Camden National Corporation Reports First Quarter 2016 Increase In Core Operating Earnings Of 14%

CAMDEN, Maine, April 26, 2016 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $3.8 billion bank holding company headquartered in Camden, Maine, reported core operating earnings¹ of $8.8 million and core diluted earnings per share ("EPS")¹ of $0.85 per share for the first quarter of 2016, representing an increase of 14% and 9%, respectively, over the fourth quarter of 2015. Net income and diluted EPS, as presented in accordance with generally accepted accounting principles in the United States ("GAAP"), for the first quarter of 2016 were $8.3 million and $0.81 per share, respectively, compared to $1.7 million and $0.17 per share in the fourth quarter of 2015.

"Our financial results represent our first full quarter realizing the strength and benefit of the acquisition of SBM Financial, Inc., the parent company of The Bank of Maine," said Gregory A. Dufour, president and chief executive officer of Camden National. "Core operating earnings for the first quarter of 2016 increased 40% over the same period last year, while also increasing 14% over last quarter, demonstrating Camden National's earnings capacity as a larger, combined organization. We also completed various merger related cost savings initiatives during the quarter and are on track to achieve our 37% cost savings target in 2016, and look forward to leveraging the more efficient structure for revenue generation."

Dufour added, "I am also excited to announce that Mary Beth Haut, CFP, has recently joined our team as the president and chief executive officer of Acadia Trust, N.A. to lead our investment and trust services throughout Maine and New England. Mary Beth brings a deep breadth of knowledge and experience within wealth management and financial services."

FIRST QUARTER 2016 FINANCIAL HIGHLIGHTS (compared to the fourth quarter of 2015, unless otherwise stated)

• Core operating earnings increased $1.1 million, or 14%, driven by an increase in revenue² of $1.0 million, or 3%, while reducing core non-interest expenses¹ by $400,000, or 2%.
• Core diluted EPS increased $0.07 per share, or 9%, to $0.85 per share.
• Efficiency ratio¹ decreased to 61.23% at March 31, 2016 from 64.16% at December 31, 2015 as the Company begins to benefit from the synergies from its merger with SBM Financial, Inc. ("SBM") completed in the fourth quarter of 2015.
• Tangible book value per share increased 5% to $26.48 per share.
• In early April 2016, the Company announced that it named Mary Beth Haut, CFP, as its new president and chief executive officer of Acadia Trust, N.A., the Company's wealth management subsidiary.

FINANCIAL CONDITION

Total assets at March 31, 2016 were $3.8 billion compared to $3.7 billion at December 31, 2015, representing an increase of $53.2 million. The increase in assets was primarily driven by an increase in our investment portfolio of $53.6 million. At March 31, 2016, our investment portfolio represented 24% of total assets compared to 23% at December 31, 2015. Loans (excluding loans held for sale) at March 31, 2016 totaled $2.5 billion, an increase of $2.4 million since December 31, 2015. The commercial loan portfolio increased $16.0 million, or 5% annualized, since December 31, 2015, while the retail loan portfolio decreased $13.6 million over the same period. With the ramp-up of our mortgage banking platform over the past year, we continue to sell a significant portion of our residential mortgage production.

¹ This is a non-GAAP measure. Please refer to "Reconciliation of non-GAAP to GAAP Financial Measures" for further details.

² Revenue is defined as the sum of net interest income and non-interest income.

In the first quarter of 2016, the Company sold $38.9 million of residential mortgage loans, compared to $36.7 million in the fourth quarter of 2015. At March 31, 2016, loans held for sale totaled $16.6 million, representing an increase of $5.7 million since December 31, 2015.

Total deposits at March 31, 2016 were $2.7 billion, representing a decrease of $51.5 million since year-end. Core deposits (demand, interest checking, savings and money market) at March 31, 2016 totaled $2.0 billion, representing a decrease of 1% since year-end, which was consistent with the same period a year ago, due to the seasonality and cyclical nature of core deposit flows within our market. Certificates of deposit decreased $34.0 million since year-end, primarily due to the maturity and non-renewal of one significant municipal account totaling $30.0 million. Total borrowings at March 31, 2016 totaled $659.1 million, representing an increase of $86.7 million since year-end.

Our asset quality at March 31, 2016 remains strong with non-performing loans as a percentage of total loans of 0.84%, representing a decrease of 0.09% since year-end. At March 31, 2016, the ratio of loans 30-89 days past due to total loans was 0.30%, representing a decrease of 0.10% since year-end.

The Company and its wholly-owned subsidiary Camden National Bank continue to maintain risk-based capital ratios in excess of the regulatory levels required for an institution to be considered "well capitalized." At March 31, 2016, the Company's total risk-based capital ratio, Tier I risk-based capital ratio, common equity Tier I risk-based capital ratio, and Tier I leverage capital ratio were 13.08%, 11.69%, 10.37%, and 8.42%, respectively.

FINANCIAL OPERATING RESULTS

Core operating earnings for the first quarter of 2016 were $8.8 million compared to $7.7 million for the fourth quarter of 2015. Core diluted EPS for the first quarter of 2016 was $0.85 per share compared to $0.78 per share last quarter. Overall, the increase in core operating earnings and core diluted EPS reflects the benefit of a full quarter of additional revenues derived from the acquisition of SBM and the cost savings achieved through the merger.

Revenues increased $1.0 million, or 3%, in the first quarter of 2016 to $35.9 million compared to the fourth quarter of 2015. The increase in revenues was driven by a $1.6 million increase in our net interest income partially offset by a decline in non-interest income of $547,000.

• Net interest income of $28.0 million increased 6% between quarters due to:
  • Growth in average interest-earning assets for the first quarter of 2016 of $155.3 million, or 5%, compared to the fourth quarter of 2015, driven by higher average loan balances of $119.4 million and higher average investment balances of $35.9 million.
  • Increase in our net interest margin of five basis points to 3.35% in the first quarter of 2016 compared to the fourth quarter of 2015. Excluding the impact of the fair value mark accretion from purchase accounting and collection of previously charged-off acquired loans, our normalized net interest margin was 3.18%, compared to 3.21% for the previous quarter.
• Non-interest income of $7.9 million decreased 7% between quarters due to:
  • A decline in fees from our commercial real estate back-to-back loan swap program of $608,000 to $253,000 for the first quarter of 2016 due to commercial refinance activities during the fourth quarter of 2015 that resulted in significant swap fee income last quarter.
  • A net decrease in mortgage banking income of $248,000 related to a decrease in our mortgage servicing rights assets ("MSR") of $587,000 since year-end. The decline in the ten year U.S. Treasury rate of 49 basis points since December 31, 2015 drove increased prepayment activity and higher prepayment speed assumptions resulting in higher MSR amortization and a valuation adjustment. At March 31, 2016, our MSRs of $1.6 million were 0.43% of the respective serviced loan portfolio compared to 0.57% at December 31, 2015.
  • Partially offset by an increase in debit card income of $277,000 between periods.

The provision for credit losses was $872,000 for the first quarter of 2016, representing a decrease of $85,000 compared to the fourth quarter of 2015. The decrease reflects lower net charge-offs to average loans (annualized) in the first quarter of 2016 of 0.11% (annualized) compared to 0.16% (annualized) for the fourth quarter of 2015.

Core operating expenses (non-interest expense, excluding merger and acquisition costs) for the first quarter of 2016 totaled $22.3 million, representing a decrease of $400,000 compared to the fourth quarter of 2015. Core operating expenses as a percentage of total average assets (annualized) for the first quarter of 2016 was 2.38%, compared to 2.56% for the fourth quarter of 2015. The changes in core operating expenses included:

• Incremental cost saves of approximately $1.9 million resulting from our execution of our integration strategies, partially offset by approximately $1.3 million of incremental operating expense in the first quarter of 2016 due to an additional 15 days of operating costs as a combined organization as the merger was completed on October 16, 2015.
• Higher seasonal costs of $583,000, including employer payroll taxes and occupancy costs.
• Lower other real estate owned and collection costs of $281,000, primarily due to less auction activity.
• Lower debit card and check fraud costs of $149,000.

Merger and acquisition costs of $644,000 for the first quarter of 2016 included the cost of closing and consolidating the following locations: (1) the Healthcare Professional Funding Corporation ("HPFC") office in Boston, Massachusetts, (2) an operations center in Gardiner, Maine, and (3) consolidation of two banking centers in Portland, Maine. Core operating expenses in the first quarter of 2016 included overhead costs of HPFC and the operations and banking centers totaling approximately $400,000 that will not be incurred in future periods.

FIRST QUARTER 2016 DIVIDEND

The board of directors approved a dividend of $0.30 per share, payable on April 29, 2016, to shareholders of record as of April 15, 2016. This distribution represents an annualized dividend yield of 2.86%, based on the March 31, 2016 closing price of Camden National's common stock at $42.00 per share as reported by NASDAQ.

CONFERENCE CALL

Camden National will host a conference call and webcast at 1:00 p.m. eastern time on April 26, 2016 to discuss our first quarter 2016 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:                   http://services.choruscall.com/links/cac160427

A link to the live webcast will be will be available on Camden National's website under "Investor Relations" at www.CamdenNational.com  prior to the meeting. 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 is the holding company of Camden National Bank and Acadia Trust, N.A. Headquartered in Camden, Maine, Camden National Corporation has $3.8 billion in assets and is the largest publicly traded company in Northern New England (NASDAQ: CAC). Camden National Bank is a full-service community bank that employs over 650 people, features a network of 63 banking centers and 85 ATMs in Maine, and offers state-of-the-art online and mobile banking resources as well as brokerage and insurance services through its division, Camden Financial Consultants. Acadia Trust, N.A. offers investment management and fiduciary services through its offices in Portland, Bangor and Ellsworth. To learn more, visit www.CamdenNational.com.

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, 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 difficulties in achieving cost savings in connection with the recent acquisition of SBM or in achieving such cost savings within the expected time frame, increased competitive pressures, changes in the interest rate environment, changes in general economic conditions, 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, 2015, 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 with accordance GAAP, management supplements this evaluation with certain non-GAAP financial measures, such as the efficiency, core operating expenses to total average assets, tangible common equity, and core return ratios; core operating earnings; core diluted EPS; core operating expenses; 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.

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.