Camden National Corporation Reports Fourth Quarter And Year End 2020 Financial Results

CAMDEN, Maine, Jan. 26, 2021 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $4.9 billion bank holding company headquartered in Camden, Maine, reported net income of $18.3 million and diluted earnings per share ("EPS") of $1.22 for the fourth quarter of 2020, an increase of 20% and 23% over the fourth quarter of 2019, respectively.

Net income for the year ended 2020 was $59.5 million, an increase of 4% over the year ended 2019. Over the same period, diluted EPS increased 7% to $3.95 for the year ended 2020. Strong earnings translated into a return on average assets of 1.23%, a return on average equity of 11.81%, and a return on average tangible equity (non-GAAP) of 14.79% for the year ended 2020.

"We have a lot to be proud about at Camden National this year," said Gregory A. Dufour, President and Chief Executive Officer of the Company. "2020 was a year unlike any other with so many personal and professional challenges, as the COVID-19 health crisis disrupted the lives of the people and businesses across all communities we serve. Despite these challenges, we were able to support our employees, as well as provide outstanding service to our customers and communities in their time of need through various offerings, including our Employee Assistance Program, SBA Paycheck Protection Program, short-term loan deferrals, and continued generous donations to our communities."

"Our annual financial results speak to the dedication, hard work and resiliency of our employees across all areas of our company. One great example that highlights the effort and teamwork across the organization is from our residential mortgage team. The team worked tirelessly this past year to support our customers as interest rates hit a historical low, and we were able reach a new record of $1 billion in mortgage originations this past year." Dufour added, "While our methods for conducting business may have changed this year in response to COVID-19, our focus on and ability to deliver an excellent customer experience didn't. Recently, we were named a Customer Experience Leader by a leading independent research firm, Greenwich Associates, for U.S. Retail Banking and U.S. Commercial Small Business."

The Company ended 2020 with excellent asset quality, including non-performing assets of 0.22% of total assets and short-term loan modifications of 0.8% of total loans.

Q4 2020 FINANCIAL HIGHLIGHTS

• Fourth quarter 2020 net income and diluted EPS increased 20% and 23% over the fourth quarter of 2019, respectively, and 9% and 10% over the third quarter of 2020, respectively.
• Fourth quarter 2020 pre-tax, pre-provision earnings (non-GAAP) increased 19% over the fourth quarter of 2019 and 5% over the third quarter of 2020.
• Fourth quarter 2020 return on average assets was 1.45%, return on average equity was 13.94%, and return on average tangible equity (non-GAAP) was 17.27%.
• Fourth quarter 2020 net interest margin was 3.06%, compared to 3.12% for the fourth quarter of 2019 and 3.00% for the third quarter of 2020.
• In the fourth quarter of 2020, the Company adopted the new accounting standard for credit loss provisions, commonly referred to as "CECL" (Current Expected Credit Losses), effective as of January 1, 2020. Under CECL, the allowance for loan losses was 1.18% of total loans at December 31, 2020.
• At December 31, 2020, loans operating under a short-term deferral arrangement due to COVID-19 were negligible at 0.8% of total loans, compared to 5.5% at September 30, 2020.
• Non-performing assets were 0.22% of total assets at December 31, 2020, and annualized net (recoveries) / charge-offs were (0.02)% and 0.02% of average loans for the fourth quarter and year ended 2020, respectively.
• Repurchased 9,408 shares of Camden National common stock in the fourth quarter of 2020 and 274,354 shares for the year ended 2020.

FINANCIAL CONDITION

As of December 31, 2020, total assets were $4.9 billion, an 11% increase over last year. Asset growth during 2020 was driven by an increase in investment balances of $195.6 million, or 21%, loan balances of $124.8 million, or 4%, and cash balances of $70.1 million, or 93%. The increase in cash and investment balances during the year was primarily driven by elevated deposits resulting from government stimulus in response to COVID-19, and loan balances increased primarily due to PPP loans. Commercial and commercial real estate loan originations slowed during the year in response to COVID-19, while residential mortgage loan originations soared and reached a new record during the year of $1.0 billion, an increase of 79% over 2019. The increase was largely driven by refinancing activities as interest rates hit record lows in response to economic uncertainty related to COVID-19. For the fourth quarter and year ended 2020, the Company sold 59% and 61% of its residential mortgage originations to the secondary market, respectively, compared to 59% for the fourth quarter of 2019, 69% for the third quarter of 2020, and 51% for the year ended 2019.

As of December 31, 2020, deposits totaled $4.0 billion, an increase of 13% during the year. The increase was driven by core deposit (non-GAAP) growth of $539.0 million, or 19%, which was fueled by government stimulus programs in response to COVID-19. Over the same period, certificates of deposits ("CD's") and total borrowings decreased $164.1 million, or 31%, and $91.1 million, or 27%, respectively, given the influx of core deposits.

The Company's total loan-to-deposit ratio at December 31, 2020 was 80%, compared to 87% at December 31, 2019.

At December 31, 2020, the Company's capital position remained well in excess of regulatory requirements, including a total risk-based capital ratio of 15.40% and a tier 1 leverage ratio of 9.13%.

In December 2020, the Company announced a cash dividend to shareholders of $0.33 per share, payable on January 29, 2021, to shareholders of record as of January 15, 2021. As of December 31, 2020, the Company's annualized dividend yield was 3.69% based on Camden National's closing share price of $35.78, as reported by NASDAQ.

For the year ended 2020, the Company repurchased 274,354 shares of its common stock. The Company continues to monitor and evaluate its use of capital, particularly during these volatile and uncertain times.

ASSET QUALITY AND COVID-19 SHORT TERM LOAN DEFERMENTS

As of December 31, 2020, the Company's asset quality metrics remained very strong with non-performing assets of 0.22% of total assets and loans 30-89 days past due of 0.10% of total loans. In comparison, at September 30, 2020 and December 31, 2019, non-performing assets were 0.22% and 0.25% of total assets, respectively, and loans 30-89 days past due were 0.18% and 0.17% of total loans, respectively.

In March 2020, the Company began offering temporary debt relief to business and retail customers impacted by COVID-19. All loan modifications made by the Company complied with the terms of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") or bank regulator guidance, and, thus, were not individually assessed, designated or accounted for as troubled-debt restructurings.

Short-term debt payment relief was provided to commercial and retail customers for periods up to 180 days, including full and partial principal and/or interest payment relief. At December 31, 2020, loans operating under a short-term deferral arrangement totaled $26.5 million, or 0.8% of total loans, in comparison to 5.5% of total loans at September 30, 2020.

In late December 2020, another stimulus package was signed into law to provide additional COVID-19 relief for business and consumers. This stimulus package allows the Company the opportunity to again provide temporary debt relief to those impacted by COVID-19. At this time, the Company believes that any additional temporary debt relief would be made on a case-by-case basis.

CECL ADOPTION

In the fourth quarter of 2020, the Company adopted the CECL methodology for accounting for provision for loan losses and certain off-balance credit exposures, effective as of January 1, 2020. Upon the adoption of CECL, the Company recorded a net cumulative-effect adjustment that decreased retained earnings by $2.8 million. This adjustment was the net result of: (1) a $233,000 increase in the allowance for loan losses, (2) a $3.3 million increase in other liabilities related to the allowance for off-balance sheet credit exposures, and (3) a $769,000 increase in deferred tax assets. Interim period financial statements for 2020 were not restated for CECL adoption, but rather continue to be reported under the incurred loss methodology.

The adoption of CECL did not result in the recording of an allowance for credit losses on the Company's held-to-maturity debt securities.

FINANCIAL OPERATING RESULTS (Q4 2020 vs. Q3 2020)

Net income for the fourth quarter of 2020 was $18.3 million, an increase of $1.5 million, or 9%, over the third quarter of 2020. Diluted EPS for the fourth quarter of 2020 was $1.22, an increase of $0.11, or 10%, over the previous quarter.

Net Interest Income.  Net interest income for the fourth quarter of 2020 was $35.5 million, an increase of $980,000, or 3%, over the third quarter of 2020. The increase was driven by PPP loan income earned during the fourth quarter of $3.7 million, an increase of $1.3 million over the prior quarter.

Net interest margin for the fourth quarter of 2020 was 3.06%, an increase of 6 basis points over the third quarter of 2020. The increase between periods was driven by higher PPP loan contribution of 14 basis points and a decrease in costs of funds of 5 basis points, partially offset by an increase in excess liquidity of 4 basis points and a decrease in interest-earning asset yields given the low interest rate environment.

Our net interest margin, excluding PPP loans and excess liquidity (non-GAAP), for the fourth quarter of 2020 was 2.99%, compared to 3.03% for the third quarter of 2020.

Provision for Credit Losses.  The provision for credit losses for the fourth quarter of 2020 was reported using the CECL loss methodology, whereas the third quarter 2020 provision for credit losses was reported using the incurred loss methodology.

The change in provision for credit losses between periods is highlighted in the table below:

Non-Interest Income.  Non-interest income for the fourth quarter of 2020 was $14.3 million, an increase of $1.6 million, or 13%, over the third quarter of 2020. The increase between periods was driven by an increase in mortgage banking income of $934,000 and recognition of our annual debit card income bonus of $555,000 in the fourth quarter of 2020.

Non-Interest Expense.  Non-interest expense for the fourth quarter of 2020 was $26.7 million, an increase of $1.5 million, or 6%, compared to the third quarter of 2020. Compensation-related expenses increased $2.5 million between periods primarily due to incentive compensation due to strong Company performance for the year ended 2020. This was partially offset by a decrease in other expenses of $1.2 million between periods as the Company accrued $1.2 million for a legal matter settlement in the third quarter of 2020. The Company's efficiency ratio calculated in accordance with generally accepted accounting principles in the United States ("GAAP") was 53.61% for the fourth quarter of 2020 and 53.30% for the fourth quarter of 2020 on a non-GAAP basis.

FINANCIAL OPERATING RESULTS (Q4 2020 vs. Q4 2019)

Net income for the fourth quarter 2020 increased $3.0 million, or 20%, over the fourth quarter of 2019. Diluted EPS increased $0.23, or 23%, over the same period.

Net Interest Income.  Net interest income for the fourth quarter of 2020 increased $3.2 million, or 10%, over the fourth quarter 2019. The increase was led by PPP loan income of $3.7 million in the fourth quarter of 2020.

Net interest margin for the fourth quarter of 2020 decreased 6 basis points compared to the fourth quarter of 2019. Net interest margin compression between periods was driven by the change in the interest rate environment and the build of cash balances both pressuring our yield on interest-earning assets. Our yield on interest-earning assets for the fourth quarter of 2020 was 3.38%, which included a 19 basis point contribution from PPP loans and a 15 basis point drag from excess liquidity, compared to 4.02%, which included a 1 basis point drag from excess liquidity, for the fourth quarter of 2019. Over this same period, our cost of funds decreased 61 basis points to 0.33% for the fourth quarter of 2020.

Our net interest margin, excluding PPP loans and excess liquidity (non-GAAP), for the fourth quarter of 2020 was 2.99%, compared to 3.13% for the fourth quarter of 2019.

Provision for Credit Losses.  The provision for credit losses for the fourth quarter of 2020 was reported using the CECL loss methodology, whereas the fourth quarter 2019 provision for credit losses was reported using the incurred loss methodology.

The change in provision for credit losses between periods is highlighted in the table below:

Non-Interest Income.  Non-interest income for the fourth quarter 2020 increased $2.4 million, or 20%, over the fourth quarter of 2019. The increase between periods was led by an increase in mortgage banking income of $3.4 million driven by an increase in residential mortgage sales of 64%, and was partially offset by a one-time unrealized gain of $866,000 recognized in the fourth quarter of 2019, lower service charge income of $449,000 and lower customer loan swap fees of $247,000.

Non-Interest Expense.  Non-interest expense for the fourth quarter of 2020 increased $1.9 million, or 8%, over the fourth quarter of 2019. The net increase was driven by: (1) an increase in compensation-related expenses of $1.8 million driven by normal merit increases and higher incentive accruals based on performance, (2) an increase in furniture, equipment, and data processing costs of $410,000 driven by new systems and technologies, (3) an increase in regulatory assessment costs of $309,000 as the assessment credits received in 2019 were fully utilized prior to the fourth quarter of 2020, and (4) lower employment and travel-related costs of $432,000 driven by changes due to COVID-19.

CONFERENCE CALL

Camden National will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, January 26, 2021 to discuss its fourth quarter and fiscal year 2020 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:

A link to the live webcast will be available on Camden National's website under "Investor Relations" at CamdenNational.com 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 the largest publicly traded bank holding company in Northern New England with approximately $4.9 billion in assets and approximately 610 employees. Camden National Bank, its subsidiary, is a full-service community bank founded in 1875 in Camden, Maine. Dedicated to customers at every stage of their financial journey, the bank offers the latest in digital banking, complemented by personalized service with 58 banking centers, 24/7 live phone support, 68 ATMs, and additional lending offices in New Hampshire and Massachusetts. For the past three years, Camden National Bank was named a Customer Experience (CX) Leader by a leading independent research firm, Greenwich Associates. In 2020, it received awards in two CX categories: U.S. Retail Banking and U.S. Commercial Small Business. The Finance Authority of Maine has awarded Camden National Bank as "Lender at Work for Maine" for eleven years. 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 in Camden National's Annual Report on Form 10-K for the year ended December 31, 2019, as updated by other filings with the Securities and Exchange Commission ("SEC"). Further, statements about the potential effects of the COVID-19 pandemic on our business, results of operations and financial condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly 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 our control, including the scope and duration of the pandemic, action taken by government authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, service providers and on economies and markets more generally. 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 GAAP, management supplements this evaluation with certain non-GAAP financial measures, such as pre-tax, pre-provision earnings; return on average tangible equity; the efficiency and tangible common equity ratios; tangible book value per share; core deposits and average core deposits; adjusted yield on interest-earning assets and adjusted net interest margin (fully-taxable equivalent); and allowance for loan losses to total loans, excluding SBA PPP loans. 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 measure 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. 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.