Camden National Corporation Reports Third Quarter 2012 Results

CAMDEN, Maine, Oct. 30, 2012 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or "the Company"), a $2.5 billion bank holding company headquartered in Camden, Maine, reported net income for the third quarter of 2012 of $6.3 million and diluted earnings per share ("EPS") of $0.82. Third quarter 2012 results compare to net income of $6.4 million and EPS of $0.83 for the prior quarter, and net income of $6.9 million and EPS of $0.90 for the third quarter of 2011. For the third quarter of 2012, the Company achieved a return on assets of 1.03%, a return on tangible equity of 13.54%, a net interest margin of 3.30%, and an efficiency ratio of 55.10%. For the nine months ended September 30, 2012, the Company achieved a return on assets of 1.09%, a return on tangible equity of 14.31%, a net interest margin of 3.39%, and an efficiency ratio of 54.77%.

"I'm pleased that the Camden National team has been able to complete the acquisition of 15 Bank of America branches and divest one as required by the Department of Justice, while producing solid financial results for the quarter," said Camden National President and Chief Executive Officer Gregory A. Dufour. "Expanding and strengthening our geographic footprint is just one important aspect of the branch acquisition. Also of strategic importance is the welcoming of approximately 30,000 new customer relationships to our organization, which will allow us to better leverage the entire franchise to benefit both customers and shareholders."

Third Quarter 2012 Highlights

• Strong core deposit growth as core deposit average balances grew $82.6 million between the second and third quarters of 2012.
• A decrease in net interest margin of 10 basis points during the third quarter of 2012 compared to the previous quarter, reflecting the impact of the prolonged and historically low interest rate environment.
• Higher capital levels as the total risk-based capital ratio increased to 16.39% at September 30, 2012.
• Stability of asset quality as non-performing asset levels and total past due loans have trended downward since December 31, 2011, as the Company maintained its credit underwriting discipline.

Operating Results

Net interest income on a fully-taxable basis for the third quarter of 2012 increased to $18.7 million, compared to $18.6 million for the second quarter of 2012, and decreased $250,000 compared to the third quarter of 2011. The net interest margin for the third quarter of 2012 declined 10 basis points from the previous quarter and 21 basis points from the third quarter of 2011. The decline reflects the impact of reinvesting cash flow in both investment securities and loans at lower interest rates due to the continued low interest rate environment. The decline in the net interest margin was partially mitigated by growth in average investments and average loans of $61.6 million during the third quarter of 2012.

The provision for credit losses was $868,000 for the third quarter of 2012, compared to $835,000 for the prior quarter and $1.2 million for the third quarter of 2011. The decrease in the provision for credit losses from the third quarter of 2011 was a result of lower non-performing assets and stabilization of net charge-offs. Net loan charge-offs totaled $1.3 million during the third quarter of 2012, compared to $574,000 for the prior quarter and $1.2 million for the third quarter of 2011.

Non-interest income for the third quarter of 2012 was $5.0 million, compared to $5.8 million for both the second quarter of 2012 and the third quarter of 2011. The decrease from the prior quarter was primarily due to a decrease in security gains of $554,000 and mortgage banking income of $124,000. The decrease in non-interest income from the third quarter of 2011 was primarily due to non-recurring bank-owned life insurance proceeds of $550,000 recorded in the third quarter of 2011, and a decrease in mortgage banking income of $360,000, partially offset by a $215,000 increase in service charges and fees.

Non-interest expense for the third quarter of 2012 was $13.4 million, compared to $14.0 million for the second quarter of 2012 and $13.3 million for the third quarter of 2011. The third quarter of 2012 included non-recurring expenses of $396,000 in branch acquisition-related expenditures. The second quarter of 2012 included non-recurring expenses of $728,000 for the early extinguishment of borrowings and $308,000 in branch acquisition-related expenditures. Other than these non-recurring expenses, non-interest expense totaled $13.0 million for the third quarter of 2012, which was flat from the previous quarter and a 3% decline from the third quarter of 2011.

Balance Sheet

Total loans (excluding loans held for sale) of $1.5 billion grew by $26.6 million, or 2%, since year-end. For the first nine months of 2012, commercial real estate loans increased $31.2 million and consumer and home equity portfolios grew $9.1 million as a result of retail promotions. During the same period, our residential real estate loan portfolio declined $7.0 million, primarily due to sales of thirty-year fixed rate mortgages, and commercial loans declined $6.8 million.

Our investment portfolio totaled $751.7 million at September 30, 2012, an increase of $139.7 million since December 31, 2011. During the second and third quarters of 2012, we purchased approximately $115.0 million of investment securities as a pre-investment strategy in anticipation of excess cash resulting from the branch acquisition, which was completed on October 26, 2012.

Total average deposits increased $73.7 million during the third quarter of 2012 compared to the previous quarter. This increase in average deposits resulted from growth of $82.6 million in demand deposits, interest checking, savings, and money market accounts, partially offset by a decline in retail certificates of deposit average balances of $9.0 million. 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

"Credit quality remains stable, reflecting our adherence to our credit underwriting standards," said Dufour. "Non-performing assets were 12% lower than the previous quarter and total past due loans have declined since year-end."

Non-performing assets at September 30, 2012, were $26.3 million, or 1.06% of total assets, compared to $29.7 million, or 1.24% of total assets, at June 30, 2012. Annualized net charge-offs for the third quarter of 2012 increased to 0.33% from 0.15% in the second quarter of 2012. The allowance for credit losses to total loans decreased slightly to 1.49% at September 30, 2012, compared to 1.52% at June 30, 2012.

Dividends and Capital

The board of directors approved a dividend of $0.25 per share, payable on October 31, 2012, to shareholders of record as of October 15, 2012. This distribution resulted in an annualized dividend yield of 2.70%, based on the September 28, 2012, closing price of Camden National's common stock at $37.04 per share as reported by NASDAQ.

Camden National's total risk-based capital ratio increased to 16.39% at September 30, 2012, compared to 15.95% at December 31, 2011, 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."

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 over the next year.

"This is the annual renewal of our common stock repurchase program," said Dufour. "We view the repurchase program as one component of our capital management plan, which provides flexibility to efficiently return capital to our shareholders when conditions and events warrant." Under the 2011 Common Stock Repurchase Program, the Company repurchased 78,824 shares, or 16% of the program's allotment and 1% of total outstanding shares.

About Camden National Corporation

Camden National Corporation, recently recognized by Forbes as one of "America's Most Trustworthy Companies," 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 including but not limited to, the Dodd-Frank Wall Street Reform & Consumer Protection Act; 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 other-than-temporary impairment charges from non-interest expenses, excludes securities gains and losses 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 and net interest income in accordance with GAAP. A 35.0% tax rate was used for each period above.

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:

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SOURCE Camden National Corporation