Posted May 10, 2019
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.
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 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.
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.
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.
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.