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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K


CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 2019

Camden National Corporation
(Exact name of registrant as specified in its charter)
 

Maine
 
01-28190
 
01-0413282
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
Two Elm Street, Camden, Maine
 
04843
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (207) 236-8821
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
  
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨





 
Item 2.02
Results of Operations and Financial Condition.
 
Camden National Corporation (the “Company”) issued a press release on April 30, 2019 announcing earnings for the first quarter ended March 31, 2019. In addition, the Company released its quarterly shareholder letter and financial summary for the quarter ended March 31, 2019. The press release and shareholder letter are being furnished pursuant to Item 2.02, and the information contained therein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities under that Section. Furthermore, the information contained in Exhibits 99.1 and 99.2 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933.

Item 9.01
Financial Statements and Exhibits.
 
(d)    The following exhibits are filed with this Report:
Exhibit No.
Description


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

Dated: April 30, 2019
 
 
CAMDEN NATIONAL CORPORATION
(Registrant)
 
 
 
 
 
By: 
/s/ DEBORAH A. JORDAN
 
 
Deborah A. Jordan
Chief Operating Officer, Chief Financial Officer, and Principal Financial & Accounting Officer







(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
397725849_cncsignaturebrandmarkrgba11.jpg
CONTACT:                                
Michael Archer
Senior Vice President
Corporate Controller
Camden National Corporation
(800) 860-8821
[email protected]

FOR IMMEDIATE RELEASE

CAMDEN NATIONAL CORPORATION REPORTS AN 11%
INCREASE IN FIRST QUARTER 2019 EARNINGS

Q1 2019 Net Income of $14.3 Million Sets Company Record

CAMDEN, Maine, April 30, 2019/PRNewswire/--Camden National Corporation (NASDAQ: CAC; “Camden National” or the “Company”), a $4.4 billion bank holding company headquartered in Camden, Maine, reported net income for the first quarter of 2019 of $14.3 million and diluted earnings per share ("EPS") of $0.91, representing increases over the first quarter of 2018 of 11%. The Company's return on average assets was 1.33% and return on average equity was 13.13% for the first quarter of 2019.

"We are thrilled to start 2019 on such a strong note, reporting record earnings for the quarter of $14.3 million," said Gregory A. Dufour, President and Chief Executive Officer of the Company. "Our financial results are the culmination of the strategic investments we have made in products, technology and talent, all focused to continuously expand our customer base and enhance the customer experience. These investments have translated into strong loan and deposit growth that includes a 10% increase in average loans and 17% increase in average core deposits1 in the first quarter of 2019 over the first quarter last year.”

Dufour added, "In the first quarter of 2019, our net interest margin on a fully-taxable basis reached 3.18%, an increase of 8 basis points over the first quarter last year, as our core deposit growth outpaced loan growth. However, because we are asset sensitive, we anticipate that if interest rates remain at current levels or decrease there will be downward pressure on our net interest margin in future periods as funding costs continue to increase."

For the first quarter of 2019, Camden National declared a $0.30 dividend per share, which represents a $0.05 per share, or 20%, increase over the first quarter of 2018, and a dividend yield of 2.88% as of March 29, 2019 (the last business day of the first quarter).

"In January, we announced a stock repurchase plan of up to 775,000 shares of the Company's common stock. Through April 26, 2019, we repurchased 95,967 shares at an average price of $41.87 per share. We continue to be active in the market and prudently repurchase shares based on our market price," said Dufour.




FIRST QUARTER 2019 FINANCIAL HIGHLIGHTS

Net income and diluted EPS increased 11% over the first quarter of 2018 and 2% over last quarter.
Loan growth of $16.2 million and deposit growth of $113.7 million since December 31, 2018.
Average loan growth of 10% and deposit growth (excluding brokered deposits) of 13% over the first quarter of 2018, and a 3% increase over last quarter.
Net interest margin on a fully-taxable basis of 3.18% increased 8 basis points over the first quarter of 2018 and decreased 3 basis points over last quarter.

FINANCIAL CONDITION

Total assets increased 3% since December 31, 2018 to $4.4 billion at March 31, 2019. Loans grew $16.2 million, or less than 1%, over the same period, led by residential real estate loan growth of 2% and commercial loan growth of 2%. Commercial real estate loans decreased 1% over this same period, driven by larger loan prepayment activity that included a $39.2 million payout financed directly by a government-sponsored entity.

Total deposits increased 3% since December 31, 2018 to $3.6 billion at March 31, 2019. Checking balances grew 9% over this period while savings and money market balances decreased 7%. Our core deposit growth in the first quarter of 2019 was primarily driven by our larger commercial deposit relationships. These deposit relationships are subject to more variability in balances due to dependence on business-specific cash flow needs, interest rates and pricing, and other factors. Brokered deposits increased 19% over this same period, as this option provided a more cost efficient source of short-term funding.

At March 31, 2019, our loan-to-deposit ratio improved to 85%, compared to 87% at December 31, 2018 and 92% at March 31, 2018.

The Company's capital position at March 31, 2019 was well in excess of regulatory requirements, including a total risk-based capital ratio of 14.46% and a Tier I leverage ratio of 9.47%. At March 31, 2019, the Company's common equity ratio was 10.26% and tangible common equity ratio2 was 8.21%.

ASSET QUALITY

Asset quality remained strong throughout the first quarter of 2019. At March 31, 2019, non-performing assets to total assets was 0.33%, a decrease of 0.01% since December 31, 2018. Loans past due 30-89 days to total loans improved 0.03% at March 31, 2019 to 0.26%, since year-end.

At March 31, 2019, the allowance for loan losses was 0.83% of total loans and 180.81% of non-performing loans, compared to 0.82% and 171.17%, respectively, at December 31, 2018.

OPERATING RESULTS (First Quarter 2019 vs. First Quarter 2018)

Net income for the first quarter of 2019 was $14.3 million, an increase of $1.5 million, or 11%, over the first quarter of 2018. Over the same period, diluted EPS increased $0.09, or 11%, to $0.91 for the first quarter of 2019.

Net interest income for the first quarter of 2019 was $31.9 million, an increase of $3.0 million, or 10%, over the same period last year. The increase was driven by average loan growth of $269.7 million, or 10%, and strong average core deposit growth of $376.6 million, or 17%, over this period. Net interest margin on a fully-taxable basis increased 8 basis points to 3.18% for the first quarter of 2019 as deposit growth outpaced loan growth resulting in a reduction in borrowings.




The provision for credit losses for the first quarter of 2019 was $744,000, or 10 basis points of average loans for the quarter on an annualized basis, an increase of $1.2 million over the first quarter of 2018. In the first quarter of 2018, a large commercial real estate loan that was previously on non-accrual status was favorably resolved and resulted in a $978,000 release of provision expense for this loan.

Non-interest income for the first quarter of 2019 was $9.4 million, an increase of $585,000, or 7%, over the same period last year. The increase was primarily driven by an increase in customer loan swap fees of $438,000.

Non-interest expense for the first quarter of 2019 was $22.8 million, an increase of $479,000, or 2%, over the same period last year. Compensation-related costs increased 3% over this period primarily due to normal merit increases and an increase in health insurance premiums. Partially offsetting these increases was the recovery of certain collection costs in the first quarter of 2019 that resulted in a net recovery of other real estate and collection costs for the quarter of $307,000. The Company's efficiency ratio calculated in accordance with generally accepted accounting principles ("GAAP") for the first quarter was 55.19%, compared to 59.15% for the same period last year. The Company's non-GAAP efficiency ratio for the first quarter of 2019 was 54.86% compared to 58.76% for the same period last year.

OPERATING RESULTS (Linked Quarter)

Net income for the first quarter of 2019 increased $296,000, or 2%, and diluted EPS increased $0.02, or 2%, compared to the previous quarter. The increase between periods was led by a reduction in non-interest expense of $797,000 and revenue growth of $218,000.

Net interest income for the first quarter of 2019 increased $308,000, or 1%, over the last quarter. The increase was driven by an increase in average loans and deposits of 3%, and was partially offset by a decrease in net interest margin on a fully-taxable basis of 3 basis points to 3.18% for the first quarter of 2019. The decrease in net interest margin on a fully-taxable basis between periods was due to a decrease in fair value mark accretion income of $296,000. Net interest margin on a fully-taxable basis, excluding fair value mark accretion, remained consistent at 3.14% for the first quarter of 2019 and the fourth quarter of 2018.

The provision for credit losses for the first quarter of 2019 increased $737,000 over the last quarter primarily as the Company recorded $1.2 million of net recoveries in the fourth quarter upon the favorable resolution of a large commercial credit relationship.

Non-interest income for the first quarter of 2019 decreased $90,000, or 1%, over the last quarter. The decrease was driven by a decrease in debit card income of $829,000 as debit card activity peaks in the fourth quarter and fourth quarter debit card income includes an annual debit card incentive bonus. This was partially offset by an increase in customer loan swap fees of $124,000 and investment losses of $420,000 recorded in the fourth quarter of 2018.

Non-interest expense for the first quarter of 2019 decreased $797,000, or 3%, over last quarter. The decrease was largely driven by a decrease in other real estate and collection costs of $677,000 between periods as the Company recovered certain collection costs in the first quarter of 2019 that were incurred in prior periods.

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 Conference Center, The Summit, 67 Atlantic Highway, Northport, Maine 04849. The date for determining the Company's shareholders of record for the annual meeting was February 22, 2019.




CONFERENCE CALL

Camden National will host a conference call and webcast at 1:00 p.m., Eastern Time, on Tuesday, April 30, 2019 to discuss its first quarter 2019 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/cac190430.html

A link to the live webcast will be available on Camden National's website under "Investor Relations" at www.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), headquartered in Camden, Maine, is the largest publicly traded bank holding company in Northern New England with $4.4 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 www.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, 2018, 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 return on average tangible equity; the efficiency and tangible common equity ratios; and tangible book value per share. 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 measures 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.





























_____________________________________________________________________________________________
1
Core deposits includes non-interest checking, interest checking, savings and money market accounts.
2
This is a non-GAAP measure. Please refer to "Reconciliation of non-GAAP to GAAP Financial Measures" for further details.




Selected Financial Data
(unaudited)

 
 
At or For The
Three Months Ended
(In thousands, except number of shares and per share data)
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Financial Condition Data
 
 
 
 
 
 
Investments
 
$
936,859

 
$
926,678

 
$
912,368

Loans and loans held for sale
 
3,051,237

 
3,030,625

 
2,798,696

Allowance for loan losses
 
25,201

 
24.712

 
22,990

Total assets
 
4,421,189

 
4,297,435

 
4,112,176

Deposits
 
3,578,197

 
3,464,474

 
3,025,580

Borrowings
 
325,159

 
341,515

 
622,347

Shareholders' equity
 
453,718

 
435,825

 
403,046

Operating Data
 
 
 
 
 
 
Net interest income
 
$
31,895

 
$
31,587

 
$
28,902

Provision (credit) for credit losses
 
744

 
7

 
(497
)
Non-interest income
 
9,389

 
9,479

 
8,804

Non-interest expense
 
22,783

 
23,580

 
22,304

Income before income tax expense
 
17,757

 
17,479

 
15,899

Income tax expense
 
3,484

 
3,502

 
3,079

Net income
 
$
14,273

 
$
13,977

 
$
12,820

Key Ratios
 
 
 
 
 
 
Return on average assets
 
1.33
%
 
1.32
 %
 
1.28
%
Return on average equity
 
13.13
%
 
13.19
 %
 
12.91
%
Net interest margin (fully-taxable equivalent)
 
3.18
%
 
3.21
 %
 
3.10
%
Non-performing loans to total loans
 
0.46
%
 
0.48
 %
 
0.69
%
Non-performing assets to total assets
 
0.33
%
 
0.34
 %
 
0.47
%
Annualized net charge-offs (recoveries) to average loans
 
0.03
%
 
(0.16
)%
 
0.10
%
Tier I leverage capital ratio
 
9.47
%
 
9.53
 %
 
9.23
%
Total risk-based capital ratio
 
14.46
%
 
14.36
 %
 
14.32
%
Per Share Data
 
 
 
 
 
 
Basic earnings per share
 
$
0.91

 
$
0.90

 
$
0.82

Diluted earnings per share
 
$
0.91

 
$
0.89

 
$
0.82

Cash dividends declared per share
 
$
0.30

 
$
0.30

 
$
0.25

Book value per share
 
$
29.16

 
$
27.95

 
$
25.89

Weighted average number of common shares outstanding
 
15,592,141

 
15,589,310

 
15,541,975

Diluted weighted average number of common shares outstanding
 
15,634,126

 
15,646,540

 
15,603,380

Non-GAAP Measures(1)
 
 
 
 
 
 
Return on average tangible equity
 
17.08
%
 
17.43
 %
 
17.35
%
Efficiency ratio
 
54.86
%
 
56.50
 %
 
58.76
%
Tangible common equity ratio
 
8.21
%
 
8.02
 %
 
7.57
%
Tangible book value per share
 
$
22.81

 
$
21.61

 
$
19.50

(1) Please see "Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)."





Consolidated Statements of Condition Data
(unaudited)
 
 
 
(In thousands, except number of shares)
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
ASSETS
 
 

 
 

 
 

Cash and due from banks
 
$
43,722

 
$
52,240

 
$
48,159

Interest-bearing deposits in other banks (including restricted cash)
 
95,846

 
14,759

 
76,950

Total cash, cash equivalents and restricted cash
 
139,568

 
66,999

 
125,109

Investments:
 
 

 
 

 
 

Available-for-sale securities, at fair value (book value of $933,135, $933,399 and $914,335, respectively)
 
924,311

 
910,692

 
887,283

Held-to-maturity securities, at amortized cost (fair value of $1,324, $1,291 and $1,277, respectively)
 
1,306

 
1,307

 
1,311

Other investments
 
11,242

 
14,679

 
23,774

Total investments
 
936,859

 
926,678

 
912,368

Loans held for sale, at fair value (book value of $8,711, $4,314 and $9,502, respectively)
 
8,795

 
4,403

 
9,548

Loans:
 
 
 
 
 
 
Commercial real estate
 
1,258,474

 
1,269,533

 
1,169,533

Residential real estate
 
1,017,442

 
992,866

 
860,533

Commercial(1)
 
421,824

 
415,436

 
420,429

Consumer and home equity
 
344,702

 
348,387

 
338,653

Total loans
 
3,042,442

 
3,026,222

 
2,789,148

      Less: allowance for loan losses
 
(25,201
)
 
(24,712
)
 
(22,990
)
       Net loans
 
3,017,241

 
3,001,510

 
2,766,158

Goodwill
 
94,697

 
94,697

 
94,697

Other intangible assets
 
4,054

 
4,230

 
4,774

Bank-owned life insurance
 
90,513

 
89,919

 
88,097

Premises and equipment, net
 
42,033

 
42,495

 
41,545

Deferred tax assets
 
18,854

 
23,053

 
23,457

Other assets
 
68,575

 
43,451

 
46,423

Total assets
 
$
4,421,189

 
$
4,297,435

 
$
4,112,176

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

 
 
Liabilities
 
 

 
 

 
 
Deposits:
 
 

 
 

 
 
Non-interest checking
 
$
492,306

 
$
496,729

 
$
463,496

Interest checking
 
1,163,678

 
1,023,373

 
840,054

Savings and money market
 
1,059,897

 
1,137,356

 
1,005,329

Certificates of deposit
 
428,487

 
443,912

 
471,155

Brokered deposits
 
433,829

 
363,104

 
245,546

Total deposits
 
3,578,197

 
3,464,474

 
3,025,580

Short-term borrowings
 
256,181

 
270,868

 
552,624

Long-term borrowings
 
10,000

 
11,580

 
10,773

Subordinated debentures
 
58,978

 
59,067

 
58,950

Accrued interest and other liabilities
 
64,115

 
55,621

 
61,203

Total liabilities
 
3,967,471

 
3,861,610

 
3,709,130

Shareholders’ equity
 
453,718

 
435,825

 
403,046

Total liabilities and shareholders’ equity
 
$
4,421,189

 
$
4,297,435

 
$
4,112,176

(1) Includes the HPFC loan portfolio.





Consolidated Statements of Income Data
(unaudited)
 
 
For The
Three Months Ended
(In thousands, except per share data)
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Interest Income
 
 

 
 

 
 

Interest and fees on loans
 
$
35,721

 
$
34,532

 
$
29,834

Taxable interest on investments
 
4,994

 
4,708

 
4,225

Nontaxable interest on investments
 
644

 
659

 
672

Dividend income
 
230

 
319

 
286

Other interest income
 
420

 
235

 
261

Total interest income
 
42,009

 
40,453

 
35,278

Interest Expense
 
 

 
 

 
 

Interest on deposits
 
8,423

 
6,650

 
3,749

Interest on borrowings
 
974

 
1,357

 
1,780

Interest on subordinated debentures
 
717

 
859

 
847

Total interest expense
 
10,114

 
8,866

 
6,376

Net interest income
 
31,895

 
31,587

 
28,902

Provision (credit) for credit losses
 
744

 
7

 
(497
)
Net interest income after provision (credit) for credit losses
 
31,151

 
31,580

 
29,399

Non-Interest Income
 
 

 
 

 
 

Service charges on deposit accounts
 
2,023

 
2,145

 
1,967

Debit card income
 
2,010

 
2,839

 
1,929

Income from fiduciary services
 
1,392

 
1,347

 
1,283

Mortgage banking income, net
 
1,252

 
1,156

 
1,391

Bank-owned life insurance
 
594

 
607

 
608

Brokerage and insurance commissions
 
585

 
665

 
650

Customer loan swap fees
 
525

 
401

 
87

Net loss on sale of securities
 

 
(420
)
 

Other income
 
1,008

 
739

 
889

Total non-interest income
 
9,389

 
9,479

 
8,804

Non-Interest Expense
 
 

 
 

 
 

Salaries and employee benefits
 
12,978

 
13,080

 
12,562

Furniture, equipment and data processing
 
2,680

 
2,649

 
2,586

Net occupancy costs
 
1,914

 
1,764

 
1,873

Debit card expense
 
823

 
841

 
730

Consulting and professional fees
 
813

 
874

 
804

Regulatory assessments
 
472

 
490

 
499

Amortization of intangible assets
 
176

 
181

 
181

Other real estate owned and collection (recoveries) costs, net
 
(307
)
 
370

 
75

Other expenses
 
3,234

 
3,331

 
2,994

Total non-interest expense
 
22,783

 
23,580

 
22,304

Income before income tax expense
 
17,757

 
17,479

 
15,899

Income tax expense
 
3,484

 
3,502

 
3,079

Net Income
 
$
14,273

 
$
13,977

 
$
12,820

Per Share Data
 
 

 
 

 
 

Basic earnings per share
 
$
0.91

 
$
0.90

 
$
0.82

Diluted earnings per share
 
$
0.91

 
$
0.89

 
$
0.82

 




Quarterly Average Balance and Yield/Rate Analysis
(unaudited)
 
 
Average Balance
 
Yield/Rate
 
 
For The Three Months Ended
 
For The Three Months Ended
(In thousands)
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits in other banks
 
$
29,985

 
$
24,620

 
$
52,510

 
2.63
%
 
1.57
%
 
1.40
%
Investments - taxable
 
851,516

 
830,097

 
826,529

 
2.56
%
 
2.49
%
 
2.22
%
Investments - nontaxable(1)
 
94,710

 
97,192

 
99,560

 
3.44
%
 
3.43
%
 
3.42
%
Loans(2):
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
 
1,281,501

 
1,230,791

 
1,171,598

 
4.73
%
 
4.60
%
 
4.20
%
Residential real estate
 
1,008,285

 
973,124

 
860,783

 
4.30
%
 
4.29
%
 
4.12
%
Commercial(1)
 
369,832

 
364,253

 
349,963

 
4.70
%
 
4.50
%
 
4.27
%
Consumer and home equity
 
347,052

 
346,494

 
341,078

 
5.46
%
 
5.36
%
 
4.76
%
HPFC
 
32,171

 
35,163

 
43,757

 
7.91
%
 
7.66
%
 
7.99
%
Municipal(1)
 
15,333

 
17,520

 
17,277

 
3.60
%
 
3.28
%
 
3.33
%
     Total loans 
 
3,054,174

 
2,967,345

 
2,784,456

 
4.70
%
 
4.60
%
 
4.30
%
Total interest-earning assets
 
4,030,385

 
3,919,254

 
3,763,055

 
4.20
%
 
4.11
%
 
3.78
%
Other assets
 
308,064

 
294,178

 
292,312

 
 
 
 
 
 
Total assets
 
$
4,338,449

 
$
4,213,432

 
$
4,055,367

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities & Shareholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest checking
 
$
490,382

 
$
523,283

 
$
452,629

 
%
 
%
 
%
Interest checking
 
1,085,301

 
995,333

 
833,410

 
0.98
%
 
0.76
%
 
0.38
%
Savings
 
485,646

 
483,651

 
493,660

 
0.08
%
 
0.06
%
 
0.06
%
Money market
 
582,685

 
553,785

 
487,685

 
1.21
%
 
1.07
%
 
0.66
%
Certificates of deposit
 
443,107

 
444,769

 
472,213

 
1.34
%
 
1.26
%
 
1.00
%
Total deposits
 
3,087,121

 
3,000,821

 
2,739,597

 
0.78
%
 
0.65
%
 
0.42
%
Borrowings:
 
 
 
 
 
 
 
 
 
 
 
 
Brokered deposits
 
405,837

 
307,559

 
238,870

 
2.50
%
 
2.28
%
 
1.59
%
Customer repurchase agreements
 
238,499

 
265,675

 
237,056

 
1.24
%
 
1.22
%
 
0.72
%
Subordinated debentures
 
59,007

 
59,048

 
58,930

 
4.93
%
 
5.77
%
 
5.83
%
Other borrowings
 
44,711

 
93,181

 
328,141

 
2.22
%
 
2.29
%
 
1.68
%
Total borrowings
 
748,054

 
725,463

 
862,997

 
2.27
%
 
2.18
%
 
1.68
%
Total funding liabilities
 
3,835,175

 
3,726,284

 
3,602,594

 
1.07
%
 
0.94
%
 
0.72
%
Other liabilities
 
62,247

 
66,805

 
50,147

 
 
 
 
 
 
Shareholders' equity
 
441,027

 
420,343

 
402,626

 
 
 
 
 
 
Total liabilities & shareholders' equity
 
$
4,338,449

 
$
4,213,432

 
$
4,055,367

 
 
 
 
 
 
Net interest rate spread (fully-taxable equivalent)
 
3.13
%
 
3.17
%
 
3.06
%
Net interest margin (fully-taxable equivalent)
 
3.18
%
 
3.21
%
 
3.10
%
Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans(3)
 
3.14
%
 
3.14
%
 
3.04
%
(1) 
Reported on a tax-equivalent basis calculated using a federal tax rate of 21%, including certain commercial loans.
(2)
Non-accrual loans and loans held for sale are included in total average loans.
(3)
Excludes the impact of the fair value mark accretion on loans and certificates of deposit generated in purchase accounting and collection of previously charged-off acquired loans for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018 totaling $390,000, $686,000 and $558,000, respectively.

 




Asset Quality Data
(unaudited)
(In thousands)
 
At or For The
Three Months Ended
March 31, 2019
 
At or For The
Year Ended
December 31, 2018
 
At or For The
Nine Months Ended
September 30, 2018
 
At or For The
Six Months Ended
June 30, 2018
 
At or For The
Three Months Ended
March 31, 2018
Non-accrual loans:
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
$
5,415

 
$
5,492

 
$
4,720

 
$
5,742

 
$
6,185

Commercial real estate
 
975

 
1,380

 
5,517

 
5,600

 
4,603

Commercial 
 
802

 
1,279

 
2,402

 
1,934

 
1,991

Consumer and home equity
 
2,476

 
1,861

 
1,647

 
1,700

 
1,464

HPFC
 
485

 
518

 
591

 
834

 
655

Total non-accrual loans
 
10,153

 
10,530

 
14,877

 
15,810

 
14,898

Loans 90 days past due and accruing
 
14

 
14

 
14

 

 

   Accruing troubled-debt restructured loans not included above
 
3,771

 
3,893

 
4,039

 
4,000

 
4,361

Total non-performing loans
 
13,938

 
14,437

 
18,930

 
19,810

 
19,259

Other real estate owned
 
673

 
130

 
185

 
130

 
130

Total non-performing assets
 
$
14,611

 
$
14,567

 
$
19,115

 
$
19,940

 
$
19,389

Loans 30-89 days past due:
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
$
2,265

 
$
4,833

 
$
3,816

 
$
2,222

 
$
2,777

Commercial real estate
 
2,947

 
2,130

 
574

 
309

 
1,121

Commercial 
 
1,205

 
169

 
723

 
1,490

 
243

Consumer and home equity
 
1,430

 
1,467

 
902

 
1,258

 
1,190

HPFC
 
187

 
183

 
1,078

 
455

 
528

Total loans 30-89 days past due
 
$
8,034

 
$
8,782

 
$
7,093

 
$
5,734

 
$
5,859

Allowance for loan losses at the beginning of the period
 
$
24,712

 
$
24,171

 
$
24,171

 
$
24,171

 
$
24,171

Provision (credit) for loan losses
 
750

 
845

 
845

 
490

 
(500
)
Charge-offs:
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
11

 
173

 
231

 
116

 
31

Commercial real estate
 
65

 
512

 
512

 
512

 
426

Commercial 
 
236

 
736

 
448

 
298

 
171

Consumer and home equity
 
24

 
572

 
451

 
266

 
175

HPFC
 

 
255

 
209

 

 

Total charge-offs 
 
336

 
2,248

 
1,851

 
1,192

 
803

Total recoveries 
 
(75
)
 
(1,944
)
 
(361
)
 
(199
)
 
(122
)
Net charge-offs
 
261

 
304

 
1,490

 
993

 
681

Allowance for loan losses at the end of the period
 
$
25,201

 
$
24,712

 
$
23,526

 
$
23,668

 
$
22,990

Components of allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
 
$
25,201

 
$
24,712

 
$
23,526

 
$
23,668

 
$
22,990

Liability for unfunded credit commitments
 
16

 
22

 
15

 
16

 
23

Allowance for credit losses 
 
$
25,217

 
$
24,734

 
$
23,541

 
$
23,684

 
$
23,013

Ratios:
 
 
 
 
 
 
 
 
 
 
Non-performing loans to total loans
 
0.46
%
 
0.48
 %
 
0.65
%
 
0.69
%
 
0.69
%
Non-performing assets to total assets
 
0.33
%
 
0.34
 %
 
0.46
%
 
0.48
%
 
0.47
%
Allowance for loan losses to total loans
 
0.83
%
 
0.82
 %
 
0.81
%
 
0.83
%
 
0.82
%
Net charge-offs (recoveries) to average loans (annualized):
 
 
 
 
 
 
 
 
 
 
Quarter-to-date
 
0.03
%
 
(0.16
)%
 
0.07
%
 
0.04
%
 
0.10
%
Year-to-date
 
0.03
%
 
0.01
 %
 
0.07
%
 
0.07
%
 
0.10
%
Allowance for loan losses to non-performing loans
 
180.81
%
 
171.17
 %
 
124.28
%
 
119.48
%
 
119.37
%
Loans 30-89 days past due to total loans
 
0.26
%
 
0.29
 %
 
0.24
%
 
0.20
%
 
0.21
%






Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)

Return on Average Tangible Equity:
 
 
For the
Three Months Ended
(In thousands)
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Net income, as presented
 
$
14,273

 
$
13,977

 
$
12,820

Add: amortization of intangible assets, net of tax(1)
 
139

 
143

 
143

Net income, adjusted for amortization of intangible assets
 
$
14,412

 
$
14,120

 
$
12,963

Average equity, as presented
 
$
441,027

 
$
420,343

 
$
402,626

Less: average goodwill and other intangible assets
 
(98,838
)
 
(99,015
)
 
(99,568
)
Average tangible equity
 
$
342,189

 
$
321,328

 
$
303,058

Return on average equity
 
13.13
%
 
13.19
%
 
12.91
%
Return on average tangible equity
 
17.08
%
 
17.43
%
 
17.35
%
(1) Assumed a 21% tax rate.




Efficiency Ratio:
 
 
 
 
 
 
 
 
For the
Three Months Ended
(In thousands)
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Non-interest expense, as presented
 
$
22,783

 
$
23,580

 
$
22,304

Net interest income, as presented
 
$
31,895

 
$
31,587

 
$
28,902

Add: effect of tax-exempt income(1)
 
244

 
251

 
254

Non-interest income, as presented
 
9,389

 
9,479

 
8,804

Add: net loss on sale of securities
 

 
420

 

Adjusted net interest income plus non-interest income
 
$
41,528

 
$
41,737

 
$
37,960

GAAP efficiency ratio
 
55.19
%
 
57.42
%
 
59.15
%
Non-GAAP efficiency ratio
 
54.86
%
 
56.50
%
 
58.76
%
(1) Assumed a 21% tax rate.






Tangible Book Value Per Share and Tangible Common Equity Ratio:
 
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
(In thousands, except number of shares and per share data)
 
Tangible Book Value Per Share:
 
 
 
 
 
 
Shareholders' equity, as presented
 
$
453,718

 
$
435,825

 
$
403,046

Less: goodwill and other intangible assets
 
(98,751
)
 
(98,927
)
 
(99,471
)
Tangible shareholders' equity
 
$
354,967

 
$
336,898

 
$
303,575

Shares outstanding at period end
 
15,560,565

 
15,591,914

 
15,565,868

Tangible book value per share
 
$
22.81

 
$
21.61

 
$
19.50

Book value per share
 
$
29.16

 
$
27.95

 
$
25.89

Tangible Common Equity Ratio:
Total assets
 
$
4,421,189

 
$
4,297,435

 
$
4,112,176

Less: goodwill and other intangibles
 
(98,751
)
 
(98,927
)
 
(99,471
)
Tangible assets
 
$
4,322,438

 
$
4,198,508

 
$
4,012,705

Common equity ratio
 
10.26
%
 
10.14
%
 
9.80
%
Tangible common equity ratio
 
8.21
%
 
8.02
%
 
7.57
%



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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
397725849_cncsignaturebrandmarka12.jpg First Quarter Report - 2019

Dear Fellow Shareholders:
We are pleased to report a strong start to 2019.We ended our first quarter with record quarterly net income of$14.3 million, compared to $12.8 million for the first quarter of 2018, and diluted earnings per share of $0.91, an 11% increase from a year ago. Our financial performance was powered by steady loan and deposit growth, a positive return on investments and a stable credit environment.
Our primary source of revenues is net interest income and for the first quarter of 2019 totaled $31.9 million, an increase of nearly $3.0 million, or 10%, over the first quarter of 2018. Increased net interest income reflects major investments we made in our employees and in products and services to support loan and deposit growth.
We increased lending activity by leveraging digital platforms, such as MortgageTouch®, our online residential mortgage solution, and hiring experienced lenders within our growth markets. At March 31, 2019, total loans of $3.1 billion were up $252.5 million, or 9%, from a year ago. Residential mortgages grew 18% and commercial real estate grew 8%.
Total deposits grew 18% to $3.6 billion at March 31, 2019, compared to a year ago, led by checking, savings and money market deposit growth of $407.0 million, or 18%. Equipped with extensive training, our retail banking teams serve as experts and consultants to individuals, families and small businesses, and our corporate treasury management team offers online cash management and in-person guidance to commercial customers.
Our net interest margin for the first quarter of 2019 expanded to 3.18%, compared to 3.10% for the first quarter of 2018. Our asset yield increased 42 basis points to 4.20%, compared to the first quarter of 2018, while our cost of funds increased 35 basis points over the same period to 1.07%. More importantly, our loan-to-deposit ratio improved to 85% at March 31, 2019, compared to 92% at March 31, 2018. In comparison, the average loan-to-deposit ratio for all other Maine-based banks at December 31, 2018 was 104%.
Asset quality through the first quarter of 2019 remained strong with annualized average net charge offs of 0.03% of average loans, compared to 0.10% for the same period last year. Non-performing assets at March 31, 2019, were 0.33% of total assets, comparing favorably to 0.47% recorded a year prior.

 

We are closely monitoring changing economic conditions, including the overall level of interest rates and the yield curve. There is increased market concern of an inverted yield curve where short-term rates exceed long-term rates. One of our key elements of managing interest rate risk is a strong core deposit base, which we have expanded through product and service innovation. Over the past several years, we have also invested in resources to adopt the new accounting standard for loan loss reserves (commonly referred to as “CECL”) that goes into effect January 1, 2020.
Our first quarter 2019 performance yielded strong financial metrics, including a return on average equity of 13.13%, a return on average assets of 1.33% and an efficiency ratio of 54.86%. During the first three months of 2019, we repurchased 55,557 shares of our common stock and provided a cash dividend of $0.30 per common share.
As a full-service community bank, social responsibility is core to our heritage and impact. We are proud to provide financial guidance and expertise to customers, make direct donations to nonprofit organizations and volunteer our time to support the people and organizations that make our towns and neighborhoods such amazing places to live and work. Through our [email protected] program alone, we have donated over $385,000 in unrestricted funding to homeless shelters across our communities. In addition, this year we celebrated 10 years of supporting Maine’s High School Basketball State Championship games. Over the past decade, more than 10,000 students have been able to attend over 70 championship games through our support. We credit this company-wide tradition to our dedicated employees who have been inspired to help, knowing that many high school students cannot afford to purchase tickets to see their classmates compete.
Our financial performance and community impact result from a strong, talented team of employees, backed by shareholders who understand the unique value we bring to all of the people, communities and organizations we serve. We greatly appreciate your support.
Sincerely,
397725849_sig_greg-dufoura12.jpg
Gregory A. Dufour
President and Chief Executive Officer




Financial Highlights (unaudited)
 
 
Three Months Ended
March 31,
(Dollars in thousands, except per share data)
 
2019
 
2018
Earnings and Dividends
 
 
 
 
Net interest income
 
$
31,895

 
$
28,902

Provision (credit) for credit losses
 
744

 
(497
)
Non-interest income
 
9,389

 
8,804

Non-interest expense
 
22,783

 
22,304

Income before taxes
 
17,757

 
15,899

Income taxes
 
3,484

 
3,079

    Net income
 
$
14,273

 
$
12,820

Diluted earnings per share
 
$
0.91

 
$
0.82

Cash dividends declared per share
 
0.30

 
0.25

Performance Ratios
 
 
 
 
Return on average equity
 
13.13
%
 
12.91
%
Return on average assets
 
1.33
%
 
1.28
%
Net interest margin (fully-taxable equivalent)
 
3.18
%
 
3.10
%
Efficiency ratio1
 
54.86
%
 
58.76
%
Balance sheet (end of period)
 
 
 
 
Investments
 
$
936,859

 
$
912,368

Loans and loans held for sale
 
3,051,237

 
2,798,696

Allowance for loan losses
 
25,201

 
22,990

Total assets
 
4,421,189

 
4,112,176

Deposits
 
3,578,197

 
3,025,580

Borrowings
 
325,159

 
622,347

Shareholders' equity
 
453,718

 
403,046

Book Value per Share and Capital Ratios
 
 
 
 
Book value per share
 
$
29.16

 
$
25.89

Tangible book value per share1
 
22.81

 
19.50

Tangible common equity ratio1
 
8.21
%
 
7.57
%
Tier I leverage capital ratio
 
9.47
%
 
9.23
%
Total risk-based capital ratio
 
14.46
%
 
14.32
%
Asset Quality
 
 
 
 
Allowance for loan losses to total loans
 
0.83
%
 
0.82
%
Net charge-offs to average loans (annualized)
 
0.03
%
 
0.10
%
Non-performing loans to total loans
 
0.46
%
 
0.69
%
Non-performing assets to total assets
 
0.33
%
 
0.47
%
1 This is a non-GAAP measure. A reconciliation of non-GAAP to GAAP financial measures can be found in the Company's earnings release dated and filed with the SEC on April 30, 2019.

















397725849_chart-b5fd88539592549e9de.jpg397725849_chart-f23ec46fdb07599dab3.jpg
A complete set of financial statements for Camden National Corporation may be obtained upon written request to Camden National Corporation, P.O. Box 310, Camden, Maine 04843.




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