Camden National Corporation Reports First Quarter 2014 Earnings
The following excerpt is from the company's SEC filing
CAMDEN, Maine, April 29, 2014/PRNewswire/--Camden National Corporation (NASDAQ: CAC; “Camden National” or the “Company”), a $2.6 billion bank holding company headquartered in Camden, Maine, reported net income for the first quarter of 2014 of $5.7 million and diluted earnings per share ("EPS") of $0.75, representing a 1% increase in both earnings and diluted EPS compared to the first quarter of 2013. The Company's return on average shareholders' equity and return on average assets for the first quarter of 2014 was 9.97% and 0.89%, respectively.
“We've seen a strong start to 2014 with annualized loan growth f
or the first quarter of 10% and an increase in earnings and diluted EPS compared to the same period last year. These results are reflective of our commitment to enhance shareholder value through growth in our loan portfolio to drive revenues, while strategically repositioning our organization for the future," said Gregory A. Dufour, president and chief executive officer of Camden National Corporation. Dufour added, "We're optimistic and excited about the year ahead with a healthy loan pipeline and execution of our strategy to enhance our geographic reach through the recent opening of a commercial loan production office in Manchester, New Hampshire. A seasoned commercial lender with experience and knowledge of the New Hampshire market will lead this office and help build our franchise in New Hampshire, while strengthening our presence in Southern Maine."
Total assets at March 31, 2014 were $2.6 billion, representing a $36.8 million, or 1%, increase since year-end. The growth in total assets was driven by an increase in loans of $39.8 million, representing a 10% annualized growth rate. Our loan growth was centered in the commercial real estate and commercial portfolios, which increased $33.6 million and $11.9 million, respectively. Since year-end, we have experienced declines in our residential real estate, home equity and consumer portfolios totaling $5.7 million. Retail loan growth continues to be hampered by a combination of higher interest rates, the long winter season experienced in Maine, and consumers remaining optimistically cautious of the general economic improvement.
Total deposits at March 31, 2014 increased $22.9 million to $1.8 billion since year-end. The increase was primarily attributable to growth in brokered deposits of $31.9 million that funded loan growth. Core deposits (demand, interest checking, savings, and money market) remained consistent to year-end balances, which we are pleased with as core deposits typically decline due to the seasonality and cyclical nature of deposit flows within our market.
Net income for the first quarter of 2014 was $5.7 million, representing a $53,000, or 1%, increase compared to the first quarter of 2013. The increase was led by a decrease in operating costs and provision for credit losses of $1.6 million, offsetting the decrease in revenues of $1.4 million. These financial results exclude the earnings contribution of the Franklin County branches that were divested in October 2013 (the "Branch Divestiture"), which included the sale of $46.0 million of loans and $85.9 million of deposits and borrowings. For the first quarter of 2013, the five Franklin County branches contributed approximately $146,000 to net income.
For the first quarter of 2014, the Company's average interest-earning assets grew $47.2 million, or 2%, compared to the same period in 2013, even after the sale of $46.0 million of loans as part of the Branch Divestiture. Net interest income decreased $758,000 compared to the first quarter of 2013 due to both the Branch Divestiture and continued net interest margin compression with loan and investment yields declining.
The Company's average yield on interest-earning assets for the first quarter of 2014 decreased 25 basis points to 3.57% compared to the first quarter of 2013. The Company partially offset the declining yield with a decrease in cost of funds of 6 basis points compared to the first quarter of 2013. Net interest margin on a fully-taxable equivalent basis for the first quarter of 2014 was 3.08% compared to 3.27% for the first quarter of 2013 and 3.09% for the fourth quarter of 2013.
Provision for credit losses for the first quarter of 2014 was $493,000, representing a $181,000, or 27%, decrease compared to the first quarter of 2013. The reduction is largely attributable to the improvement in the general economic condition of our borrowers as evidenced by an improvement in the ratio of loans 30 - 89 days past due to total loans at March 31, 2014 of 0.29%, compared to 0.38% and 0.39% at December 31, 2013 and March 31, 2013, respectively.
Non-interest income for the first quarter of 2014 was $5.7 million, representing a $651,000, or 10%, decrease compared to the first quarter of 2013. The reduction is largely attributable to a decrease in mortgage banking income of $502,000 as there were no sales of 30-year mortgages during the first quarter of 2014. Also, deposit-related income declined $200,000 due to the Branch Divestiture.
Non-interest expense for the first quarter of 2014 was $15.1 million, representing a $1.4 million, or 8%, decrease compared to the first quarter of 2013. The primary contributing factors include:
• A decrease in salary and employee costs, occupancy and branch operations costs, and other general operating costs of $378,000 due to the Branch Divestiture;
•A decrease in other real estate owned and collection costs of $375,000 due to the establishment of a reserve on a servicing-related claim in the first quarter of 2013 of $215,000 as well as a decrease in foreclosure- and collection-related costs;
•A decrease in non-recurring costs of $161,000 incurred in the first quarter of 2013 related to the acquisition of 14 branches in the fourth quarter of 2012; and
•A decrease in general operating costs, including general building maintenance and supplies, as non-routine costs were incurred in the first quarter of 2013 related to the continued on-boarding of our 14 new branches acquired in the fourth quarter of 2012.
Our asset quality metrics as of and for the quarter ended March 31, 2014 continue to trend positively. The steady improvement in our asset quality metrics stem from (i) the strong loan growth in the first quarter of 2014, which requires less allocated allowance per loan, (ii) general improvement in the financial condition of our existing borrowers, and (iii) the resolution of foreclosure properties in the fourth quarter of 2013 and first quarter of 2014. The following asset quality ratios highlight our current metrics compared to prior periods:
•Non-performing loans to total loans at March 31, 2014 were 1.68%, compared to 1.80% and 1.72% at December 31, 2013 and March 31, 2013, respectively;
•Non-performing assets to total assets at March 31, 2014 were 1.13%, compared to 1.18% and 1.12% at December 31, 2013 and March 31, 2013, respectively;
•Allowance for credit losses to total loans at March 31, 2014 was 1.34%, compared to 1.37% and 1.48% at December 31, 2013 and March 31, 2013, respectively; and
•Net-charge offs (annualized) to average loans for the three months ended March 31, 2014 were 0.10%, compared to 0.27% and 0.09% for the three months ended December 31, 2013 and March 31, 2013, respectively.
The board of directors approved a dividend of $0.27 per share, payable on April 30, 2014, to shareholders of record as of April 16, 2014. This distribution represents an annualized dividend yield of 2.62%, based on the March 31, 2014 closing price of Camden National's common stock at $41.20 per share as reported by NASDAQ.
In 2013, the board of directors approved a common stock repurchase program (the "Repurchase Program") of up to 250,000 shares of the Company's outstanding common stock. During the first quarter of 2014, the Company repurchased 113,527 shares under the Repurchase Program at a weighted-average price of $38.70 per share. The Company has 68,328 shares remaining under the Repurchase Program at March 31, 2014.
The Company's total risk-based capital ratio, Tier I risk-based capital ratio, and Tier I leverage capital ratio was 15.89%, 14.64%, and 9.27%, respectively, at March 31, 2014. Camden National Corporation and its wholly-owned subsidiary, Camden National Bank, continue to exceed the minimum total and Tier I risk-based capital ratios of 10% and 6%, respectively, and the minimum Tier I leverage capital ratio of 5% required by the Federal Reserve for an institution to be considered “well capitalized”.
Camden National Corporation is the holding company employing more than 480 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 44 banking offices throughout Maine and a commercial loan office in Manchester, New Hampshire. Acadia Trust offers investment management and fiduciary services with offices in Portland, Bangor and Ellsworth. Located at Camden National Bank, Camden Financial Consultants offers full-service brokerage and insurance services. Learn more at www.CamdenNational.com. Member FDIC.
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, an increase in the allowance for loan losses, or a reduced demand for the Company's credit or fee-based products and services; 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; competitive pressures, including continued industry consolidation and the increased financial services provided by non-banks; 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 could lead to impairment in the value of securities in the Company's investment portfolio; changes in information technology that require increased capital spending; changes in consumer spending and savings habits; changes in tax, banking, securities and insurance laws and regulations including laws and regulations; and changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as 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 the Company's 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.
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 the efficiency and tangible equity ratios, 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 or the Form 8-K related to this document, all of which can be found on Camden National's website at www.CamdenNational.com.
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.
Selected Financial Data (unaudited) At or For TheThree Months Ended March 31, 2014 March 31, 2013Selected Financial and Per Share Data: Return on average assets 0.89% 0.90%Return on average shareholders' equity 9.97% 9.81%Return on average tangible shareholders' equity (non-GAAP)(1) 13.05% 13.10%Tangible equity to tangible assets (non-GAAP)(1) 7.04% 7.19%Efficiency ratio (non-GAAP)(1) 62.69% 63.88%Net interest margin 3.08% 3.27%Tier I leverage capital ratio 9.27% 8.95%Tier I risk-based capital ratio 14.64% 14.34%Total risk-based capital ratio 15.89% 15.60%Basic earnings per share $0.76 $0.74Diluted earnings per share $0.75 $0.74Cash dividends declared per share $0.27 $0.27Book value per share $30.93 $30.85Tangible book value per share (non-GAAP)(1) $24.38 $23.91Weighted average number of common shares outstanding 7,528,751 7,627,691Diluted weighted average number of common shares outstanding 7,551,785 7,643,267
Consolidated Statements of Condition Data(In Thousands, Except Number of Shares) March 31, 2014 (unaudited) December 31, 2013ASSETS Cash and due from banks $51,877 $51,355Securities: Available-for-sale securities, at fair value 797,242 808,477Held-to-maturity securities, at amortized cost 6,973 —Federal Home Loan Bank and Federal Reserve Bank stock, at cost 20,417 19,724Total securities 824,632 828,201Trading account assets 2,308 2,488Loans 1,620,186 1,580,402Less: allowance for loan losses (21,670) (21,590)Net loans 1,598,516 1,558,812Goodwill and other intangible assets 49,032 49,319Bank-owned life insurance 46,669 46,363Premises and equipment, net 25,177 25,727Deferred tax assets 15,632 16,047Interest receivable 6,061 5,808Other real estate owned 2,712 2,195Other assets 18,050 17,514Total assets $2,640,666 $2,603,829LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits: Demand $228,689 $241,866Interest checking 457,301 453,909Savings and money market 685,381 675,679Certificates of deposit 334,081 343,034Brokered deposits 131,227 99,336Total deposits 1,836,679 1,813,824Federal Home Loan Bank advances 56,094 56,112Other borrowed funds 441,349 430,058Junior subordinated debentures 43,947 43,922Accrued interest and other liabilities 31,128 28,817Total liabilities 2,409,197 2,372,733Shareholders’ Equity Common stock, no par value; authorized 20,000,000 shares, issued and outstanding 7,484,560 and 7,579,913 shares on March 31, 2014 and December 31, 2013, respectively 43,684 47,783Retained earnings 199,363 195,660Accumulated other comprehensive loss: Net unrealized losses on available-for-sale securities, net of tax (6,139) (7,964)Net unrealized losses on derivative instruments, at fair value, net of tax (3,625) (2,542)Net unrecognized losses on postretirement plans, net of tax (1,814) (1,841)Total accumulated other comprehensive loss (11,578) (12,347)Total shareholders’ equity 231,469 231,096Total liabilities and shareholders’ equity $2,640,666 $2,603,829
Consolidated Statements of Income Data (unaudited) Three Months EndedMarch 31,(In Thousands, Except Number of Shares and Per Share Data) 2014 2013Interest Income Interest and fees on loans $16,780 $17,795Interest on U.S. government and sponsored enterprise obligations 4,230 4,276Interest on state and political subdivision obligations 294 305Interest on federal funds sold and other investments 89 50Total interest income 21,393 22,426Interest Expense Interest on deposits 1,551 1,819Interest on borrowings 807 818Interest on junior subordinated debentures 625 621Total interest expense 2,983 3,258Net interest income 18,410 19,168Provision for credit losses 493 674Net interest income after provision for credit losses 17,917 18,494Non-Interest Income Service charges on deposit accounts 1,469 1,684Other service charges and fees 1,395 1,429Income from fiduciary services 1,184 1,143Brokerage and insurance commissions 478 412Bank-owned life insurance 306 338Mortgage banking income, net 72 574Net gain on sale of securities 166 138Other income 615 618Total non-interest income 5,685 6,336Non-Interest Expense Salaries and employee benefits 7,980 8,361Furniture, equipment and data processing 1,789 1,604Net occupancy 1,380 1,552Consulting and professional fees 518 547Other real estate owned and collection costs 513 888Regulatory assessments 481 499Amortization of intangible assets 287 288Branch acquisition costs — 161Other expenses 2,177 2,600Total non-interest expense 15,125 16,500Income before income taxes 8,477 8,330Income Taxes 2,762 2,668Net Income $5,715 $5,662Per Share Data Basic earnings per share $0.76 $0.74Diluted earnings per share $0.75 $0.74
Quarterly Average Balance, Interest and Yield/Rate Analysis (unaudited) At or for the Three Months Ended At or for the Three Months Ended March 31, 2014 March 31, 2013(In Thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/RateAssets Interest-earning assets: Securities - taxable $793,696 $4,318 2.18% $769,995 $4,314 2.24%Securities - nontaxable(1) 32,709 452 5.52% 31,681 470 5.93%Trading account assets 2,486 2 0.26% 2,237 12 2.11%Loans(2): Residential real estate 568,205 5,965 4.20% 575,154 6,576 4.57%Commercial real estate 553,472 6,282 4.54% 503,799 6,074 4.82%Commercial 170,146 1,690 3.98% 176,536 1,970 4.46%Municipal(1) 10,900 114 4.23% 11,579 132 4.61%Consumer 288,725 2,768 3.89% 302,131 3,088 4.15%Total loans 1,591,448 16,819 4.24% 1,569,199 17,840 4.56%Total interest-earning assets 2,420,339 21,591 3.57% 2,373,112 22,636 3.82%Cash and due from banks 41,502 44,744 Other assets 165,762 166,704 Less: allowance for loan losses (21,604) (23,267) Total assets $2,605,999 $2,561,293 Liabilities & Shareholders' Equity Deposits: Demand $227,426 — — $221,796 — —Interest checking 461,544 77 0.07% 478,944 67 0.06%Savings 244,460 33 0.06% 230,128 32 0.06%Money market 421,607 306 0.29% 456,333 373 0.33%Certificates of deposit 338,211 803 0.96% 415,034 987 0.96%Total deposits 1,693,248 1,219 0.29% 1,802,235 1,459 0.33%Borrowings: Brokered deposits 103,246 332 1.30% 126,078 360 1.16%Junior subordinated debentures 43,935 625 5.77% 43,832 621 5.75%Other borrowings 504,024 807 0.65% 318,198 818 1.04%Total borrowings 651,205 1,764 1.10% 488,108 1,799 1.50%Total funding liabilities 2,344,453 2,983 0.52% 2,290,343 3,258 0.58%Other liabilities 29,007 36,774 Shareholders' equity 232,539 234,176 Total liabilities & shareholders' equity $2,605,999 $2,561,293 Net interest income (fully-taxable equivalent) 18,608 19,378 Less: fully-taxable equivalent adjustment (198) (210) Net interest income $18,410 $19,168 Net interest rate spread (fully-taxable equivalent) 3.05% 3.24%Net interest margin (fully-taxable equivalent) 3.08% 3.27% (1) Reported on tax-equivalent basis calculated using a tax rate of 35.0%. (2) Non-accrual loans and loans held for sale are included in total average loans.
Asset Quality Data (unaudited)(In Thousands) At or For TheThree Months EndedMarch 31, 2014 At or For TheYear EndedDecember 31, 2013 At or For TheNine Months EndedSeptember 30, 2013 At or For TheSix Months EndedJune 30, 2013 At or For TheThree Months EndedMarch 31, 2013Non-accrual loans: Residential real estate $9,125 $10,520 $10,224 $8,624 $10,311Commercial real estate 8,278 7,799 9,847 6,634 5,782Commercial 1,935 2,146 2,994 3,233 3,134Consumer 2,457 2,012 2,018 1,945 2,341Total non-accrual loans 21,795 22,477 25,083 20,436 21,568Loans 90 days past due and accruing 50 455 24 — 49Renegotiated loans not included above 5,413 5,468 5,379 5,701 5,491Total non-performing loans 27,258 28,400 30,486 26,137 27,108Other real estate owned: Residential real estate 1,035 1,044 1,126 1,038 1,101Commercial real estate 1,677 1,151 676 1,117 812Total other real estate owned 2,712 2,195 1,802 2,155 1,913Total non-performing assets $29,970 $30,595 $32,288 $28,292 $29,021Loans 30-89 days past due: Residential real estate $1,349 $1,551 $1,419 $1,827 $1,165Commercial real estate 1,716 2,595 833 1,591 3,375Commercial 1,007 313 529 202 731Consumer 632 1,571 1,207 716 962Total loans 30-89 days past due $4,704 $6,030 $3,988 $4,336 $6,233Allowance for loan losses at the beginning of the period $21,590 $23,044 $23,044 $23,044 $23,044Provision for loan losses 492 2,052 2,051 1,384 684Charge-offs: Residential real estate 183 1,059 687 347 145Commercial real estate 171 952 762 171 80Commercial 219 1,426 823 444 277Consumer 76 837 598 470 85Total charge-offs 6494,274 2,870 1,432 587Total recoveries 237 768 436 325 228Net charge-offs 412 3,506 2,434 1,107 359Allowance for loan losses at the end of the period $21,670 $21,590 $22,661 $23,321 $23,369Components of allowance for credit losses: Allowance for loan losses $21,670 $21,590 $22,661 $23,321 $23,369Liability for unfunded credit commitments 22 21 28 30 35Balance of allowance for credit losses $21,692 $21,611 $22,689 $23,351 $23,404Ratios: Non-performing loans to total loans 1.68% 1.80% 1.92% 1.63% 1.72%Non-performing assets to total assets 1.13% 1.18% 1.24% 1.09% 1.12%Allowance for credit losses to total loans 1.34% 1.37% 1.43% 1.45% 1.48%Net charge-offs to average loans (annualized): Quarter-to-date 0.10% 0.27% 0.33% 0.20% 0.09%Year-to-date 0.10% 0.22% 0.20% 0.14% 0.09%Allowance for credit losses to non-performing loans 79.58% 76.09% 74.42% 89.34% 86.34%Loans 30-89 days past due to total loans 0.29% 0.38% 0.25% 0.27% 0.39%
Camden National presents its efficiency ratio using non-GAAP information. The GAAP-based efficiency ratio is non-interest expense divided by net interest income plus non-interest income from the consolidated statements of income. The non-GAAP efficiency ratio excludes branch acquisition costs from non-interest expense, excludes net gain on sale of securities from non-interest income, and adds the tax-equivalent adjustment (assumed 35.0% tax rate) to net interest income. The following table provides a reconciliation between the GAAP and non-GAAP efficiency ratio:
Three Months EndedMarch 31,(In Thousands) 2014 2013Non-interest expense, as presented $15,125 $16,500Less: branch acquisition costs — 161Adjusted non-interest expense $15,125 $16,339Net interest income, as presented $18,410 $19,168Add: effect of tax-exempt income 198 210Non-interest income, as presented 5,685 6,336Less: net gain on sale of securities 166 138Adjusted net interest income plus non-interest income $24,127 $25,576Non-GAAP efficiency ratio 62.69% 63.88%GAAP efficiency ratio 62.77% 64.70%
The following table provides a reconciliation between tax-equivalent net interest income to GAAP net interest income using a 35.0% tax rate.
Return on average tangible shareholders' equity is the ratio of (i) net income, adjusted for tax-effected amortization of intangible assets to (ii) average shareholders' equity, adjusted for goodwill and other intangible assets. The following table reconciles the return on average tangible shareholders' equity to GAAP return on average shareholders' equity:
Three Months EndedMarch 31,(In Thousands) 2014 2013Net income, as presented $5,715 $5,662Add: tax-effected amortization of intangible assets 187 187Net income, adjusted $5,902 $5,849Average shareholders' equity $232,539 $234,176Less: average goodwill and other intangible assets 49,168 53,157Average tangible shareholders' equity $183,371 $181,019Return on average tangible shareholders' equity 13.05% 13.10%Return on average shareholders' equity 9.97% 9.81%
(In Thousands, Except Number of Shares and Per Share Data) March 31,2014 December 31,2013 March 31,2013Shareholders' equity, as presented $231,469 $231,096 $235,575Less: goodwill and other intangible assets 49,032 49,319 53,011Tangible shareholders' equity $182,437 $181,777 $182,564Shares outstanding at period end 7,484,560 7,579,913 7,635,957Tangible book value per share $24.38 $23.98 $23.91Book value per share $30.93 $30.49 $30.85
(In Thousands) March 31,2014 December 31,2013 March 31,2013Shareholders' equity, as presented $231,469 $231,096 $235,575Less: goodwill and other intangibles 49,032 49,319 53,011Tangible shareholders' equity $182,437 $181,777 $182,564Total assets $2,640,666 $2,603,829 $2,590,817Less: goodwill and other intangibles 49,032 49,319 53,011Tangible assets $2,591,634 $2,554,510 $2,537,806Tangible equity to tangible assets 7.04% 7.12% 7.19%Shareholders' equity to assets 8.77% 8.88% 9.09%
The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.
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