Camden National Corporation Reports Net Income of $18.1 Million for the Second Quarter of 2021 and $37.9 Million for the Six Months Ended June 30, 2021

CAMDEN, Maine, July 27, 2021 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $5.2 billion bank holding company headquartered in Camden, Maine, reported net income of $18.1 million and diluted earnings per share ("EPS") of $1.21 for the second quarter of 2021, an increase of 66% over the second quarter of 2020. Net income and diluted EPS for the six months ended June 30, 2021 was $37.9 million and $2.52, respectively, increases of 55% and 56% compared to the same period of 2020. These strong financial results led to a return on average equity of 13.50% and return on average tangible equity (non-GAAP) of 16.60% for the second quarter of 2021, and a return on average equity of 14.24% and return on average tangible equity (non-GAAP) of 17.52% for the six months ended June 30, 2021.

"We have had an excellent first half of the year with very strong financial results that included net income of $37.9 million and diluted EPS of $2.52, superior asset quality, and continued momentum on our various strategic initiatives, all while navigating the intricacies of the pandemic and its impact on our customers and employees," said Gregory A. Dufour, President and Chief Executive Officer. "We are optimistic about the future based on  vaccination rates, tourism and real estate activity within our markets. Our ongoing conversations with customers about economic recovery and growth further solidify this."

On a linked-quarter-basis, the Company's second quarter 2021 net income and diluted EPS each decreased 8% compared to the first quarter of 2021. This was driven by a shift in the Company's strategy in recent months to hold more of its residential mortgage loan production within its loan portfolio, which resulted in a decrease in mortgage banking income between periods.

In June 2021, the Company announced a cash dividend of $0.36 per share, payable on July 30, 2021, to shareholders of record on July 15, 2021, representing an annualized dividend yield of 3.02%, based on the Company's closing share price of $47.76, as reported by NASDAQ as of June 30, 2021.

"During the quarter, we welcomed Stephens, Inc. ('Stephens') to our group of stock analysts who provide research on our stock. With the addition of Stephens, we now have four stock analysts covering our stock," added Dufour.

SECOND QUARTER 2021 HIGHLIGHTS

• Net income increased by $7.2 million, or 66%, over the second quarter of 2020 and decreased $1.6 million, or 8%, compared to the first quarter of 2021.
• Net interest margin on a fully-taxable equivalent basis ("net interest margin") for the second quarter of 2021 was 2.83%, compared to 3.11% for the second quarter of 2020 and 2.88% for the first quarter of 2021.
• Adjusted net interest margin (non-GAAP), which excludes Small Business Administration Paycheck Protection Program ("SBA PPP") average loans and related income, and average excess liquidity and related income, for the second quarter of 2021 was 2.89%, compared to 3.15% for the second quarter of 2020 and 2.91% for the first quarter of 2021.
• Loans grew 3% during the second quarter of 2021 and 2% over this same period last year, excluding SBA PPP loans (non-GAAP).
• Non-performing assets were 0.17% of total assets and loans 30-89 days past due were 0.02% of total loans at June 30, 2021, compared to 0.22% and 0.10% at December 31, 2020, respectively.
• Book value per share grew 2% and tangible book value per share (non-GAAP) grew 3% during the second quarter of 2021 to $36.49 and $29.99 at June 30, 2021, respectively, and grew 8% and 10%, respectively, over the last 12 months.

FINANCIAL CONDITION

As of June 30, 2021, total assets were $5.2 billion, an increase of $253.3 million, or 5%, since December 31, 2020. Asset growth for the first half of 2021 was driven by an increase in investment balances of $282.9 million, or 25%, and loan balances of $66.1 million, or 2%. The Company continues to deploy excess liquidity and its primary means of doing so has been through investment and loan growth.

• Through the first half of 2021, the Company purchased $482.2 million of debt securities, which continue to be primarily mortgage-backed securities and collateralized mortgage obligations. As of June 30, 2021, the weighted-average life was 5.9 years compared to 5.1 years as of December 31, 2020.
• Loan growth for the first half of 2021 was centered within residential mortgages and commercial real estate which increased $66.1 million, or 6%, and $54.4 million, or 4%, respectively. In the first quarter of 2021, the Company shifted its position and began holding more of its residential mortgage production within its loan portfolio. Through the first six months of 2021, the Company held 46%, or $263.1 million, of its residential mortgage originations within its loan portfolio, which included holding 60% of its originations for the second quarter of 2021. As of June 30, 2021, the Company's residential mortgage pipeline was $214.2 million with 70% designated to be held in its portfolio.

As of June 30, 2021, total deposits were $4.3 billion, an increase of $288.9 million, or 7%, since December 31, 2020. Deposit growth for the first half of 2021 was due to core deposit (non-GAAP) growth of $313.0 million, or 9%, which was driven by another round of government stimulus programs in response to the COVID-19 pandemic during the first quarter of 2021 and the beginning of seasonal inflows, as business activity accelerates across the Company's markets during the summer months. Of note, the Company redesigned its consumer checking account products in the second quarter of 2021, which resulted in many accounts and balances transitioning from interest to non-interest checking.

As of June 30, 2021, total borrowings were $214.7 million, a decrease of $32.0 million, or 13%, since December 31, 2020. In light of its liquidity position, the Company terminated a $25.0 million long-term borrowing contract with the Federal Home Loan Bank of Boston ("FHLBB") during the first quarter of 2021. The long-term borrowing contract had an interest rate of 0.98%, and the Company incurred a one-time prepayment penalty of $514,000 for terminating the contract. Also, given the strength of the Company's liquidity and capital position, the Company redeemed in full its $15.0 million of outstanding subordinated notes that carried a 5.50% interest rate, at a redemption price equal to the principal amount of the notes plus accrued and unpaid interest, during the second quarter of 2021.

The Company's loan-to-deposit ratio was 77% at June 30, 2021, compared to 80% at December 31, 2020.

At June 30, 2021, the Company's capital position remained well in excess of regulatory requirements, including a total risk-based capital ratio of 15.26% and a tier 1 leverage ratio of 9.48%. The Company's shareholders' equity to total assets position and tangible common equity ratio (non-GAAP) was 10.59% and 8.87% at June 30, 2021, respectively, compared to 10.81% and 8.99% at December 31, 2020.

In the first quarter of 2021, the Company initiated a new share repurchase program for up to 750,000 shares of its common stock, or approximately 5% of the Company's shares outstanding. This share repurchase program replaces the program that terminated in January 2021. The Company did not repurchase any shares of its common stock during the first half of 2021.

ASSET QUALITY AND COVID-19 SHORT-TERM LOAN DEFERMENTS

As of June 30, 2021, the Company's asset quality metrics remained very strong and continued to improve, with non-performing assets of 0.17% of total assets and loans 30-89 days past due of 0.02% of total loans. In comparison, at December 31, 2020, non-performing assets were 0.22% of total assets, and loans 30-89 days past due were 0.10% of total loans.

In response to the COVID-19 pandemic, the Company offered temporary debt relief to its business and retail customers impacted by COVID-19 in 2020 in accordance with the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and bank regulator guidance. The Company provided short-term debt payment relief to commercial and retail customers for periods up to 180 days, including full and partial principal and/or interest payment relief, and these loans were not individually assessed, designated or accounted for as troubled-debt restructurings. As of June 30, 2021, the Company had no loans operating under a short-term deferral arrangement,  compared to $26.5 million as of December 31, 2020 and $546.7 million as of June 30, 2020. The majority of these loans have returned to normal payment status or have since fully paid-off. Of those loans that were previously operating under a short-term deferral arrangement, $1.3 million were classified as non-accrual and $536,000 were 30-89 days past due as of June 30, 2021.

In late December 2020, another stimulus package was signed into law to provide additional COVID-19 relief for businesses and consumers. This stimulus package permits the Company the opportunity to again provide temporary debt relief to borrowers impacted by COVID-19. As of June 30, 2021, the Company had not provided any additional temporary debt relief to borrowers; however, such relief may be made in the future on a case-by-case basis.

ALLOWANCE FOR CREDIT LOSSES ("ACL")

In the fourth quarter of 2020, the Company adopted the current expected credit loss methodology, commonly referred to as "CECL," to account for the ACL on loans and certain off-balance credit exposures, effective as of January 1, 2020. Interim periods prior to the fourth quarter of 2020 continue to be presented under the incurred loss methodology.

At June 30, 2021, the ACL on loans was $32.1 million, or 0.98% of total loans, compared to $37.9 million, or 1.18% of total loans, at December 31, 2020. The decrease in the allowance reflects the Company's strong asset quality and overall improvement in the current and forecasted market conditions over its forecast period. There have been no significant changes in the Company's CECL methodology since year-end.

FINANCIAL OPERATING RESULTS (Q2 2021 vs. Q2 2020)

Net income for the second quarter of 2021 was $18.1 million, an increase of $7.2 million, or 66%, over the second quarter of 2020. Diluted EPS for the second quarter of 2021 was $1.21, an increase of $0.48, or 66%, over the second quarter of 2020.

Net Interest Income and Net Interest Margin.  Net interest income for the second quarter of 2021 was $33.5 million, a decrease of $1.0 million, or 3%, compared to the second quarter of 2020. Interest income decreased $2.9 million, or 7%, between periods, and was partially offset by a decrease in interest expense of $1.9 million, or 41%. The decrease in interest income between periods was driven by the change in the interest rate environment as the Company's average yield on interest-earning assets decreased 47 basis points to 3.06% for the second quarter of 2021. For the second quarter of 2021, the Company recognized $1.7 million of SBA PPP loan income, a decrease of $47,000 compared to the second quarter of 2020. Interest expense decreased $1.9 million between periods as interest rates fell and the Company's funding mix allocation shifted to lower cost deposits. The Company's cost of funds decreased 20 basis points between periods to 0.24% for the second quarter of 2021.

Net interest margin for the second quarter of 2021 was 2.83%, a decrease of 28 basis points compared to the second quarter of 2020. Adjusted net interest margin, which excludes SBA PPP loans and excess liquidity (non-GAAP), for the second quarter of 2021 was 2.89%, compared to 3.15% for the second quarter of 2020.

Provision for Credit Losses.  The provision for credit losses for the second quarter of 2021 was reported using the CECL methodology, whereas the provision for credit losses for the second quarter of 2020 was reported using the incurred loss methodology.

The change in provision for credit losses between periods is highlighted in the table below:

For the second quarter of 2020, the Company recorded $9.4 million of provision expense to increase its allowance for credit losses on loans in response to the COVID-19 pandemic as it recognized the credit risks the pandemic created as "stay at home" orders were issued, non-essential businesses were temporarily closed and wide-spread layoffs occurred throughout its markets. A full 12-months later, the Company's asset quality remains very strong with total non-performing loans of $8.4 million, or 0.26% of total loans, as of June 30, 2021, annualized net charge-offs for the second quarter of 2021 of 0.03% of average loans, and improving macroeconomic factors over this period. As such, in the second quarter of 2021, the Company released $3.5 million of allowance for credit losses on loans.

Non-Interest Income.  Non-interest income for the second quarter of 2021 was $11.3 million, a decrease of $740,000, or 6%, over the second quarter of 2020. The decrease was driven by lower mortgage banking income of $2.1 million. In the first quarter of 2021, the Company shifted its strategy to hold more residential mortgage loans within its loan portfolio, and, as a result, the Company sold 40% of its residential mortgage production during the second quarter of 2021, compared to 65% for the second quarter of 2020. The decrease in mortgage banking income was partially offset by an increase in debit card income of $721,000 between periods. The increase in debit card income was driven by higher customer spending due to government stimulus provided in response to the COVID-19 pandemic.

Non-Interest Expense.  Non-interest expense for the second quarter of 2021 was $25.6 million, an increase of $2.1 million, or 9%, compared to the second quarter of 2020. The increase was driven by higher performance-based incentive accruals of $1.8 million. The second quarter of 2020 marked the first full calendar quarter of the COVID-19 pandemic, and performance-based incentive accruals were carried at lower levels given the level of risk and uncertainty at that time, in comparison to the current state of the economy and markets for the second quarter of 2021.

FINANCIAL OPERATING RESULTS (Q2 2021 vs. Q1 2021)

Net income for the second quarter of 2021 decreased $1.6 million, or 8%, compared to the first quarter of 2021. On a linked-quarter-basis, diluted EPS decreased $0.10, or 8%.

Net Interest Income and Net Interest Margin.  Net interest income for the second quarter of 2021 increased $1.2 million, or 4%, compared to the first quarter of 2021. Interest income increased $878,000, or 2%, between periods driven by increases in average investment balances of $179.6 million and loan balances of $9.3 million. SBA PPP loan income decreased $217,000, or 12%, compared to the first quarter of 2021. Interest expense decreased $287,000, or 9%, between periods as the cost of funds decreased 0.05% and average total borrowings decreased $8.6 million during between periods.

Net interest margin for the second quarter of 2021 decreased 5 basis points compared to the first quarter of 2021. Adjusted net interest margin, which excludes SBA PPP loans and excess liquidity (non-GAAP), for the second quarter of 2021 was 2.89%, compared to 2.91% for the first quarter of 2021.

Provision for Credit Losses.  The change in provision for credit losses between periods is highlighted in the table below:

Non-Interest Income.  Non-interest income for the second quarter of 2021 decreased $3.9 million, or 26%, compared to the first quarter of 2021. The decrease between periods was driven by lower mortgage banking income of $4.5 million as the Company sold 40% of its residential mortgage loan production during the second quarter of 2021, compared to 66% during the first quarter of 2021. The change in percentage sold reflects the Company's shift in strategy as it looks to hold more residential mortgages within its loan portfolio. The decrease in mortgage banking income was partially offset by an increase in debit card income of $376,000 between periods. The increase in debit card income was driven by higher customer spending due to government stimulus provided in response to the COVID-19 pandemic.

Non-Interest Expense.  Non-interest expense for the second quarter of 2021 increased $691,000, or 3%, compared to the first quarter of 2021. The increase was driven by an increase in compensation-related expenses of $796,000, or 5%, which was driven by annual merit increases that normally occur in March each year and an increase in incentive-based accruals of $374,000 based on year-to-date performance.

Q2 2021 CONFERENCE CALL

Camden National will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, July 27, 2021 to discuss its second quarter 2021 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:

A link to the live webcast will be available on Camden National's website under "Investor Relations" at ww.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) is the largest publicly traded bank holding company in Northern New England with $5.2 billion in assets and approximately 600 employees. Camden National Bank, its subsidiary, is a full-service community bank founded in 1875 in Camden, Maine. Dedicated to customers at every stage of their financial journey, the bank offers the latest in digital banking, complemented by personalized service with 58 banking centers, 24/7 live phone support, 68 ATMs, and additional lending offices in New Hampshire and Massachusetts. For the past three years, Camden National Bank was named a Customer Experience (CX) Leader by leading independent research firm, Greenwich Associates. In 2020, it received awards in two CX categories: U.S. Retail Banking and U.S. Commercial Small Business. The Finance Authority of Maine has awarded Camden National Bank as "Lender at Work for Maine" for eleven years, and Camden National Corporation received a 2020 Raymond James Community Bankers Cup award, placing it in the top 10% of community banks. Comprehensive wealth management, investment and financial planning services are delivered by Camden National Wealth Management. To learn more, visit 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 Camden National's Annual Report on Form 10-K for the year ended December 31, 2020, as updated by other filings with the Securities and Exchange Commission ("SEC"). Further, statements about the potential effects of the COVID-19 pandemic on our business, results of operations and financial condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, action taken by government authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, service providers and on economies and markets more generally. 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 pre-tax, pre-provision earnings; return on average tangible equity; the efficiency and tangible common equity ratios; tangible book value per share; core deposits and average core deposits; adjusted yield on interest-earning assets and adjusted net interest margin (fully-taxable equivalent); and total loans, excluding SBA PPP loans. 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 measure 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.