Camden National Corporation Completes Branch Integration and Reports Full Year 2012 Results

CAMDEN, Maine, Jan. 29, 2013 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $2.6 billion bank holding company headquartered in Camden, Maine, reported net income of $23.4 million and diluted earnings per share ("EPS") of $3.05 for the full year 2012 compared to net income and EPS of $26.2 million and $3.40, respectively, for the full year 2011.  Return on average assets and return on average equity for 2012 were 0.98% and 10.31%, respectively, comparing favorably to the Company's annualized national peer group averages of 0.82% and 7.93%, respectively, for the nine months ended September 30, 2012.

On April 23, 2012, the Company announced a definitive agreement to acquire 15 branches and associated deposits from Bank of America.  The acquisition was finalized on October 26, 2012, and the branches were successfully converted over that weekend. As part of the transaction, Camden National also divested one branch as required by the Department of Justice and sold its former Bangor, Maine branch location. Camden National acquired $288.9 million in deposits and $6.1 million in small business loans in addition to the 14 branch locations. 

"Our 2012 results were impacted by expenses associated with the branch acquisition and other costs to ramp up the branches, as well as continued pressure on net interest income and increased compliance costs," said Gregory A. Dufour, president and chief executive officer of Camden National Corporation. "We continue to manage the organization over the long-term by making strategic investments, such as the branch acquisition and remaining cautious in this challenging interest rate environment," Dufour added.

Total assets grew 11% to $2.6 billion at December 31, 2012, with loans growing 3% and deposits increasing over 21% as a result of the branch transaction and organic growth. Net income for 2012 declined $2.7 million, or 11%, compared to the record earnings level of $26.2 million in 2011. The financial results for 2012 include one-time conversion and integration-related costs associated with the branch acquisition, a decline in core net interest income as a result of the interest rate environment and an increase in operating costs primarily due to recurring operating expenses of the newly acquired branches. 

Fourth Quarter 2012 Highlights

• Completion of acquisition of 14 branches on October 26, 2012, resulting in a $288.9 million increase in deposit balances.
• Net income of $4.2 million for the fourth quarter of 2012, a decrease of $1.7 million compared to the same period in 2011, primarily due to a combination of acquisition expenses and recurring operating expenses of the newly acquired branches.
• Net interest margin compression of 10 basis points in the fourth quarter 2012 compared to the third quarter of 2012, reflecting the impact of low interest rates and the increase in the investment portfolio as the result of liquidity provided by the branch acquisition.
• Favorable decline in annualized net loan charge-offs with fourth quarter 2012 at 0.24%, compared to 0.33% in the third quarter of 2012 and 0.39% for the fourth quarter of 2011.

Year-End Operating Results

Net interest income on a fully-taxable basis totaled $74.7 million for 2012, decreasing $1.7 million, or 2%, compared to 2011. This decline is a result of lower net interest margins partially offset by growth in average investments and loans of $80.0 million during the year. The net interest margin for 2012 of 3.36% declined 21 basis points from 2011, reflecting the impact of the reinvestment of cash flow of both investment securities and loans at lower interest rates as a direct result of the prolonged low interest rate environment.

"Even though we experienced a decline in our net interest margin due to the reinvestment of cash flows in this low yield environment, we have been cautious not to chase yield by taking on significant investment duration risk or lessening the quality of our investment and loan portfolios," said Dufour.

Non-interest income of $23.4 million for the year ended December 31, 2012, increased $359,000 when compared to the same period in 2011.  The increase was due to growth in deposit-related service fees of $907,000, increases in other income of $823,000 primarily due to gain on sale of a branch facility and an increase in net gains on securities of $422,000.  The increase was partially offset by a reduction in fiduciary income of $989,000 as a result of the outsourcing of the Company's employee benefits business line, and a decline in bank-owned life insurance of $791,000 related to life insurance proceeds of $740,000 recorded in 2011.

Non-interest expense for the year ended December 31, 2012, totaled $59.0 million, compared to $55.6 million for the same period in 2011. The 6% increase was primarily due to one-time conversion and integration costs of $2.3 million and the additional operating costs of $2.6 million associated with the new branch facilities and staffing. Consulting and professional fees decreased $811,000 during the year primarily due to the outsourcing of the employee benefits business line.

Balance Sheet

Total loans (excluding loans held for sale) of $1.6 billion at December 31, 2012, grew by $49.8 million, or 3%, since year-end 2011. This increase was driven by solid growth in the commercial real estate loan portfolio, which expanded by $36.2 million, or 8%. The consumer and home equity portfolios also grew $14.3 million, or 5%, largely due to a ten-year fixed-rate home equity promotion and a car loan campaign. Commercial loan balances increased $5.4 million, primarily due to loans acquired in connection with the branch acquisition.  Residential real estate loan balances declined $6.0 million since year-end 2011, partially due to a shift to the home equity product and mortgage loan sales of $18.8 million in 2012, which helped manage the Company's interest rate risk profile.

The investment portfolio totaled $812.1 million at December 31, 2012, which represented an increase of $200.1 million since December 31, 2011. The growth was due to the purchase of investment securities resulting from excess cash generated from the branch acquisition.

Total deposits at December 31, 2012, increased $338.1 million, or 21%, since year-end 2011 due to the branch acquisition that resulted in $288.9 million in deposits as well as our continued organic growth in core deposits.  The Company reduced Federal Home Loan Bank term borrowings by $80.5 million during 2012. Furthermore, the branch transaction generated an increase in core deposit funding at lower interest rate costs.  The Company's average cost of funds declined 31 basis points to 0.81% for 2012 compared to 2011 and was reduced further to 0.71% for the fourth quarter of 2012.

Asset Quality

"Overall, our asset quality metrics were stable throughout the year and we experienced lower net charge-offs in 2012 compared to a year ago," said Dufour. "Total non-performing assets of $29.1 million at December 31, 2012, are slightly lower compared to a year ago and we have seen a favorable shift in the composition with a decline in non-accrual loans and other real estate owned and an increase in restructured loans. As a community bank, we are committed to working with borrowers during challenging economic times,"  Dufour commented.

The loan loss provision totaled $3.8 million in 2012, a decrease of $950,000 from 2011, and the allowance for credit losses to total loans decreased slightly to 1.48% at December 31, 2012, compared to 1.52% at December 31, 2011.

Dividends and Capital

The board of directors approved a dividend of $0.25 per share, payable on January 31, 2013, to shareholders of record as of January 15, 2013. This distribution resulted in an annualized dividend yield of 2.94%, based on the December 31, 2012, closing price of Camden National's common stock at $33.97 per share as reported by NASDAQ. The Company's tangible book value per share of $23.68 at December 31, 2012, grew 4% from a year ago.

Camden National's total risk-based capital ratio was 15.56% at December 31, 2012, compared to 15.95% at December 31, 2011.  Capital levels decreased due to the recognition of goodwill and other intangible assets of $8.8 million resulting from the branch acquisition. Camden National and its wholly-owned subsidiary, Camden National Bank, exceeded the minimum total risk-based, Tier 1, and Tier 1 leverage ratios of 10.0%, 6.0%, and 5.0%, respectively, required by the Federal Reserve for an institution to be considered "well capitalized."

On September 25, 2012, the board of directors authorized the 2012 Common Stock Repurchase Program ("Repurchase Program"). The Repurchase Program will allow for the repurchase of up to 500,000 shares, or approximately 6.5% of the Company's outstanding common stock, during its term. No shares have been repurchased yet under the Repurchase Program, which expires on October 1, 2013.

Annual Meeting

Camden National Corporation has scheduled its annual meeting of shareholders for Tuesday, April 30, 2013, at 3:00 p.m. local time, at Point Lookout Resort and Conference Center, 67 Atlantic Highway, Lincolnville, Maine. The date for determining the Company's shareholders of record for the annual meeting is March 4, 2013.

About Camden National Corporation

Camden National Corporation, recognized by Forbes as one of "America's Most Trustworthy Companies" in 2012, is the holding company employing more than 500 Maine residents for two financial services companies including Camden National Bank and the wealth management company, Acadia Trust, N.A. Camden National Bank is a full-service community bank with a network of 50 banking offices throughout Maine. Acadia Trust offers investment management and fiduciary services with offices in Portland and Ellsworth. Located at Camden National Bank, Camden Financial Consultants offers full-service brokerage and insurance services.

Forward-Looking Statements

This press release and the documents incorporated by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, projections, and statements, which are subject to numerous risks, assumptions, and uncertainties. Forward-looking statements can be identified by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "plan," "target," or "goal," or future or conditional verbs such as "will," "may", "might", "should," "would", "could" and other expressions which predict or indicate future events or trends and which do not relate to historical matters. Forward-looking statements should not be relied on, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Camden National. These risks, uncertainties and other factors may cause the actual results, performance or achievements of Camden National to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include, but are not limited to, the following: continued weakness in the United States economy in general and the regional and local economies within the New England region and Maine, which could result in a deterioration of credit quality, a change in the allowance for loan losses, or a reduced demand for the Company's credit or fee-based products and services; adverse changes in the local real estate market could result in a deterioration of credit quality and an increase in the allowance for loan loss, as most of the Company's loans are concentrated in Maine, and a substantial portion of these loans have real estate as collateral; changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; adverse changes in asset; competitive pressures, including continued industry consolidation, the increased financial services provided by non-banks and banking reform; continued volatility in the securities markets that could adversely affect the value or credit quality of the Company's assets, impairment of goodwill, the availability and terms of funding necessary to meet the Company's liquidity needs, and the Company's ability to originate loans and could lead to impairment in the value of securities in the Company's investment portfolios; changes in information technology that require increased capital spending; changes in consumer spending and savings habits; new laws and regulations regarding the financial services industry; changes in laws and regulations including laws and regulations concerning taxes, banking, securities and insurance; and changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters.  Additional factors that could also cause results to differ materially from those described above can be found in our Annual Report on Form 10-K, as updated by our Quarterly Reports on Form 10-Q and other filings with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements.

These forward-looking statements were based on information, plans and estimates at the date of this press release, and Camden National does not promise and assumes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Use of Non-GAAP Financial Measures

In addition to evaluating the Company's results of operations in accordance with GAAP, management supplements this evaluation with certain non-GAAP financial measures, such as the efficiency and tangible equity ratios, tangible book value per share, and tax-equivalent net interest income. We believe these non-GAAP financial measures help investors in understanding the Company's operating performance and trends and allow for better performance comparisons to other banks. 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.  The reconciliation to the comparable GAAP financial measure can be found in this document or the Form 8-K related to this document, all of which can be found on Camden National's website at www.camdennational.com.

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.

 

Reconciliation of non-GAAP to GAAP Financial Measures

Camden National presents its efficiency ratio using non-GAAP information. The GAAP-based efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Consolidated Statements of Income. The non-GAAP efficiency ratio excludes acquisition costs and prepayment penalties on borrowings from non-interest expenses, excludes net gains on sale of securities from non-interest income, and adds the tax-equivalent adjustment to net interest income. The following table provides a reconciliation between the GAAP and non-GAAP efficiency ratio:

The following table provides a reconciliation between tax-equivalent net interest income to GAAP net interest income using a 35.0% tax rate.

The following table provides a reconciliation between tangible book value per share and book value per share, which has been prepared in accordance with GAAP:

The following table provides a reconciliation between tangible equity to tangible assets and equity to assets, which has been prepared in accordance with GAAP:

The following table provides a reconciliation between return on average tangible equity and return on average equity, which has been prepared in accordance with GAAP:

The following table provides a reconciliation between net income and core operating net income, which has been prepared in accordance with GAAP:

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SOURCE Camden National Corporation