16. SEGMENT REPORTING 17. SHAREHOLDERS’ EQUITY The Company, through its bank and non-bank subsidiaries, provides a broad range of financial services to individuals and companies in the State of Maine. These services include lending, demand deposits, savings and time deposits, cash management, and trust services. While the CompanyGLYPH<213>s senior management team monitors operations of each subsidiary, these subsidiaries primarily operate in the banking industry. Substantially all revenues and services are derived from banking products and services in Maine. Accordingly, the CompanyGLYPH<213>s subsidiaries are considered by management to be aggregated in 1 reportable operating segment. The primary source of funds available to the Company for payment of dividends to its shareholders is dividends paid to the Company by its subsidiaries. The CompanyGLYPH<213>s subsidiary banks are subject to certain requirements imposed by state and federal banking laws and regulations. These requirements, among other things, establish minimum levels of capital and restrict the amount of dividends that may be distributed by the subsidiary banks to the Company.  The Company has 3 stock option plans accounted for under Accounting Principles Board Opinion (GLYPH<210>APBGLYPH<211>) No. 25 and related interpretations, as permitted under SFAS No. 123, GLYPH<210>Accounting for Stock-Based Compensation.GLYPH<211> The 1993 stock option plan,  which is the plan currently available for future grants, allows the Company to grant options to employees for up to 19,732 additional shares of Company common stock. Under all three plans, the options are immediately vested when granted, and expire 10 years from the date the option was granted. The exercise price of all options equals the market price of the CompanyGLYPH<213>s stock on the date  of grant. Therefore, in accordance with APB No. 25, no compensation cost has been recognized for the plans. Had compensation cost for the plans been determined based on the fair value of the options at the grant dates consistent with the method of SFAS No. 123, the CompanyGLYPH<213>s net income and earnings per share for 2002 and 2000 would have been equal to pro forma amounts in the table below since there were no options granted during the years ended December 31, 2002 and 2000. The CompanyGLYPH<213>s net income and earnings per share for 2001 would have been reduced to the pro forma amounts indicated in the table below.  EARNINGS PER SHARE NET INCOME BASIC DILUTED 2002 As reported $17,051 $2.12 $2.11 Pro forma 17,051 2.12 2.11 2001 As reported $15,418 $1.90 $1.89 Total stock option compensation expense determined under fair value based method for all options, net of related tax (24)  (0.01) (0.01) Pro forma $15,394 $ 1.89 $1.88 2000 As reported $13,859 $ 1.70 $1.69 Pro forma 13,859 1.70 1.69 The fair value of each option granted is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions used for all grants; in 2001 dividend yield of 2.6%, expected volatility of 3.32%, risk-free interest rate of 4.93%, and expected lives of 10 years. A summary of the status of the CompanyGLYPH<213>s stock option plans as of December 31, 2002, 2001 and 2000, and changes during the years ended on those dates is presented below. 56 Camden National Corporation and Subsidiaries 18. EARNINGS PER SHARE The following table summarizes information related to options outstanding at December 31, 2002: The following table sets forth the computation of basic and diluted earnings per share: Camden National Corporation and Subsidiaries 57 2002 Number of Weighted-average Shares Exercise Price Outstanding at beginning of year 147,163 $14.44 Exercised during the year 24,004 13.34 Forfeited during the year 2,273  16.29  Outstanding at end of year 120,886 $14.62 Exercisable at end of year 120,886 $14.62 2001 Number of Weighted-average Shares Exercise Price Outstanding at beginning of year 183,729 $14.29 Granted during the year 5,000 16.00 Exercised during the year 19,926 11.13 Forfeited during the year  21,640  16,56 Outstanding at end of year 147,163 $14.44 Exercisable at end of year 147,163 $14.44 Weighted-average fair value of options granted during the year $ 7.50 2000 Number of Weighted-average Shares Exercise Price Outstanding at beginning of year 199,842 $14.13 Exercised during the year 11,613 11.55 Forfeited during the year 4,500  14.47 Outstanding at end of year 183,729 $14.29 Exercisable at end of year 183,729 $14.29 Number Remaining Weighted-average Outstanding Contractual Life Exercise Price 8,394 1.0 $13.38 52,500 4.0 12.33 50,492 6.0 16.74 4,500 7.0 18.38 5,000 9.0  16.00 120,886 4.9 $14.62 2002 2001 2000 Net income, as reported  $ 17,051 $ 15,418 $ 13,859 Weighted-average shares 8,049,629 8,123,928 8,164,188 Effect of dilutive employee stock options 47,841 33,558 14,617 Adjusted weighted-average shares and assumed conversion 8,097,470 8,157,486 8,178,805 Basic earnings per share $ 2.12 $ 1.90 $ 1.70 Diluted earnings per share $ 2.11 $ 1.89 $ 1.69