Good day and welcome to Camden National Corporation's second quarter 2025 earnings conference call. My name is Elliot and I'll be your operator for today's call. All participants will be in listener earning mode during today's presentation. Following the presentation, we'll conduct a question and answer session. If you require operator assistance at any time during the call, please press star then zero. I'll now turn the call over to Renee Smith, Executive Vice President, Chief Experience and Marketing Officer.

thank you good afternoon and welcome to camden national corporations conference call for the second quarter of 2025. joining us this afternoon are members of camden national corporations executive team simon griffiths president and chief executive officer and mike archer executive vice president and chief financial officer please note that today's presentation contains forward looking statements and actual results could differ materially from what is discussed on today's call Cautionary language regarding these forward-looking statements is contained in our second quarter 2025 earnings release issued this morning and in other reports we file with the SEC. All of these materials and public filings are available on our investor relations website at camdennational.bank. Camden National Corporation trades on the NASDAQ under the symbol CAC. In addition, today's presentation includes discussion of non-GAAP financial measures, Any references to non-GAAP financial measures are intended to provide meaningful insights and are reconciled with GAAP in our earnings release, which is also available on our Investor Relations website. I am pleased to introduce our host, President and CEO, Simon Griffiths.

Good afternoon, everyone, and thank you, Renee. We appreciate you taking the time to join us today. We're pleased to report on our strong performance in our first full quarter as a unified organization following the acquisition of Northway Financial earlier this year, which bolstered our presence in the New Hampshire market. This quarter marked the beginning of unlocking the financial potential of our combined franchise with pre-tax, pre-provisioned income, excluding one-time merger-related expenses rising 13% from the prior quarter. Earlier this morning, we reported strong quarterly earnings of $14.1 million, resulting in diluted earnings per share of $0.83. cents. On a non-gap basis, adjusted earnings were $15.2 million, or $0.89 per share. Our strong quarterly earnings accretion continues to rebuild our capital levels following the completion of the Northway acquisition and to enhance shareholder value. This is evidenced by the expansion of a tangible common equity ratio to 6.77% at June 30th, and a 3% increase in tangible book value during the second quarter, reaching $26.90 per share. These outstanding results reflect early success in realizing cost synergies from the Northway acquisition and the ability to drive solid revenue growth, underscoring the strategic value of the acquisition for all our constituents, customers, employees, communities, and shareholders. Several of our key performance indicators continue to trend positively. Net interest margin expanded by an additional two basis points, and our non-gap efficiency ratio improved to 55.5%. We believe these outcomes demonstrate that we are well-positioned to sustain interest margin expansion and earnings growth through the second half of 2025. As reported, one commercial borrower filed for bankruptcy during the second quarter, resulting in the need for additional provisioning on this loan. We are actively engaged with a small group of other lenders involved in this loan and anticipate resolution later this year. In a few minutes, Mike will provide more details on our provision and loan loss reserve levels for the second quarter. We remain confident in the overall health of our loan portfolio and that this is not a broader trend across our well-diversified loan portfolio as evidenced by our continued strong asset quality metrics. Our second quarter performance reflects the continued benefits of our strategic investments, both digital and talent-focused across the organization, along with the disciplined execution of proactive deposit gathering and management. While average deposits were down 1% on a linked quarter basis due to seasonal trends, we have seen encouraging growth more recently as the summer months are upon us. While average loans remain stable during the quarter, we grew ending loan balances in both the consumer and commercial businesses. Our commercial team remains highly engaged, leveraging strong, long-standing relationships and increased visibility in the high-growth markets of southern New Hampshire and Maine. We're seeing consistent pipeline activity across our markets, signaling strong demand and sustained momentum. And at the same time, we remain firmly committed to our underwriting discipline. During the quarter, we achieved robust growth in home equity loan balances in our high-yield savings account, which requires a consumer checking account helping us expand and deepen relationships. We also achieved significant success in growing and diversifying our fee revenue. Our fiduciary and brokerage fee income organically grew 16% year over year. Our growing wealth management team is realizing substantial operational efficiencies from its new platform, which was implemented last year. We continue to see strong opportunities to expand our services within our existing customer base, particularly as we prioritize advice-driven conversations and extend our treasury management services into the New Hampshire market. We continue to advance our innovation agenda with strategic investments to modernize our mobile app, aimed at attracting and retaining a digitally savvy customer base. This quarter, we successfully launched both our Roundup feature and Zogo, a digital financial literacy program, the response has been strong. Within the first 60 days, customers completed over 140,000 Roundup transactions, automatically directing spare change into savings and charitable giving accounts, and engaging in more than 13,000 learning activities through our financial education tool. We are proud of our second quarter financial performance reflects the dedication of our 700 plus united teammates and their unwavering focus on serving our customers and executing our strategy their efforts have fueled strong results and built momentum we expect to carry through the second half of 2025 and beyond we are well positioned to continue delivering exceptional outcomes and unlocking meaningful long-term value for shareholders with that i'll hand over to mike to provide some additional financial highlights regarding the quarter

Thank you, Simon, and good afternoon, everyone. Our second quarter operating results gave us a first look at our earnings power as a larger organization, having completed the acquisition of Northway Financial and much of our integration in the first quarter this year. As we enter the second half of the year, I'm pleased to report that we remain on track to deliver the financial targets outlined as part of the acquisition, including achieving our targeted cost reductions. For the second quarter, we reported GAAP net income of $14.1 million and diluted earnings per share of $0.83, representing increases of 92% and 93% respectively over the previous quarter. On a non-GAAP basis, pre-tax, pre-provisioned net income, excluding M&A-related costs, totaled $26.1 million for the second quarter and increased 13% over the previous quarter. This increase highlights the improvement in our efficiency ratio during the second quarter, which reached 55.5%, our lowest level since the second quarter of 2022. Total revenues for the second quarter grew 4% over the last quarter to $62.3 million, driven by both net interest income and non-interest income growth. Net interest margin and non-GAAP core net interest margin each expanded two basis points during the second quarter to $306,000 and $270,000, respectively. We continue to focus on driving core net interest margin expansion and anticipate further expansion in the third quarter, as we'll benefit from seasonal deposit flows and continued steady expansion of our earning asset yield. Non-interest income reached $13.1 million for the second quarter, which beat our guidance provided last quarter. We are currently estimating a range for non-interest income for the third quarter of $12 to $13 million. Reported non-interest expense for the second quarter was $37.6 million, which was 15% lower than the first quarter. Non-interest expense, excluding M&A costs for the second quarter, was $36.2 million, a 2% decrease compared to the prior quarter. For the third quarter, we'll currently anticipate non-interest expenses, excluding M&A costs and CDI amortization, to land closer to $34 million as we realize a full quarter of cost energy savings from the Northway acquisition. Weighing on a reported financial results for the second quarter were elevated provision expenses of $6.9 million. During the second quarter, a borrower under our syndicated loan, in which Camden's participation totaled $12 million, entered bankruptcy, and we placed a loan on nonaccural status. As of June 30, we carried an allowance on this credit of $6 million, which represents our best estimate of the potential loss as of the end of the second quarter. This credit was the driver of the elevated provision expense and the increase in our allowance coverage ratio of 12 basis points during the second quarter to 1.08% at June 30. As noted in our earnings release earlier today, we currently anticipate that this credit will be fully resolved later this year. Overall, our credit trends across the broader loan portfolio will remain very strong. Past two loans accounted for eight basis points of total loans at June 30. net charge off for two basis points of average loan to a second quarter and non-performing loans for 37 basis points of total loans at june 30. we experienced nice long growth during the quarter of one percent coming primarily from commercial and home equity loans our loan pipelines were robust at june 30 with 150 million committed loan pipeline representing a 40 increase over last quarter lastly our capital position remains very strong supported by growing ratios as we rebuild capital following the Northway acquisition earlier this year. Our TCE ratio grew to 6.77% at June 30, an increase of 28 basis points from the previous quarter, and our regulatory capital ratios continue to be well in excess of requirements and continue to build as well. We anticipate strong capital generation in the second half of the year, driven by the full realization of synergies and sustained revenue growth. This concludes our comments. We'll now open up the call for questions.

If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Steve Moss with Raymond James. Your line is open. Please go ahead.

Good afternoon, guys. Maybe just starting here on the credit front. Hey, Mike. uh just start on the credit front here just curious what type of cni loan was it and did the placement on non-accrual here this quarter also impact uh net interest income um yeah so that

was one of our just cni loans it was a syndication steve um you know as mentioned in the comments we're working with a small group of other vendors on that um in terms of the you know our credit team is working very closely and diligently uh trying to work through the resolution there and as we mentioned you anticipate that uh full resolution here a little bit later this year it did impact net interest income uh for the quarter overall it was about a basis point of net interest margin core margin uh for the quarter okay i'm sorry i should have been more

specific just curious as to like what kind of industry um the borrower is active in steve yeah

as you know, I've characterized it as a service company.

Okay, got it, yeah. And then in terms of the loan pipeline here, just curious color around the drivers of the improvement of the pipeline and kind of what's the coupon you're seeing on new originations?

Yeah, I'll take that, Steve. And just talking, just to go back a click here, you know, I think obviously we've mentioned the one loan, But, you know, I think we still feel very confident around our credit position. And, you know, when you look at non-approvals at 15 basis points absent that loan, it really is flat quarter over quarter. So we feel very good about that. And, you know, as we push into this quarter, we are seeing a pickup, you know, particularly on the commercial side. We're seeing a lot of activity. We're also seeing some great results in the home equity front. We grew 16.7 million in the second quarter in balances as compared to 18 million all of last year. So that's, you know, very positive momentum there, which I think is really good to see. So, you know, we're seeing a nice balance across C&I, small loans, business loans. Mortgage is actually quite resilient as well. So it's a broad-based sort of pickup. And, you know, certainly, as we say, we've got a very positive pipeline.

Okay. Got you. In terms of the margin expansion here, just kind of thinking about the asset repricing, obviously originations help here too. You know, do you think about it as a couple basis points? a quarter i'm just kind of curious how how you guys are thinking about that uh dynamic

i'll just say steve yeah i think you know we do see continued momentum back into this year obviously contingent uh you know in terms of the fed but we see you know plus minus five ten basis points uh for the next quarter uh independent obviously where the fed goes okay great appreciate

all the color i'll step back in the queue thanks steve we now turn to matthew breeze with stevens

Your line is open. Please go ahead. Good afternoon. Just on the C&I credit, a couple from me here. You know that you're actively involved with other lenders on the note. Can you give us some sense for the ultimate size of this loan? And then what is your exposure

overall with syndicated loans? So our total exposure, Matt, is $12 million at quarter end. And, you know, I can certainly say there are five or six other banks in this group. And total exposure for the is around the 200 million mark.

In just terms of unfunded there, Matt, there's a small piece of remaining exposure out there. I think it's around a million dollars or so, maybe a little bit over, but in that neighborhood.

And the 200 million, are those, you know, how would you characterize those in terms of, you know, geography? Are they mostly local or are they national? What kind of, broadly speaking, what kind of businesses are they attached to?

It's a mix, you know, from national to large regional, local.

And there's no other sign of deterioration in the broader book?

No. No, we feel very good. I mean, again, just coming back to my earlier points, Matt, you know, none occur all the 15 basis points of, I mean, you know, that's pretty much flat quarter over quarter. But delinquencies are eight basis points up, one basis point from Q1. Charge-offs are two basis points annualized. You know, we feel very good about the overall book, but, you know, inevitably sometimes you have these, you know, one-off situations, and that's exactly what this is.

Mike, you've mentioned a couple of guidance items I was hoping to kick the tires on. The first one was just fee income of $12 to $13 million next quarter. a little bit of a pullback and curious as to where we might see that pullback occur

yeah it's a couple good question matt a couple things in there one just on the the mortgage side there is some fair value accounting that's you know giving a bit of a pop if you will and just the pipeline loans um you know at quarter end um the other item is within the bully you would have seen a pop there as well um and you know obviously just with the acquisition, some different securities supporting one of the underlying bully policies that, you know, it's more tied to the equity markets and just has more volatility, as you can imagine, in some of that. So, a little bit – that's a little bit of my caution out there. That said, I think mortgage will be strong from a sales perspective this go around. I think we've pegged that somewhere in the $750,000 to a million. So, that could be, you know, pretty stable. My hope would be we'd be in the 12.5 to 13, kind of more that range but there's a couple items out there that are a little less in our control if you will

from a valuation perspective got it okay and then on expenses i think you had said 34 to 35 million for the rest of the year um at that point at year end have you kind of done all you can from from north way and should we expect a little bit of growth from the year end figure whether it's 34 and 35 just just trying to get some sense for the inflection point on expenses that you're in

yeah i mean so we're targeting something closer to 34 million for the third quarter matt um you know we anticipate that we'll you know have certainly the high majority vast majority of the cost synergies by that point there could be some items that continue to fall out there but certainly the you know the material significant items who would have gained most of that benefit as we you know close down the third quarter possibly into the early fourth but you know all things all things considered um i do think we'll we'll see the most of that in the third quarter there's a little bit of lumpiness just in the second quarter that is in our numbers in terms of some of the expenses we just have annual equity grants for for board members and directors that you know flush through and so it's a little bit higher than maybe you would have otherwise expected but again that's just more of a seasonality factor um and something that we've always had

Understood. Okay. Yeah, Simon, just on the credit piece, the stock is down 11% today. It feels like it's mostly tied to the increase in non-accruals and a bit of a mismatch between your commentary today. So just curious, if the stock kind of stays here, would you be interested in the buyback as soon as the window opens up? That's all I have. Thank you.

Yeah. I mean, certainly, I think in the context of the credit and the comments, I think we're very well positioned for the second half of the year. I think we see a lot of positives. We're starting to really see the traction, which we hope for with the New Hampshire franchise. We're certainly picking up a lot of the momentum in the commercial volume in New Hampshire, which I think is really positive. We have a buyback open as an option for us, if that makes sense. So certainly that optionality is there. We certainly feel very good about the core kind net interest margin as we've talked about and I think the continued focus on the team with a trajectory to focusing on getting to three percent I think is certainly something the team are very committed to so I think that's a real positive for us we've got cost discipline I think in place and really landing the commitments we made around the integration so you put all those pieces together I think the back half of the year is looks very positive you know looks and you know we're excited as a management team to continue to execute on the integration and opening up the markets in New Hampshire and obviously the organic growth we have in the

main markets. I'll leave it there. I appreciate you taking all my questions. Thank you.

As another reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to Damon Del Monte with KBW. Your line is open. Please go ahead.

Hey, everybody. This is Matt Rank filling in for Damon Del Monte. I hope everybody's doing okay today um just as a i don't know what that noise was but um yeah just as a follow-up on the fee income side of things um just kind of hoping to see how um early wealth management conversations are going in new hampshire and um what you think that business and franchise could maybe grow to

over the next year yeah i think it's you know we've added particularly in the main footprint um we've added a couple of wealth folk um so we see you know that potential with some investing into our core market where we've got strong relationships and certainly continuing to build that out and seeing some very nice growth, both within our brokerage business, but also with our wealth franchise. We've certainly started to take a step into the New Hampshire market. We're certainly right now focused more on the lending side. The commercial, as I said earlier, my earlier comments, very positive results. Home equity, of course, as I talked about, we're seeing a lot of traction there, which is exciting. That wasn't a product that the Northway team had. So that's, I think, bringing a real asset to our customers. And with those loans, we're bringing in deposits as well and seeing a lot of traction on that side. So I think that helps the funding side, which is real positive. So I think the wealth picture for us is really probably more as we build into next year, but certainly going to continue to invest and have the potential, I think, some very attractive markets there to continue to build out the wealth team. And that's not a this year thing. I think I said that's a next year thing.

Okay, got it. And then just one follow-up. You mentioned a new wealth platform, new mobile app. I was just curious if you're investing in any other technologies that you think could drive, you know, efficiencies or maybe revenue generation opportunities.

Yeah, we, you know, thanks for the question. And certainly that has gone well. And the team, I think the Wealth team felt very good about both the operational efficiencies, but also the improved customer experience from the mobile app. So that's just sort of very real positive. As you know, from previous calls, we talked about the Terrafina platform, the new online account opening platform has been very positive. We're seeing a lot of traction there. Just under 10% now of our accounts are coming in through that platform, which is really positive. And I think a great customer experience. We'll continue to leverage that platform and build that platform out. We've also had some great innovations recently. We've rolled out some fabulous new innovations around Roundup, Roundup to save, Roundup to We're seeing a lot of energy and traction, as I referenced in my comments, and I think that's real possible, as well as a learning platform and starting to see a lot of engagement from our young customers around that. So I think it's a very digital forward strategy. We've got other pieces in the pipeline, which we're not ready to talk about, but I think when you start to put all these pieces together, I think it's driving engagement, driving account acquisition which of course is going to be crucial to funding and and just the overall health and growth of the bank so feel very good about the digital strategy and the momentum that we have

great thank you i'll step back we have no further questions so now hand back to simon griffiths

for any final remarks thank you for your time today and your continued interest in camden national corporation we appreciate your support and wish you a productive and restful summer

thanks everyone ladies and gentlemen today's call is now concluded we'd like to thank you for your participation, you may now disconnect your lines.