CAMDEN, Maine, January 31, 2012: Camden National Corporation (NASDAQ: CAC; “Camden National” or “Company”) reported record net income of $26.2 million for the full year 2011 compared with $24.8 million in 2010, an increase of $1.4 million, or 6%. Earnings per diluted share for 2011 and 2010 were $3.41 and $3.23, respectively.
“While facing a challenging economic and interest rate environment, we’re proud of Camden National’s strength and perseverance in 2011, which helped generate record earnings of $26.2 million,” said Gregory A. Dufour, president and chief executive officer of Camden National Corporation. “This performance provided the Company the opportunity to reward its shareholders with a special dividend in December, in addition to our normal dividend, while allowing us the ability to serve our customers’ needs on both an individual and community basis.”
Financially, the Company’s 2011 results reflect the following:
- Strengthened the Company’s capital position as shown by increasing the Tier 1 leverage capital ratio to 9.59% at December 31, 2011, up from 8.77% the previous year.
- Increased the allowance for loan losses to 1.52% of loans at December 31, 2011, up from 1.46% the previous year.
- Generated return on average assets of 1.13% and return on average equity of 12.16% for the full year of 2011.
“Based on the most recent Bank Holding Company Performance Report dated September 30, 2011, our return on average assets and average equity should place Camden National in the top 25% of its national peer group and number one for Maine banks,” said Dufour.
Fourth quarter 2011 net income was $5.8 million, compared to net income of $6.4 million in the fourth quarter of 2010. Earnings per diluted share for the fourth quarter of 2011 and 2010 were $0.76 and $0.84, respectively. Net income for the fourth quarter of 2011 decreased $587,000, or 9%, compared to the fourth quarter of 2010 primarily due to a decline in net interest income, an increase in the loan loss provision, a $2.0 million gain on sale of securities, and a $2.3 million expense related to the prepayment of wholesale borrowings.
Balance Sheet Highlights
Total assets at December 31, 2011 were $2.3 billion, a slight decline of $3.3 million compared to December 31, 2010. At December 31, 2011, total loans were $1.5 billion, a decrease of $10.2 million, or 1%, compared to a year ago. The decrease in total loans was primarily related to the residential real estate loan portfolio, which declined by $17.4 million due to the sale of thirty-year fixed rate mortgages totaling $27.6 million. The commercial and commercial real estate portfolios grew $4.5 million and $6.0 million, respectively, while consumer and home equity balances declined $3.2 million.
Total deposits of $1.6 billion at December 31, 2011 increased $75.6 million, or 5%, compared to December 31, 2010. During 2011, we experienced strong core deposit growth of $133.9 million, or 14%, which offset the decline in retail certificates of deposit of $69.2 million, or 15%. The overall growth across our core deposits reflects excess customer liquidity and success in obtaining several large deposit relationships.
During the fourth quarter of 2011, the Company sold $38.0 million in securities, which resulted in a $2.0 million gain. At the same time, the Company prepaid $70.0 million in wholesale borrowings, resulting in prepayment penalties totaling $2.3 million. These borrowings had an average cost of 4.90% and an average remaining maturity of 10 months. Although the Company re-invested the cash flow from the securities sales at lower yields, the cost of funding was reduced and should result in a positive contribution to net interest income over the next two years.
Asset Quality and the Provision for Credit Losses
“Camden National’s overall credit quality improved during 2011, with net loan charge-offs declining to $4.0 million in 2011 from $4.3 million in 2010,” reported Dufour. “We have seen a shift in our non-performing asset mix with the stabilization of commercial credits, but increased stresses in the residential and consumer portfolios.”
Non-performing assets increased to $29.3 million, or 1.27% of total assets at December 31, 2011, compared to $24.8 million, or 1.08% of total assets at December 31, 2010. The provision for credit losses for 2011 and 2010 was $4.7 million and $6.3 million, respectively. The allowance for credit losses to total loans increased to 1.52% at December 31, 2011 compared to 1.46% a year ago.
Net Interest Income
Net interest income for the year ended December 31, 2011, was $75.2 million, an increase of $929,000, or 1%, compared to $74.3 million for the same period a year ago. The increase in net interest income was primarily due to growth in our average earning assets of $39.2 million, partially offset by a 3 basis point decline in our net interest margin. The tax equivalent net interest margin was 3.57% and 3.60% for the years ended December 31, 2011 and 2010, respectively.
Yields on our earning assets, which averaged 4.65% in 2011 and 5.04% in 2010, have continued to decline as cash flows are reinvested at lower rates. The cost of funds averaged 1.27% in 2011, compared to 1.64% in 2010, as a result of lower interest rates and a favorable shift in the deposit mix to lower cost transaction accounts.
Net interest income for the fourth quarter of 2011 decreased $341,000, compared to the fourth quarter of 2010. The decrease was primarily related to the decline in average earning assets of $43.2 million. The fourth quarter 2011 tax equivalent net interest margin of 3.54% was unchanged from the same period a year ago.
Non-Interest Income and Non-Interest Expense
Non-interest income for the year ended December 31, 2011, was $23.1 million, an increase of $2.2 million, or 11%, compared to the same period in 2010. The increase was primarily due to a $2.2 million gain on the sale of securities, a $1.1 million increase in loan servicing income, and proceeds on bank-owned life insurance of $740,000, partially offset by a $2.0 million legal settlement received in 2010.
Non-interest income was $7.1 million for the fourth quarter of 2011, an increase of $2.1 million, or 41%, from the fourth quarter of 2010. The increase was primarily due to a $2.0 million gain on the sale of securities.
Non-interest expense for the year ended December 31, 2011 was $55.6 million, an increase of $2.6 million, or 5%, compared to the same period in 2010. Other than the $2.3 million borrowing prepayment expense in 2011, non-interest expense increased only $342,000, or 1%, compared to a year ago. Salaries and employee benefit costs increased 9% due to merit and increased employee incentive compensation based on the Company’s 2011 financial performance, which exceeded the benchmarks determined by the board of directors. Other real estate owned (OREO) and collections costs declined 39% due to lower write-downs on OREO properties and regulatory assessment fees declined 32% due to lower FDIC deposit assessment rates.
Non-interest expense of $15.7 million increased $2.0 million, or 15%, from fourth quarter of 2010. This increase was primarily related to a $2.3 million charge for the early extinguishment of borrowings.
Dividends and Capital
The board of directors approved a dividend of $0.25 per share, payable on January 31, 2012, to shareholders of record on January 17, 2012. In addition, the board of directors authorized a special dividend of $0.50 per share, payable on December 30, 2011. This resulted in an annual dividend yield of 4.60% for the year, based on the December 30, 2011, closing price of $32.60 per share for Camden National’s common stock, as reported on NASDAQ.
Camden National’s total risk-based capital ratio increased to 15.95% at December 31, 2011, compared to 15.05% at December 31, 2010, as capital levels increased from retained earnings. Camden National and its wholly-owned subsidiary Camden National Bank exceeded the minimum total risk-based, Tier 1 and Tier 1 leverage ratios of 10.0%, 6.0%, and 5.0%, respectively, required by the Federal Reserve for an institution to be considered “well capitalized.”
The board of directors also authorized the 2011 Common Stock Repurchase Program for the repurchase of up to 500,000 shares, or approximately 6.5% of the Company's outstanding common stock over the next year.
"One important component of our capital plan is a stock buyback program which will provide flexibility to efficiently return capital to our shareholders," Dufour explained. "The Repurchase Program allows the buyback of common shares at times when the market may not value our stock appropriately." The Repurchase Program will expire on October 1, 2012.
Camden National Corporation has scheduled its annual meeting of shareholders for Tuesday, May 1, 2012, at 3:00 p.m. local time, at the Company’s Hanley Center, Fox Ridge Office Park, 245 Commercial Street, Route One, Rockport, Maine. The date for determining the Company’s shareholders of record for the annual meeting is March 5, 2012.
About Camden National Corporation
Camden National Corporation, headquartered in Camden, Maine, is the holding company employing more than 400 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 38 banking offices throughout Maine. Acadia Trust, N.A. 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.
This press release and the documents incorporated by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, projections, and statements, which are subject to numerous risks, assumptions, and uncertainties. Forward-looking statements can be identified by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “plan,” “target,” or “goal,” or future or conditional verbs such as “will,” “may”, “might”, “should,” “would”, “could” and other expressions which predict or indicate future events or trends and which do not relate to historical matters. Forward-looking statements should not be relied on, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Camden National. These risks, uncertainties and other factors may cause the actual results, performance or achievements of Camden National to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.
Some of the factors that might cause these differences include, but are not limited to, the following: (1) general, national, regional or local economic conditions which are less favorable than anticipated; (2) changes in loan default and charge-off rates; including such actions resulting from worsening of credit quality performance due to a number of factors such as the underlying value of the collateral could prove less valuable than otherwise assumed and assumed cash flows may be worse than expected; (3) competitive pressures on pricing of products and services; (4) the success, impact, and timing of our business strategies, including market acceptance of any new products or services; (5) changes in accounting policies and principles and the accuracy of our assumptions and estimates used to prepare financial statements; (6) the extended disruption of vital infrastructure due to a natural disaster; (7) the final outcome of significant litigation or threatened litigation; (8) the outcome of judicial and regulatory decisions regarding practices in the residential mortgage industry, including, among other things, the process followed for foreclosing residential mortgages; (9) declines in the securities and financial markets; (10) reductions in deposit levels; (11) declines in mortgage loan refinancing, equity loan and line of credit activity; (12) changes and movements in the domestic interest rate environment and inflation; (13) changes in the carrying value of investment securities and other assets; (14) further actions by the U.S. government and Treasury Department, including actions similar to the Federal Home Loan Mortgage Corporation conservatorship, which could have a negative impact on Camden National’s investment portfolio and earnings; (15) misalignment of Camden National’s interest-bearing assets and liabilities; (16) increases in loan repayment rates affecting interest income and the value of mortgage servicing rights; (17) changing business, banking, or regulatory conditions or policies, or new legislation affecting the financial services industry, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and future regulations to be adopted by the relevant regulatory agencies, including the Consumer Financial Protection Bureau, to implement the Dodd-Frank Act’s provisions, any of which could lead to changes in the competitive balance among financial institutions, restrictions on bank activities; and, (18) changes in costs (including deposit insurance premiums), increased regulatory scrutiny, declines in consumer confidence in depository institutions, or changes in the secondary market for bank loan and other products; and changes in accounting rules, Federal and State laws, Internal Revenue Service regulations, and other regulations and policies governing financial holding companies and their subsidiaries which may impact our ability to take appropriate action to protect or maximize our financial interests in certain loan situations. Additional factors that could also cause results to differ materially from those described above can be found in the Company’s periodic reports. For more information about these factors please see our Annual Report on Form 10-K, as updated by our Quarterly Reports on Form 10-Q and other filings on file 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.
Use of Non-GAAP Financial Measures
This document may contain non-GAAP financial measures where management believes them to be helpful in understanding Camden National’s results of operations or financial position. If and where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can also 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.