CAMDEN, Maine, July 25, 2023/PRNewswire/--Camden National Corporation (NASDAQ: CAC; “Camden National” or the “Company”), a $5.8 billion bank holding company headquartered in Camden, Maine, reported net income of $12.4 million and diluted earnings per share of ("EPS") of $0.85 for the second quarter of 2023, decreases of 3% and 2%, respectively, compared to the first quarter of 2023. The Company's second quarter operating results were impacted by continued rising short-term interest rates driving higher deposit and funding costs and compressing net interest margin 14 basis points on a linked quarter basis. The Company's return on average equity was 10.66% and return on average tangible equity (non-GAAP) was 13.55% for the second quarter of 2023, compared to 11.16% and 14.21%, respectively, for the first quarter of 2023.
“Camden National is well-positioned to weather the current turbulent markets, highlighted by prolonged and steep yield curve inversion that has caused significant profitability pressure across the banking industry. Our strong capital levels, asset quality, and reserves provide us with stability for the future,” said Gregory A. Dufour, President and Chief Executive Officer. “As I shared last quarter, our short-term organizational priorities continue to be centered around deposits and net interest margin optimization and maintaining our strong asset quality through proactive management and early identification of any credit-related trends.”
For the first six months of 2023, the Company reported net income of $25.1 million and EPS of $1.72, decreases of 21% and 20%, respectively, compared to the six months ended June 30, 2022. These decreases were primarily driven by the change in interest rates between periods, highlighted by a Federal Funds Interest Rate range of 5.00% - 5.25% at June 30, 2023, compared to a range of 1.50% - 1.75% at June 30, 2022, as well as the write-off of a $1.8 million Signature Bank corporate bond in the first quarter of 2023.
At June 30, 2023, the Company's regulatory capital ratios were well in excess of regulatory requirements; nonperforming assets were 0.09% of total assets; loans 30-89 days past due were 0.05% of total loans; and total deposits increased 1% from the first quarter of 2023.
SECOND QUARTER 2023 HIGHLIGHTS
•Net income decreased $338,000, or 3%, and diluted EPS decreased $0.02, or 2%, compared to the first quarter.
•Net interest margin decreased 14 basis points to 2.40%, compared to the first quarter of 2023, as funding costs increased 36 basis points, partially offset by an increase in interest-earning asset yields of 20 basis points.
•Loans and deposits each grew 1% during the second quarter of 2023.
•Asset quality remained strong, with non-performing assets totaling 0.09% of total assets and 0.13% of total loans, and loans 30-89 days delinquent remained 0.05% to total loans, and, as a result, the allowance for credit losses (“ACL”) on loans to total loans ratio remained stable at 0.90% of total loans, a decrease of 1 basis point from March 31, 2023.
•Uninsured and uncollateralized1 deposits at June 30, 2023 and March 31, 2023 totaled $699.1 million and $691.5 million, respectively, and were 15% of total deposits at each date.
•Available liquidity sources totaled $1.4 billion, or 2.0 times, uninsured and uncollateralized deposits, at June 30, 2023, compared to $1.3 billion, or 1.9 times, at March 31, 2023.
•Loan-to-deposit ratio was 88% at both June 30, 2023 and March 31, 2023.
•Announced a cash dividend of $0.42 per share, representing an annualized dividend yield of 5.42%, based on the Company's closing share price of $30.97, as reported by NASDAQ on June 30, 2023, payable on July 31, 2023, to shareholders of record on July 14, 2023.
•Repurchased 65,692 shares of common stock at an average price of $33.36 per share representing capital usage of $2.2 million.
FINANCIAL CONDITION
As of June 30, 2023, total assets were $5.8 billion, an increase of $78.2 million, since December 31, 2022.
Loans
Loans at June 30, 2023, totaled $4.1 billion, an increase of 3% since December 31, 2022 and a 1% increase since March 31, 2023.
•Residential real estate loans grew 4% and commercial real estate loans grew 3% in the first six months of 2023.
•Residential real estate loan production decreased 56% for the first six months of 2023 in comparison to the same period in 2022. In light of the current interest rate environment, the Company has made a deliberate shift in its loan pricing strategy in 2023 to help slow on-books loan production compared to the previous years and to drive more residential loan sales. The Company sold 37% of residential mortgages it originated through the six months ended June 30, 2023, compared to 21% for the same period in 2022.
•At June 30, 2023, the committed retail and commercial loan portfolio pipelines totaled $62.7 million and $40.4 million, respectively. As of June 30, 2023, 50% of the committed residential real estate loan portfolio was designated for sale.
Investments
Investments totaled $1.2 billion as of June 30, 2023, a decrease of 4% since December 31, 2022, and represented 21% and 22% of total assets as of June 30, 2023 and December 31, 2022, respectively.
•The Company continues to use investment cash flows to support higher-yielding loan growth and to pay-down borrowings.
1 Uncollateralized deposits are customer deposits for which the Company has not pledged any of its assets, including investment securities, or provided any other type of guarantee.
•As of June 30, 2023, the Company's debt securities designated as available-for-sale (“AFS") and held-to-maturity (“HTM”) were in a net unrealized loss position of $138.7 million, compared to $141.5 million as of December 31, 2022.
•As of June 30, 2023, the weighted-average life and duration of the Company's debt securities were 7.7 years and 5.7 years, respectively, compared to 7.8 years and 5.8 years at December 31, 2022.
Deposits
As of June 30, 2023, deposits totaled $4.7 billion, a decrease of 3% since December 31, 2022, and an increase of 1% since March 31, 2023. While we are not able to predict deposit activity with certainty, recent data suggests we are beginning to receive seasonal deposit inflows as anticipated, as local market activity picks up during the summer months.
•Deposit balances were down $133.2 million for the first half of 2023 driven by lower balances within checking and savings of $347.1 million, or 9%, partially offset by higher money market and certificates of deposits (“CD”) balances of $170.9 million, or 17%, and brokered deposits of $43.0 million, or 24%. Rising short-term interest rates and competitive pressures for deposits continued throughout the second quarter of 2023 pushing many depositors to redeploy excess liquidity into products yielding higher interest rates.
•Deposit balances increased $51.0 million in the second quarter of 2023 led by CDs and money market balances which grew $89.2 million, or 25%, and $15.8 million, or 2%, respectively, partially offset by lower savings and checking balances of $47.8 million, or 7%, and $14.4 million, or less than 1%, respectively. The Company has used a mix of CD and money market promotions throughout the second quarter of 2023 to attract and retain deposits.
•As of June 30, 2023 and December 31, 2022, uninsured and uncollateralized deposits totaled 15% of total deposits and the Company had available liquidity of 2.0 times and 1.9 times total uninsured and uncollateralized deposits, respectively.
•As of June 30, 2023 the Company had $1.4 billion in available liquidity from different sources, or 30% of total deposits (not including brokered market availability).
•The loan-to-deposit ratio was 88% as of June 30, 2023 compared to 83% at December 31, 2022.
Borrowings
As of June 30, 2023, borrowings totaled $492.5 million, an increase of $183.0 million, or 59%, since December 31, 2022, and a decrease of $38.1 million, or 7%, since March 31, 2023.
•In the second quarter of 2023, the Company borrowed $135.0 million from the Bank Term Funding Program (“BTFP”) for a period of one year at a fixed rate of 4.70%. Under the program, the Company may prepay this borrowing at any time without penalty and the borrowing is secured by the Company's investment securities at par. The Company utilized the BTFP to manage borrowing costs while obtaining favorable prepayment terms.
•Federal Home Loan Bank ("FHLB") borrowings were used to supplement funding needed for modest asset growth for the first six months of 2023 of 1%.
Derivatives
The Company executed five fixed-for-floating interest rate swaps on a pool of residential mortgage loans through the first six months of 2023 for a total of $375.0 million of notional, including one in the second quarter for $75.0 million of notional.
•These five derivatives contributed $1.7 million of interest income through the six months ended June 30, 2023, including $1.2 million for the second quarter of 2023.
•In early July 2023, the Company executed a $75.0 million floating-for-fixed interest rate swap on borrowings for a period of 18 months.
Capital
As of June 30, 2023, the Company's regulatory capital ratios were each well in excess of regulatory capital requirements. The Company's common equity ratio was 8.13%, and its tangible common equity ratio (non-GAAP) was 6.57%, compared to 8.13% and 6.56%, respectively, as of March 31, 2023.
The Company announced a cash dividend of $0.42 per share, payable on July 31, 2023, to shareholders of record on July 14, 2023, representing an annualized dividend yield of 5.42%, based on the Company's closing share price of $30.97, as reported by NASDAQ on June 30, 2023.
The Company has repurchased 65,692 shares of its common stock at an average price of $33.36 per share through the first six months of 2023.
ASSET QUALITY
The Company's credit quality within its loan portfolio remained very strong throughout the second quarter of 2023. The Company continues to actively monitor its loan portfolio, particularly its commercial real estate loan portfolio, for signs of credit stress.
•Loans 30-89 days past due were 0.05% of total loans at June 30, 2023 and March 31, 2023, and 0.06% of total loans at December 31, 2022.
•Non-performing loans were 0.13% of total loans at June 30, 2023, March 31, 2023 and December 31, 2022.
•Annualized net charge-offs to average loans were 0.04% for the second quarter of 2023, 0.02% for the first quarter of 2023, and 0.03% for the fourth quarter of 2022. Higher net charge-offs for the second quarter of 2023 in comparison to the previous two quarters was not the result of any systemic trends within the loan portfolio.
Each quarter, the Company evaluates its investment portfolio for potential credit risk, and, through the evaluation of its holdings there were no credit concerns identified within its investment portfolio as of June 30, 2023. In the first quarter of 2023 the Company wrote-off one corporate bond in Signature Bank for $1.8 million.
•At June 30, 2023, the book value of the Company's corporate bonds totaled $44.7 million, of which 79% carry an investment-grade credit rating and the remaining are held in non-rated community banks within our markets. As of June 30, 2023, the corporate bond portfolio was comprised of 20 different companies, of which 18 were differing banks. The banks in the portfolio range from the largest U.S. banks to community banks, with the largest exposure being to a global systemically important bank, or “G-SIB”, with a book value of $6.7 million as of June 30, 2023.
•At June 30, 2023, the book value of the Company's municipal bonds totaled $105.2 million and all carry an investment-grade credit rating.
FINANCIAL OPERATING RESULTS (Q2 2023 vs. Q1 2023)
Net income for the second quarter of 2023 was $12.4 million, a decrease of $338,000, or 3%, compared to the first quarter of 2023. Excluding income taxes and provision for credit losses, adjusted earnings (non-GAAP) for the second quarter of 2023 was $15.7 million, a decrease of $2.3 million, or 13%, compared to last quarter.
Net Interest Income and Net Interest Margin
Net interest income for the second quarter of 2023 was $32.7 million, a decrease of $1.6 million, or 5%, compared to the first quarter of 2023. The decrease was driven by further net interest margin compression of 14 basis points during the second quarter of 2023 to 2.40%.
•Funding costs rose 36 basis points on a linked quarter basis to 1.81% for the second quarter of 2023. The increase reflects the impact of the increases in the Federal Funds Interest Rate, which totaled 75 basis points
through the first six months of 2023. The increase in short-term interest rates has put a premium on deposits across our markets and has led to a very competitive marketplace. Our deposit beta, excluding brokered deposits, for the second quarter of 2023 was 53.9%, and from January 1, 2022 to June 30, 2023 was 47.5%.
•Yield on average interest-earning assets rose 20 basis points on a linked quarter basis to 4.12% for the second quarter of 2023 as our loan yield increased 23 basis points over this same period. The increase reflects the repricing of existing loans, higher loan pricing of new originations and continued redeployment of investment cash flows to fund loan growth.
Provision for Credit Losses
Asset quality remained very strong in the second quarter of 2023, although the risk of a macroeconomic slow-down in future periods remains consistent with the previous quarter's forecast. The Company continues to monitor any indicators of potential credit risk that would require additional ACL coverage should we enter into an economic slow-down. At June 30, 2023, the ACL on loans was 0.90% of total loans and was 7.1 times total non-performing loans, compared to 0.91% and 7.3 times, respectively, at March 31, 2023, and 0.92% and 7.2 times, respectively, at December 31, 2022.
The change in provision for credit losses between periods is highlighted in the table below:
($ in thousands)
Q2 2023
Q1 2023
Increase / (Decrease)
Provision for credit losses - loans
$
305
$
439
$
(134)
Credit for credit losses - off-balance sheet credit exposures
(202)
(275)
73
Provision for credit losses - HTM debt securities
—
1,838
(1,838)
Provision for credit losses
$
103
$
2,002
$
(1,899)
In the first quarter of 2023, the Company wrote-off its Signature Bank corporate bond totaling $1.8 million and recognized the write-off as a provision for credit losses on HTM debt securities.
Non-Interest Income
Non-interest income for the second quarter of 2023 was $10.1 million, an increase of $244,000, or 2%, over the first quarter of 2023. The increases were across all categories with the exception of other income, which was lower primarily due to less back-to-back loan swap fee income of $280,000, and mortgage banking income, which was lower primarily due to the change in fair value of the residential mortgage loan pipeline on a linked-quarter basis.
•The Company sold $36.0 million, or 34%, of its residential mortgage originations in the second quarter of 2023, compared to $35.1 million, or 40%, in the previous quarter. Over the coming quarters, the Company anticipates its sale volume as a percent of total production will increase as it manages its on-books production in the current interest rate environment.
Non-Interest Expense
Non-interest expense for the second quarter of 2023 was $27.1 million, an increase of $978,000, or 4%, compared to the first quarter of 2023. The Company's GAAP efficiency ratio and non-GAAP efficiency ratio for the second quarter of 2023 was 63.42% and 63.07%, respectively, compared to 59.27% and 58.96% for the first quarter of 2023. The increase in the GAAP and non-GAAP efficiency ratios on a linked quarter-basis reflects the decrease in revenues from net interest income and increased expenses. For the second quarter of 2023, the Company's overhead ratio, which compares annualized non-interest expense for the quarter to average assets, was 1.90%, compared to 1.84% for the first quarter of 2023.
•Salaries and employee benefits costs increased 5% on a linked quarter basis, primarily due to higher incentive compensation expense due to the timing of annual incentive compensation true-ups that were paid out last quarter.
•Consulting and other professional fees increased by $320,000 on a linked quarter basis, primarily due timing of the annual equity award grant to the Company's independent directors in the second quarter of each year.
•Net occupancy costs decreased by $227,000 on a linked quarter basis, primarily due to seasonality between periods as we generally experience higher heating and related costs in the first quarter during the winter months within our markets.
Q2 2023 CONFERENCE CALL
Camden National will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, July 25, 2023 to discuss its second quarter 2023 financial results and outlook. Participants should dial into the call 10 - 15 minutes before it begins. Information about the conference call is as follows:
Live dial-in (Domestic): (833) 470-1428
Live dial-in (All other locations): (929) 526-1599
Participant access code: 366261
Live webcast: https://events.q4inc.com/attendee/859163792
A link to the live webcast will be available on Camden National's website under "About — Investor Relations" at CamdenNational.bank 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 $5.8 billion in assets and approximately 630 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 57 banking centers, 24/7 live phone support, 68 ATMs, and additional lending offices in New Hampshire and Massachusetts. For the past four years, Camden National Bank was named a Customer Experience (CX) Leader by Coalition Greenwich, a division of CRISIL. In 2021, 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 the bank was included in the 2021 list of Best Places to Work in Maine. Member FDIC. Equal Housing Lender.
Comprehensive wealth management, investment and financial planning services are delivered by Camden National Wealth Management. To learn more, visit CamdenNational.bank
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; inflation; ongoing competition in labor markets and employee turnover; deterioration in the value of Camden National's investment securities; changes in consumer spending and savings habits; 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; turmoil and volatility in the financial services industry, including failures or rumors of failures of other depository institutions, including Camden National, which could affect Camden National's ability to attract and retain depositors, and could affect the ability of financial services providers, including the Company, to borrow or raise capital; actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions; changes to regulatory capital requirements in response to recent developments affecting the banking sector; 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, 2022, as updated by other filings with the Securities and Exchange Commission ("SEC"). Further, statements regarding the potential effects of the war in Ukraine, the COVID-19 pandemic and other notable and global current events on the Company's business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possible 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 the Company's control. 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 earnings before income taxes and provision and earnings before income taxes, provision and SBA PPP loan income; return on average tangible equity; the efficiency and tangible common equity ratios; tangible book value per share; core deposits and average core deposits. 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. Reconciliations to the comparable GAAP financial measures 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 is presented for illustrative purposes only.
Selected Financial Data
(unaudited)
At or For The Three Months Ended
At or For The Six Months Ended
(In thousands, except number of shares and per share data)
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Financial Condition Data
Investments
$
1,211,679
$
1,249,882
$
1,352,882
$
1,211,679
$
1,352,882
Loans
4,112,271
4,073,108
3,724,227
4,112,271
3,724,227
Allowance for credit losses on loans
36,983
37,134
34,244
36,983
34,244
Total assets
5,750,001
5,716,605
5,466,496
5,750,001
5,466,496
Deposits
4,693,745
4,642,734
4,527,061
4,693,745
4,527,061
Borrowings
492,513
530,649
415,833
492,513
415,833
Shareholders' equity
467,376
464,874
446,381
467,376
446,381
Operating and Per Share Data
Net income
$
12,389
$
12,727
$
15,026
$
25,116
$
31,821
Earnings before income taxes and provision for credit losses(1)
15,657
17,981
21,119
33,638
41,100
Diluted earnings per share
0.85
0.87
1.02
1.72
2.15
Cash dividends declared per share
0.42
0.42
0.40
0.84
0.80
Book value per share
32.11
31.87
30.52
32.11
30.52
Tangible book value per share(1)
25.52
25.28
23.92
25.52
23.92
Profitability Ratios
Return on average assets
0.87
%
0.91
%
1.11
%
0.89
%
1.18
%
Return on average equity
10.66
%
11.16
%
13.16
%
10.91
%
13.06
%
Return on average tangible equity(1)
13.55
%
14.21
%
16.83
%
13.88
%
16.38
%
GAAP efficiency ratio
63.42
%
59.27
%
55.70
%
61.31
%
56.21
%
Efficiency ratio(1)
63.07
%
58.96
%
55.42
%
60.99
%
55.94
%
Net interest margin (fully-taxable equivalent)
2.40
%
2.54
%
2.84
%
2.47
%
2.85
%
Asset Quality Ratios
ACL on loans to total loans
0.90
%
0.91
%
0.92
%
0.90
%
0.92
%
Non-performing assets to total assets
0.09
%
0.09
%
0.11
%
0.09
%
0.11
%
Annualized net charge-offs (recoveries) to average loans
0.04
%
0.02
%
—
%
0.03
%
0.02
%
Capital Ratios
Common equity ratio
8.13
%
8.13
%
8.17
%
8.13
%
8.17
%
Tangible common equity ratio(1)
6.57
%
6.56
%
6.51
%
6.57
%
6.51
%
Tier 1 leverage capital ratio
9.29
%
9.24
%
9.25
%
9.29
%
9.25
%
Common equity tier 1 risk-based capital ratio
11.90
%
11.90
%
12.04
%
11.90
%
12.04
%
Total risk-based capital ratio
13.92
%
13.95
%
14.15
%
13.92
%
14.15
%
(1) This is a non-GAAP measure, please see "Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)."
Consolidated Statements of Condition Data
(unaudited)
(In thousands)
June 30, 2023
December 31, 2022
June 30, 2022
ASSETS
Cash, cash equivalents and restricted cash
$
94,278
$
75,427
$
76,423
Investments:
Trading securities
4,235
3,990
3,808
Available-for-sale securities, at fair value (amortized cost of $757,959, $796,960, and $864,600 respectively)
658,205
695,875
788,123
Held-to-maturity securities, at amortized cost (fair value of $495,590, $506,193 and $537,538 respectively)
534,584
546,583
546,520
Other investments
14,655
12,713
14,431
Total investments
1,211,679
1,259,161
1,352,882
Loans held for sale, at fair value (book value of $11,685, $5,259, and $3,380 respectively)
12,036
5,197
3,340
Loans:
Commercial real estate
1,677,002
1,624,937
1,532,914
Commercial
421,977
429,499
421,220
SBA PPP
460
632
2,509
Residential real estate
1,760,443
1,700,266
1,517,239
Consumer and home equity
252,389
255,019
250,345
Total loans
4,112,271
4,010,353
3,724,227
Less: allowance for credit losses on loans
(36,983)
(36,922)
(34,244)
Net loans
4,075,288
3,973,431
3,689,983
Goodwill and core deposit intangible assets
95,964
96,260
96,573
Other assets
260,756
262,374
247,295
Total assets
$
5,750,001
$
5,671,850
$
5,466,496
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Non-interest checking
$
1,015,184
$
1,141,753
$
1,228,146
Interest checking
1,627,250
1,763,850
1,448,408
Savings and money market
1,377,791
1,439,622
1,470,720
Certificates of deposit
449,265
300,451
296,408
Brokered deposits
224,255
181,253
83,379
Total deposits
4,693,745
4,826,929
4,527,061
Short-term borrowings
448,182
265,176
371,502
Junior subordinated debentures
44,331
44,331
44,331
Accrued interest and other liabilities
96,367
84,136
77,221
Total liabilities
5,282,625
5,220,572
5,020,115
Commitments and Contingencies
Shareholders’ equity
Common stock, no par value: authorized 40,000,000 shares, issued and outstanding 14,554,778, 14,567,325 and 14,625,041 shares on June 30, 2023, December 31, 2022 and June 30, 2022, respectively
114,302
115,069
116,825
Retained earnings
475,008
462,164
444,522
Accumulated other comprehensive loss:
Net unrealized loss on debt securities, net of tax
(127,829)
(131,539)
(116,037)
Net unrealized gain on cash flow hedging derivative instruments, net of tax
6,213
5,891
3,985
Net unrecognized loss on postretirement plans, net of tax
(318)
(307)
(2,914)
Total accumulated other comprehensive loss
(121,934)
(125,955)
(114,966)
Total shareholders’ equity
467,376
451,278
446,381
Total liabilities and shareholders’ equity
$
5,750,001
$
5,671,850
$
5,466,496
Consolidated Statements of Income Data
(unaudited)
For The Three Months Ended
For The Six Months Ended
(In thousands, except per share data)
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Interest Income
Interest and fees on loans
$
48,645
$
45,332
$
33,121
$
93,977
$
65,156
Taxable interest on investments
5,852
5,963
5,850
11,815
11,639
Nontaxable interest on investments
762
763
770
1,525
1,534
Dividend income
267
219
106
486
212
Other interest income
529
448
183
977
347
Total interest income
56,055
52,725
40,030
108,780
78,888
Interest Expense
Interest on deposits
19,245
15,832
2,510
35,077
4,343
Interest on borrowings
3,587
2,085
454
5,672
585
Interest on junior subordinated debentures
533
528
532
1,061
1,061
Total interest expense
23,365
18,445
3,496
41,810
5,989
Net interest income
32,690
34,280
36,534
66,970
72,899
Provision for credit losses
103
2,002
2,345
2,105
1,270
Net interest income after provision for credit losses
32,587
32,278
34,189
64,865
71,629
Non-Interest Income
Debit card income
3,079
2,938
3,213
6,017
6,137
Service charges on deposit accounts
1,935
1,762
1,931
3,697
3,764
Income from fiduciary services
1,775
1,600
1,681
3,375
3,312
Brokerage and insurance commissions
1,152
1,093
1,272
2,245
2,266
Mortgage banking income, net
590
716
1,517
1,306
2,551
Bank-owned life insurance
613
592
569
1,205
1,145
Net loss on sale of securities
—
—
(9)
—
(9)
Other income
966
1,165
967
2,131
1,800
Total non-interest income
10,110
9,866
11,141
19,976
20,966
Non-Interest Expense
Salaries and employee benefits
15,288
14,573
15,402
29,861
30,908
Furniture, equipment and data processing
3,179
3,211
3,202
6,390
6,334
Net occupancy costs
1,852
2,079
1,806
3,931
3,950
Debit card expense
1,262
1,201
1,134
2,463
2,200
Consulting and professional fees
1,375
1,055
1,293
2,430
2,300
Regulatory assessments
868
845
515
1,713
1,170
Amortization of core deposit intangible assets
148
148
157
296
313
Other real estate owned and collection costs (recoveries), net
4
5
38
9
(47)
Other expenses
3,167
3,048
3,009
6,215
5,637
Total non-interest expense
27,143
26,165
26,556
53,308
52,765
Income before income tax expense
15,554
15,979
18,774
31,533
39,830
Income Tax Expense
3,165
3,252
3,748
6,417
8,009
Net Income
$
12,389
$
12,727
$
15,026
$
25,116
$
31,821
Per Share Data
Basic earnings per share
$
0.85
$
0.87
$
1.02
$
1.72
$
2.16
Diluted earnings per share
0.85
0.87
1.02
1.72
2.15
Quarterly Average Balance and Yield/Rate Analysis
(unaudited)
Average Balance
Yield/Rate
For The Three Months Ended
For The Three Months Ended
(Dollars in thousands)
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
March 31, 2023
June 30, 2022
Assets
Interest-earning assets:
Interest-bearing deposits in other banks and other interest-earning assets
$
27,008
$
26,018
$
51,018
4.90
%
3.89
%
0.43
%
Investments - taxable
1,212,942
1,237,351
1,366,612
2.08
%
2.06
%
1.78
%
Investments - nontaxable(1)
105,210
105,502
112,954
3.67
%
3.66
%
3.45
%
Loans(2):
Commercial real estate
1,670,299
1,646,005
1,500,284
4.75
%
4.61
%
3.73
%
Commercial(1)
405,485
409,112
399,240
5.83
%
5.49
%
3.64
%
SBA PPP
512
594
4,696
4.27
%
2.55
%
13.88
%
Municipal(1)
17,484
15,997
18,633
3.98
%
3.56
%
3.13
%
Residential real estate
1,748,443
1,715,192
1,457,639
4.06
%
3.78
%
3.42
%
Consumer and home equity
253,308
253,760
240,967
7.53
%
7.10
%
4.26
%
Total loans
4,095,531
4,040,660
3,621,459
4.73
%
4.50
%
3.64
%
Total interest-earning assets
5,440,691
5,409,531
5,152,043
4.12
%
3.92
%
3.11
%
Other assets
271,822
278,136
259,592
Total assets
$
5,712,513
$
5,687,667
$
5,411,635
Liabilities & Shareholders' Equity
Deposits:
Non-interest checking
$
999,809
$
1,076,469
$
1,199,678
—
%
—
%
—
%
Interest checking
1,638,677
1,689,862
1,426,335
2.28
%
2.00
%
0.32
%
Savings
685,282
734,804
751,274
0.10
%
0.08
%
0.04
%
Money market
692,330
699,080
707,176
2.47
%
2.20
%
0.42
%
Certificates of deposit
410,272
320,209
298,335
2.55
%
1.73
%
0.44
%
Total deposits
4,426,370
4,520,424
4,382,798
1.48
%
1.22
%
0.21
%
Borrowings:
Brokered deposits
237,083
220,559
145,735
4.89
%
4.05
%
0.59
%
Customer repurchase agreements
192,428
182,754
223,212
1.47
%
1.07
%
0.40
%
Junior subordinated debentures
44,331
44,331
44,331
4.83
%
4.83
%
4.81
%
Other borrowings
272,737
175,223
85,917
4.23
%
3.71
%
1.07
%
Total borrowings
746,579
622,867
499,195
3.77
%
3.13
%
0.97
%
Total funding liabilities
5,172,949
5,143,291
4,881,993
1.81
%
1.45
%
0.29
%
Other liabilities
73,366
81,725
71,838
Shareholders' equity
466,198
462,651
457,804
Total liabilities & shareholders' equity
$
5,712,513
$
5,687,667
$
5,411,635
Net interest rate spread (fully-taxable equivalent)
2.31
%
2.47
%
2.82
%
Net interest margin (fully-taxable equivalent)
2.40
%
2.54
%
2.84
%
(1) Reported on a tax-equivalent basis calculated using the federal corporate income tax rate of 21%, including certain commercial loans.
(2) Non-accrual loans and loans held for sale are included in total average loans.
Year-to-Date Average Balance and Yield/Rate Analysis
(unaudited)
Average Balance
Yield/Rate
For The Six Months Ended
For The Six Months Ended
(Dollars in thousands)
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Assets
Interest-earning assets:
Interest-bearing deposits in other banks and other interest-earning assets
$
26,515
$
75,375
4.41
%
0.23
%
Investments - taxable
1,225,079
1,387,971
2.07
%
1.74
%
Investments - nontaxable(1)
105,355
113,982
3.67
%
3.41
%
Loans(2):
Commercial real estate
1,658,219
1,494,824
4.68
%
3.69
%
Commercial(1)
407,288
386,147
5.66
%
3.59
%
SBA PPP
553
13,145
3.35
%
18.12
%
Municipal(1)
16,744
16,937
3.78
%
3.28
%
Residential real estate
1,731,911
1,402,838
3.92
%
3.44
%
Consumer and home equity
253,533
233,888
7.31
%
4.26
%
Total loans
4,068,248
3,547,779
4.61
%
3.67
%
Total interest-earning assets
5,425,197
5,125,107
4.02
%
3.09
%
Other assets
274,961
291,236
Total assets
$
5,700,158
$
5,416,343
Liabilities & Shareholders' Equity
Deposits:
Non-interest checking
$
1,037,927
$
1,199,567
—
%
—
%
Interest checking
1,664,128
1,420,552
2.14
%
0.26
%
Savings
709,907
751,087
0.09
%
0.04
%
Money market
695,687
708,708
2.33
%
0.36
%
Certificates of deposit
365,489
301,510
2.19
%
0.44
%
Total deposits
4,473,138
4,381,424
1.35
%
0.18
%
Borrowings:
Brokered deposits
228,866
160,982
4.49
%
0.57
%
Customer repurchase agreements
187,618
215,721
1.28
%
0.33
%
Junior subordinated debentures
44,331
44,331
4.83
%
4.83
%
Other borrowings
224,249
43,998
4.03
%
1.06
%
Total borrowings
685,064
465,032
3.48
%
0.91
%
Total funding liabilities
5,158,202
4,846,456
1.63
%
0.25
%
Other liabilities
77,522
78,453
Shareholders' equity
464,434
491,434
Total liabilities & shareholders' equity
$
5,700,158
$
5,416,343
Net interest rate spread (fully-taxable equivalent)
2.39
%
2.84
%
Net interest margin (fully-taxable equivalent)
2.47
%
2.85
%
(1) Reported on a tax-equivalent basis calculated using the federal corporate income tax rate of 21%, including certain commercial loans.
(2) Non-accrual loans and loans held for sale are included in total average loans.
Asset Quality Data
(unaudited)
(In thousands)
At or For The Six Months Ended June 30, 2023
At or For The Three Months Ended March 31, 2023
At or For The Year Ended December 31, 2022
At or For The Nine Months Ended September 30, 2022
At or For The Six Months Ended June 30, 2022
Non-accrual loans:
Residential real estate
$
1,781
$
1,713
$
1,733
$
1,562
$
1,831
Commercial real estate
56
56
57
73
182
Commercial
729
748
715
541
723
Consumer and home equity
482
441
486
589
769
Total non-accrual loans
3,048
2,958
2,991
2,765
3,505
Accruing troubled-debt restructured loans not included above
2,140
2,154
2,114
2,285
2,316
Total non-performing loans
5,188
5,112
5,105
5,050
5,821
Other real estate owned
—
—
—
—
—
Total non-performing assets
$
5,188
$
5,112
$
5,105
$
5,050
$
5,821
Loans 30-89 days past due:
Residential real estate
$
1,192
$
313
$
1,038
$
2,326
$
918
Commercial real estate
112
111
323
195
258
Commercial
294
1,030
802
1,344
422
Consumer and home equity
653
684
391
843
577
Total loans 30-89 days past due
$
2,251
$
2,138
$
2,554
$
4,708
$
2,175
ACL on loans at the beginning of the period
$
36,922
$
36,922
$
33,256
$
33,256
$
33,256
Provision for loan losses
744
439
4,430
3,788
1,275
Charge-offs:
Residential real estate
18
18
66
65
16
Commercial
846
312
1,042
744
561
Consumer and home equity
31
4
134
130
84
Total charge-offs
895
334
1,242
939
661
Total recoveries
(212)
(107)
(478)
(437)
(374)
Net charge-offs
683
227
764
502
287
ACL on loans at the end of the period
$
36,983
$
37,134
$
36,922
$
36,542
$
34,244
Components of ACL:
ACL on loans
$
36,983
$
37,134
$
36,922
$
36,542
$
34,244
ACL on off-balance sheet credit exposures(1)
2,788
2,990
3,265
3,441
3,190
ACL, end of period
$
39,771
$
40,124
$
40,187
$
39,983
$
37,434
Ratios:
Non-performing loans to total loans
0.13
%
0.13
%
0.13
%
0.13
%
0.16
%
Non-performing assets to total assets
0.09
%
0.09
%
0.09
%
0.09
%
0.11
%
ACL on loans to total loans
0.90
%
0.91
%
0.92
%
0.95
%
0.92
%
Net charge-offs to average loans (annualized):
Quarter-to-date
0.04
%
0.02
%
0.03
%
0.02
%
—
%
Year-to-date
0.03
%
0.02
%
0.02
%
0.02
%
0.02
%
ACL on loans to non-performing loans
712.86
%
726.41
%
723.25
%
723.60
%
588.28
%
Loans 30-89 days past due to total loans
0.05
%
0.05
%
0.06
%
0.12
%
0.06
%
(1) Presented within accrued interest and other liabilities on the consolidated statements of condition.
Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)
Return on Average Tangible Equity:
For the Three Months Ended
For the Six Months Ended
(Dollars in thousands)
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income, as presented
$
12,389
$
12,727
$
15,026
$
25,116
$
31,821
Add: amortization of core deposit intangible assets, net of tax(1)
117
117
124
234
247
Net income, adjusted for amortization of core deposit intangible assets
$
12,506
$
12,844
$
15,150
$
25,350
$
32,068
Average equity, as presented
$
466,198
$
462,651
$
457,804
$
464,434
$
491,434
Less: average goodwill and core deposit intangible assets
(96,036)
(96,191)
(96,648)
(96,113)
(96,731)
Average tangible equity
$
370,162
$
366,460
$
361,156
$
368,321
$
394,703
Return on average equity
10.66
%
11.16
%
13.16
%
10.91
%
13.06
%
Return on average tangible equity
13.55
%
14.21
%
16.83
%
13.88
%
16.38
%
(1) Assumed a 21% tax rate.
Efficiency Ratio:
For the Three Months Ended
For the Six Months Ended
(Dollars in thousands)
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Non-interest expense, as presented
$
27,143
$
26,165
$
26,556
$
53,308
$
52,765
Net interest income, as presented
$
32,690
$
34,280
$
36,534
$
66,970
$
72,899
Add: effect of tax-exempt income(1)
235
229
231
464
458
Non-interest income, as presented
10,110
9,866
11,141
19,976
20,966
Add: net loss on sale of securities
—
—
9
—
9
Adjusted net interest income plus non-interest income
$
43,035
$
44,375
$
47,915
$
87,410
$
94,332
GAAP efficiency ratio
63.42
%
59.27
%
55.70
%
61.31
%
56.21
%
Non-GAAP efficiency ratio
63.07
%
58.96
%
55.42
%
60.99
%
55.94
%
(1) Assumed a 21% tax rate.
Earnings before Income Taxes and Provision, and Earnings before Income Taxes, Provision and SBA PPP Loan Income:
For the Three Months Ended
For the Six Months Ended
(In thousands)
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income, as presented
$
12,389
$
12,727
$
15,026
$
25,116
$
31,821
Add: provision for credit losses
103
2,002
2,345
2,105
1,270
Add: income tax expense
3,165
3,252
3,748
6,417
8,009
Earnings before income taxes and provision for credit losses
15,657
17,981
21,119
33,638
41,100
Less: SBA PPP loan income
(6)
(4)
(165)
(9)
(1,198)
Earnings before income taxes and provision for credit losses and SBA PPP loan income
$
15,651
$
17,977
$
20,954
$
33,629
$
39,902
Tangible Book Value Per Share and Tangible Common Equity Ratio:
June 30, 2023
March 31, 2023
June 30, 2022
(In thousands, except number of shares, per share data and ratios)
Tangible Book Value Per Share:
Shareholders' equity, as presented
$
467,376
$
464,874
$
446,381
Less: goodwill and core deposit intangible assets
(95,964)
(96,112)
(96,573)
Tangible shareholders' equity
$
371,412
$
368,762
$
349,808
Shares outstanding at period end
14,554,778
14,587,906
14,625,041
Book value per share
$
32.11
$
31.87
$
30.52
Tangible book value per share
25.52
25.28
23.92
Tangible Common Equity Ratio:
Total assets
$
5,750,001
$
5,716,605
$
5,466,496
Less: goodwill and core deposit intangible assets
(95,964)
(96,112)
(96,573)
Tangible assets
$
5,654,037
$
5,620,493
$
5,369,923
Common equity ratio
8.13
%
8.13
%
8.17
%
Tangible common equity ratio
6.57
%
6.56
%
6.51
%
Core Deposits:
(In thousands)
June 30, 2023
March 31, 2023
June 30, 2022
Total deposits
$
4,693,745
$
4,642,734
$
4,527,061
Less: certificates of deposit
(449,265)
(360,103)
(296,408)
Less: brokered deposits
(224,255)
(215,949)
(83,379)
Core deposits
$
4,020,225
$
4,066,682
$
4,147,274
Average Core Deposits:
For the Three Months Ended
For the Six Months Ended
(In thousands)
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Total average deposits, as presented(1)
$
4,426,370
$
4,520,424
$
4,382,798
$
4,473,138
$
4,381,424
Less: average certificates of deposit
(410,272)
(320,209)
(298,335)
(365,489)
(301,510)
Average core deposits
$
4,016,098
$
4,200,215
$
4,084,463
$
4,107,649
$
4,079,914
(1) Brokered deposits are excluded from total average deposits, as presented on the Average Balance, Interest and Yield/Rate analysis table.
