Camden National Corporation Reports An Increase In Second Quarter 2014 Earnings Per Share Of 13% Over First Quarter 2014

CAMDEN, Maine, July 29, 2014 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $2.7 billion bank holding company headquartered in Camden, Maine, reported net income for the second quarter of 2014 of $6.3 million and diluted earnings per share ("EPS") of $0.85, representing a 10% increase in earnings and a $0.10 increase in EPS compared to the first quarter of 2014.  Camden National's return on equity and return on assets for the second quarter of 2014 was 10.92% and 0.95%, respectively, compared to 9.97% and 0.89% last quarter.

"We have implemented several significant strategies over the past several quarters and are pleased to see the positive impact of those investments," said Gregory A. Dufour, president and chief executive officer.  "Our annualized loan growth of 15% for the first half of 2014 and a 13% increase in earnings per share over the first quarter of 2014 reflects our efforts to increase market share and enhance our products to better serve our customers, while balancing the needs of our shareholders through our repurchase and dividend programs."

Second Quarter 2014 Highlights

• Earnings Growth — Second quarter 2014 EPS grew 13% or $0.10 per share over prior quarter.
• Loan Growth — Year-to-date annualized loan growth of 15%.
• Net Interest Margin — Net interest margin increased 3 basis points over prior quarter.
• Asset Quality — Year-to-date asset quality metrics trend favorably.

Balance Sheet

Total assets at June 30, 2014 were $2.7 billion, representing an $87.9 million, or 3%, increase since year-end.  The growth in total assets was fueled by loan growth of $116.4 million, representing a 15% annualized growth rate.  Loan growth continues to be centered within our commercial real estate and commercial portfolios, evidenced by total growth in those portfolios of $117.7 million since year-end, while our retail portfolio decreased by $1.3 million.  The Company saw signs of positive momentum within our home equity and consumer portfolio in the second quarter of 2014 primarily due to recent promotions offered; however, the effects of higher mortgage rates continue to hamper refinance activity.

Total liabilities at June 30, 2014 were $2.5 billion, representing an $81.3 million, or 3%, increase since year-end.  The increase is reflective of additional borrowings and brokered deposits totaling $119.8 million necessary to fund strong loan growth.  Core deposits (demand, interest checking, savings, and money market) decreased $28.9 million since year-end due to the seasonal outflows of deposits within our market.

Second Quarter 2014 Operating Results Compared to First Quarter 2014

Second quarter 2014 net income was $6.3 million, representing a $600,000, or 10%, increase compared to the first quarter of 2014.  EPS for the second quarter 2014 increased $0.10 per share to $0.85 compared to the first quarter of 2014.  Strong earnings and EPS growth for the second quarter of 2014 compared to prior quarter is primarily reflective of:

• An increase in average loan balances of $84.1 million, or 5%, accompanied by an increase in net interest margin on a fully-taxable basis of 3 basis points to 3.11%.  Net interest margin increased as our interest-earning assets mix shifted slightly to a higher concentration of loans providing a more favorable yield, while our cost of funds decreased 2 basis points to 0.50%.
• An increase in non-interest income of $819,000, or 14%, driven by: (i) an increase in deposit and other service-related fees of $299,000; (ii) $196,000 of derivative income; (iii) an increase in fiduciary income of $165,000; and (iv) additional gains of $119,000 realized upon sale of investment securities.
• An increase in non-interest expense of $667,000, or 4%, primarily due to (i) an increase in incentive-related costs of $321,000 due to strong year-to-date financial results exceeding performance metrics and (ii) $106,000 of cost recognized upon issuance of common stock to the Company's directors.
• A decrease of 101,146 dilutive weighted-average shares outstanding as the Company continued to actively repurchase shares of its common stock under the 2013 Repurchase Program.

Six months ended June 30, 2014 Operating Results Compared to Six Months Ended June 30, 2013

Net income and EPS for the six months ended June 30, 2014 was $12.0 million and $1.60 per share, respectively, reflecting an increase in net income of $38,000 and EPS of $0.04 per share over the six months ended June 30, 2013.  Excluded from Camden National's six months ended June 30, 2014 operating results are the five Franklin County branches it divested of in 2013.  For the six months ended June 30, 2013, the five Franklin County branches contributed $342,000 to net income, or $0.04 per share.  Other significant factors impacting Camden National's year-to-date operating results year-over-year include:

• A decrease in non-interest expense of $1.2 million.  This decrease is largely due to expenses incurred in the first half of 2013 that did not recur in the first half of 2014 – primarily costs associated with (i) the five Franklin County branches totaling $686,000; (ii) a receivable write-down of $348,000; (iii) branch acquisition costs of $232,000; and (iv) $198,000 of costs associated with the conversion of Acadia Trust, N.A.'s core operating system – partially offset by (a) an increase in foreclosure-related expenses of $162,000; and (b) $106,000 of cost recognized upon issuance of common stock to the Company's directors.
• A decrease in net interest income of $760,000.  This decrease is attributable to two factors: (i) the divestiture of five Franklin County branches, which contributed $813,000 to net interest income in the first half of 2013; and (ii) net interest margin compression of 16 basis points.  Average interest-earning assets for the first half of 2014 increased $70.8 million, or 3%, over the same period in 2013.  The increase was largely a combination of average loan and investments growth of $53.5 million and $17.1 million, respectively, even after the sale of $46.0 million of loans as part of the Franklin County branch divestiture.  Net interest margin on a fully-taxable basis for the six months ended June 30, 2014 was 3.09%.
• A decrease in non-interest income of $523,000.  The decrease is largely due to a $1.0 million reduction in mortgage banking income due to a reduction in loan sales compared to the same period in 2013 and the divestiture of five Franklin County branches, which contributed $376,000 to non-interest income in the first half of 2013.  Partially offsetting the decrease were additional gains of $313,000 realized upon sale of investment securities; an increase in fiduciary and brokerage revenues totaling $231,000; and $196,000 of derivative income.

Asset Quality

Our asset quality metrics as of and for the six months ended June 30, 2014 continue to trend favorably, which has led to a decrease in provision for credit losses for the six months ended June 30, 2014 of $233,000 compared to the same period last year.  The following asset quality ratios highlight our current metrics compared to prior periods:

• Loans 30-89 days past due to total loans at June 30, 2014 were 0.23%, representing a decrease of 6 basis points and 4 basis points compared to March 31, 2014 and June 30, 2013, respectively.
• Year-to-date net-charge offs (annualized) to average loans as of June 30, 2014 were 0.10%, compared to 0.10% and 0.14% for year-to-date March 31, 2014 and June 30, 2013, respectively.
• Non-performing loans to total loans at June 30, 2014 were 1.54%, representing a decrease of 14 basis points and 9 basis points compared March 31, 2014 and June 30, 2013, respectively.
• Non-performing assets to total assets at June 30, 2014 were 1.05%, representing a decrease of 8 basis points and 4 basis points compared March 31, 2014 and June 30, 2013, respectively.

Dividends and Capital

The board of directors approved a dividend of $0.27 per share, payable on July 31, 2014, to shareholders of record as of July 17, 2014.  This distribution represents an annualized dividend yield of 2.79%, based on the June 30, 2014 closing price of Camden National's common stock at $38.76 per share as reported by NASDAQ.

The Company's total risk-based capital ratio, Tier I risk-based capital ratio, and Tier I leverage capital ratio was 15.32%, 14.07%, and 9.09%, respectively, at June 30, 2014. Camden National Corporation and its wholly-owned subsidiary, Camden National Bank, continue to exceed the minimum total and Tier I risk-based capital ratios of 10% and 6%, respectively, and the minimum Tier I leverage capital ratio of 5% required by the Federal Reserve for an institution to be considered "well capitalized".

About Camden National Corporation

Camden National Corporation is the holding company employing more than 480 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 44 banking offices throughout Maine and a commercial loan office in Manchester, New Hampshire. Acadia Trust offers investment management and fiduciary services with offices in Portland, Bangor and Ellsworth. Located at Camden National Bank, Camden Financial Consultants offers full-service brokerage and insurance services. Learn more at www.CamdenNational.com.  Member FDIC.

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, an increase in the allowance for loan losses, or a reduced demand for the Company's credit or fee-based products and services; 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; competitive pressures, including continued industry consolidation and the increased financial services provided by non-banks; 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 could lead to impairment in the value of securities in the Company's investment portfolio; changes in information technology that require increased capital spending; changes in consumer spending and savings habits; changes in tax, banking, securities and insurance laws and regulations including laws and regulations; and changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as 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 the Company's 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 generally accepted accounting principles in the United States ("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. Management believes 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. 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 expense divided by net interest income plus non-interest income from the consolidated statements of income.  The non-GAAP efficiency ratio excludes branch acquisition costs from non-interest expense, excludes net gain on sale of securities from non-interest income, and adds the tax-equivalent adjustment (assumed 35.0% tax rate) 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: 

Return on average tangible equity is the ratio of (i) net income, adjusted for tax-effected amortization of intangible assets to (ii) average equity, adjusted for goodwill and other intangible assets.  The following table reconciles the return on average tangible equity to GAAP return on average equity:

The following table provides a reconciliation between tangible book value per share and GAAP book value per share:

The following table provides a reconciliation between tangible equity to tangible assets and GAAP equity to assets:

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SOURCE Camden National Corporation