region and Maine,which could result in a deterioration of credit quality,an increasein the allowance for loan losses or a reduced de

75、mand for the Companys credit or fee-basedproducts and services;changes in trade,monetary,and fiscal policies and laws,including interest rate policies of theBoard of Governors of the Federal Reserve System;inflation,interest rate,market,and monetary fluctuations;competitive pressures,including conti

76、nued industry consolidation and the increased financialservices provided by non-banks;volatility in the securities markets that could adversely affect the value or credit quality of theCompanys assets,impairment of goodwill,the availability and terms of funding necessary to meetthe Companys liquidit

77、y needs,and could lead to impairment in the value of securities in theCompanys investment portfolio;changes in information technology that require increased capital spending;changes in consumer spending and savings habits;changes in tax,banking,securities and insurance laws and regulations;andchange

78、s in accounting policies,practices and standards,as may be adopted by the regulatoryagencies as well as the Financial Accounting Standards Board(FASB),and other accountingstandard setters.You should carefully review all of these factors,and be aware that there may be other factors that couldcause di

79、fferences,including the risk factors listed in Part I,Item 1A,Risk Factors,beginning on page 12.Readers should carefully review the risk factors described therein and should not place undue reliance on ourforward-looking statements.These forward-looking statements were based on information,plans and

80、 estimates at the date of thisreport,and we do not promise to update any forward-looking statements to reflect changes in underlyingassumptions or factors,new information,future events or other changes.1PART IItem 1.BusinessOverview.Camden National Corporation(hereafter referred to as we,our,us,or t

81、heCompany)is a publicly-held bank holding company,with$3.9 billion in assets,61 banking centers,84 ATMs,and three lending offices at December 31,2016,incorporated under the laws of the State of Maineand headquartered in Camden,Maine.The Company,as a diversified financial services provider,pursues th

82、eobjective of achieving long-term sustainable growth by balancing growth opportunities against profit,whilemitigating risks inherent in the financial services industry.The primary business of the Company and itssubsidiary,Camden National Bank(the Bank),is to attract deposits from,and to extend loans

83、 to,consumer,institutional,municipal,non-profit and commercial customers.The Company,through the Bank,offerscommercial and consumer banking products and services,and through Camden Financial Consultants andCamden National Wealth Management,divisions of the Bank,brokerage and insurance services as we

84、ll asinvestment management and fiduciary services.The Company acquired SBM Financial,Inc.(SBM),the parent company of The Bank of Maine,onOctober 16,2015.Healthcare Professional Funding Corporation(HPFC),a wholly-owned subsidiary of TheBank of Maine,became a wholly-owned subsidiary of the Bank.Effect

85、ive February 19,2016,the Companyceased ongoing operations of HPFC and it is no longer originating loans.The Company will continue to earnrevenues from HPFCs loan portfolio as it naturally runs off.The consolidated financial statements of the Company accompanying this Form 10-K include theaccounts of

86、 the Company,the Bank and its subsidiaries and divisions.All inter-company accounts andtransactions have been eliminated in consolidation.The Company is committed to the philosophy of serving the financial needs of customers in localcommunities,as described in its core purpose:Through each interacti

87、on,we will enrich the lives of people,help businesses succeed and vitalize communities.The Company has achieved a five-year compounded annual asset growth rate of 11%,resulting in$3.9 billion in total assets at December 31,2016.The following is a chronological timeline of significantevents and facto

88、rs contributing to the Companys asset growth over the past five years:2012 The acquisition of 14 branches,including$287.6 million in deposits and$5.7 million insmall business loans,from Bank of America,National Association,in October 2012.2013 The divestiture of our five Franklin County branches,inc

89、luding$46.0 million in loans and$85.9 million in deposits and borrowings,in October 2013.2014 The Company had$192.2 million of organic loan growth,primarily within the commercialreal estate and commercial loan portfolios.Also,in 2014,we expanded our franchise outside ofMaine by opening a commercial

90、loan office in Manchester,New Hampshire,providing us with awider reach across northern New England.2015 The Company achieved organic asset growth of$80.0 million,fueled by organic loangrowth of$102.4 million.The Company completed the acquisition of SBM on October 16,2015.SBM was approximately one-th

91、ird the size of the Company pre-acquisition with total assets of$840.1 million,total loans of$615.2 million and total deposits of$687.0 million.The acquisitionprovided the Company with an expanded presence in Southern and Central Maine,significant lowcost deposits,and strengthened its mortgage banki

92、ng platform,including two additional lendingoffices in Falmouth,Maine and Braintree,Massachusetts.2016 The Company had$104.4 million of organic loan growth,primarily within the commercialreal estate and commercial loan portfolios.In 2016,the Company originated approximately$370.0 million of resident

93、ial mortgages and sold approximately 65%of its production.This resultedin gains from loan sales of$6.2 million,compared to$1.3 million for 2015.2The financial services industry continues to experience consolidations through mergers that could createopportunities for the Company to promote its value

94、proposition to customers.The Company evaluates thepossibility of expansion into new markets through both de novo expansion and acquisitions.In addition,theCompany is focused on maximizing the potential for growth in existing markets,especially in markets wherethe Company has less of a presence.Furth

95、er details on the Companys financial information can be foundwithin the consolidated financial statements within Item 8 of this report.Camden National Bank.The Bank is a national banking association chartered under the laws of theUnited States headquartered in Camden,Maine.Originally founded in 1875

96、,the Bank became a direct,wholly-owned subsidiary of the Company as a result of a corporate reorganization in 1984.The Bank offersits products and services across Maine,and focuses primarily on attracting deposits from the general publicthrough its branches,and then leveraging this relationship to o

97、riginate residential mortgage loans,commercialbusiness loans,commercial real estate loans and a variety of consumer loans across New England.TheCompany has locations within 13 of Maines 16 counties.Customers may also access the Banks products andservices using other channels,including online at www.

98、CamdenN.Camden Financial Consultants.Camden Financial Consultants is a full-service brokerage andinsurance division of the Bank in the business of helping clients meet all of their financial needs by using atotal wealth management approach.Its financial offerings include college,retirement,and estat

99、e planning,mutual funds,strategic asset management accounts,and variable and fixed annuities.Camden National Wealth Management.Effective as of close of business November 30,2016,theCompanys wholly-owned subsidiary,Acadia Trust,N.A.,merged into the Bank,and was rebranded asCamden National Wealth Mana

100、gement.Prior to the merger,Acadia Trust,N.A.was a limited purpose nationalbanking association chartered under the laws of the U.S.headquartered in Portland,Maine.Now operating asCamden National Wealth Management,a division of the Bank,it continues to provide a broad range of trust,trust-related,inve

101、stment and wealth management services to both individual and institutional clients.Thefinancial services provided by Camden National Wealth Management complement the services provided by theBank by offering high net worth individuals,businesses and non-profit institutional customers investmentmanage

102、ment services,as well as serving as trustee.Healthcare Professional Funding Corporation.HPFC is a wholly-owned subsidiary of the Bank and,prior to the closing of ongoing operations on February 19,2016,it provided specialized lending to dentists,optometrists and veterinarians across the U.S.HPFC was

103、acquired in connection with the acquisition of SBM.HPFCs website address is .The Companys Investor Relations information can be obtained through the Banks internet address,www.CamdenN.The Company makes available on or through its Investor Relations page,withoutcharge,its annual reports on Form 10-K,

104、quarterly reports on Form 10-Q,and current reports on Form 8-Kand amendments to those reports filed or furnished pursuant to Section 13(a)or 15(d)of the SecuritiesExchange Act of 1934,as amended,as soon as reasonably practicable after such reports are electronically filedwith,or furnished to,the SEC

105、.The Companys reports filed with,or furnished to,the SEC are also availableat the SECs website at www.sec.gov.In addition,the Company makes available,free of charge,its pressreleases and Code of Ethics through the Companys Investor Relations page.Information on our website is notincorporated by refe

106、rence into this document and should not be considered part of this report.Competition.Through the Bank and its subsidiaries and division of,the Company competes throughoutMaine,New Hampshire and Massachusetts.Our primary markets within Maine run along Mainescoast from Calais to Kittery and mid-inter

107、ior(along Interstate 95)through Bangor,Maine.We operateand manage the Banks business within Maines various regions,including Mid Coast,Southern,Central,Bangor and Downeast.Many of these markets that we operate in are characterized as rural areas.Majorcompetitors in the Companys primary market area i

108、nclude local branches of large regional and nationalbanking organizations and brokerage houses,as well as local independent banks,financial advisors,thriftinstitutions and credit unions.Other competitors for deposits and loans within the Banks primary market areainclude insurance companies,money mar

109、ket funds,consumer finance companies and financing affiliates ofconsumer durable goods manufacturers.3The Company and the Bank generally have effectively competed with other financial institutions byemphasizing customer service,which is branded as the Camden National Experience,highlighted by locald

110、ecision-making,establishing long-term customer relationships,building customer loyalty and providingproducts and services designed to meet the needs of customers.The Company,through Camden NationalWealth Management and Camden Financial Consultants,competes for trust,trust-related,investmentmanagemen

111、t,individual retirement,foundation and endowment management services and brokerage serviceswith local banks and non-banks,which may now,or in the future,offer a similar range of services,as well aswith a number of brokerage firms and investment advisors with offices in the Companys market area.Inadd

112、ition,most of these services are widely available to the Companys customers by telephone and over theinternet through firms located outside the Companys market area.Employees.The Company employed 631 people on a full-or part-time basis as of December 31,2016through the Bank,and its divisions.Supervi

113、sion and RegulationThe following discussion addresses elements of the regulatory framework applicable to bank holdingcompanies and their subsidiaries.This regulatory framework is intended primarily for the protection of thesafety and soundness of depository institutions,the federal deposit insurance

114、 system,and depositors,ratherthan the protection of shareholders of a bank holding company such as the Company.As a bank holding company,the Company is subject to regulation,supervision and examination by theBoard of Governors of the Federal Reserve System(the FRB)under the Bank Holding Company Act

115、of1956,as amended(the BHCA).The Bank is subject to regulation,supervision and examination by theOffice of the Comptroller of the Currency(the OCC).The following is a summary of certain aspects of various statutes and regulations applicable to theCompany and its direct and indirect subsidiaries.This

116、summary is not a comprehensive analysis of allapplicable law,however,and you should refer to the applicable statutes and regulations for more information.Regulation of the CompanyThe Company is subject to regulation,supervision and examination by the FRB,which has the authority,among other things,to

117、 order bank holding companies to cease and desist from unsafe or unsound bankingpractices;to assess civil money penalties;and to order termination of non-banking activities or termination ofownership and control of a non-banking subsidiary by a bank holding company.Source of Strength.Under the BHCA,

118、as amended by the Dodd-Frank Wall Street Reform andConsumer Protection Act(the Dodd-Frank Act),the Company is required to serve as a source of financialstrength for the Bank.This support may be required at times when the bank holding company may not havethe resources to provide support to the Bank.I

119、n the event of a bank holding companys bankruptcy,anycommitment by the bank holding company to a federal bank regulatory agency to maintain the capital of abank subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment.Acquisitions and Activities.The BHCA prohibits a

120、 bank holding company,without prior approval of theFRB,from acquiring all or substantially all the assets of a bank,acquiring control of a bank,merging orconsolidating with another bank holding company,or acquiring direct or indirect ownership or control of anyvoting shares of another bank or bank h

121、olding company if,after such acquisition,the acquiring bank holdingcompany would control more than 5%of any class of the voting shares of such other bank or bank holdingcompany.The BHCA also prohibits a bank holding company from engaging directly or indirectly in activitiesother than those of bankin

122、g,managing or controlling banks or furnishing services to its subsidiary banks.However,a bank holding company may engage in and may own shares of companies engaged in certainactivities that the FRB has determined to be closely related to banking or managing and controlling banks.Limitations on Acqui

123、sitions of Company Common Stock.The Change in Bank Control Act prohibits aperson or group of persons from acquiring control of a bank holding company unless the FRB has beennotified and has not objected to the transaction.Under a rebuttable presumption established by the FRB,theacquisition of 10%or

124、more of a class of voting securities of a bank holding company with a class ofsecurities registered under Section 12 of the Exchange Act would constitute the acquisition of control of a4bank holding company.In addition,the BHCA prohibits any company from acquiring control of a bank orbank holding co

125、mpany without first having obtained the approval of the FRB.Among other circumstances,under the BHCA,a company has control of a bank or bank holding company if the company owns,controlsor holds with power to vote 25%or more of a class of voting securities of the bank or bank holding company,controls

126、 in any manner the election of a majority of directors or trustees of the bank or bank holdingcompany,or the FRB has determined,after notice and opportunity for hearing,that the company has thepower to exercise a controlling influence over the management or policies of the bank or bank holdingcompan

127、y.Regulation of the BankThe Bank is subject to regulation,supervision,and examination by the OCC.Additionally,the FederalDeposit Insurance Corporation(the FDIC)has secondary supervisory authority as the insurer of the Banksdeposits.Pursuant to the Dodd-Frank Act,the FRB may directly examine the subs

128、idiaries of the Company,including the Bank.The enforcement powers available to the federal banking regulators include,among otherthings,the ability to issue cease and desist or removal orders;to terminate insurance of deposits;to assesscivil money penalties;to issue directives to increase capital;to

129、 place the Bank into receivership;and to initiateinjunctive actions against banking organizations and institution-affiliated parties.Deposit Insurance.The deposit obligations of the Bank are insured up to applicable limits by theFDICs Deposit Insurance Fund(DIF)and are subject to deposit insurance a

130、ssessments to maintain the DIF.The Dodd-Frank Act permanently increased the FDIC deposit insurance limit to$250,000 per depositor fordeposits maintained in the same right and capacity at a particular insured depository institution.The FederalDeposit Insurance Act(the FDIA),as amended by the Federal

131、Deposit Insurance Reform Act and theDodd-Frank Act,requires the FDIC to take steps as may be necessary to cause the ratio of deposit insurancereserves to estimated insured deposits the designated reserve ratio to reach 1.35%by September 30,2020,and it mandates that the reserve ratio designated by th

132、e FDIC for any year may not be less than 1.35%.Further,the Dodd-Frank Act required that,in setting assessments,the FDIC offset the effect of the increase inthe minimum reserve ratio from 1.15%to 1.35%on banks with less than$10 billion in assets.To satisfy these requirements,on March 15,2016,the FDIC

133、s Board of Directors approved a final rule toincrease the DIFs reserve ratio to the statutorily required minimum ratio of 1.35%of estimated insureddeposits.The final rule imposes on large banks a surcharge of 4.5 basis points of their assessment base,aftermaking certain adjustments.Large banks will

134、pay quarterly surcharges in addition to their regular risk-basedassessments.Overall regular risk-based assessment rates will decline once the reserve ratio reaches 1.15%.Small banks,such as the Bank,will receive credits to offset the portion of their assessments that help to raisethe reserve ratio f

135、rom 1.15%to 1.35%.After the reserve ratio reaches 1.38%,the FDIC will automaticallyapply a small banks credits to reduce its regular assessment up to the entire amount of the assessment.Thefinal rule provided that these changes would become effective July 1,2016 if the reserve ratio reached 1.15%pri

136、or to that date.On June 30,2016,the reserve ratio rose to 1.17%,which resulted in the revised depositinsurance assessment pricing becoming effective on July 1,2016.Deposit premiums are based on assets.To determine its deposit insurance premium,the Bank computesthe base amount of its average consolid

137、ated assets less its average tangible equity(defined as the amount ofTier 1 capital)and the applicable assessment rate.On April 26,2016,the FDICs Board of Directors adopteda final rule that changed the manner in which deposit insurance assessment rates are calculated for establishedsmall banks,gener

138、ally those banks with less than$10 billion of assets that have been insured for at leastfive years.The rule updated the data and methodology that the FDIC uses to determine risk-based assessmentrates for these institutions with the intent of better reflecting risks and ensuring that banks that take

139、on greaterrisks pay more for deposit insurance than their less risky counterparts.The rule revised the financial ratiosmethod used to determine assessment rates for these banks so that it is based on a statistical model thatestimates the probability of failure over three years.The rule eliminated ri

140、sk categories for established smallbanks and uses the financial ratios method.Under this method each of seven financial ratios and a weightedaverage of CAMELS component ratings will be multiplied by a corresponding pricing multiplier.The sum ofthese products will be added to a uniform amount,with th

141、e resulting sum being an institutions initial baseassessment rate(subject to minimum or maximum assessment rates based on a banks CAMELS compositerating).This method takes into account various measures that are similar to the factors that the FDIC5previously considered in assigning institutions to r

142、isk categories,including an institutions leverage ratio,brokered deposit ratio,one year asset growth,the ratio of net income before taxes to total assets andconsiderations related to asset quality.Under the small bank pricing rule,beginning the first assessment periodafter June 30,2016,where the DIF

143、s reserve ratio has reached 1.15%,assessments for established small bankswith a CAMELS rating of 1 or 2 will range from 1.5 to 16 basis points,after adjustments,while assessmentrates for established small banks with a CAMELS composite rating of 4 or 5 may range from 11 to 30 basispoints,after adjust

144、ments.Assessments for established small banks with a CAMLES rating of 3 will rangefrom 3 to 30 basis points.The FDIC has the power to adjust deposit insurance assessment rates at any time.In addition,under theFDIA,the FDIC may terminate deposit insurance upon a finding that the institution has engag

145、ed in unsafe andunsound practices,is in an unsafe or unsound condition to continue operations,or has violated any applicablelaw,regulation,rule,order or condition imposed by the FDIC.The Banks FDIC insurance expense for theyear ended December 31,2016 was$2.0 million.Acquisitions and Branching.The Ba

146、nk must seek prior regulatory approval from the OCC to acquireanother bank or establish a new branch office.Well capitalized and well managed banks may acquire otherbanks in any state,subject to certain deposit concentration limits and other conditions,pursuant to theRiegle-Neal Interstate Banking a

147、nd Branching Efficiency Act of 1994,as amended by the Dodd-Frank Act.Inaddition,the Dodd-Frank Act authorizes a state-chartered bank,such as the Bank,to establish new brancheson an interstate basis to the same extent a bank chartered by the host state may establish branches.Activities and Investment

148、s of National Banking Associations.National banking associations mustcomply with the National Bank Act and the regulations promulgated thereunder by the OCC,which limit theactivities of national banking associations to those that are deemed to be part of,or incidental to,thebusiness of banking.Activ

149、ities that are part of,or incidental to,the business of banking include takingdeposits,borrowing and lending money and discounting or negotiating promissory notes,drafts,bills ofexchange,and other evidences of debt.Subsidiaries of national banking associations generally may onlyengage in activities

150、permissible for the parent national bank.The Dodd-Frank Act bars the Bank fromengaging in proprietary trading and from sponsoring and investing in hedge funds and private equity funds,except as permitted under certain limited circumstances.Lending Restrictions.Federal law limits a banks authority to

151、 extend credit to its directors,executiveofficers and 10%shareholders,as well as to entities controlled by such persons.Among other things,extensions of credit to insiders are required to be made on terms that are substantially the same as,and followcredit underwriting procedures that are not less s

152、tringent than,those prevailing for comparable transactionswith unaffiliated persons.Also,the terms of such extensions of credit may not involve more than the normalrisk of repayment or present other unfavorable features and may not exceed certain limitations on the amountof credit extended to such p

153、ersons,individually and in the aggregate,which limits are based,in part,on theamount of the banks capital.The Dodd-Frank Act explicitly provides that an extension of credit to an insiderincludes credit exposure arising from a derivatives transaction,repurchase agreement,reverse repurchaseagreement,s

154、ecurities lending transaction or securities borrowing transaction.Additionally,the Dodd-Frank Actrequires that asset sale transactions with insiders must be on market terms,and if the transaction representsmore than 10%of the capital and surplus of the Bank,be approved by a majority of the disintere

155、sted directorsof the Bank.Brokered Deposits.Section 29 of the FDIA and FDIC regulations generally limit the ability of aninsured depository institution to accept,renew or roll over any brokered deposit unless the institutions capitalcategory is well capitalized or,with the FDICs approval,adequately

156、capitalized.Depository institutionsthat have brokered deposits in excess of 10%of total assets will be subject to increased FDIC depositinsurance premium assessments.However,for institutions that are well capitalized and have a CAMELScomposite rating of 1 or 2,reciprocal deposits are deducted from b

157、rokered deposits.Community Reinvestment Act.The Community Reinvestment Act(the CRA)requires the OCC toevaluate the Banks performance in helping to meet the credit needs of the entire communities it serves,including low and moderate-income neighborhoods,consistent with its safe and sound banking oper

158、ations,andto take this record into consideration when evaluating certain applications.The FDICs CRA regulations are6generally based upon objective criteria of the performance of institutions under three key assessment tests:(i)a lending test,to evaluate the institutions record of making loans in its

159、 service areas;(ii)an investmenttest,to evaluate the institutions record of investing in community development projects,affordable housing,and programs benefiting low or moderate income individuals and businesses;and(iii)a service test,toevaluate the institutions delivery of services through its bra

160、nches,ATMs,and other offices.Failure of aninstitution to receive at least a Satisfactory rating could inhibit the Bank or the Company from undertakingcertain activities,including engaging in activities permitted as a financial holding company under theGramm-Leach-Bliley Act of 1999(the GLBA)and acqu

161、isitions of other financial institutions.The Bankcurrently has an Outstanding CRA rating.Capital Adequacy and Safety and SoundnessRegulatory Capital Requirements.The FRB and the OCC have issued substantially similar risk-basedand leverage capital guidelines applicable to United States banking organi

162、zations.These rules are intended toreflect the relationship between the banking organizations capital and the degree of risk associated with itsoperations based on transactions recorded on-balance sheet as well as off-balance sheet items.The FRB andthe OCC may from time to time require that a bankin

163、g organization maintain capital above the minimumlevels discussed below,due to the banking organizations financial condition or actual or anticipated growth.The capital adequacy rules define qualifying capital instruments and specify minimum amounts of capitalas a percentage of assets that banking o

164、rganizations are required to maintain.Common equity Tier I capitalgenerally includes common stock and related surplus,retained earnings and,in certain cases and subject tocertain limitations,minority interest in consolidated subsidiaries,less goodwill,other non-qualifying intangibleassets and certai

165、n other deductions.Tier I capital for banks and bank holding companies generally consists ofthe sum of common equity Tier I capital,non-cumulative perpetual preferred stock,and related surplus and,incertain cases and subject to limitations,minority interest in consolidated subsidiaries that does not

166、 qualify ascommon equity Tier I capital,less certain deductions.Tier II capital generally consists of hybrid capitalinstruments,perpetual debt and mandatory convertible debt securities,cumulative perpetual preferred stock,term subordinated debt and intermediate-term preferred stock,and,subject to li

167、mitations,allowances for loanlosses.The sum of Tier I and Tier II capital less certain required deductions represents qualifying totalrisk-based capital.Prior to the effectiveness of certain provisions of the Dodd-Frank Act,bank holdingcompanies were permitted to include trust preferred securities a

168、nd cumulative perpetual preferred stock inTier I capital,subject to limitations.However,the FRBs capital rule applicable to bank holding companiespermanently grandfathers non-qualifying capital instruments,including trust preferred securities,issued beforeMay 19,2010 by depository institution holdin

169、g companies with less than$15 billion in total assets as ofDecember 31,2009,subject to a limit of 25%of Tier I capital.In addition,under rules that became effectiveJanuary 1,2015,accumulated other comprehensive income(positive or negative)must be reflected in Tier Icapital;however,the Company was pe

170、rmitted to make a one-time,permanent election to continue to excludeaccumulated other comprehensive income from capital.The Company has made this election.Under the capital rules,risk-based capital ratios are calculated by dividing common equity Tier I,Tier Iand total risk-based capital,respectively

171、,by risk-weighted assets.Assets and off-balance sheet creditequivalents are assigned a risk weight based primarily on relative credit risk.Under the FRBs capital rules applicable to the Company and the OCCs capital rules applicable to theBank,the Company and the Bank are each required to maintain a

172、minimum common equity Tier I capital torisk-weighted assets ratio of 4.5%,a minimum Tier I capital to risk-weighted assets ratio of 6%,a minimumtotal capital to risk-weighted assets ratio of 8%and a minimum leverage ratio of 4%.Additionally,subject toa transition schedule,these rules require an inst

173、itution to establish a capital conservation buffer of commonequity Tier I capital in an amount above the minimum risk-based capital requirements for adequatelycapitalized institutions equal to 2.5%of total risk weighted assets,or face restrictions on the ability to paydividends,pay discretionary bon

174、uses,and to engage in share repurchases.Under the FRBs rules,a bank holding company,such as the Company,is considered well capitalizedif the bank holding company(i)has a total risk based capital ratio of at least 10%,(ii)has a Tier I risk-basedcapital ratio of at least 6%,and(iii)is not subject to a

175、ny written agreement order,capital directive or promptcorrective action directive to meet and maintain a specific capital level for any capital measure.Under the7OCCs rules,an OCC supervised institution is considered well capitalized if it(i)has a total risk-basedcapital ratio of 10.0%or greater;(ii

176、)a Tier I risk-based capital ratio of 8.0%or greater;(iii)a common Tier Iequity ratio of at least 6.5%or greater,(iv)a leverage capital ratio of 5.0%or greater;and(v)is not subjectto any written agreement,order,capital directive,or prompt corrective action directive to meet and maintain aspecific ca

177、pital level for any capital measure.Generally,a bank,upon receiving notice that it is not adequately capitalized(i.e.,that it isundercapitalized),becomes subject to the prompt corrective action provisions of Section 38 of FDIA that,for example,(i)restrict payment of capital distributions and managem

178、ent fees,(ii)require that is federal bankregulator monitor the condition of the institution and its efforts to restore its capital,(iii)require submission ofa capital restoration plan,(iv)restrict the growth of the institutions assets and(v)require prior regulatoryapproval of certain expansion propo

179、sals.A bank that is required to submit a capital restoration plan mustconcurrently submit a performance guarantee by each company that controls the bank.A bank that iscritically undercapitalized(i.e.,has a ratio of tangible equity to total assets that is equal to or less than2.0%)will be subject to

180、further restrictions,and generally will be placed in conservatorship or receivershipwithin 90 days.Information concerning the Company and the Bank with respect to capital requirements is incorporatedby reference from Item 7.Managements Discussion and Analysis of Financial Condition and Results ofOpe

181、rations Capital Resources,and Item 8.Financial Statements and Supplementary Data,in the sectionentitled Note 20,Regulatory Capital Requirements.The Company and the Bank are considered well capitalized under all regulatory definitions.Safety and Soundness Standards.The FDIA requires the federal bank

182、regulatory agencies to prescribestandards,by regulations or guidelines,relating to internal controls,information systems and internal auditsystems,loan documentation,credit underwriting,interest rate risk exposure,asset growth,asset quality,earnings,stock valuation and compensation,fees and benefits

183、,and such other operational and managerialstandards as the agencies deem appropriate.Guidelines adopted by the federal bank regulatory agenciesestablish general standards relating to internal controls and information systems,internal audit systems,loandocumentation,credit underwriting,interest rate

184、exposure,asset growth,asset quality,earnings andcompensation,fees and benefits.In general,these guidelines require,among other things,appropriate systemsand practices to identify and manage the risk and exposures specified in the guidelines.The guidelinesprohibit excessive compensation as an unsafe

185、and unsound practice and describe compensation as excessivewhen the amounts paid are unreasonable or disproportionate to the services performed by an executive officer,employee,director or principal stockholder.In addition,the federal banking agencies adopted regulations thatauthorize,but do not req

186、uire,an agency to order an institution that has been given notice by an agency that itis not satisfying any of such safety and soundness standards to submit a compliance plan.If,after being sonotified,an institution fails to submit an acceptable compliance plan or fails in any material respect toimp

187、lement an acceptable compliance plan,the agency must issue an order directing action to correct thedeficiency and may issue an order restricting asset growth,requiring an institution to increase its ratio oftangible equity to assets or directing other actions of the types to which an undercapitalize

188、d institution issubject under the prompt corrective action provisions of the FDIA.See Regulatory CapitalRequirements above.If an institution fails to comply with such an order,the agency may seek to enforcesuch order in judicial proceedings and to impose civil money penalties.Dividend RestrictionsTh

189、e Company is a legal entity separate and distinct from its subsidiaries.The revenue of the Company(on a parent-only basis)is derived primarily from interest and dividends paid to it by the Bank.The right ofthe Company,and consequently the right of shareholders of the Company,to participate in any di

190、stribution ofthe assets or earnings of the Bank through the payment of such dividends or otherwise is necessarily subjectto the prior claims of creditors of the Bank(including depositors),except to the extent that certain claims ofthe Company in a creditor capacity may be recognized.Restrictions on

191、Bank Holding Company Dividends.The FRB has the authority to prohibit bank holdingcompanies from paying dividends if such payment is deemed to be an unsafe or unsound practice.The FRBhas indicated generally that it may be an unsafe or unsound practice for bank holding companies to pay8dividends unles

192、s the bank holding companys net income over the preceding year is sufficient to fund thedividends and the expected rate of earnings retention is consistent with the organizations capital needs,assetquality and overall financial condition.Further,the Companys ability to pay dividends is restricted if

193、 it doesnot maintain the capital conservation buffer.See Capital Adequacy and Safety andSoundness Regulatory Capital Requirements above.Under Maine law,a corporations Board of Directors may declare,and the corporation may pay,dividends on its outstanding shares,in cash or other property,generally on

194、ly out of the corporationsunreserved and unrestricted earned surplus,or out of the unreserved and unrestricted net earnings of thecurrent fiscal year and the next preceding fiscal year taken as a single period,except under certaincircumstances,including when the corporation is insolvent,or when the

195、payment of the dividend would renderthe corporation insolvent or when the declaration would be contrary to the corporations charter.Restrictions on Bank Dividends.National banks generally may not declare a dividend in excess of thebanks undivided profits and,absent OCC approval,if the total amount o

196、f dividends declared by the nationalbank in any calendar year exceeds the total of the national banks retained net income of that year to datecombined with its retained net income for the preceding two years.National banks also are prohibited fromdeclaring or paying any dividend if,after making the

197、dividend,the national bank would be consideredundercapitalized(as defined by reference to other OCC regulations).The OCC has the authority to use itsenforcement powers to prohibit a national bank,such as the Bank,from paying dividends if,in its opinion,thepayment of dividends would constitute an uns

198、afe or unsound practice.Certain Transactions by Bank Holding Companies with their AffiliatesThere are various statutory restrictions on the extent to which bank holding companies and theirnon-bank subsidiaries may borrow,obtain credit from or otherwise engage in covered transactions withtheir insure

199、d depository institution subsidiaries.The Dodd-Frank Act amended the definition of affiliate toinclude an investment fund for which the depository institution or one of its affiliates is an investment adviser.An insured depository institution(and its subsidiaries)may not lend money to,or engage in c

200、overedtransactions with,its non-depository institution affiliates if the aggregate amount of covered transactionsoutstanding involving the bank,plus the proposed transaction exceeds the following limits:(i)in the case ofany one such affiliate,the aggregate amount of covered transactions of the insur

201、ed depository institution andits subsidiaries cannot exceed 10%of the capital stock and surplus of the insured depository institution;and(ii)in the case of all affiliates,the aggregate amount of covered transactions of the insured depositoryinstitution and its subsidiaries cannot exceed 20%of the ca

202、pital stock and surplus of the insured depositoryinstitution.For this purpose,covered transactions are defined by statute to include a loan or extension ofcredit to an affiliate,a purchase of or investment in securities issued by an affiliate,a purchase of assets froman affiliate unless exempted by

203、the FRB,the acceptance of securities issued by an affiliate as collateral for aloan or extension of credit to any person or company,the issuance of a guarantee,acceptance or letter ofcredit on behalf of an affiliate,securities borrowing or lending transactions with an affiliate that creates acredit

204、exposure to such affiliate,or a derivatives transaction with an affiliate that creates a credit exposure tosuch affiliate.Covered transactions are also subject to certain collateral security requirements.Coveredtransactions as well as other types of transactions between a bank and a bank holding com

205、pany must be onmarket terms and not otherwise unduly favorable to the holding company or an affiliate of the holdingcompany.Moreover,the Bank Holding Company Act Amendments of 1970 provide that,to furthercompetition,a bank holding company and its subsidiaries are prohibited from engaging in certain

206、tyingarrangements in connection with any extension of credit,lease or sale of property of any kind,or furnishingof any service.Consumer Protection RegulationThe Company and the Bank are subject to federal and state laws designed to protect consumers andprohibit unfair or deceptive business practices

207、,including the Equal Credit Opportunity Act,the Fair HousingAct,the Home Ownership Protection Act,the Fair Credit Reporting Act,as amended by the Fair and AccurateCredit Transactions Act of 2003(the FACT Act),the GLBA,the Truth in Lending Act,the CRA,the HomeMortgage Disclosure Act,the Real Estate S

208、ettlement Procedures Act,the National Flood Insurance Act andvarious state law counterparts.These laws and regulations mandate certain disclosure requirements and9regulate the manner in which financial institutions must interact with customers when taking deposits,makingloans,collecting loans and pr

209、oviding other services.Further,the Dodd-Frank Act established the CFPB,whichhas the responsibility for making rules and regulations under the federal consumer protection laws relating tofinancial products and services.The CFPB also has a broad mandate to prohibit unfair,deceptive or abusiveacts and

210、practices and is specifically empowered to require certain disclosures to consumers and draft modeldisclosure forms.Failure to comply with consumer protection laws and regulations can subject financialinstitutions to enforcement actions,fines and other penalties.The OCC examines the Bank for complia

211、ncewith CFPB rules and enforces CFPB rules with respect to the Bank.Mortgage Reform.The Dodd-Frank Act prescribes certain standards that mortgage lenders mustconsider before making a residential mortgage loan,including verifying a borrowers ability to repay suchmortgage loan,and allows borrowers to

212、assert violations of certain provisions of the Truth in Lending Act as adefense to foreclosure proceedings.Under the Dodd-Frank Act,prepayment penalties are prohibited for certainmortgage transactions and creditors are prohibited from financing insurance policies in connection with aresidential mort

213、gage loan or home equity line of credit.In addition,the Dodd-Frank Act prohibits mortgageoriginators from receiving compensation based on the terms of residential mortgage loans and generally limitsthe ability of a mortgage originator to be compensated by others if compensation is received from a co

214、nsumer.The Dodd-Frank Act requires mortgage lenders to make additional disclosures prior to the extension of credit,in each billing statement and for negative amortization loans and hybrid adjustable rate mortgages.Privacy and Customer Information Security.The GLBA requires financial institutions to

215、 implementpolicies and procedures regarding the disclosure of nonpublic personal information about consumers tononaffiliated third parties.In general,the Bank must provide its customers with an initial and annualdisclosure that explains its policies and procedures regarding the disclosure of such no

216、npublic personalinformation,and,except as otherwise required or permitted by law,the Bank is prohibited from disclosingsuch information except as provided in such policies and procedures.However,an annual disclosure is notrequired to be provided by a financial institution if the financial institutio

217、n only discloses information underexceptions from GLBA that do not require an opt out to be provided and if there has been no change in itsprivacy policies and practices since its most recent disclosure provided to consumers.The GLBA also requiresthat the Bank develop,implement and maintain a compre

218、hensive written information security programdesigned to ensure the security and confidentiality of customer information(as defined under GLBA),toprotect against anticipated threats or hazards to the security or integrity of such information;and to protectagainst unauthorized access to or use of such

219、 information that could result in substantial harm orinconvenience to any customer.The Bank is also required to send a notice to customers whose sensitiveinformation has been compromised if unauthorized use of this information is reasonably possible.Most states,including the states where the Bank op

220、erates,have enacted legislation concerning breaches of data securityand Congress is considering federal legislation that would require consumer notice of data security breaches.Pursuant to the FACT Act,the Bank must develop and implement a written identity theft prevention programto detect,prevent,a

221、nd mitigate identity theft in connection with the opening of certain accounts or certainexisting accounts.Additionally,the FACT Act amends the Fair Credit Reporting Act to generally prohibit aperson from using information received from an affiliate to make a solicitation for marketing purposes to ac

222、onsumer,unless the consumer is given notice and a reasonable opportunity and a reasonable and simplemethod to opt out of the making of such solicitations.Anti-Money LaunderingThe Bank Secrecy Act.Under the Bank Secrecy Act(BSA),a financial institution,is required to havesystems in place to detect ce

223、rtain transactions,based on the size and nature of the transaction.Financialinstitutions are generally required to report to the United States Treasury any cash transactions involving morethan$10,000.In addition,financial institutions are required to file suspicious activity reports for anytransacti

224、on or series of transactions that involve more than$5,000 and which the financial institution knows,suspects or has reason to suspect involves illegal funds,is designed to evade the requirements of the BSA orhas no lawful purpose.The Uniting and Strengthening America by Providing Appropriate Tools R

225、equired toIntercept and Obstruct Terrorism Act of 2001(the USA PATRIOT Act),which amended the BSA,togetherwith the implementing regulations of various federal regulatory agencies,has caused financial institutions,such as the Bank,to adopt and implement additional policies or amend existing policies

226、and procedures with10respect to,among other things,anti-money laundering compliance,suspicious activity,currency transactionreporting,customer identity verification and customer risk analysis.In evaluating an application underSection 3 of the BHCA to acquire a bank or an application under the Bank M

227、erger Act to merge banks oraffect a purchase of assets and assumption of deposits and other liabilities,the applicable federal bankingregulator must consider the anti-money laundering compliance record of both the applicant and the target.Inaddition,under the USA PATRIOT Act financial institutions a

228、re required to take steps to monitor theircorrespondent banking and private banking relationships as well as,if applicable,their relationships withshell banks.OFAC.The U.S.has imposed economic sanctions that affect transactions with designated foreigncountries,nationals and others.These sanctions,wh

229、ich are administered by the U.S.Treasurys Office ofForeign Assets Control(OFAC),take many different forms.Generally,however,they contain one or moreof the following elements:(i)restrictions on trade with or investment in a sanctioned country,includingprohibitions against direct or indirect imports f

230、rom and exports to a sanctioned country and prohibitions onU.S.persons engaging in financial or other transactions relating to a sanctioned country or with certaindesignated persons and entities;(ii)a blocking of assets in which the government or specially designatednationals of the sanctioned count

231、ry have an interest,by prohibiting transfers of property subject to U.S.jurisdiction(including property in the possession or control of U.S.persons);and(iii)restrictions ontransactions with or involving certain persons or entities.Blocked assets(for example,property and bankdeposits)cannot be paid o

232、ut,withdrawn,set off or transferred in any manner without a license from OFAC.Failure to comply with these sanctions could have serious legal and reputational consequences for theCompany.Regulation of Other ActivitiesVolcker Rule Restrictions on Proprietary Trading and Sponsorship of Hedge Funds and

233、 Private EquityFunds.The Dodd-Frank Act bars banking organizations,such as the Company and the Bank,from engagingin proprietary trading and from sponsoring and investing in hedge funds and private equity funds,except aspermitted under certain circumstances,in a provision commonly referred to as the

234、Volcker Rule.Under theDodd-Frank Act,proprietary trading generally means trading by a banking entity or its affiliate for its tradingaccount.Hedge funds and private equity funds are described by the Dodd-Frank Act as funds that would beregistered under the 1940 Act but for certain enumerated exempti

235、ons.The Volcker Rule restrictions apply tothe Company,the Bank and all of their subsidiaries and affiliates.Legal ContingenciesIn the normal course of business,the Company and its subsidiaries are subject to pending and threatenedlegal actions.Although the Company is not able to predict the outcome

236、of such actions,after reviewingpending and threatened actions with counsel,management believes that based on the information currentlyavailable the outcome of such actions,individually or in the aggregate,will not have a material adverse effecton the Companys consolidated financial position as a who

237、le.Reserves are established for legal claims only when losses associated with the claims are judged to beprobable,and the loss can be reasonably estimated.In many lawsuits and arbitrations,it is not possible todetermine whether a liability has been incurred or to estimate the ultimate or minimum amo

238、unt of that liabilityuntil the case is close to resolution,in which case a reserve will not be recognized until that time.11Item 1A.Risk FactorsIf our allowance for loan losses is not adequate to cover actual loan losses,our earnings could decrease.We make various assumptions and judgments about the

239、 collectability of our loan portfolio and provide anallowance for probable loan losses based on a number of factors.On a monthly basis,management reviewsthe allowance for loan losses to assess recent asset quality trends and impact on the Companys financialcondition.On a quarterly basis,the allowanc

240、e for loan losses is brought before the Banks Board of Directorsfor discussion,review,and approval.If our assumptions are incorrect,the allowance for loan losses may notbe sufficient to cover the losses we could experience,which would have an adverse effect on operating results,and may also cause us

241、 to increase the allowance for loan losses in the future.In addition,bank regulatorsperiodically review our allowance for loan losses and may require us to increase our provisions for creditlosses or recognize further loan charge-offs.Any increase in our allowance for loan losses or loan charge-offs

242、as required by regulatory authorities could have a material adverse effect on our consolidated results ofoperations and financial condition.If additional amounts are provided to the allowance for loan losses,ourearnings could decrease.Our loans are concentrated in certain areas of Maine and adverse

243、conditions in those markets couldadversely affect our operations.We are exposed to real estate and economic factors throughout Maine,as 85%of our loan portfolio isconcentrated among borrowers in Maine,with higher concentrations of exposure in Cumberland,Hancock,Kennebec,Knox,and Penobscot counties.F

244、urther,because a substantial portion of the loan portfolio issecured by real estate in this area,the value of the associated collateral is also subject to regional real estatemarket conditions.Adverse economic,political or business developments or natural hazards may affect theseareas and the abilit

245、y of property owners in these areas to make payments of principal and interest on theunderlying mortgages.If these regions experience adverse economic,political or business conditions,wewould likely experience higher rates of loss and delinquency on these loans than if the loans were moregeographica

246、lly diverse.We experience strong competition within our markets,which may impact our profitability.Competition in the banking and financial services industry is strong.In our market areas,we compete forloans,deposits and other financial products and services with large financial companies,local inde

247、pendentbanks,thrift institutions,savings institutions,mortgage brokerage firms,credit unions,finance companies,mutual funds,insurance companies and brokerage and investment banking firms operating locally as well asnationally.Some of these competitors have substantially greater resources and lending

248、 limits than those of theBank and may offer services that the Bank does not or cannot provide.There is also increased competitionby out-of-market competitors through the internet.Our long-term success depends on the ability of oursubsidiaries to compete successfully with other financial institutions

249、 in their service areas.Because wemaintain a smaller staff and have fewer financial and other resources than larger institutions with which wecompete,we may be limited in our ability to attract customers.If we are unable to attract and retaincustomers,we may be unable to achieve growth in the loan a

250、nd core deposit portfolios,and our results ofoperations and financial condition may be negatively impacted.Interest rate volatility may reduce our profitability.Our profitability depends to a large extent upon our net interest income,which is the difference betweeninterest income on interest-earning

251、 assets,such as loans and investments,and interest expense related tointerest-bearing liabilities,such as deposits and borrowed funds.Net interest income can be affectedsignificantly by changes in market interest rates.In particular,changes in relative interest rates may reduce ournet interest incom

252、e as the difference between interest income and interest expense decreases.As a result,wehave adopted asset and liability management policies to minimize the potential adverse effects of changes ininterest rates on net interest income,primarily by altering the mix and maturity of loans,investments a

253、ndfunding sources.However,there can be no assurance that a change in interest rates will not negatively impactour results of operations or financial condition.Because market interest rates may change by differingmagnitudes and at different times,significant changes in interest rates over an extended

254、 period of time could12reduce overall net interest income.An increase in interest rates could also have a negative impact on ourresults of operations by reducing the ability of borrowers to repay their current loan obligations,which couldnot only result in increased loan defaults,foreclosures and wr

255、ite-offs,but also necessitate further increases toour allowance for loan losses.Our cost of funds for banking operations may increase as a result of general economic conditions,interestrates and competitive pressures.The Bank has traditionally obtained funds principally through deposits and borrowin

256、gs.As a generalmatter,deposits are a less costly source of funds than borrowings because interest rates paid for deposits aretypically less than interest rates paid for borrowings.If,as a result of general economic conditions,marketinterest rates,competitive pressures or otherwise,total deposits at

257、the Bank decrease relative to our overallbanking operations,we may have to rely more heavily on borrowings as a source of funds in the future.Potential downgrades of U.S.government securities by one or more of the credit ratings agencies couldhave a material adverse effect on our operations,earnings

258、 and financial condition.A possible future downgrade of the sovereign credit ratings of the U.S.government and a decline in theperceived creditworthiness of U.S.government-related obligations could impact our ability to obtain fundingthat is collateralized by affected instruments,as well as affect t

259、he pricing of that funding when it is available.A downgrade may also adversely affect the market value of such instruments.We cannot predict if,whenor how any changes to the credit ratings or perceived creditworthiness of these organizations will affecteconomic conditions.Such ratings actions could

260、result in a significant adverse impact on us.Among otherthings,a further downgrade in the U.S.governments credit rating could adversely impact the value of oursecurities portfolio and may trigger requirements that the Company post additional collateral for trades relativeto these securities.A downgr

261、ade of the sovereign credit ratings of the U.S.government or the credit ratings ofrelated institutions,agencies or instruments would significantly exacerbate the other risks to which we aresubject and any related adverse effects on the business,financial condition and results of operations.We are su

262、bject to liquidity risk.Liquidity risk is the risk of potential loss if we are unable to meet our funding requirements at areasonable cost.Our liquidity could be impaired by an inability to access the capital markets or by unforeseenoutflows of cash.This situation may arise due to circumstances that

263、 we may be unable to control,such as ageneral market disruption or an operational problem that affects third parties or us.Market changes may adversely affect demand for our services and impact results of operations.Channels for servicing our customers are evolving rapidly,with less reliance on trad

264、itional branchfacilities,more use of online and mobile banking,and increased demand for universal bankers and otherrelationship managers who can service multiples product lines.We compete with larger providers that arerapidly evolving their service offerings and escalating the costs of evolving the

265、Banks efforts to keep pace.We have a process for evaluating the profitability of our branch system and other office and operationalfacilities.The identification of unprofitable operations and facilities can lead to restructuring charges andintroduce the risk of disruptions to revenues and customer r

266、elationships.Prepayments of loans may negatively impact our business.Generally,our customers may prepay the principal amount of their outstanding loans at any time.Thespeeds at which such prepayments occur,as well as the size of such prepayments,are within our customersdiscretion.Fluctuations in int

267、erest rates,in certain circumstances,may also lead to high levels of loanprepayments,which may also have an adverse impact on our net interest income.If customers prepay theprincipal amount of their loans,and we are unable to lend those funds to other borrowers or invest the fundsat the same or high

268、er interest rates,our interest income will be reduced.A significant reduction in interestincome could have a negative impact on our results of operations and financial condition.Our banking business is highly regulated,and we may be adversely affected by changes in law andregulation.We are subject t

269、o regulation and supervision by the FRB,and the Bank is subject to regulation andsupervision by the OCC and the FDIC.Federal laws and regulations govern numerous matters affecting us,13including changes in the ownership or control of banks and bank holding companies,maintenance of adequatecapital an

270、d the financial condition of a financial institution,permissible types,amounts and terms ofextensions of credit and investments,permissible nonbanking activities,the level of reserves against depositsand restrictions on dividend payments.The OCC possesses the power to issue cease and desist orders t

271、oprevent or remedy unsafe or unsound practices or violations of law by banks subject to their regulation,andthe FRB possesses similar powers with respect to bank holding companies.These and other restrictions limitthe manner in which we may conduct business and obtain financing.Our business is highl

272、y regulated and the laws,rules,regulations,and supervisory guidance and policiesapplicable to us are subject to regular modification and change.These changes could adversely and materiallyimpact us.The Dodd-Frank Act instituted major changes to the banking and financial institutions regulatoryregime

273、s in light of the performance of and government intervention in the financial services sector.Otherchanges to statutes,regulations,or regulatory policies,including changes in interpretation or implementationof statutes,regulations,or policies,could subject us to additional costs,limit the types of f

274、inancial servicesand products we may offer,and/or increase the ability of non-banks to offer competing financial services andproducts,among other things.Failure to comply with laws,regulations,policies or supervisory guidance couldresult in enforcement and other legal actions by federal or state aut

275、horities,including criminal and civilpenalties,the loss of FDIC insurance,revocation of a banking charter,other sanctions by regulatory agencies,civil money penalties,and/or reputational damage,which could have a material adverse effect on our business,financial condition,and results of operations.S

276、ee Item 1.Business-Supervision and Regulation.We have become subject to new capital and liquidity standards that require banks and bank holdingcompanies to maintain more and higher quality capital and greater liquidity that has historically beenthe case.We became subject to new capital requirements

277、in 2015.These new standards,which now apply and willbe fully phased-by 2018,force bank holding companies and their bank subsidiaries to maintain substantiallyhigher levels of capital as a percentage of their assets,with a greater emphasis on common equity as opposedto other components of capital.The

278、 need to maintain more and higher quality capital,as well as greaterliquidity,and generally increased regulatory scrutiny with respect to capital levels,may at some point limitour business activities,including lending,and our ability to expand.It could also result in our being requiredto take steps

279、to increase our regulatory capital and may dilute shareholder value or limit our ability to paydividends or otherwise return capital to our investors through stock repurchases.Pursuant to the Dodd-FrankAct,we were permitted to make a one-time,permanent election to continue to exclude accumulated oth

280、ercomprehensive income from capital.We made this election.We face significant legal risks,both from regulatory investigations and proceedings and from privateactions brought against us.From time to time,we are named as a defendant or are otherwise involved in various legal proceedings,including clas

281、s actions and other litigation or disputes with third parties.There is no assurance that litigationwith private parties will not increase in the future.Future actions against us may result in judgments,settlements,fines,penalties or other results adverse to us,which could materially adversely affect

282、 ourbusiness,financial condition or results of operations,or cause serious reputational harm to us.As a participantin the financial services industry,we are exposed to a high level of potential litigation related to ourbusinesses and operations.Although we maintain insurance,the scope of this covera

283、ge may not provide uswith full,or even partial,coverage in any particular case.As a result,a judgment against us in any suchlitigation could have a material adverse effect on our financial condition and results of operation.Our businesses and operations are also subject to increasing regulatory over

284、sight and scrutiny,which maylead to additional regulatory investigations or enforcement actions.These and other initiatives from federaland state officials may subject us to further judgments,settlements,fines or penalties,or cause us to berequired to restructure our operations and activities,all of

285、 which could lead to reputational issues,or higheroperational costs,thereby reducing our revenue.14We may incur fines,penalties and other negative consequences from regulatory violations,possibly eveninadvertent or unintentional violations.The financial services industry is subject to intense scruti

286、ny from bank supervisors in the examinationprocess and aggressive enforcement of federal and state regulations,particularly with respect tomortgage-related practices and other consumer compliance matters,and compliance with anti-moneylaundering,Bank Secrecy Act and Office of Foreign Assets Control r

287、egulations,and economic sanctionsagainst certain foreign countries and nationals.Enforcement actions may be initiated for violations of laws andregulations and unsafe or unsound practices.We maintain systems and procedures designed to ensure that wecomply with applicable laws and regulations;however

288、,some legal/regulatory frameworks provide for theimposition of fines or penalties for noncompliance even though the noncompliance was inadvertent orunintentional and even though there were systems and procedures designed to ensure compliance in place atthe time.Failure to comply with these and other

289、 regulations,and supervisory expectations related thereto,mayresult in fines,penalties,lawsuits,regulatory sanctions,reputation damage,or restrictions on our business.We are subject to numerous laws designed to protect consumers,including the Community ReinvestmentAct and fair lending laws,and failu

290、re to comply with these laws could lead to a wide variety of sanctions.The Community Reinvestment Act,the Equal Credit Opportunity Act,the Fair Housing Act and other fairlending laws and regulations impose community investment and nondiscriminatory lending requirements onfinancial institutions.The C

291、onsumer Financial Protection Bureau,the Department of Justice and other federalagencies are responsible for enforcing these laws and regulations.A successful regulatory challenge to aninstitutions performance under the Community Reinvestment Act,the Equal Credit Opportunity Act,the FairHousing Act o

292、r other fair lending laws and regulations could result in a wide variety of sanctions,includingdamages and civil money penalties,injunctive relief,restrictions on mergers and acquisitions,restrictions onexpansion and restrictions on entering new business lines.Private parties may also have the abili

293、ty tochallenge an institutions performance under fair lending laws in private class action litigation.Such actionscould have a material adverse effect on our business,financial condition and results of operations.Our loan portfolio includes commercial real estate and commercial loans,which are gener

294、ally riskier thanother types of loans.At December 31,2016,our commercial real estate and commercial loan portfolios comprised 56%ofour total loan balances.Commercial loans generally carry larger loan balances and involve a higher risk ofnonpayment or late payment than residential mortgage loans.Thes

295、e loans may lack standardized terms andmay include a balloon payment feature.The ability of a borrower to make or refinance a balloon paymentmay be affected by a number of factors,including the financial condition of the borrower,prevailing economicconditions and prevailing interest rates.Repayment

296、of these loans is generally more dependent on theeconomy and the successful operation of a business.Because of the risks associated with commercial loans,we may experience higher rates of default than if the portfolio were more heavily weighted toward residentialmortgage loans.Higher rates of defaul

297、t could have an adverse effect on our financial condition and results ofoperations.As of December 31,2016,the most significant industry concentration within our loan portfolio wasnon-residential building operators(operators of commercial and industrial buildings,retail establishments,theaters,banks

298、and insurance buildings),which was 12%of our total loans and 31%of our total commercialreal estate portfolio.As of December 31,2016,we had no other industry concentrations in excess of 10%oftotal loans.We may incur significant losses as a result of ineffective risk management processes and strategie

299、s.We seek to monitor and control our risk exposure through a risk and control framework encompassing avariety of separate but complementary financial,credit,operational,compliance and legal reporting systems,internal controls,management review processes and other mechanisms.While we employ a broad a

300、nddiversified set of risk monitoring and risk mitigation techniques,those techniques and the judgments thataccompany their application may not be effective and may not anticipate every economic and financial15outcome in all market environments or the specifics and timing of such outcomes.Market cond

301、itions over thelast several years have involved unprecedented dislocations and highlight the limitations inherent in usinghistorical data to manage risk.We may be unable to attract and retain key personnel.Our success depends,in large part,on our ability to attract and retain key personnel.Competiti

302、on forqualified personnel in the financial services industry can be intense and we may not be able to hire or retainthe key personnel that we depend upon for success.The unexpected loss of services of one or more of ourkey personnel could have a material adverse impact on our business because of the

303、ir skills,knowledge of themarkets in which we operate,years of industry experience and the difficulty of promptly finding qualifiedreplacement personnel.We have credit and counterparty risk inherent in our securities portfolio and the soundness of otherfinancial institutions that could adversely aff

304、ect us.Our ability to engage in routine funding transactions could be adversely affected by the actions andcommercial soundness of other financial institutions.Financial services institutions are interrelated as a resultof trading,clearing,counterparty and other relationships.We maintain a diversifi

305、ed securities portfolio andhave exposure to many different counterparties,and we routinely execute transactions with counterparties inthe financial industry,including brokers and dealers,other commercial banks,investment banks,mutual andhedge funds,and other financial institutions.As a result,defaul

306、ts by,or even rumors or questions about,oneor more financial services institutions,or the financial services industry generally,could lead to market-wideliquidity problems and losses or defaults by us or by other institutions and organizations.Many of thesetransactions expose us to credit risk in th

307、e event of default of our counterparty or client.Furthermore,ourcredit risk may be exacerbated when the collateral held by us cannot be liquidated or is liquidated at pricesnot sufficient to recover the full amount of the financial instrument exposure due to us.There is no assurancethat any such los

308、ses would not materially and adversely affect our results of operations.We believe that we have adequately reviewed our investment securities for impairment and we did notrecognize any other-than-temporary impairments on our investment securities portfolio in 2016.However,overtime,the economic and m

309、arket environment may provide additional insight regarding the fair value of certainsecurities,which could change our judgment regarding impairment.In addition,if the counter-party shoulddefault,become insolvent,declare bankruptcy,or otherwise cease to exist,the value of our investment may beimpaire

310、d.This could result in realized losses relating to other-than-temporary declines being charged againstfuture income.Given the significant judgments involved,there is risk that material other-than-temporaryimpairments may be charged to income in future periods,resulting in realized losses.We could be

311、 held responsible for environmental liabilities of properties we acquired through foreclosure.In the course of business,we may acquire,through foreclosure,properties securing loans originated orpurchased that are in default.Particularly in commercial real estate lending,there is a risk that material

312、environmental violations could be discovered on these properties.In this event,we might be required toremedy these violations at the affected properties at our sole cost and expense.The cost of remedial actioncould substantially exceed the value of affected properties.We may not have adequate remedi

313、es against theprior owner or other responsible parties and could find it difficult or impossible to sell the affected properties.These events could have an adverse effect on our financial condition and results of operations.We are subject to reputational risk.We are dependent on our reputation withi

314、n our market area,as a trusted and responsible financialcompany,for all aspects of our relationships with customers,employees,vendors,third-party serviceproviders,and others,with whom we conduct business or potential future business.Our actual or perceivedfailure to(a)identify and address potential

315、conflicts of interest,ethical issues,money-laundering,or privacyissues;(b)meet legal and regulatory requirements applicable to the Bank and to the Company;(c)maintainthe privacy of customer and accompanying personal information;(d)maintain adequate record keeping;(e)engage in proper sales and tradin

316、g practices;and(f)identify the legal,reputational,credit,liquidity and16market risks inherent in our products could give rise to reputational risk that could cause harm to the Bankand our business prospects.If we fail to address any of these issues in an appropriate manner,we could besubject to addi

317、tional legal risks,which,in turn,could increase the size and number of litigation claims anddamages asserted or subject us to enforcement actions,fines and penalties and cause us to incur related costsand expenses.Our ability to attract and retain customers and employees could be adversely affected

318、to theextent our reputation is damaged.We may be required to write down goodwill and other identifiable intangible assets.When we acquire a business,a portion of the purchase price of the acquisition may be allocated togoodwill and other identifiable intangible assets.The excess of the purchase pric

319、e over the fair value of thenet identifiable tangible and intangible assets acquired determines the amount of the purchase price that isallocated to goodwill acquired.At December 31,2016,our goodwill and other identifiable intangible assetstotaled$101.5 million,which included goodwill and core depos

320、it intangible assets created in connection withthe SBM acquisition on October 16,2015 of$49.9 million and$6.6 million,respectively.Under currentaccounting standards,if we determine goodwill or intangible assets are impaired,we would be required towrite down the value of these assets to fair value.We

321、 conduct an annual review,or more frequently if eventsor circumstances warrant such,to determine whether goodwill is impaired.We recently completed ourgoodwill impairment analysis as of November 30,2016 and concluded goodwill was not impaired.Weconduct a review of our other intangible assets for imp

322、airment should events or circumstances warrant such.There were no triggers for such review for impairment for other intangible assets for the year endedDecember 31,2016.We cannot provide assurance that we will not be required to take an impairment chargein the future.Any impairment charge would have

323、 a negative effect on our shareholders equity and financialresults and may cause a decline in our stock price.Systems failures,interruptions or breaches of security concerning our information base,including theinformation we maintain relating to our customers,could have an adverse effect on our fina

324、ncial conditionand results of operations.In the ordinary course of business,we rely on electronic communications and information systems toconduct our business and to store sensitive data,including financial information regarding customers.We aresubject to certain operational risks,including,but not

325、 limited to,data processing system failures and errors,inadequate or failed internal processes,customer or employee fraud,cyberattacks,hacking,identity theft andcatastrophic failures resulting from terrorist acts or natural disasters.We depend upon data processing,software,communication,and informat

326、ion exchange on a variety of computing platforms and networks andover the internet,and we rely on the services of a variety of vendors to meet our data processing andcommunication needs.Despite instituted safeguards,we cannot be certain that all of our systems are entirelyfree from vulnerability to

327、attack or other technological difficulties or failures.Information security risks haveincreased significantly due to the use of online,telephone and mobile banking channels by customers and theincreased sophistication and activities of organized crime,hackers,terrorists and other external parties.Ou

328、rtechnologies,systems,networks and our customers devices may be the target of,cyber-attacks,computerviruses,malicious code,phishing attacks or information security breaches that could result in the unauthorizedrelease,gathering,monitoring,misuse,loss or destruction of our or our customers confidenti

329、al,proprietaryand other information,the theft of customer assets through fraudulent transactions or disruption of our or ourcustomers or other third parties business operations.If information security is breached or other technologydifficulties or failures occur,information may be lost or misappropr

330、iated,services and operations may beinterrupted and we could be exposed to claims from customers.While we maintain a system of internalcontrols and procedures,any of these results could have a material adverse effect on our business,financialcondition,results of operations or liquidity.We regularly

331、assess and test our security systems and disaster preparedness,including back-up systems,but the risks are substantially escalating.As a result,cybersecurity and the continued enhancement of ourcontrols and processes to protect our systems,data and networks from attacks,unauthorized access orsignifi

332、cant damage remain a priority.Accordingly,we may be required to expend additional resources toenhance our protective measures or to investigate and remediate any information security vulnerabilities orexposures.Any breach of our system security could result in disruption of our operations,unauthoriz

333、ed access17to confidential customer information,significant regulatory costs,litigation exposure and other possibledamages,loss or liability.Such costs or losses could exceed the amount of available insurance coverage,ifany,and would adversely affect our earnings.Also,any failure to prevent a security breach or to quickly andeffectively deal with such a breach could negatively impact customer conf