Camden National Corporation Reports Fourth Quarter And Annual Earnings For 2018

CAMDEN, Maine, Jan. 29, 2019 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $4.3 billion bank holding company headquartered in Camden, Maine, reported net income for 2018 of $53.1 million and diluted earnings per share ("EPS") of $3.39, representing an increase of 86% over 2017. Net income and diluted EPS for 2018 each grew 24% over last year, adjusted for a $14.3 million income tax charge recorded in the fourth quarter of 2017 after the Tax Cuts and Jobs Act of 2017 (the "Tax Act") was enacted¹. Return on average assets for 2018 was 1.28%, and return on average equity was 12.92% for the same period.

"We are pleased to report that 2018 was a banner year for the Company," said Gregory A. Dufour, President and Chief Executive Officer of the Company. "We delivered outstanding operating and financial performance driven by the realization of many key investments we've made over the past several years and the benefit of a lower federal income tax rate. We experienced strong deposit growth of 15% during the year and loan growth of 9% over the same period. At the same time, asset quality continues to be excellent with non-performing assets comprising just 34 basis points of total assets at year-end."

Net income for the fourth quarter of 2018 was $14.0 million and diluted EPS was $0.89, representing an increase over the fourth quarter of 2017 of $17.2 million and $1.09 per share, respectively, and a slight decrease compared to the third quarter of 2018 of $80,000 and $0.01 per share, respectively. Fourth quarter 2018 net income and diluted EPS grew $2.9 million and $0.18 per share, respectively, over the fourth quarter of 2017, adjusted for a $14.3 million income tax charge recorded in the fourth quarter of 2017 due to the Tax Act¹.

"We had a great fourth quarter as loan balances grew 4% and deposits grew 8%," said Dufour. "Our loan growth was funded by low-cost deposits², thus expanding net interest margin to 3.21%, a 7 basis point increase over last quarter. Our loan-to-deposit ratio at December 31, 2018, was 87%, positioning us well as we enter 2019."

In December 2018, the Company's Board of Directors announced a dividend of $0.30 per share, reflecting a dividend yield of 3.34% on December 31, 2018. On January 22, 2019, the Company announced the approval of its common share repurchase program for up to 775,000 shares, or approximately 5% of the Company's outstanding common stock.

Dufour added, "In November 2018, we announced the opening of our new prototype, state-of-the-art banking center located in the Bill & Joan Alfond Main Street Commons in downtown Waterville, Maine, following the sale of the Company's Waterville property to Colby College earlier this year. The revitalization efforts by the City and Colby College have been nothing short of extraordinary, and we are excited to be part of it."

FINANCIAL CONDITION

Total assets at December 31, 2018, grew 6% over last year to $4.3 billion. The loan portfolio increased $243.8 million, or 9%, in 2018 to $3.0 billion at December 31, 2018, led by residential and commercial real estate growth of $134.5 million and $105.5 million, respectively, while consumer and home equity loan balances grew 2%. Over the same period, commercial loans decreased 1% as the Healthcare Professional Funding Corporation ("HPFC") loan portfolio continues to run-off.

Total deposits at December 31, 2018, grew 15% over last year to $3.5 billion. Over this period, low-cost deposits² increased $337.7 million, or 15%, to $2.7 billion at December 31, 2018, led by an increase in checking account deposits of $185.9 million and savings and money market deposits of $151.8 million. At December 31, 2018, interest checking balances included $75.0 million of temporary funds which we anticipate will be fully withdrawn by March 31, 2019.

For 2018, average low-cost deposits² balances grew $221.1 million, or 10%, to $2.4 billion for the year-ended December 31, 2018. Over the same period, average total borrowings decreased 10%.

The Company's capital position at December 31, 2018 was well in excess of regulatory requirements, including a total risk-based capital ratio of 14.36% and a Tier I leverage ratio of 9.53%. At December 31, 2018, the Company's book value per share was $27.95, representing an 8% increase over December 31, 2017, and its tangible book value per share¹ increased 10% over the same period to $21.61 at December 31, 2018.

ASSET QUALITY

Asset quality as of December 31, 2018 was very strong, continuing the trend from the previous quarter. At December 31, 2018, non-performing assets were 0.34% of total assets, and non-performing loans were 0.48% of total loans, representing a decrease of 0.12% and 0.17%, respectively, since September 30, 2018 and 0.16% and 0.25%, respectively, since December 31, 2017. Loans 30-89 days past due were 0.29% of total loans at December 31, 2018.

In the fourth quarter of 2018, a significant commercial credit relationship previously on non-accrual was favorably resolved, which drove a net recovery of $1.2 million for the quarter and net charge-offs of 0.01% of average loans for the year. With this recovery, the provision for credit losses was $7,000 for the fourth quarter of 2018, and $847,000 for the year ended December 31, 2018. At December 31, 2018, the allowance for loan losses was 0.82% of total loans and 171.17% of non-performing loans.

Q4 2018 FINANCIAL OPERATING RESULTS (linked quarter)

The Company reported net income of $14.0 million for the fourth quarter of 2018 and diluted EPS of $0.89, representing a decrease of $80,000 and $0.01 per share, respectively, compared to the third quarter of 2018.

Net interest income of $31.6 million in the fourth quarter of 2018 increased $1.2 million over last quarter. The 4% increase was driven by average deposits growth of $140.9 million, or 5%, between quarters. This enabled the Company to fund its average loan growth of $75.0 million between quarters with lower-cost funding and expand its net interest margin by 7 basis points to 3.21% for the fourth quarter of 2018.

Non-interest income of $9.5 million in the fourth quarter of 2018 decreased $913,000 compared to last quarter. The 9% decrease was driven by (i) net losses from the sale of investment securities of $420,000 recorded in the fourth quarter of 2018 as a result of a portfolio re-balancing effort, compared to net gains from the sale of investment securities of $664,000 the previous quarter, and (ii) a decrease in mortgage banking income of $602,000 as we sold 36% of our residential mortgage originations in the fourth quarter of 2018, compared to 46% last quarter. This was partially offset by an increase in debit card income of $666,000, of which $530,000 was attributable to an annual incentive bonus received in the fourth quarter from VISA©.

The provision for credit losses for the fourth quarter was $7,000, compared to $354,000 last quarter. The decrease was due to $1.2 million in net recoveries in the fourth quarter upon the favorable resolution of a large commercial credit relationship.

Non-interest expense of $23.6 million for the fourth quarter of 2018 increased $414,000 over last quarter. The 2% increase was driven by (i) an increase in donation and marketing-related costs of $194,000, (ii) an increase in occupancy costs of $150,000 due to higher utility, heating and ground maintenance costs during the winter months, and (iii) an increase in collection-related costs of $131,000.

YEAR-TO-DATE FINANCIAL OPERATING RESULTS

The Company reported net income of $53.1 million and diluted EPS of $3.39 for the year ended December 31, 2018, representing an increase of $24.6 million and $1.57 per share, respectively, over the same period last year. In the fourth quarter of 2017 the Tax Act was passed, reducing the federal income tax rate from 35% to 21%, effective January 1, 2018, and a $14.3 million income tax expense charge was recorded. For the year-ended December 31, 2018, it's estimated that the lower federal income tax rate benefit was $9.2 million.

Net interest income of $120.4 million in 2018 increased $5.1 million over 2017. The 4% increase was driven by:

• Average deposits growth of $222.4 million, or 8%, over last year.
• Average loans growth of $155.9 million, or 6%, over last year.
• Net interest margin on a fully-taxable basis for 2018 was 3.16%, compared to 3.19% last year. The decrease between periods was due to lower accretion income on acquired loans and time deposits of $902,000. Excluding accretion income on acquired loans and time deposits, net interest margin on a fully-taxable basis for 2018 was 3.10% for 2018 and 2017.

Non-interest income of $38.2 million in 2018 decreased 1% compared to 2017. The decrease was driven by (i) a decrease in mortgage banking income of $1.4 million as we sold 44% of our residential mortgage originations in 2018, compared to 53% in 2017, (ii) a decrease in loan swap fee income of $619,000, and (iii) a decrease in net gains from the sale of investment securities of $580,000. This was partially offset by (i) an increase in debit card income of $988,000, of which $506,000 was attributable to an increase in the VISA© incentive bonus, and (ii) an increase in brokerage and insurance commissions of $468,000.

The provision for credit losses for the year ended December 31, 2018, was $847,000, compared to $3.0 million for the same period last year. The decrease was due to a decrease in non-performing loans of 29% since December 31, 2017, and net charge-offs of 0.01% of average loans for the year ended December 31, 2018, compared to 0.07% for the same period last year.

Non-interest expense for the year ended December 31, 2018, was $91.9 million, compared to $88.5 million for the same period last year. The 4% increase was driven by:

• An increase in compensation and related expenses of 5%, driven by normal merit increases, additional positions added throughout 2018, and an 11% increase in health insurance costs.
• An increase in other expense of $864,000, of which $734,000 was employee- and business-related travel costs.
• An increase in consulting and professional fees of $634,000, data processing costs of $608,000, and debit card expense of $425,000.
• The increase was partially offset by a decrease in intangible amortization expense of $1.1 million.

ANNUAL MEETING

Camden National has scheduled its annual meeting of shareholders for Tuesday, April 30, 2019, at 3:00 p.m. local time, at Point Lookout Resort and Conference Center, 67 Atlantic Highway, Northport, Maine 04849. The date for determining the Company's shareholders of record for the annual meeting is February 22, 2019.

CONFERENCE CALL

Camden National will host a conference call and webcast at 3:00 p.m. Eastern Time on January 29, 2019 to discuss our fourth quarter and year-to-date 2018 financial results and outlook. Participants should dial in to the call 10 - 15 minutes before it begins. Information about the conference call is as follows:

Live dial-in (domestic): (888) 349-0139
Live dial-in (international): (412) 542-4154
Live webcast: https://services.choruscall.com/links/cac190129.html

A link to the live webcast will be will be available on Camden National's website under "Investor Relations" at CamdenNational.com prior to the meeting. The transcript of the conference call will also be available on Camden National's website approximately two business days after the conference call.

ABOUT CAMDEN NATIONAL CORPORATION

Camden National Corporation (NASDAQ:CAC), headquartered in Camden, Maine, is the largest publicly traded bank holding company in Northern New England with $4.3 billion in assets and nearly 650 employees. Camden National Bank, its subsidiary, is a full-service community bank founded in 1875 that offers an array of consumer and business financial products and services, accompanied by the latest in digital banking technology to empower customers to bank the way they want. The Bank provides personalized service through a network of 60 banking centers, 71 ATMs, and lending offices in New Hampshire and Massachusetts, all complemented by 24/7 live phone support. Greenwich Associates named Camden National Bank a 2018 Greenwich Customer Experience (CX) Leader in U.S. Retail Banking, a designation that recognizes top U.S. banks in customer experience. In 2018, Camden National Bank received the "Lender at Work for Maine" Award from the Finance Authority of Maine. Comprehensive wealth management, investment, and financial planning services are delivered by Camden National Wealth Management. To learn more, visit CamdenNational.com. Member FDIC.

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; changes in the interest rate environment; changes in general economic conditions; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; legislative and regulatory changes that adversely affect the business in which Camden National is engaged; changes in the securities markets and other risks and uncertainties disclosed from time to time in in Camden National's Annual Report on Form 10-K for the year ended December 31, 2017, as updated by other filings with the Securities and Exchange Commission ("SEC"). 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 adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average equity, and adjusted return on average tangible equity; tangible common equity ratio; tangible book value per share; and the efficiency ratio. 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.

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 are presented for illustrative purposes only.