Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CAC > SEC Filings for CAC > Form 10-Q on 8-Aug-2014All Recent SEC Filings

Show all filings for CAMDEN NATIONAL CORP

Form 10-Q for CAMDEN NATIONAL CORP


8-Aug-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The discussions set forth below and in the documents we incorporate 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, exceptions, 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," "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 the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

The following factors, among others, could cause the Company's financial performance to differ materially from the Company's goals, plans, objectives, intentions, expectations and other forward-looking statements:

continued weakness in the United States economy in general and the regional and local economies within the New England region and Maine, which could result in a deterioration of credit quality, an increase in the allowance for loan losses or a reduced demand for the Company's credit or fee-based products and services;

changes in trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

inflation, interest rate, market, and monetary fluctuations;

competitive pressures, including continued industry consolidation and the increased financial services provided by non-banks;

volatility in the securities markets that could adversely affect the value or credit quality of the Company's assets, impairment of goodwill, the availability and terms of funding necessary to meet the Company's liquidity needs, and could lead to impairment in the value of securities in the Company's investment portfolio;

changes in information technology that require increased capital spending;

changes in consumer spending and savings habits;

changes in tax, banking, securities and insurance laws and regulations; and

changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the FASB, and other accounting standard setters.

You should carefully review all of these factors, and be aware that there may be other factors that could cause differences, including the risk factors listed in

Part II, Item 1A. "Risk Factors" of this Form 10-Q and in our Annual Report on
Form 10-K for the year ended December 31, 2013, as updated by the Company's quarterly reports on Form 10-Q, including this report, and other filings with the Securities and Exchange Commission. Readers should carefully review the risk factors described therein and should not place undue reliance on our forward-looking statements.

These forward-looking statements were based on information, plans and estimates at the date of this report, and we do not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.


CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. In preparing the Company's consolidated financial statements, management is required to make significant estimates and assumptions that affect assets, liabilities, revenues and expenses reported. Actual results could materially differ from our current estimates as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near-term change, including the allowance for credit losses; accounting for acquisitions and the review of goodwill and other identifiable intangible assets for impairment; valuation of OREO; OTTI of investments; effectiveness of hedging derivatives; and accounting for postretirement plans, stock-based compensation, and income taxes. There have been no material changes to our critical accounting policies as disclosed within our Annual Report on Form 10-K for the year ended December 31, 2013. Refer to the Annual Report on Form 10-K for the year ended December 31, 2013 for discussion of the Company's critical accounting policies.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP

In addition to evaluating the Company's results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures, such as the efficiency ratio, tax equivalent net interest income, return on average tangible shareholders' equity, tangible book value per share, and tangible shareholders' equity to tangible assets. We believe these non-GAAP financial measures help investors in understanding the Company's operating performance and trends and allow for better performance comparisons to other banks. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions.

Efficiency Ratio. The efficiency ratio, which represents an approximate measure of the cost required for the Company to generate a dollar of revenue, is the ratio of (i) total non-interest expense, excluding Branch Acquisition costs (the numerator) to (ii) net interest income on a fully taxable equivalent basis (assumed 35% tax rate) plus total non-interest income, excluding the net gain on sale of securities (the denominator).

                                          Three Months Ended              Six Months Ended
                                                June 30,                       June 30,
(Dollars in Thousands)                    2014            2013           2014           2013
Non-interest expense, as presented    $    15,792     $   15,648     $   30,917     $   32,148
Less: Branch Acquisition costs                  -             71              -            232
Non-interest expense, adjusted        $    15,792     $   15,577     $   30,917     $   31,916
Net interest income, as presented     $    19,248     $   19,250     $   37,658     $   38,418
Add: effect of tax-exempt income              214            205            411            415
Non-interest income, as presented           6,504          6,376         12,189         12,712
Less: net gain on sale of
securities                                    285              -            451            138
Net interest income and
non-interest income, adjusted         $    25,681     $   25,831     $   49,807     $   51,407
Non-GAAP efficiency ratio                   61.49 %        60.30 %        62.07 %        62.08 %
GAAP efficiency ratio                       61.32 %        61.06 %        62.02 %        62.88 %

Tax Equivalent Net Interest Income. Tax-equivalent net interest income is net interest income plus the taxes that would have been paid had had tax-exempt securities been taxable. This number attempts to enhance the comparability of the performance of assets that have different tax liabilities. The following table provides a reconciliation of tax equivalent net interest income to GAAP net interest income using a 35% tax rate.

                                          Three Months Ended            Six Months Ended
                                                June 30,                     June 30,
(Dollars in Thousands)                      2014           2013         2014         2013
Net interest income, as presented     $    19,248        $ 19,250    $   37,658    $ 38,418
Add: effect of tax-exempt income              214             205           411         415
Net interest income, tax equivalent   $    19,462        $ 19,455    $   38,069    $ 38,833


Return on Average Tangible Shareholders' Equity. Return on average tangible shareholders' equity is the ratio of (i) net income, adjusted for tax-effected amortization of intangible assets (the numerator) to (ii) average shareholders' equity, adjusted for average goodwill and other intangibles (the denominator). We believe this is a meaningful measure of our financial performance as it reflects the return on the equity deployed in our business and is a common measure within our industry. The following table reconciles return on average tangible shareholders' equity to return on average shareholders' equity.

                                          Three Months Ended             Six Months Ended
                                                June 30,                      June 30,
(Dollars in Thousands)                    2014           2013           2014           2013
Net income, as presented              $    6,316     $    6,331     $   12,031     $   11,993
Add: tax-effected amortization of
intangible assets                            187            187            373            373
Net income, adjusted                  $    6,503     $    6,518     $   12,404     $   12,366
Average shareholders' equity          $  231,949     $  237,166     $  232,243     $  235,679
Less average goodwill and other
intangibles                               48,880         52,860         49,023         53,007
Average tangible shareholders'
equity                                $  183,069     $  184,306     $  183,220     $  182,672
Return on average tangible
shareholders' equity (annualized)          14.25 %        14.18 %        13.65 %        13.65 %
Return on average shareholders'
equity (annualized)                        10.92 %        10.71 %        10.45 %        10.26 %

Tangible Book Value per Share. Tangible book value per share is the ratio of (i) shareholders' equity less goodwill and other intangibles (the numerator) to (ii) total common shares outstanding at period end (the denominator). We believe this is a meaningful measure as it provides information to assess capital adequacy and is a common measure within our industry. The following table reconciles tangible book value per share to book value per share.

(Dollars In Thousands, Except per Share      June 30,          December 31,         June 30,
Data)                                           2014               2013                2013
Shareholders' equity                      $      237,720             231,096     $      229,620
Less: goodwill and other intangibles              48,745              49,319             52,725
Tangible shareholders' equity             $      188,975     $       181,777     $      176,895
Shares outstanding at period end               7,421,445           7,579,913          7,640,712
Tangible book value per share             $        25.46     $         23.98     $        23.15
Book value per share                      $        32.03     $         30.49     $        30.05

Tangible Shareholders' Equity to Tangible Assets. Tangible shareholders' equity to tangible assets is the ratio of (i) shareholders' equity less goodwill and other intangibles (the numerator) to (ii) total assets less goodwill and other intangibles (the denominator). This ratio is a measure used within our industry to assess whether or not a company is highly leveraged. The following table provides a reconciliation between tangible shareholders' equity to tangible assets and shareholders' equity to assets.

                                         June 30,       December 31,      June 30,
(Dollars In Thousands)                     2014             2013            2013
Shareholders' equity, as presented     $   237,720     $    231,096     $   229,620
Less: goodwill and other intangibles        48,745           49,319          52,725
Tangible equity                        $   188,975     $    181,777     $   176,895
Total assets                           $ 2,691,706     $  2,603,829     $ 2,601,778
Less: goodwill and other intangibles        48,745           49,319          52,725
Tangible assets                        $ 2,642,961     $  2,554,510     $ 2,549,053
Tangible equity to tangible assets            7.15 %           7.12 %          6.94 %
Equity to assets                              8.83 %           8.88 %          8.83 %


EXECUTIVE OVERVIEW

Net income and diluted EPS for the three months ended June 30, 2014 was $6.3 million and $0.85 per share, respectively, reflecting a decrease in net income of $15,000 and an increase in diluted EPS of $0.03 per share over the three months ended June 30, 2013. Excluded from net income for the three months ended June 30, 2014 was the contribution provided by the five Franklin County branches divested in 2013. For the three months ended June 30, 2013, the five Franklin County branches contributed $189,000 to net income, or $0.02 per share.

Net income and diluted EPS for the six months ended June 30, 2014 was $12.0 million and $1.60 per share, respectively, reflecting an increase in net income and EPS of $38,000 and $0.04 per share, respectively, over the six months ended June 30, 2013. Excluded from net income for the six months ended June 30, 2014 was the contribution provided by the five Franklin County branches divested in 2013. For the six months ended June 30, 2013, the five Franklin County branches contributed $342,000 to net income, or $0.04 per share

Total assets at June 30, 2014 were $2.7 billion, representing an $87.9 million, or 3%, increase since year-end. The growth in total assets was fueled by loan growth of $116.4 million, representing a 15% annualized growth rate. Loan growth continues to be centered within our commercial real estate and commercial portfolios, evidenced by growth in those portfolios of $117.7 million since year-end, while our retail portfolio experienced a decrease of $1.3 million. We saw signs of positive momentum within our home equity and consumer portfolio in the second quarter of 2014 primarily due to recent promotions offered; however, the effects of higher mortgage rates continue to hamper refinance activity.

Total liabilities at June 30, 2014 were $2.5 billion, representing an $81.3 million, or 3%, increase since year-end. The increase is reflective of additional borrowings and brokered deposits totaling $119.8 million necessary to fund strong loan growth. Core deposits (demand, interest checking, savings, and money market) decreased $28.9 million since year-end due to the seasonal outflows of deposits within our market.

Shareholders' equity at June 30, 2014 was $237.7 million, representing an increase of $6.6 million since December 31, 2013. The primary factors attributable to the net increase are:
Net income of $12.0 million for the six months ended June 30, 2014.

OCI of $5.2 million for the six months ended June 30, 2014, primarily due to an increase in the fair market value of our AFS investment portfolio as interest rates have decreased since year-end.

Partially offset by:

Repurchases of 181,355 shares of the Company's common stock totaling $7.2 million.

Dividends declared of $0.54 per share, totaling $4.0 million.


RESULTS OF OPERATIONS

Net Interest Income
Net interest income is the interest earned on loans, securities, and other earning assets, plus loan fees, less the interest paid on interest-bearing deposits and borrowings. Net interest income, which is our largest source of revenue and accounts for approximately 75% of total revenues (net interest income and non-interest income), is affected by factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies and competitive conditions, the volume and mix of interest-earning assets and liabilities, and the level of non-performing assets.

Net Interest Income - Three Months Ended June 30, 2014 and 2013. Net interest income earned for the second quarter of 2014 was $19.2 million, representing a slight decrease of $2,000 compared to the same period in 2013. The decrease is primarily due to the divestiture of five branches in 2013 that contributed $411,000 to net interest income for the three months ended June 30, 2013. Overall, the Company was largely able to offset the impact of the Branch Divestiture and net interest margin compression of 12 basis points to 3.11% through strong loan production. Average loans for the three months ended June 30, 2014 increased $84.5 million, or 5%, compared to the same period last year, even with the sale of $46.0 million in loans as part of the Branch Divestiture. Loan growth primarily stemmed from our commercial and commercial real estate portfolios with average loan balances increasing $115.8 million, or 17%, over the same period in 2013.

Other key data points pertaining to net interest income for the three months ended June 30, 2014 over 2013 include:
Our yield on interest-earnings assets for the three months ended June 30, 2014 decreased 17 basis points to 3.60% compared to the same period in 2013. The decrease is due to the recording of new loans at historic low interest rates, while existing loans with higher rates continue to mature and/or refinance to lower interest rates.

Our cost of funds for the three months ended June 30, 2014 decreased 6 basis points to 0.50% compared to the same period in 2013.

The following table presents average balances, interest income, interest expense, and the corresponding average yields earned and cost of funds, as well as net interest income, net interest rate spread and net interest margin for the three months ended June 30, 2014 and 2013:


                             Quarterly Average Balance, Interest and Yield/Rate Analysis (unaudited)

                                          At or for the Three Months Ended                 At or for the Three Months Ended
                                                   June 30, 2014                                    June 30, 2013
(Dollars In Thousands)              Average Balance       Interest    Yield/Rate     Average Balance       Interest    Yield/Rate
Assets
Interest-earning assets:
Securities - taxable               $       777,935       $  4,212         2.17 %    $       774,916       $  4,130         2.13 %
Securities - nontaxable(1)                  37,386            484         5.17 %             30,800            449         5.83 %
Trading account assets                       2,309              5         0.95 %              2,245              -            - %
Loans(2):
Residential real estate                    566,070          6,017         4.25 %            572,920          6,596         4.61 %
Commercial real estate                     591,276          6,816         4.56 %            511,115          6,227         4.82 %
Commercial                                 214,559          2,045         3.77 %            178,887          1,964         4.34 %
Municipal(1)                                14,724            127         3.45 %             12,949            136         4.21 %
Consumer                                   288,897          2,797         3.88 %            315,197          3,184         4.05 %
Total loans                              1,675,526         17,802         4.23 %          1,591,068         18,107         4.53 %
Total interest-earning assets            2,493,156         22,503         3.60 %          2,399,029         22,686         3.77 %
Cash and due from banks                     42,360                                           43,758
Other assets                               165,574                                          166,333
Less: ALL                                  (21,892 )                                        (23,395 )
Total assets                       $     2,679,198                                  $     2,585,725
Liabilities & Shareholders'
Equity
Deposits:
Demand                             $       227,599       $      -            -      $       224,351       $      -            -
Interest checking                          465,565             80         0.07 %            475,621             90         0.08 %
Savings                                    245,034             35         0.06 %            236,277             33         0.06 %
Money market                               423,687            315         0.30 %            445,585            337         0.30 %
Certificates of deposit                    332,686            774         0.93 %            399,864          1,013         1.02 %
Total deposits                           1,694,571          1,204         0.28 %          1,781,698          1,473         0.33 %
Borrowings:
Brokered deposits                          144,792            361         1.00 %            123,151            355         1.16 %
Junior subordinated debentures              43,960            631         5.76 %             43,858            636         5.82 %
Other borrowings                           535,834            845         0.63 %            368,183            767         0.84 %
Total borrowings                           724,586          1,837         1.02 %            535,192          1,758         1.32 %
Total funding liabilities                2,419,157          3,041         0.50 %          2,316,890          3,231         0.56 %
Other liabilities                           28,092                                           31,669
Shareholders' equity                       231,949                                          237,166
Total liabilities &
shareholders' equity               $     2,679,198                                  $     2,585,725

Net interest income
(fully-taxable equivalent)                                 19,462                                           19,455
Less:  fully-taxable equivalent
adjustment                                                   (214 )                                           (205 )
Net interest income                                      $ 19,248                                         $ 19,250

Net interest rate spread
(fully-taxable equivalent)                                                3.10 %                                           3.21 %
Net interest margin
(fully-taxable equivalent)                                                3.11 %                                           3.23 %

(1) Reported on tax-equivalent basis calculated using a tax rate of 35%.
(2) Non-accrual loans and loans held for sale are included in total average loans.


Net Interest Income - Six Months Ended June 30, 2014 and 2013. Net interest income earned for the six months ended June 30, 2014 was $37.7 million, representing a decrease of $760,000 compared to the same period in 2013. The decrease was due to (i) the divestiture of five branches in 2013 that contributed $813,000 to net interest income for the six months ended June 30, 2013 and (ii) continued net interest margin compression of 16 basis points to 3.09% for the six months ended June 30, 2014 compared to the same period last year. The decrease due to rate and the Branch Divestiture was partially offset by strong loan production during the first half of 2014 as average loans increased $53.5 million, or 3%, compared to the same period last year, even with the sale of $46.0 million in loans as part of the Branch Divestiture. Loan growth primarily stemmed from our commercial and commercial real estate portfolios with average loan balances increasing $79.8 million, or 12%, over the same period in 2013.

Other key data points pertaining to net interest income for the six months ended June 30, 2014 over 2013 include:
Our yield on interest-earnings assets for the six months ended June 30, 2014 decreased 21 basis points to 3.59% compared to the same period in 2013. The decrease is due to the recording of new loans at historic low interest rates, while existing loans with higher rates continue to mature and/or refinance to lower interest rates.

Our cost of funds for the six months ended June 30, 2014 decreased 6 basis points to 0.51% compared to the same period in 2013.

The following table presents average balances, interest income, interest expense, and the corresponding average yields earned and cost of funds, as well as net interest income, net interest rate spread and net interest margin for the six months ended June 30, 2014 and 2013:


                          Year-to-date Average Balance, Interest and Yield/Rate Analysis (unaudited)

                                          At or for the Six Months Ended                 At or for the Six Months Ended
                                                  June 30, 2014                                  June 30, 2013
(Dollars In Thousands)              Average Balance     Interest    Yield/Rate     Average Balance     Interest    Yield/Rate
Assets
Interest-earning assets:
Securities - taxable               $      785,772      $  8,530         2.17 %    $      772,469      $  8,445         2.19 %
Securities - nontaxable(1)                 35,060           935         5.33 %            31,238           919         5.88 %
Trading account assets                      2,397             7         0.59 %             2,241            12         1.05 %
Loans(2):
Residential real estate                   567,132        11,981         4.23 %           574,031        13,171         4.59 %
Commercial real estate                    572,478        13,098         4.55 %           507,478        12,301         4.82 %
Commercial                                192,475         3,736         3.86 %           177,718         3,935         4.40 %
Municipal(1)                               12,822           240         3.78 %            12,267           267         4.39 %
Consumer                                  288,812         5,566         3.89 %           308,700         6,272         4.10 %
Total loans                             1,633,719        34,621         4.23 %         1,580,194        35,946         4.55 %
Total interest-earning assets           2,456,948        44,093         3.59 %         2,386,142        45,322         3.80 %
Cash and due from banks                    41,933                                         44,249
Other assets                              165,668                                        166,517
Less: ALL                                 (21,749 )                                      (23,331 )
Total assets                       $    2,642,800                                 $    2,573,577
Liabilities & Shareholders'
Equity
. . .
  Add CAC to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CAC - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.