CAC Camden National Corporation

Net Interest Margin Expansion and Robust Asset Quality Drive a Strong Quarter

CAMDEN, Maine, Oct. 29, 2024 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company") today reported earnings for the quarter ended September 30, 2024 of $13.1 million and diluted earnings per share ("EPS") of $0.90, an increase of 9% and 11%, respectively, over the second quarter of 2024.

The release of the Company's quarterly financial results follows its September 10, 2024, announcement of the pending merger with Northway Financial, Inc. ("Northway"), the parent company of Northway Bank, which is subject to Northway shareholder and customary regulatory approvals. The merger will create a combined franchise with 74 branches serving attractive markets throughout a contiguous footprint in New Hampshire and Maine, with approximately $7.0 billion in assets, $5.1 billion in loans, $5.5 billion in deposits, and $2.0 billion of Assets Under Administration (AUA) as of June 30, 2024. On a combined basis, the merger is expected to be approximately 19.9% accretive to Camden National's 2025 earnings per share and 32.7% accretive to Camden National's 2026 earnings per share.

Excluding merger and acquisition costs incurred through September 30, 2024, on a non-GAAP basis, net income for the third quarter of 2024 was $13.6 million, and core EPS was $0.94, an increase of 14% and 16%, respectively, over the second quarter of 2024.

"The pending merger we announced just last month marks an important step in our journey to expand in a contiguous market with a bank that shares a similar culture, consistent credit and risk profiles, and a deep commitment to our communities," said Simon Griffiths, president and chief executive officer of Camden National Corporation. 

Regarding the Company's third-quarter financial results, Griffiths commented, "Our outstanding results are driven by strong momentum, complemented by our continued exceptional credit and risk management and robust capital positions. We are confident that our strategic investments in talent, technology, products, and services will continue to benefit us as macroeconomic conditions improve."

For the nine months ended September 30, 2024, the Company reported net income of $38.3 million and diluted EPS of $2.62, compared to $34.9 million and $2.39, respectively, for the nine months ended September 30, 2023. On a non-GAAP basis, core net income for the nine months ended September 30, 2024, was $38.2 million and core EPS was $2.61, compared to $40.6 million and $2.77, respectively, for the same period in 2023.

THIRD QUARTER 2024 HIGHLIGHTS

• Our net interest margin for the third quarter of 2024 was 2.46%, an increase of 10 basis points over the second quarter of 2024.
• For the third quarter of 2024, our return on average assets was 0.91%, our return on average equity was 10.04% and, on a non-GAAP basis, our return on average tangible equity was 12.40%. Excluding merger and acquisition costs, on a non-GAAP basis, our core return on average assets was 0.95% and core return on average tangible equity was 12.94%.
• Our asset quality continues to be very strong, highlighted by loans 30-89 days past due improving since June 30, 2024, by 2 basis points to 0.03% of total loans, and non-performing loans improving by 6 basis points in the third quarter to 0.17% of total loans at September 30, 2024.
• Our capital position remained strong with regulatory capital ratios well in excess of required regulatory levels. As of September 30, 2024, our common equity ratio was 9.22% and, on a non-GAAP basis, our tangible common equity ratio was 7.69%, an increase of 34 basis points and 35 basis points, respectively, since June 30, 2024.

FINANCIAL CONDITION

As of September 30, 2024 and June 30, 2024, total assets were $5.7 billion.

Investments totaled $1.2 billion on September 30, 2024, an increase of 2% since June 30, 2024. Our strategy throughout the year has been primarily to redeploy investment cash flows to fund loan growth at current market interest rates to maximize our earning-asset yield and support net interest margin expansion. In the third quarter of 2024, the increase in investment balances was driven by the change in the interest rate environment that resulted in a $22.4 million increase in the fair value of our available-for-sale ("AFS") investment portfolio. As of September 30, 2024 and June 30, 2024, the duration of the Company's securities was 5.3 years and 5.5 years, respectively, and specifically, the AFS investment portfolio duration at September 30, 2024 and June 30, 2024 was 4.3 years and 4.5 years, respectively.

Loans totaled $4.1 billion on September 30, 2024, a decrease of $22.6 million since June 30, 2024. The decrease in loan balances for the third quarter of 2024 was driven by a 7% decrease in our commercial loans due to a few larger loan payoffs. In the third quarter of 2024, we sold 64% of our residential mortgage production, an increase from 52% in the second quarter of 2024. Overall, our loan pipelines continue to be solid and see activity within our markets across both retail and commercial customers. As of September 30, 2024, our committed loan pipeline totaled $109.3 million.

Asset quality continues to be a strength of the Company's financial position. We continue to review our loan portfolio for any potential concerns and, to-date, we have not identified any signs of systemic stress or increased risks as of September 30, 2024. On September 30, 2024, loans 30-89 days past due were 0.03% of total loans, a decrease of 2 basis points from June 30, 2024. Annualized net charge-offs for the third quarter of 2024 decreased by 1 basis point from the second quarter of 2024 to 0.03% of average loans. The Company's allowance for credit losses ("ACL") on loans was 0.86% as of September 30, 2024 and June 30, 2024. On September 30, 2024, the ACL was 5.1 times the total non-performing loans, compared to 3.7 times as of June 30, 2024.

Deposits totaled $4.6 billion on September 30, 2024, an increase of 1% since June 30, 2024. During the third quarter of 2024, on a non-GAAP basis, core deposits grew 2% as we benefited from normal seasonal deposit inflows during the summer months within our markets, as well as benefited from 8% savings deposits growth primarily due to the introduction of a high-yield savings product earlier in 2024.

On September 30, 2024, uninsured and uncollateralized¹ deposits accounted for 15.3% of total deposits, and available liquidity sources were 2.0 times uninsured and uncollateralized deposits.

In August 2024, we prepaid our remaining Bank Term Funding Program ("BTFP") borrowings of $170.0 million and entered into two interest rate swaps on $150.0 million of borrowings to reduce borrowing costs and extend the term of our borrowings. In doing so, we refinanced borrowings and lowered the rate from 4.76% to 4.09%.

As of September 30, 2024, the Company's regulatory capital ratios were each well in excess of regulatory capital requirements. The Company's common equity ratio was 9.22%, and, on a non-GAAP basis, its tangible common equity ratio was 7.69%, compared to 8.88% and 7.34%, respectively, at June 30, 2024.

The Company announced a cash dividend of $0.42 per share, representing an annualized dividend yield of 4.07%, based on the Company's closing share price of $41.32 as reported by NASDAQ on September 30, 2024, payable on October 31, 2024, to shareholders of record on October 15, 2024.

The Company did not repurchase any shares of its common stock during the third quarter of 2024. Through the nine months ended September 30, 2024, it repurchased 50,000 shares of its common stock at an average price of $32.19 per share.

FINANCIAL OPERATING RESULTS (Q3 2024 vs. Q2 2024)

Net income for the third quarter of 2024 was $13.1 million, an increase of $1.1 million, or 9%, compared to the second quarter of 2024. The increase was driven by the increase in net interest income of 4% between periods. Excluding merger and acquisition costs associated with the announced acquisition of Northway in September 2024, on a non-GAAP basis, core net income for the third quarter of 2024 increased $1.7 million, or 14%, over the second quarter of 2024.

Net interest income for the third quarter of 2024 was $33.6 million, an increase of $1.4 million, or 4%, compared to the second quarter of 2024. The increase was driven by the 10 basis point margin expansion between periods to 2.46% for the third quarter of 2024.

Provision expense of $239,000 was recorded for the third quarter of 2024, consisting of provision for loan losses of $283,000 and a credit for unfunded commitments of $44,000. The Company maintained an ACL to loans coverage ratio of 0.86% for the third quarter of 2024, consistent with the second quarter of 2024.

Non-interest income for the third quarter of 2024 was $11.4 million, an increase of $761,000, or 7%, over the second quarter of 2024. The increase between periods was driven by (1) an increase in mortgage banking income of $457,000 as the Company sold $62.4 million of residential mortgages in the third quarter of 2024, an increase of 17%, and the positive change in fair value on loans held for sale and loan pipelines; (2) an increase in back-to-back loan swap fee income of $133,000; and (3) an increase in debit card income of $100,000.

Non-interest expense for the third quarter of 2024 was $28.9 million, an increase of $1.6 million, or 6%, compared to the second quarter of 2024. The primary drivers for the increase were: (1) an increase in salaries and employee benefits of $944,000, which was driven by an increase in headcount due to seasonal and strategic hires, an increase in incentive accruals, and a one-time increase in employer-related taxes; and (2) merger and acquisition costs associated with the announced acquisition of Northway in September 2024 of $727,000. The increases were partially offset by lower consulting and professional fees of $361,000, driven by the timing of annual director equity grants in the second quarter of each year. Our GAAP efficiency ratio for the third quarter of 2024 was 64.23% and non-GAAP efficiency ratio was 62.39%, compared to 63.77% and 63.53% for the second quarter of 2024, respectively.

Q3 2024 CONFERENCE CALL

Camden National Corporation will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, October 29, 2024 to discuss its third quarter 2024 financial results and outlook. Participants should dial into the call 10 - 15 minutes before it begins. Information about the conference call is as follows:

A link to the live webcast will be available on Camden National's website under "About — Investor Relations" at CamdenNational.bank prior to the meeting, and a replay of the webcast will be available on Camden National's website following the conference call. The transcript of the conference call will also be available on Camden National's website approximately two days after the conference call.

ABOUT CAMDEN NATIONAL CORPORATION

Camden National Corporation (NASDAQ: CAC) is Northern New England's largest publicly traded bank holding company, with $5.7 billion in assets. Founded in 1875, Camden National Bank has 57 branches in Maine and New Hampshire, is a full-service community bank offering the latest digital banking, complemented by award-winning, personalized service. Additional information is available at CamdenNational.bank. Member FDIC. Equal Housing Lender.

Comprehensive wealth management, investment, and financial planning services are delivered by Camden National Wealth Management.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including certain plans, expectations, goals, projections, and other statements, which are subject to numerous risks, assumptions, and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures; inflation; ongoing competition in labor markets and employee turnover; deterioration in the value of Camden National's investment securities; changes in consumer spending and savings habits; changes in the interest rate environment; changes in general economic conditions; operational risks including, but not limited to, cybersecurity, fraud, pandemics and natural disasters; legislative and regulatory changes that adversely affect the business in which Camden National is engaged; turmoil and volatility in the financial services industry, including failures or rumors of failures of other depository institutions which could affect Camden National's ability to attract and retain depositors, and could affect the ability of financial services providers, including the Company, to borrow or raise capital; actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions; changes to regulatory capital requirements in response to recent developments affecting the banking sector; changes in the securities markets and other risks and uncertainties disclosed from time to time in Camden National's Annual Report on Form 10-K for the year ended December 31, 2023, as updated by other filings with the Securities and Exchange Commission ("SEC"). Further, statements regarding the potential effects of the war in Ukraine, conflict in the Middle East and other notable and global current events on the Company's business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possible materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company's control. Camden National does not have any obligation to update forward-looking statements.

USE OF NON-GAAP MEASURES

In addition to evaluating the Company's results of operations in accordance with generally accepted accounting principles in the United States ("GAAP"), management supplements this evaluation with certain non-GAAP financial measures such as: core net income; core diluted earnings per share; core return on average assets; core return on average equity; pre-tax, pre-provision income; return on average tangible equity and core return on average tangible equity; the efficiency and tangible common equity ratios; tangible book value per share; core deposits and average core deposits. Management utilizes these non-GAAP financial measures for purposes of measuring our performance against our peer group and other financial institutions and analyzing our internal performance. We also believe these non-GAAP financial measures help investors better understand the Company's operating performance and trends and allow for better performance comparisons to other financial institutions. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions. Reconciliations to the comparable GAAP financial measures can be found in this document.

ANNUALIZED DATA

Certain returns, yields and performance ratios are presented on an "annualized" basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts. Annualized data may not be indicative of any four-quarter period and is presented for illustrative purposes only.