Camden National Corporation Reports Second Quarter 2012 Results

CAMDEN, Maine, July 31, 2012 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or "Company"), a $2.4 billion bank holding company headquartered in Camden, Maine, reported net income for the second quarter of 2012 of $6.4 million and diluted earnings per share ("EPS") of $0.83. Second quarter 2012 results compare to net income of $6.6 million and EPS of $0.86 for the prior quarter, and net income of $7.1 million and EPS of $0.92 for the second quarter of 2011.  For the second quarter of 2012, the Company achieved a return on assets of 1.10%, a return on tangible equity of 14.33%, a net interest margin of 3.40%, and an efficiency ratio of 56.10%. For the first six months of 2012, the Company achieved a return on assets of 1.12%, a return on tangible equity of 14.71%, a net interest margin of 3.44%, and an efficiency ratio of 55.26%.

Camden National President and Chief Executive Officer Gregory A. Dufour stated, "Camden National continues to report double digit return on equity and solid return on assets despite a challenging economic environment."  Dufour further explained, "The Company's second quarter 2012 results are down slightly from the first quarter of 2012 primarily due to costs incurred with the pending acquisition of 15 branch locations from Bank of America. Other than the $310,000 of acquisition related expenses, net income remained flat between the first and second quarters of 2012. The extended low interest environment continues to negatively impact our net interest margin, which declined to 3.40% during the second quarter of 2012 compared to 3.48% for the prior quarter. Fortunately, our average interest-earning asset growth of $24.8 million during the second quarter of 2012 offset the declining net interest margin, resulting in our net interest income remaining consistent between the two quarters."

"Since our announcement in April of the acquisition of 15 Maine branches from Bank of America, a number of key milestones have been met," reported Dufour. "Regulatory approval has been received and we anticipate closing the transaction during the fourth quarter of 2012. The financial metrics of this transaction continue to be compelling, especially combined with the divestiture of one branch due to antitrust considerations and the sale of a branch building facility. Camden National expects to gain 38,000 customer relationships and approximately $350.0 million in core deposits for an investment of $14.0 million, which is comprised of the deposit premium and real estate and equipment net of the branch divestiture and sale of building. We are excited to embark on expanding our market presence in Maine and we believe this growth is good for our customers, our shareholders, and the people of Maine. Our expanded franchise will offer greater convenience, and the benefits of community banking, to new and existing customers throughout the state."

Second Quarter 2012 Highlights

• Expansion in Maine market – agreement to acquire 15 branch locations and subsequent divestiture of one branch location expected to result in net new deposits of approximately $350.0 million in the fourth quarter of 2012.
• Growth in the loan portfolio – increased demand during the second quarter of 2012 resulted in net loan growth of $20.0 million during the period, primarily centered in commercial real estate.
• Strong core deposit growth – core deposit average balances grew $24.3 million between the second and first quarter of 2012.
• Declining net interest margin – 8 basis point decline during the second quarter of 2012 compared to the previous quarter.
• Higher capital levels – total risk-based capital ratio increased to 16.22% at June 30, 2012.
• Stability of asset quality – non-performing asset levels have been consistent over the last four quarters and total past due loans have trended down since year-end.

Operating Results

Net interest income on a fully-taxable basis totaled $18.6 million for both the second and first quarters of 2012.  Growth in average loans and investments during the second quarter of 2012 of $24.8 million helped offset a decline in the net interest margin of 8 basis points between quarters. The taxable-equivalent net interest income in the second quarter decreased 6% from $19.9 million in the second quarter of 2011, primarily due to $600,000 in non-recurring loan-related fees received during the second quarter of last year, a $9.7 million reduction in average earning assets, and a tightening of our tax equivalent net interest margin of 24 basis points, resulting from the continued low rate environment that has driven asset yields lower.

The provision for credit losses was $835,000 for the second quarter of 2012, down from $1.0 million in the prior quarter and $970,000 for the second quarter of 2011, as a result of lower charge-offs. Net loan charge-offs totaled $574,000 during the second quarter of 2012, compared to $992,000 for the prior quarter and $864,000 for the second quarter of 2011.

Non-interest income for the second quarter of 2012 was $5.8 million, compared to $5.2 million and $5.0 million for the first quarter of 2012 and second quarter of 2011, respectively. The increase in second quarter 2012 non-interest income from the prior quarter was primarily due to an increase in security gains of $630,000. The growth in non-interest income from the second quarter of 2011 was primarily due to increases in security gains of $698,000 and mortgage banking income of $80,000, partially offset by a decline in income from fiduciary services of $150,000 associated with the outsourcing of Acadia Trust's employee benefit plan service business line to a third-party.

Non-interest expense for the second quarter of 2012 was $14.0 million, compared to $12.9 million for the first quarter of 2012 and $13.3 million for the second quarter of 2011. The second quarter of 2012 includes non-recurring expenses of $728,000 for the early extinguishment of borrowings and $308,000 in expenditures related to the Bank of America branch acquisition. Other than these items, non-interest expense totaled $12.9 million for the second quarter, which is flat compared to the previous quarter and a 3% decline from the second quarter of 2011.

Balance Sheet

Total loans (excluding loans held for sale) grew $22.4 million, or 3% on an annualized basis, during the first six months of 2012, to $1.5 billion at June 30, 2012. Commercial real estate loans were up $26.4 million as we experienced an increase in lending demand, and the consumer and home equity portfolios grew $7.1 million as a result of retail promotions. Since year-end, our residential real estate loan portfolio declined $8.6 million, primarily due to sales of thirty-year fixed rate mortgages, and commercial loans declined $2.6 million.

Our investment portfolio totaled $698.3 million at June 30, 2012, an increase of $86.3 million since December 31, 2011. During the second quarter of 2012, we purchased $75.0 million of securities as a pre-investment strategy in anticipation of excess cash resulting from the branch acquisition transaction later in the year.

Total average deposits increased $9.9 million during the second quarter of 2012 compared to the previous quarter.  This increase in average deposits resulted from growth of $24.2 million in demand deposits, interest checking, savings, and money market accounts, partially offset by a decline in retail certificates of deposit average balances of $14.3 million.

Asset Quality

"Our overall credit quality continues to provide us with solid financial footing," said Dufour. "Our total past due loans have declined for three straight quarters and our levels of non-performing assets have remained even over the last four quarters."

Non-performing assets at June 30, 2012, were $29.7 million, or 1.24% of total assets, compared to $29.2 million, or 1.25% of total assets, at March 31, 2012. Annualized net charge-offs for the second quarter of 2012 decreased 11 basis points from the first quarter 2012 to 0.15%.  The allowance for credit losses to total loans increased to 1.52% at June 30, 2012, compared to 1.51% at March 31, 2012.

Dividends and Capital

The board of directors approved a dividend of $0.25 per share, payable on July 31, 2012, to shareholders of record on July 13, 2012. This distribution resulted in an annualized dividend yield of 2.73%, based on the June 29, 2012, closing price of Camden National's common stock of $36.62 per share as reported by NASDAQ.

Camden National's total risk-based capital ratio increased to 16.22% at June 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 27, 2011, the board of directors authorized the 2011 Common Stock Repurchase Program ("2011 Plan") for the repurchase of up to 500,000 shares, or approximately 6.5% of the Company's outstanding common stock. Under the 2011 Plan, Camden National has repurchased 78,824 shares of common stock at an average price of $31.53. The 2011 Plan will expire on October 1, 2012.

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 400 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 38 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 of between the GAAP and non-GAAP efficiency ratio:

The following table provides a reconciliation of tax-equivalent net interest income to net interest income in accordance with GAAP. A 35.0% tax rate was used for each period above.

The following table provides a reconciliation of tangible book value per share to book value per share, which has been prepared in accordance with GAAP:

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SOURCE Camden National Corporation