Camden National Corporation Reports 11% Increase in Earnings for Nine Months Ended September 30, 2011

CAMDEN, Maine, Oct. 25, 2011 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National") reported net income for the nine months ended September 30, 2011 of $20.3 million, an increase of 11% compared to $18.3 million for the same period in 2010.  Earnings per diluted share for the nine months ended September 30, 2011 and 2010 were $2.65 and $2.39, respectively.

"We are pleased to report strong financial performance for the first nine months of 2011," said Gregory A. Dufour, president and chief executive officer, "given various economic stresses such as the current low interest rate environment, continued negative impact to both revenues and expenses resulting from various changes in government regulations, and the impact of what some are terming a potential 'double dip' recession.  We continue to improve on key year-to-date performance measures with return on assets increasing to 1.17% for 2011 compared to 1.08% for the same period a year ago, and return on equity increasing to 12.73% for 2011 from 12.43% for 2010."

Net income was $6.9 million for the third quarter of 2011, a decrease of $512,000 compared to the third quarter of 2010 and $141,000 compared to the second quarter of 2011.  Earnings per diluted share were $0.90 for the third quarter of 2011, compared to $0.97 and $0.92 for the third quarter of 2010 and the second quarter of 2011, respectively.

"The primary reason for the decline was the impact of several non-recurring items in both the third quarter 2011 and 2010," said Dufour, further commenting on these results. "Other than non-recurring items, the performance of the third quarter of 2011 was comparable to the performance of the third quarter of 2010."

Balance Sheet Highlights

Camden National's total assets were $2.3 billion at September 30, 2011, an increase of $40.7 million compared to December 31, 2010. Total loans of $1.5 billion at September 30, 2011, decreased $17.2 million, or 1%, compared to December 31, 2010.  The decrease was primarily related to the decline in the residential real estate loan portfolio of $20.7 million as Camden National has been selling all thirty-year fixed rate mortgage production given the current low interest rate environment.  We have experienced mixed loan growth results since year-end with commercial loans growing 6% while commercial real estate loans decreased 1% and consumer loan balances declined 8%.

Total deposits of $1.6 billion at September 30, 2011 increased $125.4 million, or 8%, compared to December 31, 2010. Since year-end, we have experienced strong core deposit growth of $150.8 million, or 16%, while retail certificates of deposit declined $47.2 million, or 10%. The growth in checking, savings and money market accounts is primarily due to a combination of businesses and individuals maintaining higher balances in short-term deposits, the acquisition of several large deposit relationships and the typical seasonal inflow of deposits during the third quarter of each year.

Asset Quality and the Provision for Credit Losses

The provision for credit losses of $1.2 million for the third quarter of 2011 increased $212,000 compared to the second quarter of 2011 and decreased $109,000 from the third quarter of 2010.  The increase in the provision from the second to the third quarter of 2011 is due to an increase in the net charge-offs between quarters and management's decision to build Camden National's allowance for credit losses to 1.52% of total loans.

Camden National's ratio of non-performing assets to total assets increased to 1.26% compared to 1.03% as of September 30, 2010, but this ratio continued to compare favorably to our national peer group's average of 3.72%, based on the most recent Bank Holding Company Performance Report dated June 30, 2011.  When comparing the non-performing asset composition from a year ago, residential real estate non-accrual loans increased $3.3 million, commercial real estate non-accrual loans increased $2.9 million, restructured loans increased $1.3 million, and other real estate owned declined $871,000.  

Net Interest Income

Camden National's net interest income of $18.6 million for the third quarter of 2011 decreased $916,000 and $232,000 compared to the second quarter of 2011 and the third quarter of 2010, respectively.  Net interest income for the second quarter 2011 included loan related non-recurring fees of $600,000.  Net interest income continues to trend downwards in the current low interest rate environment as cash flows from earning assets are replaced at today's compressed yields, while funding cost reductions are minimal.  The tax equivalent net interest margin decreased to 3.51% for the third quarter of 2011, compared to 3.64% and 3.61% for the second quarter of 2011 and the third quarter of 2010, respectively.  

Net interest income for the nine months ended September 30, 2011, increased $1.3 million, or 2%, to $56.8 million, compared to $55.5 million for the same period a year ago.  The increase in net interest income is primarily due to an increase in our average earning assets of $66.9 million, partially offset by a decline in our net interest margin to 3.55% from 3.60% for the nine months ended September 30, 2011 and 2010, respectively.

Non-Interest Income and Non-Interest Expense

Non-interest income of $5.8 million for the third quarter of 2011 decreased $974,000, or 14%, compared to the third quarter of 2010. The decline in non-interest income was primarily due to a $1.9 million decrease in other income, partially offset by a $509,000 increase in income from bank-owned life insurance. The $1.9 million decrease in other income was primarily related to one significant event, a $2.0 million legal settlement received in the third quarter of 2010. On a linked-quarter basis (comparing current quarter results to the previous quarter), third quarter 2011 non-interest income increased $819,000, primarily related to non-recurring bank-owned life insurance proceeds of $550,000 recorded in the third quarter of 2011.

Non-interest income of $15.9 million for the nine months ended September 30, 2011, increased $153,000, or 1%, compared to the same period in 2010.  

Non-interest expense of $13.3 million for the third quarter of 2011 decreased $152,000, or 1%, compared to the third quarter of 2010, primarily related to lower FDIC deposit assessments of $422,000 and declines in write-downs of other real estate owned of $119,000, partially offset by an increase in salaries and employee benefits of $488,000. The growth in salaries and employee benefits reflect an increase in employees' incentive compensation of $326,000, based on our 2011 financial performance exceeding benchmarks determined by the Board of Directors. On a linked-quarter basis, non-interest expense was unchanged.

Non-interest expense of $39.9 million for the nine months ended September 30, 2011, increased $626,000 compared to the same period in 2010.  This 2% increase relates to increases in salaries and employee benefit costs and consulting fees, partially offset by a decline in write-downs of other real estate owned and lower FDIC deposit assessments.

Dividends and Capital

The Board of Directors approved a dividend of $0.25 per share, payable on October 31, 2011, to shareholders of record on October 17, 2011. This resulted in an annualized dividend yield of 3.67%, based on the September 30, 2011, closing price of Camden National's common stock of $27.23 per share as reported on NASDAQ.

Camden National's total risk-based capital ratio increased to 16.05% at September 30, 2011, compared to 14.56% at September 30, 2010, and 15.05% at December 31, 2010, as capital levels increased from retained earnings. 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."

The Board of Directors also authorized the 2011 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 over the next year.

"One important component of our capital plan is a stock buyback program which will provide flexibility to efficiently return capital to our shareholders," Dufour explained. "The Repurchase Program allows the buyback of common shares at times when the market may not value our stock appropriately." The Repurchase Program will expire on October 1, 2012.

About Camden National Corporation

Camden National Corporation, headquartered in Camden, Maine, is the holding company employing more than 400 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 38 banking offices throughout Maine. Acadia Trust offers investment management and fiduciary services with offices in Portland, Bangor and Ellsworth. Located at Camden National Bank, Camden Financial Consultants, formerly known as Acadia 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: (1) general, national, regional or local economic conditions which are less favorable than anticipated; (2) changes in loan default and charge-off rates; ; including such actions resulting from worsening of credit quality performance due to a number of factors such as the underlying value of the collateral could prove less valuable than otherwise assumed and assumed cash flows may be worse than expected; (3) competitive pressures on pricing of products and services; (4) success, impact, and timing of our business strategies, including market acceptance of any new products or services; (5) changes in accounting policies and principles and the accuracy of our assumptions and estimates used to prepare financial statements; (6) extended disruption of vital infrastructure; (7) the final outcome of significant litigation or threatened litigation; (8) the outcome of judicial and regulatory decisions regarding practices in the residential mortgage industry, including, among other things, the process followed  for foreclosing residential mortgages; (9) declines in the securities and financial markets; (10) reductions in deposit levels; (11) declines in mortgage loan refinancing, equity loan and line of credit activity; (12) changes and movements in the domestic interest rate environment and inflation; (13) changes in the carrying value of investment securities and other assets; (14) further actions by the U.S. government and Treasury Department, including actions similar to the Federal Home Loan Mortgage Corporation conservatorship, which could have a negative impact on Camden National's investment portfolio and earnings; (15) misalignment of Camden National's interest-bearing assets and liabilities; (16) increases in loan repayment rates affecting interest income and the value of mortgage servicing rights; (17) changing business, banking, or regulatory conditions or policies, or new legislation affecting the financial services industry, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, and future regulations to be adopted by the relevant regulatory agencies, including the Consumer Financial Protection Bureau (CFPB), to implement the Act's provisions, any of which could lead to changes in the competitive balance among financial institutions, restrictions on bank activities; and, (18) changes in costs (including deposit insurance premiums), increased regulatory scrutiny, declines in consumer confidence in depository institutions, or changes in the secondary market for bank loan and other products; and changes in accounting rules, Federal and State laws, Internal Revenue Service regulations, and other regulations and policies governing financial holding companies and their subsidiaries which may impact our ability to take appropriate action to protect or maximize our financial interests in certain loan situations. Additional factors that could also cause results to differ materially from those described above can be found in the Company's periodic reports. For more information about these factors please see our Annual Report on Form 10-K, as updated by our Quarterly Reports on Form 10-Q and other filings on file 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

This document may contain GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Camden National's results of operations or financial position. If and where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can also 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. For example, net loan charge-offs to average loans, are most often expressed in terms of an annual rate like 0.20%. As such, a net loan charge-offs to average loans ratio of 0.05% for a quarter would represent 0.20%, annualized.