Comprehensive Analysis of Company’s 2024 Financial Performance

Overview The Company is a bank holding company headquartered in Maine that provides a broad range of banking and financial services to businesses and consumers primarily within its three-state footprint. The Company’s primary sources of revenue are net interest income from loans and investment securities, as well as non-interest income from fees and other financial services.

Annual Performance Summary In 2024, the Company reported net income of $43.5 million, a 3% decrease from the prior year. Diluted earnings per share was $2.84, down from $2.95 in 2023. The decline was driven primarily by higher net interest expense as deposits repriced to higher rates.

The Company’s return on assets was 1.09% in 2024, down from 1.14% in 2023. Return on equity decreased to 9.75% from 10.88% the prior year. These declines were also due to the higher cost of funds and relatively flat unrealized losses on securities.

Net Interest Income and Margin Net interest income was $113.8 million in 2024, compared to $117.7 million in 2023. The net interest margin decreased to 3.15% from 3.29% the prior year. This was primarily due to the repricing of deposits and continued loan growth, which was offset by higher borrowing costs and the cost of interest-bearing liabilities.

Provision for Credit Losses The provision for credit losses was $2.1 million in 2024, down from $2.9 million in 2023. The decrease was driven by more refined economic forecasting, especially in national unemployment figures and commercial real estate prices, as well as loan portfolio growth.

Non-Interest Income Non-interest income increased to $36.9 million in 2024 from $35.1 million in 2023. This was primarily due to a $1.4 million increase in trust and investment management fee income, driven by higher assets under management and improved market performance.

Non-Interest Expense Non-interest expense rose to $96.0 million in 2024 from $92.7 million in 2023. Salaries and benefits expense increased $2.3 million due to cost of living increases, higher commissions and incentive costs. Other expenses increased $1.7 million, driven by higher debit, ATM and credit card expenses, software costs, and adjustments to cash surrender values on a split dollar policy.

Financial Position Total assets increased $86.1 million to $4.1 billion, mainly due to loan growth offset by pay-downs of available-for-sale securities. Cash and cash equivalents decreased to $72.2 million from $94.8 million, primarily due to loan growth and paydown of borrowings.

The securities portfolio decreased to $533.3 million, or 13% of total assets, from $547.4 million, or 14% of total assets. Net unrealized losses were flat at $62.3 million, compared to a gain of $62.4 million the prior year.

Total loans grew 5% annualized, with increases in the commercial construction and commercial real estate owner-occupied segments. The allowance for credit losses to total loans ratio was 0.91%, down from 0.94%, reflecting updated economic forecasting and decreases in specific reserves, offset by loan portfolio growth. Net charge-offs were 0.01% of average loans, a nominal increase from last year.

Deposit balances increased 4% annualized, driven by consumer migration to money market accounts and higher-yielding time deposits. Borrowings decreased to $40.9 million, primarily due to excess cash used to pay off subordinated debt and Federal Reserve Bank borrowings, offset by an increase in FHLB advances.

Total book value per share was $30.00, up from $28.48 the prior year. The dividend increased 9.7% to $0.30 per share, yielding an annualized dividend of 3.92%.

Strengths and Weaknesses The Company’s key strengths include its diversified revenue streams, strong deposit base, and prudent risk management as evidenced by the low level of non-performing loans and net charge-offs. The Company has also demonstrated the ability to grow its commercial loan portfolio and trust and investment management business, which have contributed to its profitability.

However, the Company faces headwinds from the rising interest rate environment, which has compressed its net interest margin and increased its cost of funds. The Company’s reliance on net interest income as its primary revenue source makes it vulnerable to changes in interest rates. Additionally, the unrealized losses on the securities portfolio, while stabilizing, remain a concern.

Outlook and Future Considerations Looking ahead, the Company’s performance will likely continue to be impacted by the interest rate environment and its ability to manage its cost of funds. Strategies to grow non-interest income, such as further expanding the trust and investment management business, will be crucial to offset potential margin compression.

The Company will also need to closely monitor credit quality and the adequacy of its allowance for credit losses as economic conditions evolve. Prudent risk management and a diversified loan portfolio will be essential to maintaining asset quality.

Overall, the Company remains a well-capitalized and profitable institution, but it faces challenges in the current economic environment. Continued focus on cost management, revenue diversification, and prudent risk management will be key to the Company’s future success.