UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 28, 2020
Camden National Corporation
(Exact name of registrant as specified in its charter)
 
Maine
 
01-28190
 
01-0413282
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
Two Elm Street, Camden, Maine
 
04843
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (207) 236-8821
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, without par value
CAC
The NASDAQ Stock Market LLC




Item 2.02
Results of Operations and Financial Condition.
 
Camden National Corporation (the “Company”) issued a press release on January 28, 2020 announcing earnings for the fiscal quarter and year ended December 31, 2019. The press release is being furnished pursuant to Item 2.02, and the information contained therein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities under that Section. Furthermore, the information contained in Exhibits 99.1 and 99.2 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933.

Item 9.01
Financial Statements and Exhibits.
 
(d)    The following exhibits are filed with this Report:
Exhibit No.
Description

 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: January 28, 2020

 
CAMDEN NATIONAL CORPORATION
 
(Registrant)
 
 
 
By: 
/s/ DEBORAH A. JORDAN
 
 
Deborah A. Jordan
Chief Operating Officer,
Chief Financial Officer and
Principal Financial & Accounting Officer
 



cncsignaturebrandmarkrgba21.jpg
CONTACT:                                
Michael Archer
Senior Vice President
Corporate Controller
Camden National Corporation
(800) 860-8821
[email protected]

FOR IMMEDIATE RELEASE


CAMDEN NATIONAL CORPORATION REPORTS
FOURTH QUARTER AND ANNUAL EARNINGS FOR 2019

Company Reports Record Net Income of $57.2 Million and Diluted EPS of $3.69 for 2019

CAMDEN, Maine, January 28, 2020/PRNewswire/--Camden National Corporation (NASDAQ: CAC; “Camden National” or the “Company”), a $4.4 billion bank holding company headquartered in Camden, Maine, reported record net income of $57.2 million and diluted earnings per share ("EPS") of $3.69 for 2019, an increase of 8% and 9% over 2018, respectively. Strong earnings for the year resulted in a return on average assets of 1.30% and return on average equity of 12.44% for 2019, compared to a return on average assets and equity of 1.28% and 12.92%, respectively, for 2018.

"Camden National reported record earnings of $57.2 million for the year,” said Gregory A. Dufour, President and Chief Executive Officer of the Company. "Our efforts and focus on our core businesses have translated directly to our bottom line." Dufour added, "Over the year, Camden National received several accolades from various organizations recognizing our financial performance, customer experience and service to our communities. It is certainly rewarding to see our hard work recognized by those we serve in varying capacities, and it is a reminder of our impact on and responsibility to many."

Net income for the fourth quarter of 2019 of $15.2 million increased 9% over the fourth quarter of 2018, while diluted EPS increased 11% to $0.99 over the same period. On a linked-quarter basis, net income and diluted EPS for the fourth quarter of 2019 each increased 5% over last quarter.

"We continue to actively manage our capital through various strategies," said Dufour. "In 2019, we returned nearly $20.8 million of capital to shareholders through the repurchase of 488,052 shares of Camden National common stock, and in December announced an increase in our quarterly dividend rate of 10%. As we balance our capital needs and generation of shareholder value, we believed it was the right time to increase our return of capital to shareholders."

“We continue to review our organization for efficiencies, and after careful consideration we will be closing our Corinth, Hampden and Milo banking centers by the end of April,” Dufour reported. "Our decision was based on many factors, including changes in customer behavior, financial considerations, and impact to stakeholders and customers."

2019 FINANCIAL HIGHLIGHTS

•
2019 net income and diluted EPS grew 8% and 9%, respectively, over 2018; fourth quarter 2019 net income grew 9% over the fourth quarter of 2018 and 5% on a linked-quarter basis.
•
Return on average assets for 2019 was 1.30%, and return on average equity was 12.44%; fourth quarter 2019 return on average assets of 1.35%, and return on average equity of 12.77%.
•
Loans and deposits each grew 2% in 2019; loans and deposits decreased 1% and 2%, respectively, in the fourth quarter of 2019.

1

•
Average deposits for 2019 grew 14% over 2018, led by average checking account growth of 20% over 2018; fourth quarter 2019 average deposits grew 12% over the fourth quarter of 2018 and 2% on a linked-quarter basis.
•
Average loans for 2019 grew 8% over 2018; fourth quarter 2019 average loans grew 5% over the fourth quarter of 2018 and less than 1% on a linked-quarter basis.

FINANCIAL CONDITION

Assets. As of December 31, 2019, total assets were $4.4 billion. In 2019, total assets grew 3% driven by loan growth (including loans held for sale) of $76.3 million, or 3%. Loans and loans held for sale, at December 31, 2019, were $3.1 billion. Net loan growth in 2019 was driven by:
•
Residential mortgage growth of $78.0 million, or 8%. During 2019, the Company originated $570.3 million of residential real estate loans and sold 50%, compared to $494.3 million in originations and 44% sold in 2018. Refinancing activity was 37% of residential real estate loan originations in 2019, compared to 24% in 2018.
•
Commercial loan growth of $27.3 million, or 7%. Commercial loan originations for 2019 totaled $212.3 million, driven primarily by small business loans. Syndication loans were 10% of total commercial loan originations in 2019.
•
Commercial real estate ("CRE") loans decreased $26.1 million, or 2%, primarily due to elevated prepayments. CRE loan activity was steady but very competitive within our markets throughout 2019. The Company had record CRE loan production in 2019 of $361.0 million, of which $137.5 million were construction loans yet to fund as of December 31, 2019.

Deposits and Borrowings. As of December 31, 2019, deposits totaled $3.5 billion. In 2019, deposits grew 2% driven by checking account growth of $185.7 million, or 12%, and certificates of deposit ("CD") growth of $77.8 million, or 18%. The Company's CD growth was primarily attributable to one large depositor shifting $70.0 million of funding from interest checking to CDs earlier in the year.

At December 31, 2019, brokered deposits totaled $191.0 million, a decrease of $172.1 million, or 47%, since December 31, 2018. Brokered deposits represented 5% of total deposits at December 31, 2019, compared to 10% of total deposits at December 31, 2018. The decrease was attributable to strong checking and CD deposit growth in 2019.

The Company's total loan-to-deposit ratio at December 31, 2019 and 2018 was 87%.

Shareholders' Equity. At December 31, 2019, the Company's capital position was well in excess of regulatory requirements, including a total risk-based capital ratio of 14.44% and a Tier 1 leverage ratio of 9.55%. The Company deployed $20.8 million of capital throughout 2019 through the repurchase of 488,052 shares of its common stock.

The Company's Board of Directors has approved a new share repurchase program for up to 750,000 shares of the Company's common stock, or approximately 5% of shares outstanding at December 31, 2019, as the Company's current share repurchase program expired in January 2020. Repurchases under the new program may be made at the Company's discretion from time to time in the open market, through block trades or otherwise, and in privately negotiated transactions, subject to market conditions and other factors, and in accordance with applicable legal and regulatory requirements. If any share repurchases are made, they will be over a period of not greater than twelve months.

In December 2019, the Company announced a $0.03 per share, or 10%, increase in its quarterly cash dividend to shareholders of record as of January 15, 2020. The cash dividend is payable to shareholders of record on January 31, 2020 at a rate of $0.33 per share. As of December 31, 2019, the Company's annualized dividend yield was 2.87%, based on Camden National's closing share price of $46.06 as reported by NASDAQ.
 
ASSET QUALITY

As of December 31, 2019, the Company's asset quality metrics reached a new milestone with non-performing assets at a historical low of 0.25% of total assets and non-performing loans at 0.36% of total loans. In comparison, at December 31, 2018, non-performing assets to total assets were 0.34% and non-performing loans to total loans were 0.48%. As of December 31, 2019, loans 30-89 days past due were 0.17% of total loans, compared 0.29% at December 31, 2018.

At December 31, 2019, the allowance for loan losses was 0.81% of total loans and 225.77% of non-performing loans, compared to 0.82% of total loans and 171.17% of non-performing loans at December 31, 2018.


2

Q4 2019 FINANCIAL OPERATING RESULTS (linked quarter)

The Company reported net income of $15.2 million for the fourth quarter of 2019, an increase of $750,000, or 5%, over the third quarter of 2019. Diluted EPS for the fourth quarter of 2019 increased $0.05 over last quarter to $0.99.

Net Interest Income. Net interest income for the fourth quarter of 2019 was $32.2 million, an increase of $316,000, or 1%, over the third quarter of 2019.

Net interest margin for the fourth quarter was 3.12%, an increase of 3 basis points between quarters. The Company's cost of funds decreased 14 basis points between quarters to 0.94% for the fourth quarter, while its earning asset yield decreased 9 basis points between quarters to 4.02% for the fourth quarter.

Cost of Funds
•
Cost of deposits decreased 8 basis points between quarters to 0.77% for the fourth quarter. The decrease was driven by average checking account growth of 3% between quarters at an average cost of 0.53% for the fourth quarter, due in part to seasonal deposits within our markets and active management of deposit rates with new and existing customers.
•
Cost of borrowings decreased 20 basis points between quarters to 2.07% for the fourth quarter. The decrease was driven by lower average borrowings of $70.9 million, or 12%, due to average deposit growth and a reduction in average cash balances for the quarter, as well as a 25 basis point Fed Funds interest rate cut in September and October.

Asset Yield
•
Loan yields decreased 11 basis points between quarters to 4.49% due to repricing of existing variable rate loans combined with new loans funded at lower rates than the overall loan portfolio.
•
Our fourth quarter loan yield benefited from an increase in loan prepayment income between quarters of $289,000, which provided a 3 basis point lift in loan yield over the third quarter.

Provision for Credit Losses. The provision for credit losses for the fourth quarter of 2019 was $214,000, compared to $730,000 last quarter. The decrease in expense between quarters was due to:
•
Annualized net charge-offs for the fourth quarter of 0.09%, compared to 0.16% last quarter.
•
A decrease in loan balances in the fourth quarter of 1%, compared to an increase in loan balances in the third quarter of 3%.

Non-Interest Income. Non-interest income for the fourth quarter of 2019 was $11.9 million, an increase of $1.2 million, or 11%, over the third quarter of 2019. The increase in non-interest income was driven by:
•
A change in unrealized gain on equity securities of $866,000 in the fourth quarter.
•
An increase in debit card income of $546,000 as annual volume growth hurdles were reached, resulting in a $579,000 incentive bonus from our network provider in the fourth quarter.
•
A decrease in mortgage banking income of $494,000 as we experienced our normal decrease due to seasonality within our markets between quarters.

Non-Interest Expense. Non-interest expense for the fourth quarter of 2019 was $24.8 million, an increase of $1.1 million, or 4%, compared to the third quarter of 2019. The increase was primarily due to an increase in salaries and benefits costs of $842,000 between quarters as the Company accrued for bonus and incentives based on annual performance to budget. The Company's efficiency ratio for the fourth quarter, calculated as non-interest expense divided by total revenues1, was 56.16%, compared to 55.67% last quarter.

2019 ANNUAL FINANCIAL OPERATING RESULTS

The Company reported net income of $57.2 million for 2019, an increase of $4.1 million, or 8%, over 2018. Diluted EPS for 2019 increased $0.30 over 2018 to $3.69.


______________________________________________________________________________________________________
1 
Revenue is the sum of net interest income and non-interest income.

3

Net interest income. Net interest income for 2019 was $127.6 million, an increase of $7.2 million, or 6%, over 2018. Average loans grew 8% and average deposits grew 14% in 2019. The Company's ability to fund loan growth through deposit growth allowed it to maintain a relatively stable net interest margin year over year, despite the challenging interest rate environment. Net interest margin for 2019 was 3.15%, a decrease of 1 basis point compared to 2018.

Provision for Credit Losses. The provision for credit losses for 2019 was $2.9 million, compared to $847,000 for 2018. For 2019, net charge-offs to average loans were 0.08%, compared to 0.01% for 2018. Our ratio of net charge-offs to average loans for 2018 was lower primarily due to the favorable resolution of a significant commercial credit relationship that resulted in a large recovery.

Non-Interest Income. Non-interest income for 2019 was $42.1 million, an increase of $3.9 million, or 10%, over 2018. The increase was primarily attributable to:
•
An increase in mortgage banking income of $1.9 million, or 33%, due to higher mortgage sales of 32%, in part driven by higher refinance activity.
•
A change in unrealized gain on equity securities of $928,000.
•
An increase in debit card income of 7% driven by transaction volume.
•
An increase in fiduciary service of $525,000, or 10%, as Camden National Wealth Management assets under management increased 20% to $1.0 billion as of December 31, 2019. In 2019, Camden National Wealth Management reached a new milestone with $96.1 million of new business.

Non-Interest Expense. Non-interest expense for 2019 was $95.3 million, an increase of $3.4 million, or 4%, over 2018. The increase was primarily driven by an increase in salaries and benefits costs of $3.0 million, or 6%, due to an increase in: (i) wages and related taxes of 5%; (ii) health insurance costs of 10%; and (iii) bonus and incentives based on annual performance to budget. The Company's efficiency ratio for 2019, calculated as non-interest expense divided by total revenues, was 56.15%, compared to 57.98% for 2018.

CONFERENCE CALL

Camden National will host a conference call and webcast at 3:00 p.m. Eastern Time on January 28, 2020 to discuss fourth quarter and annual 2019 financial results. Participants should dial in to the call 10 - 15 minutes before it begins. Information about the conference call is as follows:

Live dial-in (domestic):         (888) 349-0139
Live dial-in (international):    (412) 542-4154
Live webcast:            https://services.choruscall.com/links/cac200128.html

A link to the live webcast will be will be available on Camden National's website under "Investor Relations" at CamdenNational.com prior to the meeting. The transcript of the conference call will also be available on Camden National's website approximately two business 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 $4.4 billion in assets and nearly 650 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 61 banking centers, 24/7 live phone support, 71 ATMs, and lending offices in New Hampshire and Massachusetts. For the past two years, Camden National Bank was named "Customer Experience Leader in U.S. Retail Banking" by Greenwich Associates, and in 2019, it was the only New England based organization included in Sandler O'Neill's "Bank and Thrift Sm-All Star" list of high-performing financial institutions. The Finance Authority of Maine has awarded Camden National Bank as "Lender at Work for Maine" for ten years. Comprehensive wealth management, investment and financial planning services are delivered by Camden National Wealth Management. To learn more, visit CamdenNational.com. Member FDIC.


4

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including certain plans, expectations, goals, projections and other statements, which are subject to numerous risks, assumptions and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures; changes in the interest rate environment; changes in general economic conditions; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; legislative and regulatory changes that adversely affect the business in which Camden National is engaged; changes in the securities markets and other risks and uncertainties disclosed from time to time in in Camden National’s Annual Report on Form 10-K for the year ended December 31, 2018, as updated by other filings with the Securities and Exchange Commission ("SEC"). 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 return on average tangible equity; the efficiency and tangible common equity ratios; tangible book value per share; and 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 measure help investors better understand the Company's operating performance and trends and allow for better performance comparisons to other financial institutions. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions. Reconciliation to the comparable GAAP financial measure can be found in this document.

ANNUALIZED DATA

Certain returns, yields, and performance ratios are presented on an “annualized” basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts. Annualized data may not be indicative of any four-quarter period, and are presented for illustrative purposes only.


5


Selected Financial Data
(unaudited)


 
 
At or For The
Three Months Ended
 
At or For The
Year Ended
(In thousands, except number of shares and per share data)
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Financial Condition Data
 
 
 
 
 
 
 
 
 
 
Investments
 
$
933,069

 
$
926,444

 
$
926,678

 
$
933,069

 
$
926,678

Loans and loans held for sale
 
3,106,877

 
3,127,083

 
3,030,625

 
3,106,877

 
3,030,625

Allowance for loan losses
 
25,171

 
25,688

 
24,712

 
25,171

 
24,712

Total assets
 
4,429,521

 
4,520,315

 
4,297,435

 
4,429,521

 
4,297,435

Deposits
 
3,537,743

 
3,617,963

 
3,464,474

 
3,537,743

 
3,464,474

Borrowings
 
337,889

 
342,459

 
341,515

 
337,889

 
341,515

Shareholders' equity
 
473,415

 
471,672

 
435,825

 
473,415

 
435,825

Operating Data
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
32,239

 
$
31,923

 
$
31,587

 
$
127,630

 
$
120,393

Provision for credit losses
 
214

 
730

 
7

 
2,861

 
847

Non-interest income
 
11,948

 
10,739

 
9,479

 
42,113

 
38,176

Non-interest expense
 
24,814

 
23,748

 
23,580

 
95,303

 
91,945

Income before income tax expense
 
19,159

 
18,184

 
17,479

 
71,579

 
65,777

Income tax expense
 
3,921

 
3,696

 
3,502

 
14,376

 
12,706

Net income
 
$
15,238

 
$
14,488

 
$
13,977

 
$
57,203

 
$
53,071

Key Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.35
%
 
1.29
%
 
1.32
%
 
1.30
%
 
1.28
%
Return on average equity
 
12.77
%
 
12.26
%
 
13.19
%
 
12.44
%
 
12.92
%
GAAP efficiency ratio
 
56.16
%
 
55.67
%
 
57.42
%
 
56.15
%
 
57.98
%
Common equity ratio
 
10.69
%
 
10.43
%
 
10.14
%
 
10.69
%
 
10.14
%
Net interest margin (fully-taxable equivalent)
 
3.12
%
 
3.09
%
 
3.21
%
 
3.15
%
 
3.16
%
Non-performing assets to total assets
 
0.25
%
 
0.30
%
 
0.34
%
 
0.25
%
 
0.34
%
Tier 1 leverage capital ratio
 
9.55
%
 
9.39
%
 
9.53
%
 
9.55
%
 
9.53
%
Total risk-based capital ratio
 
14.44
%
 
13.97
%
 
14.36
%
 
14.44
%
 
14.36
%
Per Share Data
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.00

 
$
0.94

 
$
0.90

 
$
3.70

 
$
3.40

Diluted earnings per share
 
$
0.99

 
$
0.94

 
$
0.89

 
$
3.69

 
$
3.39

Cash dividends declared per share
 
$
0.33

 
$
0.30

 
$
0.30

 
$
1.23

 
$
1.15

Book value per share
 
$
31.26

 
$
30.98

 
$
27.95

 
$
31.26

 
$
27.95

Non-GAAP Measures(1)
 
 
 
 
 
 
 
 
 
 
Return on average tangible equity
 
16.26
%
 
15.67
%
 
17.43
%
 
15.99
%
 
17.22
%
Efficiency ratio
 
55.64
%
 
55.32
%
 
56.50
%
 
55.77
%
 
57.71
%
Tangible common equity ratio
 
8.66
%
 
8.44
%
 
8.02
%
 
8.66
%
 
8.02
%
Tangible book value per share
 
$
24.77

 
$
24.52

 
$
21.61

 
$
24.77

 
$
21.61

(1)
Please see "Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)."


6

Consolidated Statements of Condition Data
(unaudited)
 
 
 
 
 
 
 
(In thousands)
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
ASSETS
 
 

 
 
 
 

Cash and due from banks
 
$
39,586

 
$
63,620

 
$
52,240

Interest-bearing deposits in other banks (including restricted cash)
 
36,050

 
73,912

 
14,759

Total cash, cash equivalents and restricted cash
 
75,636

 
137,532

 
66,999

Investments:
 
 

 
 
 
 

Available-for-sale securities, at fair value (book value of $913,978, $903,988 and $933,399, respectively)
 
918,118

 
913,523

 
910,692

Held-to-maturity securities, at amortized cost (fair value of $1,359, $1,352 and $1,291, respectively)
 
1,302

 
1,303

 
1,307

Other investments
 
13,649

 
11,618

 
14,679

Total investments
 
933,069

 
926,444

 
926,678

Loans held for sale, at fair value (book value of $11,915, $16,630 and $4,314, respectively)
 
11,854

 
16,449

 
4,403

Loans:
 
 
 
 
 
 
Commercial real estate
 
1,243,397

 
1,255,519

 
1,269,533

Residential real estate
 
1,070,374

 
1,061,898

 
992,866

Commercial(1)
 
442,701

 
445,466

 
415,436

Consumer and home equity
 
338,551

 
347,751

 
348,387

Total loans
 
3,095,023

 
3,110,634

 
3,026,222

      Less: allowance for loan losses
 
(25,171
)
 
(25,688
)
 
(24,712
)
       Net loans
 
3,069,852

 
3,084,946

 
3,001,510

Goodwill
 
94,697

 
94,697

 
94,697

Other intangible assets
 
3,525

 
3,701

 
4,230

Bank-owned life insurance
 
92,344

 
91,729

 
89,919

Premises and equipment, net
 
41,836

 
40,930

 
42,495

Deferred tax assets
 
16,823

 
15,656

 
23,053

Other assets
 
89,885

 
108,231

 
43,451

Total assets
 
$
4,429,521

 
$
4,520,315

 
$
4,297,435

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 
 
 

Liabilities
 
 

 
 
 
 

Deposits:
 
 

 
 
 
 

Non-interest checking
 
$
552,590

 
$
573,621

 
$
496,729

Interest checking
 
1,153,203

 
1,147,627

 
1,023,373

Savings and money market
 
1,119,193

 
1,105,290

 
1,137,356

Certificates of deposit
 
521,752

 
541,199

 
443,912

Brokered deposits
 
191,005

 
250,226

 
363,104

Total deposits
 
3,537,743

 
3,617,963

 
3,464,474

Short-term borrowings
 
268,809

 
273,454

 
270,868

Long-term borrowings
 
10,000

 
10,000

 
11,580

Subordinated debentures
 
59,080

 
59,005

 
59,067

Accrued interest and other liabilities
 
80,474

 
88,221

 
55,621

Total liabilities
 
3,956,106

 
4,048,643

 
3,861,610

Shareholders’ equity
 
473,415

 
471,672

 
435,825

Total liabilities and shareholders’ equity
 
$
4,429,521

 
$
4,520,315

 
$
4,297,435

(1)
Includes the HPFC loan portfolio.

7

Consolidated Statements of Income Data
(unaudited)
 
 
For The
Three Months Ended
(In thousands, except per share data)
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
Interest Income
 
 

 
 
 
 

Interest and fees on loans
 
$
35,379

 
$
36,207

 
$
34,532

Taxable interest on investments
 
4,780

 
4,794

 
4,708

Nontaxable interest on investments
 
758

 
675

 
659

Dividend income
 
160

 
158

 
319

Other interest income
 
475

 
686

 
235

Total interest income
 
41,552

 
42,520

 
40,453

Interest Expense
 
 

 
 

 
 

Interest on deposits
 
7,459

 
8,963

 
6,650

Interest on borrowings
 
961

 
801

 
1,357

Interest on subordinated debentures
 
893

 
833

 
859

Total interest expense
 
9,313

 
10,597

 
8,866

Net interest income
 
32,239

 
31,923

 
31,587

Provision for credit losses
 
214

 
730

 
7

Net interest income after provision for credit losses
 
32,025

 
31,193

 
31,580

Non-Interest Income
 
 

 
 

 
 

Debit card income
 
2,978

 
2,432

 
2,839

Service charges on deposit accounts
 
2,191

 
1,970

 
2,145

Mortgage banking income, net
 
2,175

 
2,668

 
1,156

Income from fiduciary services
 
1,520

 
1,444

 
1,347

Brokerage and insurance commissions
 
683

 
625

 
665

Bank-owned life insurance
 
615

 
613

 
607

Customer loan swap fees
 
247

 
109

 
401

Net (loss) gain on sale of securities
 
(133
)
 
1

 
(420
)
Other income
 
1,672

 
877

 
739

Total non-interest income
 
11,948

 
10,739

 
9,479

Non-Interest Expense
 
 

 
 
 
 

Salaries and employee benefits
 
14,446

 
13,604

 
13,080

Furniture, equipment and data processing
 
2,770

 
2,708

 
2,649

Net occupancy costs
 
1,784

 
1,710

 
1,764

Consulting and professional fees
 
1,027

 
892

 
874

Debit card expense
 
947

 
960

 
841

Regulatory assessments
 
170

 
182

 
490

Amortization of intangible assets
 
176

 
177

 
181

Other real estate owned and collection costs, net
 
127

 
251

 
370

Other expenses
 
3,367

 
3,264

 
3,331

Total non-interest expense
 
24,814

 
23,748

 
23,580

Income before income tax expense
 
19,159

 
18,184

 
17,479

Income tax expense
 
3,921

 
3,696

 
3,502

Net income
 
$
15,238

 
$
14,488

 
$
13,977

Per Share Data
 
 

 
 
 
 

Basic earnings per share
 
$
1.00

 
$
0.94

 
$
0.90

Diluted earnings per share
 
$
0.99

 
$
0.94

 
$
0.89



8

Consolidated Statements of Income Data
(unaudited)
 
 
Year Ended
 December 31,
(In thousands, except per share data)
 
2019
 
2018
Interest Income
 
 
 
 
Interest and fees on loans
 
$
143,399

 
$
128,546

Taxable interest on investments
 
19,509

 
17,727

Nontaxable interest on investments
 
2,701

 
2,648

Dividend income
 
722

 
1,316

Other interest income
 
2,187

 
1,140

Total interest income
 
168,518

 
151,377

Interest Expense
 
 

 
 

Interest on deposits
 
34,001

 
20,113

Interest on borrowings
 
3,621

 
7,456

Interest on subordinated debentures
 
3,266

 
3,415

Total interest expense
 
40,888

 
30,984

Net interest income
 
127,630

 
120,393

Provision for credit losses
 
2,861

 
847

Net interest income after provision for credit losses
 
124,769

 
119,546

Non-Interest Income
 
 

 
 

Debit card income
 
9,701

 
9,067

Service charges on deposit accounts
 
8,393

 
8,253

Mortgage banking income, net
 
7,837

 
5,914

Income from fiduciary services
 
5,901

 
5,376

Brokerage and insurance commissions
 
2,625

 
2,615

Bank-owned life insurance
 
2,425

 
2,430

Customer loan swap fees
 
1,166

 
956

Net (loss) gain on sale of securities
 
(105
)
 
275

Other income
 
4,170

 
3,290

Total non-interest income
 
42,113

 
38,176

Non-Interest Expense
 
 

 
 

Salaries and employee benefits
 
54,489

 
51,513

Furniture, equipment and data processing
 
10,881

 
10,359

Net occupancy costs
 
7,047

 
6,876

Consulting and professional fees
 
3,706

 
3,752

Debit card expense
 
3,613

 
3,180

Regulatory assessments
 
1,261

 
1,937

Amortization of intangible assets
 
705

 
725

Other real estate owned and collection costs, net
 
480

 
935

Other expenses
 
13,121

 
12,668

Total non-interest expense
 
95,303

 
91,945

Income before income tax expense
 
71,579

 
65,777

Income tax expense
 
14,376

 
12,706

Net income
 
$
57,203

 
$
53,071

Per Share Data
 
 

 
 

Basic earnings per share
 
$
3.70

 
$
3.40

Diluted earnings per share
 
$
3.69

 
$
3.39





9

Quarterly Average Balance and Yield/Rate Analysis
(unaudited)
 
 
Average Balance
 
Yield/Rate
 
 
For the Three Months Ended
 
For the Three Months Ended
(In thousands)
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits in other banks and other interest-earning assets
 
$
79,578

 
$
92,352

 
$
24,620

 
1.74
%
 
2.24
%
 
1.57
%
Investments - taxable
 
804,587

 
807,591

 
830,097

 
2.52
%
 
2.53
%
 
2.49
%
Investments - nontaxable(1)
 
112,730

 
98,378

 
97,192

 
3.40
%
 
3.47
%
 
3.43
%
Loans(2):
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
 
1,249,961

 
1,255,417

 
1,230,791

 
4.40
%
 
4.56
%
 
4.60
%
Residential real estate
 
1,078,485

 
1,062,728

 
973,124

 
4.38
%
 
4.31
%
 
4.29
%
Commercial(1)
 
403,601

 
399,689

 
364,253

 
4.41
%
 
4.65
%
 
4.50
%
Consumer and home equity
 
345,487

 
347,405

 
346,494

 
5.11
%
 
5.38
%
 
5.36
%
HPFC
 
22,516

 
25,973

 
35,163

 
7.56
%
 
8.40
%
 
7.66
%
Municipal(1)
 
18,469

 
22,730

 
17,520

 
3.66
%
 
3.60
%
 
3.28
%
Total loans 
 
3,118,519

 
3,113,942

 
2,967,345

 
4.49
%
 
4.60
%
 
4.60
%
Total interest-earning assets
 
4,115,414

 
4,112,263

 
3,919,254

 
4.02
%
 
4.11
%
 
4.11
%
Other assets
 
349,786

 
345,618

 
294,178

 
 
 
 
 
 
Total assets
 
$
4,465,200

 
$
4,457,881

 
$
4,213,432

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities & Shareholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest checking
 
$
558,677

 
$
540,542

 
$
523,283

 
—
%
 
—
%
 
—
%
Interest checking
 
1,165,610

 
1,130,632

 
995,333

 
0.79
%
 
0.96
%
 
0.76
%
Savings
 
471,777

 
474,096

 
483,651

 
0.08
%
 
0.08
%
 
0.06
%
Money market
 
642,174

 
622,219

 
553,785

 
1.16
%
 
1.32
%
 
1.07
%
Certificates of deposit
 
533,416

 
533,110

 
444,769

 
1.66
%
 
1.64
%
 
1.26
%
Total deposits
 
3,371,654

 
3,300,599

 
3,000,821

 
0.77
%
 
0.85
%
 
0.65
%
Borrowings:
 
 
 
 
 
 
 
 
 
 
 
 
Brokered deposits
 
187,125

 
305,019

 
307,559

 
2.02
%
 
2.42
%
 
2.28
%
Customer repurchase agreements
 
247,780

 
234,362

 
265,675

 
1.20
%
 
1.26
%
 
1.22
%
Subordinated debentures
 
59,037

 
58,998

 
59,048

 
6.01
%
 
5.60
%
 
5.77
%
Other borrowings
 
44,816

 
11,273

 
93,181

 
1.88
%
 
1.96
%
 
2.29
%
Total borrowings
 
538,758

 
609,652

 
725,463

 
2.07
%
 
2.27
%
 
2.18
%
Total funding liabilities
 
3,910,412

 
3,910,251

 
3,726,284

 
0.94
%
 
1.08
%
 
0.94
%
Other liabilities
 
81,261

 
78,710

 
66,805

 
 
 
 
 
 
Shareholders' equity
 
473,527

 
468,920

 
420,343

 
 
 
 
 
 
Total liabilities & shareholders' equity
 
$
4,465,200

 
$
4,457,881

 
$
4,213,432

 
 
 
 
 
 
Net interest rate spread (fully-taxable equivalent)
 
3.08
%
 
3.03
%
 
3.17
%
Net interest margin (fully-taxable equivalent)
 
3.12
%
 
3.09
%
 
3.21
%
Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans(3)
 
3.09
%
 
3.05
%
 
3.14
%
(1) Reported on 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.
(3) Excludes the impact of the fair value mark accretion on loans and certificates of deposit generated in purchase accounting and collection of previously charged-off acquired loans for the three months ended December 31, 2019, September 30, 2019, and December 31, 2018, totaling $326,000, $409,000 and $686,000, respectively.

10

Year-to-Date Average Balance and Yield/Rate Analysis
(unaudited)
 
 
Average Balance
 
Yield/Rate
 
 
For the Year Ended
 
For the Year Ended
(In thousands)
 
December 31,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Assets
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
Interest-bearing deposits in other banks and other interest-earning assets
 
$
67,288

 
$
45,155

 
2.13
%
 
1.62
%
Investments - taxable
 
825,674

 
829,462

 
2.54
%
 
2.35
%
Investments - nontaxable(1)
 
99,024

 
98,128

 
3.45
%
 
3.42
%
Loans(2):
 
 
 
 
 
 
 
 
Commercial real estate
 
1,260,412

 
1,195,544

 
4.66
%
 
4.47
%
Residential real estate
 
1,045,668

 
913,593

 
4.33
%
 
4.19
%
Commercial(1)
 
390,689

 
354,508

 
4.68
%
 
4.50
%
Consumer and home equity
 
346,769

 
343,292

 
5.35
%
 
5.08
%
HPFC
 
27,502

 
39,588

 
8.05
%
 
7.89
%
Municipal(1)
 
19,181

 
20,361

 
3.59
%
 
3.18
%
Total loans 
 
3,090,221

 
2,866,886

 
4.65
%
 
4.49
%
Total interest-earning assets
 
4,082,207

 
3,839,631

 
4.15
%
 
3.97
%
Other assets
 
328,301

 
295,837

 
 
 
 
Total assets
 
$
4,410,508

 
$
4,135,468

 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities & Shareholders' Equity
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
Non-interest checking
 
$
519,078

 
$
488,702

 
—
%
 
—
%
Interest checking
 
1,123,268

 
884,710

 
0.93
%
 
0.55
%
Savings
 
476,860

 
485,986

 
0.08
%
 
0.06
%
Money market
 
607,383

 
515,590

 
1.24
%
 
0.87
%
Certificates of deposit
 
506,971

 
467,631

 
1.57
%
 
1.13
%
Total deposits
 
3,233,560

 
2,842,619

 
0.81
%
 
0.52
%
Borrowings:
 
 
 
 
 
 
 
 
Brokered deposits
 
316,475

 
264,711

 
2.42
%
 
1.98
%
Customer repurchase agreements
 
241,899

 
248,743

 
1.25
%
 
1.02
%
Subordinated debentures
 
59,007

 
58,990

 
5.54
%
 
5.79
%
Other borrowings
 
29,132

 
249,544

 
2.05
%
 
1.97
%
Total borrowings
 
646,513

 
821,988

 
2.25
%
 
1.96
%
Total funding liabilities
 
3,880,073

 
3,664,607

 
1.05
%
 
0.85
%
Other liabilities
 
70,570

 
60,106

 
 
 
 
Shareholders' equity
 
459,865

 
410,755

 
 
 
 
Total liabilities & shareholders' equity
 
$
4,410,508

 
$
4,135,468

 
 
 
 
Net interest rate spread (fully-taxable equivalent)
 
3.10
%
 
3.12
%
Net interest margin (fully-taxable equivalent)
 
3.15
%
 
3.16
%
Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans(3)
 
3.11
%
 
3.10
%
(1)
Reported on 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.
(3)
Excludes the impact of the fair value mark accretion on loans and certificates of deposit generated in purchase accounting and collection of previously charged-off acquired loans for the years ended December 31, 2019 and 2018, totaling $1.6 million and $2.3 million, respectively.


11

Asset Quality Data
(unaudited)
(In thousands)
 
At or For The
Year Ended
December 31, 2019
 
At or For The
Nine Months Ended
September 30, 2019
 
At or For The
Six Months Ended
June 30, 2019
 
At or For The
Three Months Ended
March 31, 2019
 
At or For The
Year Ended
December 31, 2018
Non-accrual loans:
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
$
4,096

 
$
5,152

 
$
5,566

 
$
5,415

 
$
5,492

Commercial real estate
 
1,122

 
1,156

 
1,590

 
975

 
1,380

Commercial 
 
420

 
751

 
785

 
802

 
1,279

Consumer and home equity
 
2,154

 
2,616

 
3,039

 
2,476

 
1,861

HPFC
 
364

 
450

 
465

 
485

 
518

Total non-accrual loans
 
8,156

 
10,125

 
11,445

 
10,153

 
10,530

Loans 90 days past due and accruing
 
—

 
—

 
14

 
14

 
14

   Accruing troubled-debt restructured loans not included above
 
2,993

 
3,259

 
3,511

 
3,771

 
3,893

Total non-performing loans
 
11,149

 
13,384

 
14,970

 
13,938

 
14,437

Other real estate owned
 
94

 
94

 
130

 
673

 
130

Total non-performing assets
 
$
11,243

 
$
13,478

 
$
15,100

 
$
14,611

 
$
14,567

Loans 30-89 days past due:
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
$
2,227

 
$
1,447

 
$
2,536

 
$
2,265

 
$
4,833

Commercial real estate
 
1,582

 
2,242

 
3,378

 
2,947

 
2,130

Commercial 
 
548

 
1,135

 
1,400

 
1,205

 
169

Consumer and home equity
 
750

 
822

 
907

 
1,430

 
1,467

HPFC
 
243

 
193

 
171

 
187

 
183

Total loans 30-89 days past due
 
$
5,350

 
$
5,839

 
$
8,392

 
$
8,034

 
$
8,782

Allowance for loan losses at the beginning of the period
 
$
24,712

 
$
24,712

 
$
24,712

 
$
24,712

 
$
24,171

Provision for loan losses
 
2,862

 
2,658

 
1,925

 
750

 
845

Charge-offs:
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
462

 
436

 
25

 
11

 
173

Commercial real estate
 
300

 
157

 
65

 
65

 
512

Commercial 
 
1,167

 
636

 
453

 
236

 
736

Consumer and home equity
 
713

 
670

 
64

 
24

 
572

HPFC
 
71

 
11

 
—

 
—

 
255

Total charge-offs 
 
2,713

 
1,910

 
607

 
336

 
2,248

Total recoveries 
 
(310
)
 
(228
)
 
(133
)
 
(75
)
 
(1,944
)
Net charge-offs
 
2,403

 
1,682

 
474

 
261

 
304

Allowance for loan losses at the end of the period
 
$
25,171

 
$
25,688

 
$
26,163

 
$
25,201

 
$
24,712

Components of allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
 
$
25,171

 
$
25,688

 
$
26,163

 
$
25,201

 
$
24,712

Liability for unfunded credit commitments
 
21

 
11

 
14

 
16

 
22

Allowance for credit losses 
 
$
25,192

 
$
25,699

 
$
26,177

 
$
25,217

 
$
24,734

Ratios:
 
 
 
 
 
 
 
 
 
 
Non-performing loans to total loans
 
0.36
%
 
0.43
%
 
0.48
%
 
0.46
%
 
0.48
 %
Non-performing assets to total assets
 
0.25
%
 
0.30
%
 
0.34
%
 
0.33
%
 
0.34
 %
Allowance for loan losses to total loans
 
0.81
%
 
0.83
%
 
0.84
%
 
0.83
%
 
0.82
 %
Net charge-offs (recoveries) to average loans (annualized)
 
 
 
 
 
 
 
 
 
 
Quarter-to-date
 
0.09
%
 
0.16
%
 
0.03
%
 
0.03
%
 
(0.16
)%
Year-to-date
 
0.08
%
 
0.07
%
 
0.03
%
 
0.03
%
 
0.01
 %
Allowance for loan losses to non-performing loans
 
225.77
%
 
191.93
%
 
174.77
%
 
180.81
%
 
171.17
 %
Loans 30-89 days past due to total loans
 
0.17
%
 
0.19
%
 
0.27
%
 
0.26
%
 
0.29
 %


12

Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)
Return on Average Tangible Equity:
 
 
For the
Three Months Ended
 
For the
Year Ended
(In thousands)
 
December 31,
 2019
 
September 30,
 2019
 
December 31,
 2018
 
December 31,
 2019
 
December 31,
 2018
Net income, as presented
 
$
15,238

 
$
14,488

 
$
13,977

 
$
57,203

 
$
53,071

Add: amortization of intangible assets, net of tax(1)
 
139

 
140

 
143

 
557

 
573

Net income, adjusted for amortization of intangible assets
 
$
15,377

 
$
14,628

 
$
14,120

 
$
57,760

 
$
53,644

Average equity, as presented
 
$
473,527

 
$
468,920

 
$
420,343

 
$
459,865

 
$
410,755

Less: average goodwill and other intangible assets
 
(98,307
)
 
(98,484
)
 
(99,015
)
 
(98,570
)
 
(99,287
)
Average tangible equity
 
$
375,220

 
$
370,436

 
$
321,328

 
$
361,295

 
$
311,468

Return on average equity
 
12.77
%
 
12.26
%
 
13.19
%
 
12.44
%
 
12.92
%
Return on average tangible equity
 
16.26
%
 
15.67
%
 
17.43
%
 
15.99
%
 
17.22
%
(1)
Assumed a 21% tax rate.

Efficiency Ratio:
 
 
For the
Three Months Ended
 
For the
Year Ended
(In thousands)
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Non-interest expense, as presented
 
$
24,814

 
$
23,748

 
$
23,580

 
$
95,303

 
$
91,945

Net interest income, as presented
 
$
32,239

 
$
31,923

 
$
31,587

 
$
127,630

 
$
120,393

Add: effect of tax-exempt income(1)
 
277

 
264

 
251

 
1,029

 
1,022

Non-interest income, as presented
 
11,948

 
10,739

 
9,479

 
42,113

 
38,176

Add: net loss (gain) on sale of securities
 
133

 
(1
)
 
420

 
105

 
(275
)
Adjusted net interest income plus non-interest income
 
$
44,597

 
$
42,925

 
$
41,737

 
$
170,877

 
$
159,316

GAAP efficiency ratio
 
56.16
%
 
55.67
%
 
57.42
%
 
56.15
%
 
57.98
%
Non-GAAP efficiency ratio
 
55.64
%
 
55.32
%
 
56.50
%
 
55.77
%
 
57.71
%
(1) Assumed a 21% tax rate.



13

Tangible Book Value Per Share and Tangible Common Equity Ratio:
 
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
(In thousands, except number of shares and per share data)
 
Tangible Book Value Per Share:
 
 
 
 
 
 
Shareholders' equity, as presented
 
$
473,415

 
$
471,672

 
$
435,825

Less: goodwill and other intangible assets
 
(98,222
)
 
(98,398
)
 
(98,927
)
Tangible shareholders' equity
 
$
375,193

 
$
373,274

 
$
336,898

Shares outstanding at period end
 
15,144,719

 
15,224,903

 
15,591,914

Book value per share
 
$
31.26

 
$
30.98

 
$
27.95

Tangible book value per share
 
$
24.77

 
$
24.52

 
$
21.61

Tangible Common Equity Ratio:
Total assets
 
$
4,429,521

 
$
4,520,315

 
$
4,297,435

Less: goodwill and other intangibles
 
(98,222
)
 
(98,398
)
 
(98,927
)
Tangible assets
 
$
4,331,299

 
$
4,421,917

 
$
4,198,508

Common equity ratio
 
10.69
%
 
10.43
%
 
10.14
%
Tangible common equity ratio
 
8.66
%
 
8.44
%
 
8.02
%


Core Deposits:
(In thousands)
 
December 31,
2019
 
September 30,
 2019
 
December 31,
2018
Total deposits
 
$
3,537,743

 
$
3,617,963

 
$
3,464,474

Less: certificates of deposit
 
(521,752
)
 
(541,199
)
 
(443,912
)
Less: brokered deposits
 
(191,005
)
 
(250,266
)
 
(363,104
)
Core deposits
 
$
2,824,986

 
$
2,826,498

 
$
2,657,458



Average Core Deposits:
 
 
For the
Three Months Ended
 
For the
Year Ended
(In thousands)
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Total average deposits
 
$
3,371,654

 
$
3,300,599

 
$
3,000,821

 
$
3,233,560

 
$
2,842,619

Less: certificates of deposit
 
(533,416
)
 
(533,110
)
 
(444,769
)
 
(506,971
)
 
(467,631
)
Average core deposits
 
$
2,838,238

 
$
2,767,489

 
$
2,556,052

 
$
2,726,589

 
$
2,374,988











14
cncsignaturebrandmarka15.jpg Fourth Quarter Report - 2019

Dear Fellow Shareholders:
It is with great pride that I share Camden National Corporation’s 2019 strong financial results with record net income of $57.2 million and earnings per diluted share of $3.69, representing an 8% and 9% increase, respectively, over 2018. Our performance is the result of the strategic investments we have made, as well as the hard work and dedication of our valuable employees. Whether it’s helping customers buy their first home or building a new business, our employees are part of a caring team that goes the extra mile for our customers, communities, and each other.
Benefitting from Our Investments. We were able to maintain our net interest margin at 3.15% for 2019, compared to 3.16% for 2018 despite a challenging interest rate environment. The stability in this major source of revenue reflects our focus on building low-cost deposits within our market areas, dating back to our acquisition of 14 branches in 2012 and The Bank of Maine merger in 2015. Over several years, we have invested in our employees and technology throughout our branch network and treasury management areas, while expanding and strengthening our lending, underwriting, and risk management capabilities. As a result, average loans and deposits grew 8% and 14%, respectively, in 2019. Asset quality remained strong in 2019 with year-end non-performing assets to total assets at 0.25%, compared to 0.34% at the end of 2018.
Recognition of Our Efforts. As a result of our team’s hard work in 2019, I am proud to share that we were:
•
Named to the Sandler O’Neil Sm-All Stars Class of 2019 for top financial performance among small-cap banks and thrifts in the country
•
Presented with the U.S. Small Business Administration (SBA) District Director Award for our exceptional dedication to Maine business growth
•
Named Lender at Work for Maine by the Finance Authority of Maine (FAME) for the tenth time
•
Recognized as Customer Experience Leader in U.S. Retail Banking by Greenwich Associates for exceeding industry benchmarks, for the second year in a row
Recognizing Our Employees. We refer to our employees as “Stakeholders” to reflect the shared commitment and passion they have for our values, customers, communities, and ongoing success. Dedicated, collaborative, and highly productive, our employees contributed immensely to our 56% efficiency ratio in 2019, and helped to deliver outstanding financial results. We provide our employees with a “Total Rewards” program, including competitive salaries and benefits, long-term savings plans, as well as educational and advancement opportunities. To recognize their extraordinary efforts and share achievements in 2019, we will:
•
Award a $750 special cash bonus to certain non-executive, non-management employees, in addition to our existing stakeholder performance incentive plan
•
Contribute $1.2 million to the profit sharing plan to aid our stakeholders’ retirement planning
 

•
Continue to provide a strong benefits package in 2020 by offsetting the majority of employee health insurance premiums and contributing up to $3,150 annually into an employee’s Health Savings Account
Rooted in Our Communities. Community is at the core of what we do and why we do it, and as we've grown over the years, our commitment to social responsibility and giving back have deepened. Impactful community investments included:
•
Hope@Home: In 2019, we donated more than $108,000 to over 50 homeless shelters in Maine, New Hampshire, and Massachusetts, bringing our total donation to $430,000 since 2015.
•
Health & Wellness: We announced a $500,000 multi-year pledge to Pen Bay Healthcare and Maine Medical Center, to support long-term community health and wellness.
•
Volunteerism: Our employees volunteered over 14,000 hours to support community organizations. One in five also serve on nonprofit boards.
Grateful for You, Our Shareholders. By effectively managing capital and resources, we delivered a 12.44% return on average equity during 2019, slightly down from 12.92% in 2018, while our return on average assets improved to 1.30% for 2019 from 1.28% last year. In 2019, we recognized your valued support by:
•
Repurchasing 488,052 shares of our stock, returning nearly $21 million to our owners.
•
Increasing our quarterly cash dividend in the fourth quarter by 10%, representing a $0.33 dividend for the fourth quarter of 2019, and declaring $18.9 million in total dividends to our owners in 2019.
•
Delivering a 31.78% total return on Camden National Corporation stock from December 31, 2018 to December 31, 2019.
Please take note that our annual report and proxy voting process will be electronic this year, as more shareholders prefer to vote online and we strive to reduce our environmental impact. If you would like to receive hard copy materials and vote using paper, instructions to do so will be included within our upcoming proxy mailing. In the meantime, should you have any concerns or questions regarding this process change, please contact us at (800) 860-8821.
On behalf of everyone at Camden National Corporation, thank you for your support in 2019. We look forward to another fantastic year ahead.
Sincerely,
sig_greg-dufoura15.jpg
Gregory A. Dufour
President and Chief Executive Officer


Financial Highlights (unaudited)
 
 
Three Months Ended
December 31,
 
Year Ended
December 31,
(Dollars in thousands, except per share data)
 
2019
 
2018
 
2019
 
2018
Earnings and Dividends
 
 
 
 
 
 
 
 
Net interest income
 
$
32,239

 
$
31,587

 
$
127,630

 
$
120,393

Provision for credit losses
 
214

 
7

 
2,861

 
847

Non-interest income
 
11,948

 
9,479

 
42,113

 
38,176

Non-interest expense
 
24,814

 
23,580

 
95,303

 
91,945

Income before taxes
 
19,159

 
17,479

 
71,579

 
65,777

Income taxes
 
3,921

 
3,502

 
14,376

 
12,706

    Net income
 
$
15,238

 
$
13,977

 
$
57,203

 
$
53,071

Diluted earnings per share
 
$
0.99

 
$
0.89

 
$
3.69

 
$
3.39

Cash dividends declared per share
 
0.33

 
0.30

 
1.23

 
1.15

Performance Ratios
 
 
 
 
 
 
 
 
Return on average assets
 
1.35
%
 
1.32
%
 
1.30
%
 
1.28
%
Return on average equity
 
12.77
%
 
13.19
%
 
12.44
%
 
12.92
%
Net interest margin (fully-taxable equivalent)
 
3.12
%
 
3.21
%
 
3.15
%
 
3.16
%
Efficiency ratio1
 
55.64
%
 
56.50
%
 
55.77
%
 
57.71
%
Balance sheet (end of period)
 
 
 
 
 
 
 
 
Investments
 
 
 
 
 
$
933,069

 
$
926,678

Loans and loans held for sale
 
 
 
 
 
3,106,877

 
3,030,625

Allowance for loan losses
 
 
 
 
 
25,171

 
24,712

Total assets
 
 
 
 
 
4,429,521

 
4,297,435

Deposits
 
 
 
 
 
3,537,743

 
3,464,474

Borrowings
 
 
 
 
 
337,889

 
341,515

Shareholders' equity
 
 
 
 
 
473,415

 
435,825

Book Value per Share and Capital Ratios
 
 
 
 
 
 
 
 
Book value per share
 
 
 
 
 
$
31.26

 
$
27.95

Tangible book value per share1
 
 
 
 
 
24.77

 
21.61

Tangible common equity ratio1
 
 
 
 
 
8.66
%
 
8.02
%
Tier I leverage capital ratio
 
 
 
 
 
9.55
%
 
9.53
%
Total risk-based capital ratio
 
 
 
 
 
14.44
%
 
14.36
%
Asset Quality
 
 
 
 
 
 
 
 
Allowance for loan losses to total loans
 
 
 
 
 
0.81
%
 
0.82
%
Net charge-offs to average loans (annualized)
 
 
 
 
 
0.08
%
 
0.01
%
Non-performing loans to total loans
 
 
 
 
 
0.36
%
 
0.48
%
Non-performing assets to total assets
 
 
 
 
 
0.25
%
 
0.34
%
1 This is a non-GAAP measure. A reconciliation of non-GAAP to GAAP financial measures can be found in the Company's earnings release dated and filed with the SEC on January 28, 2020.














chart-c3d4202e7d8683311b3.jpgchart-32a5c891ed0fa844484.jpg
A complete set of financial statements for Camden National Corporation may be obtained upon written request to Camden National Corporation, P.O. Box 310, Camden, Maine 04843.