8-K
Camden National Corp (CAC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| FORM 8-K |
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CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 28, 2020
| Camden National Corporation<br><br>(Exact name of registrant as specified in its charter) | ||
|---|---|---|
| Maine | 01-28190 | 01-0413282 |
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| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
| Two Elm Street, Camden, Maine | 04843 | |
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| (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) |
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| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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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. |
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Camden National Corporation (the “Company”) issued a press release on July 28, 2020 announcing earnings for the fiscal quarter ended June 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1. A quarterly letter from the Company's Chief Executive Officer to stockholders is attached as Exhibit 99.2 and a supplemental presentation is attached as Exhibit 99.3. This information 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, and 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. |
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(d) The following exhibits are filed with this Report:
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: July 28, 2020
| CAMDEN NATIONAL CORPORATION<br><br>(Registrant) | |
|---|---|
| By: | /s/ GREGORY A. WHITE |
| Gregory A. White<br><br>Chief Financial Officer and Principal Financial & Accounting Officer |
Exhibit
CONTACT:
Michael Archer
Senior Vice President
Corporate Controller
Camden National Corporation
(800) 860-8821
FOR IMMEDIATE RELEASE
CAMDEN NATIONAL CORPORATION REPORTS
SECOND QUARTER 2020 FINANCIAL RESULTS
Second Quarter 2020 Net Income of $10.9 Million and Diluted Earnings Per Share of $0.73
CAMDEN, Maine, July 28, 2020/PRNewswire/--Camden National Corporation (NASDAQ: CAC; “Camden National” or the “Company”), a $5.0 billion bank holding company headquartered in Camden, Maine, reported net income for the second quarter 2020 of $10.9 million, a decrease of 17% compared to the second quarter of 2019, and diluted earnings per share ("EPS") of $0.73, a decrease of 14% over the same period. The decrease in net income between periods was driven by higher provision expense in response to the COVID-19 pandemic. Second quarter 2020 pre-tax, pre-provision earnings^1^ increased $5.4 million, or 31%, over the second quarter of 2019.
"Over the past several months, we have navigated new economic and social challenges as a result of the COVID-19 pandemic," said Gregory A. Dufour, President and Chief Executive Officer of the Company. "The health and financial well-being of our customers, employees, and communities has been top of mind and a significant factor in the decisions made to date. We recognize these are trying times for many, and we continue to diligently support our constituents, which included providing over 2,900 Paycheck Protection Program loans to small businesses and over 2,000 temporary loan payment deferrals to business and retail customers through June 30."
Dufour added, "While the total financial impact of the COVID-19 pandemic remains unclear, we remain well-positioned to withstand the uncertainty. We are fortifying our balance sheet as shown by our pre-tax, pre-provision earnings^1^ contribution, which is allowing us to build our reserves for loan losses that may occur due to the changing economy."
SECOND QUARTER 2020 HIGHLIGHTS
| • | Net income decreased by 17% compared to the second quarter of 2019 and by 19% compared to the first quarter of 2020 |
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| • | Second quarter 2020 pre-tax, pre-provision earnings^1^ increased 31% over the second quarter of 2019 and 24% over the first quarter of 2020 |
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| • | We continue to support our communities and customers through the COVID-19 pandemic, highlighted by our lending and relief efforts, which included originating 10% of the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans to small businesses across Maine, according to SBA data, and providing temporary debt relief on over 2,000 loans to business and retail customers through June 30, 2020 |
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| • | Asset quality remains strong with non-performing assets of 0.23% of total loans as of June 30, 2020 and second quarter 2020 annualized net charge-offs of 0.05% of average loans |
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| • | Capital remains a source of strength with capital ratios well in excess of regulatory capital thresholds and an allowance for loan losses of 3.1 times non-performing loans as of June 30, 2020 |
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FINANCIAL CONDITION
Assets. Total assets increased 12% since December 31, 2019, to $5.0 billion at June 30, 2020. Asset growth was driven by loan growth, including loans held for sale, of $255.8 million, or 8%, investments growth of $131.0 million, or 14%, and an increase in cash balances of $80.2 million, or 106%.
Loans. For the six months ended June 30, 2020, commercial loans grew $204.3 million, or 46%, driven by SBA PPP loans. Through June 30, 2020, the Company originated 2,919 PPP loans with total balances of $237.0 million. At June 30, 2020, outstanding PPP loan balances were $225.8 million.
Over the same period, commercial real estate loans grew $67.6 million, or 5%, driven by funding of prior period loan commitments, while consumer and home equity loans decreased 7% and residential mortgage loans decreased 2%.
Through the first six months of 2020, the Company originated $461.5 million of residential mortgages and sold 58% of its production to the secondary market. In comparison, for the same period last year, the Company originated $214.5 million and sold 46% of its production. Residential mortgage refinance activity was 67% of total production for the six months ended June 30, 2020, compared to 28% for the same period last year.
Cash and Investments. Strong deposit growth in the first half of 2020 of $458.6 million, or 13%, led to an increase in cash and investments. The Company designated its investment purchases as available-for-sale ("AFS") to secure its liquidity position. At June 30, 2020, the Company's AFS investments were in an unrealized gain position of $37.3 million, compared to $4.1 million at December 31, 2019, driven by the lower interest rate environment between periods.
Goodwill. In light of recent events related to the COVID-19 pandemic and its impact on the broad equity markets and economy, the Company assessed its goodwill for impairment in the second quarter of 2020 by calculating its estimated fair value and comparing to its book value. As of June 30, 2020, the Company concluded its goodwill was not impaired.
Deposits and Borrowings. Deposits increased 13% since December 31, 2019, to $4.0 billion at June 30, 2020. For the six months ended June 30, 2020, checking account balances grew $355.8 million, or 21%, and savings and money market balances grew $159.4 million, or 14%. The increase in deposits was driven by various factors in response to the COVID-19 pandemic, including the federal government stimulus programs and a shift in consumer habits as the national personal savings rate reached 23% in May 2020.
The Company's loan-to-deposit ratio was 83% at June 30, 2020, compared to 87% at December 31, 2019 and 86% at June 30, 2019.
Total borrowings decreased 2% since December 31, 2019 to $330.2 million at June 30, 2020. The Company continues to primarily use short-term borrowings to supplement funding in the current low interest rate environment. In the first half of 2020, it also locked-in long-term funding at interest rates below 1%.
Shareholders' Equity. The Company continues to be well-positioned from a capital perspective to withstand the economic uncertainty surrounding the COVID-19 pandemic. At June 30, 2020, the Company's capital position was well in excess of regulatory requirements, including a total risk-based capital ratio of 14.56%, a tier 1 risk-based capital ratio of 13.01%, common equity tier 1 risk-based capital ratio of 11.69%, and a tier 1 leverage ratio of 8.95%. Additionally, at June 30, 2020, the Company's common equity ratio was 10.21% and tangible common
equity ratio^1^ was 8.41%.
In June 2020, the Company announced a cash dividend to shareholders of $0.33 per share, consistent with that issued for the first quarter of 2020. The cash dividend is payable to shareholders of record as of July 15, 2020, and shareholders will begin receiving payments on July 31, 2020. As of June 30, 2020, the Company's annualized dividend yield was 3.82% based on Camden National's closing share price of $34.54, as reported by NASDAQ.
The Company suspended its share repurchase program during the first quarter of 2020 in response to the COVID-19 pandemic. We will continue to evaluate our use of the share repurchase program as the impact and our response to the COVID-19 pandemic develops.
ASSET QUALITY
As of June 30, 2020, the Company's asset quality metrics continue to be stable and consistent with past quarters.
| • | Non-performing assets were 0.23% of total assets at June 30, 2020, compared to 0.23% and 0.25% at March 31, 2020 and December 31, 2019, respectively. |
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| • | Past due loans were 0.19% of total loans at June 30, 2020, compared to 0.24% and 0.17% at March 31, 2020 and December 31, 2019, respectively. |
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| • | Net charge-offs (annualized) for the second quarter of 2020 were 0.05% of average loans, compared to 0.05% for the first quarter of 2020 and 0.09% for the fourth quarter of 2019. |
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COVID-19 Loan Modification Program. In March 2020, the Company began offering temporary debt relief to business and retail customers impacted by the COVID-19 pandemic. Generally, the terms of this initial temporary debt relief program provided customers with 90 to 180 days of payment deferral. All loan modifications made by the Company complied with the terms of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") or bank regulator guidance, and, thus, were not designated or accounted for as troubled-debt restructurings.
Through June 30, 2020, the Company had modified 2,064 business and retail customer loans to provide temporary debt relief to customers impacted by the COVID-19 pandemic. As of June 30, 2020, 1,763 customer loans with total loan balances of $546.7 million were still under the terms of a COVID-19 loan modification. As the original loan modification term matures, the Company may, at its discretion, extend or modify the loan terms again. With many of the original loan modifications maturing in July, the Company is currently engaged in discussion with these customers to determine if further payment relief is needed. The terms of those loan modifications will be on a case-by-case assessment, and may include an extension of payment deferral in full or in part.
Allowance for Credit Losses and Provision Expense. The provision for credit losses for the three and six months ended June 30, 2020 was $9.4 million and $11.2 million, respectively, compared to $1.2 million and $1.9 million for the three and six months ended June 30, 2019. While asset quality was strong at June 30, 2020, the increase in provision expense between periods reflects a measure of impact attributed to the COVID-19 pandemic, based on available information at that time, which includes consideration of loan modification levels and industry risk.
At June 30, 2020, the Company's allowance for loan losses was $35.5 million, or 1.07% of total loans and 3.1 times non-performing loans, compared to $25.2 million, or 0.81% of total loans and 2.3 times non-performing loans, at December 31, 2019.
CECL. In the first quarter of 2020, the Company chose to delay its implementation of the current expected credit losses model, commonly referred to as "CECL," in accordance with the provisions of the CARES Act. As such, the reported allowance for credit losses and related provision expense for the three and six months ended June 30, 2020 was accounted for under the incurred loss model. In accordance with the CARES Act, the Company will delay implementation of CECL until the earlier of (i) the date on which the national emergency concerning the COVID-19 pandemic terminates, or (ii) December 31, 2020.
While the Company has not yet adopted CECL, it estimates that as of June 30, 2020, the allowance for credit losses under CECL, which is comprised of allowance for loan losses and unfunded commitments, would have been $40.0 million to $44.0 million, or 1.20% to 1.32% of loans at June 30, 2020.
FINANCIAL OPERATING RESULTS (Q2 2020 vs. Q2 2019)
Net income for the second quarter of 2020 was $10.9 million, a decrease of $2.3 million, or 17%, compared to the second quarter of 2019. Diluted EPS for the second quarter of 2020 was $0.73, a decrease of $0.12, or 14%. Lower earnings between periods was driven by an increase in provision expense of $8.2 million.
Net Interest Income. Net interest income for the second quarter of 2020 was $34.5 million, an increase of $3.0 million, or 9%, over the second quarter of 2019 due to an increase in average interest-earning assets of 10%. Net interest margin for the second quarter of 2020 and 2019 was 3.11%.
Average interest-earning assets for the second quarter of 2020 were $4.5 billion, an increase of $394.5 million over the second quarter of 2019. The primary drivers for the growth between periods included (i) average loan growth of 8% and (ii) an increase in average cash and investment balances of 14%. The largest driver of average loan growth between periods was an increase in average PPP loans of $178.1 million during the second quarter of 2020.
Net interest margin for the second quarter of 2020 and 2019 was 3.11%. The make-up of net interest margin between periods varied significantly due to the change in interest rates and the roll-out of PPP loans in the second quarter of 2020.
| • | The 10-year U.S. Treasury rate averaged 0.69% in the second quarter of 2020, compared to 2.34% for the second quarter of 2019. The decrease in benchmark interest rates drove a decrease in yield on interest-earnings assets of 0.65% to 3.53% for the second quarter of 2020, and was partially offset by $1.7 million of PPP loan income recognized in the second quarter of 2020 with an average yield of 3.79%. |
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| • | The Federal Funds rate throughout the quarter was 0.25%, compared to 2.50% for the second quarter of 2019. In response to decreasing asset yields and funding rates, the Company effectively managed its cost of funds down to minimize the impact of the interest rate environment on net interest margin. Deposit costs decreased 0.51% between periods to 0.35% for the second quarter of 2020. Our cost of funds for the second quarter of 2020 was 0.44%, compared to 1.13% for the second quarter of 2019. |
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Provision for Credit Losses. The provision for credit losses for the second quarter of 2020 was $9.4 million, compared to $1.2 million for the second quarter of 2019. The increase in provision expense between periods was driven by an increase in allowance for loan losses due to estimates attributed to the COVID-19 pandemic.
Non-Interest Income. Non-interest income for the second quarter of 2020 was $12.1 million, an increase of $2.0 million, or 20%, over the second quarter of 2019.
| • | Mortgage banking income for the second quarter of 2020 increased $2.9 million over the second quarter of 2019 as mortgage refinance activity was strong due to the low interest rate environment. Refinance activity was 71% of unit production in the second quarter of 2020, compared to 25% for the second quarter of 2019. |
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| • | Service charges on deposit accounts for the second quarter of 2020 decreased $872,000, compared to the second quarter of 2019 due to lower overdraft fees and deposit account fees as customer deposit balances increased but the number of customer transactions decreased. |
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Non-Interest Expense. Non-interest expense for the second quarter of 2020 was $23.5 million, a decrease of $449,000, or 2%, compared to the second quarter of 2019. Certain costs were lower between periods as priorities shifted and employees transitioned to working remotely in response to the COVID-19 pandemic, while other costs increased to ensure the safety and health of our employees during this unprecedented time.
FINANCIAL OPERATING RESULTS (Q2 2020 vs. Q1 2020)
Net income between quarters decreased $2.6 million, or 19%, and diluted EPS decreased $0.16, or 18%, over the same period. Lower earnings between quarters was driven by an increase in provision expense of $7.6 million.
Net Interest Income. Net interest income increased $2.7 million, or 9%, between quarters as net interest margin increased 3 basis points to 3.11% for the second quarter of 2020 and average loan growth was $187.2 million, or 6%. The decrease in cost of funds between quarters of 0.42% outpaced the decrease in yield on interest-earning assets of 0.37%. The decrease in yields and cost of funds reflects the current interest rate environment as loans and deposits are originated and reprice to historically low levels. Average loan growth between periods was driven by PPP loan originations, which averaged $178.1 million for the second quarter of 2020.
Provision for Credit Losses. The provision for credit losses increased $7.6 million between quarters. The increase in provision expense between periods was driven by an increase in allowance for loan losses due to estimates attributed to the COVID-19 pandemic.
Non-Interest Income. Non-interest income increased $657,000, or 6%, between quarters.
| • | Mortgage banking income increased $1.2 million, or 33%, between periods as mortgage and refinance activity momentum continued into the second quarter of 2020 and interest rates remained low. |
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| • | Debit card income increased $250,000, or 12%, driven by higher customer spending as the increase in the average spend per transaction more than offset the decrease in the number of transactions. |
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| • | Service charges on deposit accounts between quarters decreased $675,000, or 34%, due to lower overdraft fees and deposit account fees as customer deposit balances increased but the number of customer transactions decreased. |
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Non-Interest Expense. Non-interest expense decreased $1.1 million, or 4%, between quarters. The decrease was driven by (i) lower employee-related costs as employees transitioned to remote working in the second quarter of 2020; (ii) lower marketing costs; and (iii) a decrease in incentive accruals. This was partially offset by the annual equity award grant to Company directors in the second quarter of 2020.
CONFERENCE CALL
Camden National will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, July 28, 2020 to discuss its second quarter 2020 financial results and outlook. 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/cac200728.html
A link to the live webcast will be available on Camden National's website under "Investor Relations" at www.CamdenNational.com prior to the meeting, and a replay of the webcast will be available on Camden National's website following the conference call. The transcript of the conference call will also be available on Camden National's website approximately two days after the conference call.
ABOUT CAMDEN NATIONAL CORPORATION
Camden National Corporation (NASDAQ:CAC) is the largest publicly traded bank holding company in Northern New England with $5.0 billion in assets and 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 58 banking centers, 24/7 live phone support, 68 ATMs, and additional 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.
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, 2019, as updated by other filings with the Securities and Exchange Commission ("SEC"). Further, statements about the potential effects of the COVID-19 pandemic on our business, results of operations and financial condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, action taken by government authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, service providers and on economies and markets more generally. 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 pre-tax, pre-provision earnings; return on average tangible equity; the efficiency and tangible common equity ratios; tangible book value per share; core deposits and average core deposits. Management utilizes these non-GAAP financial measures for purposes of measuring our performance against our peer group and other financial institutions and analyzing our internal performance. We also believe these non-GAAP financial 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.
_____________________________________________________________________________________________
| 1 | This is a non-GAAP measure. Please refer to "Reconciliation of non-GAAP to GAAP Financial Measures" for further details. |
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| Selected Financial Data<br><br>(unaudited) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At or For The<br><br>Three Months Ended | At or For The<br>Six Months Ended | ||||||||||||||
| (In thousands, except number of shares and per share data) | June 30, <br>2020 | March 31, <br>2020 | June 30, <br>2019 | June 30, <br>2020 | June 30, <br>2019 | ||||||||||
| Financial Condition Data | |||||||||||||||
| Investments | $ | 1,064,089 | $ | 976,487 | $ | 933,100 | $ | 1,064,089 | $ | 933,100 | |||||
| Loans and loans held for sale | 3,362,631 | 3,185,492 | 3,113,437 | 3,362,631 | 3,113,437 | ||||||||||
| Allowance for loan losses | 35,539 | 26,521 | 26,163 | 35,539 | 26,163 | ||||||||||
| Total assets | 4,959,016 | 4,594,539 | 4,447,038 | 4,959,016 | 4,447,038 | ||||||||||
| Deposits | 3,996,358 | 3,563,705 | 3,591,610 | 3,996,358 | 3,591,610 | ||||||||||
| Borrowings | 330,229 | 420,877 | 310,638 | 330,229 | 310,638 | ||||||||||
| Shareholders' equity | 506,467 | 492,680 | 467,759 | 506,467 | 467,759 | ||||||||||
| Operating Data | |||||||||||||||
| Net interest income | $ | 34,539 | $ | 31,826 | $ | 31,573 | $ | 66,365 | $ | 63,468 | |||||
| Provision for credit losses | 9,398 | 1,775 | 1,173 | 11,173 | 1,917 | ||||||||||
| Non-interest income | 12,060 | 11,403 | 10,037 | 23,463 | 19,426 | ||||||||||
| Non-interest expense | 23,509 | 24,561 | 23,958 | 48,070 | 46,741 | ||||||||||
| Income before income tax expense | 13,692 | 16,893 | 16,479 | 30,585 | 34,236 | ||||||||||
| Income tax expense | 2,752 | 3,400 | 3,275 | 6,152 | 6,759 | ||||||||||
| Net income | $ | 10,940 | $ | 13,493 | $ | 13,204 | $ | 24,433 | $ | 27,477 | |||||
| Key Ratios | |||||||||||||||
| Return on average assets | 0.90 | % | 1.21 | % | 1.21 | % | 1.05 | % | 1.27 | % | |||||
| Return on average equity | 8.81 | % | 11.30 | % | 11.63 | % | 10.03 | % | 12.36 | % | |||||
| GAAP efficiency ratio | 50.45 | % | 56.82 | % | 57.58 | % | 53.51 | % | 56.39 | % | |||||
| Net interest margin (fully-taxable equivalent) | 3.11 | % | 3.08 | % | 3.11 | % | 3.10 | % | 3.14 | % | |||||
| Non-performing assets to total assets | 0.23 | % | 0.23 | % | 0.34 | % | 0.23 | % | 0.34 | % | |||||
| Common equity ratio | 10.21 | % | 10.72 | % | 10.52 | % | 10.21 | % | 10.52 | % | |||||
| Tier 1 leverage capital ratio | 8.95 | % | 9.53 | % | 9.51 | % | 8.95 | % | 9.51 | % | |||||
| Common equity tier 1 risk-based capital ratio | 11.69 | % | 11.27 | % | 11.47 | % | 11.69 | % | 11.47 | % | |||||
| Tier 1 risk-based capital ratio | 13.01 | % | 12.56 | % | 12.82 | % | 13.01 | % | 12.82 | % | |||||
| Total risk-based capital ratio | 14.56 | % | 13.81 | % | 14.12 | % | 14.56 | % | 14.12 | % | |||||
| Per Share Data | |||||||||||||||
| Basic earnings per share | $ | 0.73 | $ | 0.89 | $ | 0.85 | $ | 1.62 | $ | 1.76 | |||||
| Diluted earnings per share | $ | 0.73 | $ | 0.89 | $ | 0.85 | $ | 1.62 | $ | 1.76 | |||||
| Cash dividends declared per share | $ | 0.33 | $ | 0.33 | $ | 0.30 | $ | 0.66 | $ | 0.60 | |||||
| Book value per share | $ | 33.85 | $ | 32.95 | $ | 30.26 | $ | 33.85 | $ | 30.26 | |||||
| Non-GAAP Measures^(1)^ | |||||||||||||||
| Return on average tangible equity | 11.09 | % | 14.35 | % | 15.00 | % | 12.68 | % | 16.01 | % | |||||
| Efficiency ratio | 50.13 | % | 56.45 | % | 57.27 | % | 53.17 | % | 56.07 | % | |||||
| Pre-tax, pre-provision earnings | $ | 23,090 | $ | 18,668 | $ | 17,652 | $ | 41,758 | $ | 36,153 | |||||
| Tangible common equity ratio | 8.41 | % | 8.78 | % | 8.49 | % | 8.41 | % | 8.49 | % | |||||
| Tangible book value per share | $ | 27.31 | $ | 26.39 | $ | 23.88 | $ | 27.31 | $ | 23.88 |
(1) Please see "Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)."
| Consolidated Statements of Condition Data<br><br>(unaudited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | June 30, <br>2020 | December 31, <br>2019 | June 30, <br>2019 | ||||||
| ASSETS | |||||||||
| Cash and due from banks | $ | 56,292 | $ | 39,586 | $ | 48,153 | |||
| Interest-bearing deposits in other banks (including restricted cash) | 99,536 | 36,050 | 38,083 | ||||||
| Total cash, cash equivalents and restricted cash | 155,828 | 75,636 | 86,236 | ||||||
| Investments: | |||||||||
| Available-for-sale securities, at fair value (book value of $1,010,325, $913,978 and $915,099, respectively) | 1,047,663 | 918,118 | 920,083 | ||||||
| Held-to-maturity securities, at amortized cost (fair value of $1,388, $1,359 and $1,335, respectively) | 1,299 | 1,302 | 1,304 | ||||||
| Other investments | 15,127 | 13,649 | 11,713 | ||||||
| Total investments | 1,064,089 | 933,069 | 933,100 | ||||||
| Loans held for sale, at fair value (book value of $35,909, $11,915 and $13,088, respectively) | 36,590 | 11,854 | 13,113 | ||||||
| Loans: | |||||||||
| Commercial real estate | 1,310,985 | 1,243,397 | 1,260,639 | ||||||
| Commercial^(1)^ | 428,186 | 442,701 | 456,692 | ||||||
| SBA PPP | 218,803 | — | — | ||||||
| Residential real estate | 1,054,333 | 1,070,374 | 1,035,792 | ||||||
| Consumer and home equity | 313,734 | 338,551 | 347,201 | ||||||
| Total loans | 3,326,041 | 3,095,023 | 3,100,324 | ||||||
| Less: allowance for loan losses | (35,539 | ) | (25,171 | ) | (26,163 | ) | |||
| Net loans | 3,290,502 | 3,069,852 | 3,074,161 | ||||||
| Goodwill | 94,697 | 94,697 | 94,697 | ||||||
| Core deposit intangible assets | 3,184 | 3,525 | 3,877 | ||||||
| Bank-owned life insurance | 93,647 | 92,344 | 91,116 | ||||||
| Premises and equipment, net | 41,109 | 41,836 | 41,402 | ||||||
| Deferred tax assets | 10,705 | 16,823 | 16,836 | ||||||
| Other assets | 168,665 | 89,885 | 92,500 | ||||||
| Total assets | $ | 4,959,016 | $ | 4,429,521 | $ | 4,447,038 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| Liabilities | |||||||||
| Deposits: | |||||||||
| Non-interest checking | $ | 712,146 | $ | 552,590 | $ | 505,355 | |||
| Interest checking | 1,349,456 | 1,153,203 | 1,111,424 | ||||||
| Savings and money market | 1,278,603 | 1,119,193 | 1,074,094 | ||||||
| Certificates of deposit | 431,376 | 521,752 | 547,786 | ||||||
| Brokered deposits | 224,777 | 191,005 | 352,951 | ||||||
| Total deposits | 3,996,358 | 3,537,743 | 3,591,610 | ||||||
| Short-term borrowings | 245,998 | 268,809 | 241,647 | ||||||
| Long-term borrowings | 25,000 | 10,000 | 10,000 | ||||||
| Subordinated debentures | 59,231 | 59,080 | 58,991 | ||||||
| Accrued interest and other liabilities | 125,962 | 80,474 | 77,031 | ||||||
| Total liabilities | 4,452,549 | 3,956,106 | 3,979,279 | ||||||
| Shareholders’ equity | 506,467 | 473,415 | 467,759 | ||||||
| Total liabilities and shareholders’ equity | $ | 4,959,016 | $ | 4,429,521 | $ | 4,447,038 |
(1) Includes the HPFC loan portfolio.
| Consolidated Statements of Income Data<br><br>(unaudited) | ||||||
|---|---|---|---|---|---|---|
| For The<br><br>Three Months Ended | ||||||
| (In thousands, except per share data) | June 30, <br>2020 | March 31,<br><br>2020 | June 30, <br>2019 | |||
| Interest Income | ||||||
| Interest and fees on loans | $ | 33,120 | $ | 34,045 | $ | 36,092 |
| Taxable interest on investments | 4,883 | 4,878 | 4,941 | |||
| Nontaxable interest on investments | 828 | 787 | 624 | |||
| Dividend income | 167 | 168 | 174 | |||
| Other interest income | 180 | 335 | 606 | |||
| Total interest income | 39,178 | 40,213 | 42,437 | |||
| Interest Expense | ||||||
| Interest on deposits | 3,392 | 6,662 | 9,156 | |||
| Interest on borrowings | 359 | 838 | 885 | |||
| Interest on subordinated debentures | 888 | 887 | 823 | |||
| Total interest expense | 4,639 | 8,387 | 10,864 | |||
| Net interest income | 34,539 | 31,826 | 31,573 | |||
| Provision for credit losses | 9,398 | 1,775 | 1,173 | |||
| Net interest income after provision for credit losses | 25,141 | 30,051 | 30,400 | |||
| Non-Interest Income | ||||||
| Mortgage banking income, net | 4,691 | 3,534 | 1,742 | |||
| Debit card income | 2,391 | 2,141 | 2,281 | |||
| Service charges on deposit accounts | 1,337 | 2,012 | 2,209 | |||
| Income from fiduciary services | 1,603 | 1,502 | 1,545 | |||
| Bank-owned life insurance | 614 | 689 | 603 | |||
| Brokerage and insurance commissions | 622 | 657 | 732 | |||
| Customer loan swap fees | 57 | 114 | 285 | |||
| Net gain on sale of securities | — | — | 27 | |||
| Other income | 745 | 754 | 613 | |||
| Total non-interest income | 12,060 | 11,403 | 10,037 | |||
| Non-Interest Expense | ||||||
| Salaries and employee benefits | 13,627 | 14,327 | 13,461 | |||
| Furniture, equipment and data processing | 2,710 | 2,790 | 2,723 | |||
| Net occupancy costs | 1,997 | 2,003 | 1,639 | |||
| Consulting and professional fees | 1,181 | 783 | 974 | |||
| Debit card expense | 878 | 934 | 883 | |||
| Regulatory assessments | 299 | 162 | 437 | |||
| Amortization of core deposit intangible assets | 171 | 170 | 176 | |||
| Other real estate owned and collection costs, net | 98 | 101 | 409 | |||
| Other expenses | 2,548 | 3,291 | 3,256 | |||
| Total non-interest expense | 23,509 | 24,561 | 23,958 | |||
| Income before income tax expense | 13,692 | 16,893 | 16,479 | |||
| Income Tax Expense | 2,752 | 3,400 | 3,275 | |||
| Net Income | $ | 10,940 | $ | 13,493 | $ | 13,204 |
| Per Share Data | ||||||
| Basic earnings per share | $ | 0.73 | $ | 0.89 | $ | 0.85 |
| Diluted earnings per share | $ | 0.73 | $ | 0.89 | $ | 0.85 |
| Consolidated Statements of Income Data<br><br>(unaudited) | ||||
|---|---|---|---|---|
| For The<br><br>Six Months Ended<br>June 30, | ||||
| (In thousands, except per share data) | 2020 | 2019 | ||
| Interest Income | ||||
| Interest and fees on loans | $ | 67,165 | $ | 71,813 |
| Taxable interest on investments | 9,761 | 9,935 | ||
| Nontaxable interest on investments | 1,615 | 1,268 | ||
| Dividend income | 335 | 404 | ||
| Other interest income | 515 | 1,026 | ||
| Total interest income | 79,391 | 84,446 | ||
| Interest Expense | ||||
| Interest on deposits | 10,054 | 17,579 | ||
| Interest on borrowings | 1,197 | 1,859 | ||
| Interest on subordinated debentures | 1,775 | 1,540 | ||
| Total interest expense | 13,026 | 20,978 | ||
| Net interest income | 66,365 | 63,468 | ||
| Provision for credit losses | 11,173 | 1,917 | ||
| Net interest income after provision for credit losses | 55,192 | 61,551 | ||
| Non-Interest Income | ||||
| Mortgage banking income, net | 8,225 | 2,994 | ||
| Debit card income | 4,532 | 4,291 | ||
| Service charges on deposit accounts | 3,349 | 4,232 | ||
| Income from fiduciary services | 3,105 | 2,937 | ||
| Bank-owned life insurance | 1,303 | 1,197 | ||
| Brokerage and insurance commissions | 1,279 | 1,317 | ||
| Customer loan swap fees | 171 | 810 | ||
| Net gain on sale of securities | — | 27 | ||
| Other income | 1,499 | 1,621 | ||
| Total non-interest income | 23,463 | 19,426 | ||
| Non-Interest Expense | ||||
| Salaries and employee benefits | 27,954 | 26,439 | ||
| Furniture, equipment and data processing | 5,500 | 5,403 | ||
| Net occupancy costs | 4,000 | 3,553 | ||
| Consulting and professional fees | 1,964 | 1,787 | ||
| Debit card expense | 1,812 | 1,706 | ||
| Regulatory assessments | 461 | 909 | ||
| Amortization of core deposit intangible assets | 341 | 352 | ||
| Other real estate owned and collection costs, net | 199 | 102 | ||
| Other expenses | 5,839 | 6,490 | ||
| Total non-interest expense | 48,070 | 46,741 | ||
| Income before income tax expense | 30,585 | 34,236 | ||
| Income Tax Expense | 6,152 | 6,759 | ||
| Net Income | $ | 24,433 | $ | 27,477 |
| Per Share Data | ||||
| Basic earnings per share | $ | 1.62 | $ | 1.76 |
| Diluted earnings per share | $ | 1.62 | $ | 1.76 |
| Quarterly Average Balance and Yield/Rate Analysis<br><br>(unaudited) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance | Yield/Rate | |||||||||||
| For The Three Months Ended | For The Three Months Ended | |||||||||||
| (Dollars in thousands) | June 30, <br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | June 30, <br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | ||||||
| Assets | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Interest-bearing deposits in other banks and other interest-earning assets | $ | 168,221 | $ | 66,180 | $ | 59,901 | 0.06 | % | 1.24 | % | 2.34 | % |
| Investments - taxable | 836,885 | 809,041 | 839,714 | 2.49 | % | 2.56 | % | 2.56 | % | |||
| Investments - nontaxable^(1)^ | 124,101 | 117,537 | 90,087 | 3.38 | % | 3.39 | % | 3.51 | % | |||
| Loans^(2)^: | ||||||||||||
| Commercial real estate | 1,302,393 | 1,273,538 | 1,255,172 | 3.83 | % | 4.24 | % | 4.68 | % | |||
| Residential real estate | 1,084,931 | 1,078,836 | 1,032,215 | 4.06 | % | 4.19 | % | 4.34 | % | |||
| Commercial^(1)^ | 404,545 | 416,527 | 389,166 | 3.78 | % | 4.21 | % | 4.72 | % | |||
| Consumer and home equity | 321,019 | 334,771 | 347,141 | 4.29 | % | 5.03 | % | 5.47 | % | |||
| SBA PPP | 178,119 | — | — | 3.79 | % | — | % | — | % | |||
| HPFC | 17,659 | 20,336 | 29,472 | 9.28 | % | 7.83 | % | 7.83 | % | |||
| Municipal^(1)^ | 19,567 | 16,990 | 20,117 | 3.62 | % | 3.67 | % | 3.56 | % | |||
| Total loans | 3,328,233 | 3,140,998 | 3,073,283 | 3.97 | % | 4.32 | % | 4.68 | % | |||
| Total interest-earning assets | 4,457,440 | 4,133,756 | 4,062,985 | 3.53 | % | 3.90 | % | 4.18 | % | |||
| Other assets | 414,225 | 354,436 | 315,604 | |||||||||
| Total assets | $ | 4,871,665 | $ | 4,488,192 | $ | 4,378,589 | ||||||
| Liabilities & Shareholders' Equity | ||||||||||||
| Deposits: | ||||||||||||
| Non-interest checking | $ | 664,605 | $ | 529,501 | $ | 485,724 | — | % | — | % | — | % |
| Interest checking | 1,298,468 | 1,146,783 | 1,110,567 | 0.28 | % | 0.70 | % | 1.01 | % | |||
| Savings | 518,803 | 476,849 | 476,104 | 0.06 | % | 0.07 | % | 0.09 | % | |||
| Money market | 717,056 | 650,383 | 581,638 | 0.37 | % | 0.98 | % | 1.28 | % | |||
| Certificates of deposit | 477,068 | 552,079 | 516,972 | 1.34 | % | 1.61 | % | 1.60 | % | |||
| Total deposits | 3,676,000 | 3,355,595 | 3,171,005 | 0.35 | % | 0.70 | % | 0.86 | % | |||
| Borrowings: | ||||||||||||
| Brokered deposits | 234,823 | 208,084 | 370,448 | 0.28 | % | 1.54 | % | 2.53 | % | |||
| Customer repurchase agreements | 209,302 | 236,351 | 246,935 | 0.56 | % | 1.08 | % | 1.30 | % | |||
| Subordinated debentures | 59,194 | 59,119 | 58,985 | 6.03 | % | 6.04 | % | 5.60 | % | |||
| Other borrowings | 76,983 | 59,257 | 15,940 | 0.35 | % | 1.39 | % | 2.17 | % | |||
| Total borrowings | 580,302 | 562,811 | 692,308 | 0.98 | % | 1.80 | % | 2.34 | % | |||
| Total funding liabilities | 4,256,302 | 3,918,406 | 3,863,313 | 0.44 | % | 0.86 | % | 1.13 | % | |||
| Other liabilities | 115,914 | 89,612 | 59,747 | |||||||||
| Shareholders' equity | 499,449 | 480,174 | 455,529 | |||||||||
| Total liabilities & shareholders' equity | $ | 4,871,665 | $ | 4,488,192 | $ | 4,378,589 | ||||||
| Net interest rate spread (fully-taxable equivalent) | 3.09 | % | 3.04 | % | 3.05 | % | ||||||
| Net interest margin (fully-taxable equivalent) | 3.11 | % | 3.08 | % | 3.11 | % | ||||||
| Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans^(3)^ | 3.07 | % | 3.06 | % | 3.07 | % | ||||||
| (1) | Reported on a tax-equivalent basis calculated using the federal corporate income tax rate of 21%, including certain commercial loans. | |||||||||||
| --- | --- | |||||||||||
| (2) | Non-accrual loans and loans held for sale are included in total average loans. | |||||||||||
| --- | --- | |||||||||||
| (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 June 30, 2020, March 31, 2020 and June 30, 2019 totaling $403,000, $283,000 and $439,000, respectively. | |||||||||||
| --- | --- |
| Year-to-Date Average Balance and Yield/Rate Analysis<br><br>(unaudited) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Average Balance | Yield/Rate | |||||||
| For The Six Months Ended | For The Six Months Ended | |||||||
| (Dollars in thousands) | June 30,<br><br>2020 | June 30,<br><br>2019 | June 30,<br><br>2020 | June 30,<br><br>2019 | ||||
| Assets | ||||||||
| Interest-earning assets: | ||||||||
| Interest-bearing deposits in other banks and other interest-earning assets | $ | 117,201 | $ | 48,301 | 0.39 | % | 2.27 | % |
| Investments - taxable | 822,963 | 845,583 | 2.52 | % | 2.56 | % | ||
| Investments - nontaxable^(1)^ | 120,819 | 92,386 | 3.38 | % | 3.48 | % | ||
| Loans^(2)^: | ||||||||
| Commercial real estate | 1,287,965 | 1,268,264 | 4.03 | % | 4.71 | % | ||
| Residential real estate | 1,081,884 | 1,020,316 | 4.12 | % | 4.32 | % | ||
| Commercial^(1)^ | 410,563 | 379,552 | 4.00 | % | 4.71 | % | ||
| Consumer and home equity | 327,895 | 347,097 | 4.66 | % | 5.46 | % | ||
| SBA PPP | 89,033 | — | 3.79 | % | — | % | ||
| HPFC | 18,997 | 30,814 | 8.50 | % | 7.87 | % | ||
| Municipal^(1)^ | 18,279 | 17,738 | 3.64 | % | 3.58 | % | ||
| Total loans | 3,234,616 | 3,063,781 | 4.14 | % | 4.69 | % | ||
| Total interest-earning assets | 4,295,599 | 4,050,051 | 3.71 | % | 4.19 | % | ||
| Other assets | 384,330 | 308,579 | ||||||
| Total assets | $ | 4,679,929 | $ | 4,358,630 | ||||
| Liabilities & Shareholders' Equity | ||||||||
| Deposits: | ||||||||
| Non-interest checking | $ | 597,053 | $ | 488,040 | — | % | — | % |
| Interest checking | 1,222,626 | 1,098,003 | 0.48 | % | 0.99 | % | ||
| Savings | 497,826 | 480,849 | 0.07 | % | 0.08 | % | ||
| Money market | 683,720 | 582,158 | 0.66 | % | 1.25 | % | ||
| Certificates of deposit | 514,573 | 480,244 | 1.48 | % | 1.48 | % | ||
| Total deposits | 3,515,798 | 3,129,294 | 0.52 | % | 0.82 | % | ||
| Borrowings: | ||||||||
| Brokered deposits | 221,454 | 388,045 | 0.87 | % | 2.51 | % | ||
| Customer repurchase agreements | 222,827 | 242,740 | 0.83 | % | 1.27 | % | ||
| Subordinated debentures | 59,157 | 58,996 | 6.03 | % | 5.26 | % | ||
| Other borrowings | 68,120 | 30,237 | 0.80 | % | 2.21 | % | ||
| Total borrowings | 571,558 | 720,018 | 1.38 | % | 2.31 | % | ||
| Total funding liabilities | 4,087,356 | 3,849,312 | 0.64 | % | 1.10 | % | ||
| Other liabilities | 102,762 | 61,000 | ||||||
| Shareholders' equity | 489,811 | 448,318 | ||||||
| Total liabilities & shareholders' equity | $ | 4,679,929 | $ | 4,358,630 | ||||
| Net interest rate spread (fully-taxable equivalent) | 3.07 | % | 3.09 | % | ||||
| Net interest margin (fully-taxable equivalent) | 3.10 | % | 3.14 | % | ||||
| Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans^(3)^ | 3.06 | % | 3.10 | % | ||||
| (1) | Reported on a tax-equivalent basis calculated using the federal corporate income tax rate of 21%, including certain commercial loans. | |||||||
| --- | --- | |||||||
| (2) | Non-accrual loans and loans held for sale are included in total average loans. | |||||||
| --- | --- | |||||||
| (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 six months ended June 30, 2020 and June 30, 2019 totaling $687,000 and $829,000, respectively. | |||||||
| --- | --- |
| Asset Quality Data | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||||||||||
| (In thousands) | At or For The<br>Six Months Ended<br>June 30, 2020 | At or For The<br>Three Months Ended<br>March 31, 2020 | At or For The<br>Year Ended<br>December 31, 2019 | At or For The<br>Nine Months Ended<br>September 30, 2019 | At or For The<br>Six Months Ended<br>June 30, 2019 | ||||||||||
| Non-accrual loans: | |||||||||||||||
| Residential real estate | $ | 4,664 | $ | 3,499 | $ | 4,096 | $ | 5,152 | $ | 5,566 | |||||
| Commercial real estate | 432 | 646 | 1,122 | 1,156 | 1,590 | ||||||||||
| Commercial | 699 | 748 | 420 | 751 | 785 | ||||||||||
| Consumer and home equity | 2,371 | 2,102 | 2,154 | 2,616 | 3,039 | ||||||||||
| HPFC | 392 | 322 | 364 | 450 | 465 | ||||||||||
| Total non-accrual loans | 8,558 | 7,317 | 8,156 | 10,125 | 11,445 | ||||||||||
| Loans 90 days past due and accruing | — | — | — | — | 14 | ||||||||||
| Accruing troubled-debt restructured loans not included above | 2,874 | 3,008 | 2,993 | 3,259 | 3,511 | ||||||||||
| Total non-performing loans | 11,432 | 10,325 | 11,149 | 13,384 | 14,970 | ||||||||||
| Other real estate owned | 118 | 94 | 94 | 94 | 130 | ||||||||||
| Total non-performing assets | $ | 11,550 | $ | 10,419 | $ | 11,243 | $ | 13,478 | $ | 15,100 | |||||
| Loans 30-89 days past due: | |||||||||||||||
| Residential real estate | $ | 4,016 | $ | 1,781 | $ | 2,227 | $ | 1,447 | $ | 2,536 | |||||
| Commercial real estate | 1,625 | 2,641 | 1,582 | 2,242 | 3,378 | ||||||||||
| Commercial | 95 | 1,560 | 548 | 1,135 | 1,400 | ||||||||||
| Consumer and home equity | 388 | 1,379 | 750 | 822 | 907 | ||||||||||
| HPFC | 128 | 165 | 243 | 193 | 171 | ||||||||||
| Total loans 30-89 days past due | $ | 6,252 | $ | 7,526 | $ | 5,350 | $ | 5,839 | $ | 8,392 | |||||
| Allowance for loan losses at the beginning of the period | $ | 25,171 | $ | 25,171 | $ | 24,712 | $ | 24,712 | $ | 24,712 | |||||
| Provision for loan losses | 11,172 | 1,772 | 2,862 | 2,658 | 1,925 | ||||||||||
| Charge-offs: | |||||||||||||||
| Residential real estate | 96 | 96 | 462 | 436 | 25 | ||||||||||
| Commercial real estate | 71 | 50 | 300 | 157 | 65 | ||||||||||
| Commercial | 673 | 253 | 1,167 | 636 | 453 | ||||||||||
| Consumer and home equity | 134 | 91 | 713 | 670 | 64 | ||||||||||
| HPFC | — | — | 71 | 11 | — | ||||||||||
| Total charge-offs | 974 | 490 | 2,713 | 1,910 | 607 | ||||||||||
| Total recoveries | (170 | ) | (68 | ) | (310 | ) | (228 | ) | (133 | ) | |||||
| Net charge-offs | 804 | 422 | 2,403 | 1,682 | 474 | ||||||||||
| Allowance for loan losses at the end of the period | $ | 35,539 | $ | 26,521 | $ | 25,171 | $ | 25,688 | $ | 26,163 | |||||
| Components of allowance for credit losses: | |||||||||||||||
| Allowance for loan losses | $ | 35,539 | $ | 26,521 | $ | 25,171 | $ | 25,688 | $ | 26,163 | |||||
| Liability for unfunded credit commitments | 22 | 24 | 21 | 11 | 14 | ||||||||||
| Allowance for credit losses | $ | 35,561 | $ | 26,545 | $ | 25,192 | $ | 25,699 | $ | 26,177 | |||||
| Ratios: | |||||||||||||||
| Non-performing loans to total loans | 0.34 | % | 0.33 | % | 0.36 | % | 0.43 | % | 0.48 | % | |||||
| Non-performing assets to total assets | 0.23 | % | 0.23 | % | 0.25 | % | 0.30 | % | 0.34 | % | |||||
| Allowance for loan losses to total loans | 1.07 | % | 0.84 | % | 0.81 | % | 0.83 | % | 0.84 | % | |||||
| Net charge-offs to average loans (annualized): | |||||||||||||||
| Quarter-to-date | 0.05 | % | 0.05 | % | 0.09 | % | 0.16 | % | 0.03 | % | |||||
| Year-to-date | 0.05 | % | 0.05 | % | 0.08 | % | 0.07 | % | 0.03 | % | |||||
| Allowance for loan losses to non-performing loans | 310.87 | % | 256.86 | % | 225.77 | % | 191.93 | % | 174.77 | % | |||||
| Loans 30-89 days past due to total loans | 0.19 | % | 0.24 | % | 0.17 | % | 0.19 | % | 0.27 | % |
Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)
| Return on Average Tangible Equity: | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the<br>Three Months Ended | For the<br>Six Months Ended | ||||||||||||||
| (Dollars in thousands) | June 30,<br><br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | June 30,<br><br>2020 | June 30,<br><br>2019 | ||||||||||
| Net income, as presented | $ | 10,940 | $ | 13,493 | $ | 13,204 | $ | 24,433 | $ | 27,477 | |||||
| Add: amortization of intangible assets, net of tax^(1)^ | 135 | 134 | 139 | 269 | 278 | ||||||||||
| Net income, adjusted for amortization of intangible assets | $ | 11,075 | $ | 13,627 | $ | 13,343 | $ | 24,702 | $ | 27,755 | |||||
| Average equity, as presented | $ | 499,449 | $ | 480,174 | $ | 455,529 | $ | 489,811 | $ | 448,318 | |||||
| Less: average goodwill and other intangible assets | (97,965 | ) | (98,143 | ) | (98,660 | ) | (98,054 | ) | (98,749 | ) | |||||
| Average tangible equity | $ | 401,484 | $ | 382,031 | $ | 356,869 | $ | 391,757 | $ | 349,569 | |||||
| Return on average equity | 8.81 | % | 11.30 | % | 11.63 | % | 10.03 | % | 12.36 | % | |||||
| Return on average tangible equity | 11.09 | % | 14.35 | % | 15.00 | % | 12.68 | % | 16.01 | % |
(1) Assumed a 21% tax rate.
| Efficiency Ratio: | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the<br><br>Three Months Ended | For the<br>Six Months Ended | ||||||||||||||
| (Dollars in thousands) | June 30, <br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | June 30,<br><br>2020 | June 30, <br>2019 | ||||||||||
| Non-interest expense, as presented | $ | 23,509 | $ | 24,561 | $ | 23,958 | $ | 48,070 | $ | 46,741 | |||||
| Net interest income, as presented | $ | 34,539 | $ | 31,826 | $ | 31,573 | $ | 66,365 | $ | 63,468 | |||||
| Add: effect of tax-exempt income^(1)^ | 295 | 280 | 248 | 574 | 491 | ||||||||||
| Non-interest income, as presented | 12,060 | 11,403 | 10,037 | 23,463 | 19,426 | ||||||||||
| Less: net gain on sale of securities | — | — | (27 | ) | — | (27 | ) | ||||||||
| Adjusted net interest income plus non-interest income | $ | 46,894 | $ | 43,509 | $ | 41,831 | $ | 90,402 | $ | 83,358 | |||||
| GAAP efficiency ratio | 50.45 | % | 56.82 | % | 57.58 | % | 53.51 | % | 56.39 | % | |||||
| Non-GAAP efficiency ratio | 50.13 | % | 56.45 | % | 57.27 | % | 53.17 | % | 56.07 | % |
(1) Assumed a 21% tax rate.
| Pre-tax, Pre-provision Earnings: | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| For the<br><br>Three Months Ended | For the<br>Six Months Ended | |||||||||
| (In thousands) | June 30, <br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | June 30,<br><br>2020 | June 30, <br>2019 | |||||
| Net income, as presented | $ | 10,940 | $ | 13,493 | $ | 13,204 | $ | 24,433 | $ | 27,477 |
| Add: provision for credit losses | 9,398 | 1,775 | 1,173 | 11,173 | 1,917 | |||||
| Add: income tax expense | 2,752 | 3,400 | 3,275 | 6,152 | 6,759 | |||||
| Pre-tax, pre-provision earnings | $ | 23,090 | $ | 18,668 | $ | 17,652 | $ | 41,758 | $ | 36,153 |
| Tangible Book Value Per Share and Tangible Common Equity Ratio: | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | |||||||||||||
| (In thousands, except number of shares, per share data and ratios) | |||||||||||||||
| Tangible Book Value Per Share: | |||||||||||||||
| Shareholders' equity, as presented | $ | 506,467 | $ | 492,680 | $ | 467,759 | |||||||||
| Less: goodwill and other intangible assets | (97,881 | ) | (98,052 | ) | (98,574 | ) | |||||||||
| Tangible shareholders' equity | $ | 408,586 | $ | 394,628 | $ | 369,185 | |||||||||
| Shares outstanding at period end | 14,963,041 | 14,951,597 | 15,457,480 | ||||||||||||
| Book value per share | $ | 33.85 | $ | 32.95 | $ | 30.26 | |||||||||
| Tangible book value per share | $ | 27.31 | $ | 26.39 | $ | 23.88 | |||||||||
| Tangible Common Equity Ratio: | |||||||||||||||
| Total assets | $ | 4,959,016 | $ | 4,594,539 | $ | 4,447,038 | |||||||||
| Less: goodwill and other intangible assets | (97,881 | ) | (98,052 | ) | (98,574 | ) | |||||||||
| Tangible assets | $ | 4,861,135 | $ | 4,496,487 | $ | 4,348,464 | |||||||||
| Common equity ratio | 10.21 | % | 10.72 | % | 10.52 | % | |||||||||
| Tangible common equity ratio | 8.41 | % | 8.78 | % | 8.49 | % | |||||||||
| Core Deposits: | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| (In thousands) | June 30,<br><br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | ||||||||||||
| Total deposits | $ | 3,996,358 | $ | 3,563,705 | $ | 3,591,610 | |||||||||
| Less: certificates of deposit | (431,376 | ) | (545,013 | ) | (547,786 | ) | |||||||||
| Less: brokered deposits | (224,777 | ) | (188,758 | ) | (352,951 | ) | |||||||||
| Core deposits | $ | 3,340,205 | $ | 2,829,934 | $ | 2,690,873 | |||||||||
| Average Core Deposits: | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| For the<br><br>Three Months Ended | For the<br><br>Six Months Ended | ||||||||||||||
| (In thousands) | June 30,<br><br>2020 | March 31,<br><br>2020 | June 30,<br><br>2019 | June 30,<br><br>2020 | June 30,<br><br>2019 | ||||||||||
| Total average deposits | $ | 3,676,000 | $ | 3,355,595 | $ | 3,171,005 | $ | 3,515,798 | $ | 3,129,294 | |||||
| Less: average certificates of deposit | (477,068 | ) | (552,079 | ) | (516,972 | ) | (514,573 | ) | (480,244 | ) | |||||
| Average core deposits | $ | 3,198,932 | $ | 2,803,516 | $ | 2,654,033 | $ | 3,001,225 | $ | 2,649,050 |
Exhibit
Second Quarter Report - 2020
Dear Fellow Shareholders:
On behalf of all of us at Camden National, I hope you and your loved ones are safe and healthy.
During the second quarter of 2020, we navigated new challenges, both economically and socially, as a result of the Coronavirus pandemic, and we deepened our commitment to the health and financial well-being of our customers, employees, and communities. Over the past several weeks, we have taken a measured approach to safely reopen our banking center lobbies, while remaining nimble and listening to our employees and customers. We have also been highly focused on supporting individuals and businesses with loan payment deferrals and providing over 2,900 loans from the Paycheck Protection Program (“PPP”) to customers totaling $237.0 million. I’m very proud of our team’s flexibility, hard work, and leadership as we respond to a rapidly evolving situation by keeping both urgent needs and long-term goals in mind.
Financial Impact. Financially, the pandemic has affected the economy and our company in several ways, including impacts to our revenues, balance sheet, and expense levels.
For the six months ended June 30, 2020, Camden National reported net income of $24.4 million and diluted earnings per share of $1.62, compared to $27.5 million and $1.76, respectively, for the same period last year. Despite this 11% decline in net income and 8% decline in diluted earnings per share, pre-tax, pre-provision earnings were $41.8 million for the six months ended June 30, 2020, compared to $36.2 million for the same period last year. This 15% increase was driven by strong management of interest-related products, increased revenues from residential mortgage banking, and revenues from originating and processing PPP loans.
For the first six months of 2020, return on average assets was 1.05% and return on average equity was 10.03%, compared to 1.27% and 12.36%, respectively, for the same period last year.
Asset Quality. In the first quarter this year, we opted to delay the adoption of the new accounting methodology for credit losses, commonly referred to as “CECL,” as allowed by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. For the first six months of 2020, we utilized the “incurred loss” accounting methodology and recorded a provision for credit losses of $11.2 million and had an allowance for loan losses of $35.5 million, or 1.07% of total loans, at June 30, 2020, compared to a provision for credit losses of $1.9 million and allowance for loan losses of $26.2 million, or 0.84% of total loans, for the same periods last year. We have yet to experience significant credit losses or deterioration of asset quality, but, because of the pandemic, our estimates required an increase in the allowance for loan losses and corresponding increase in provision for credit losses between periods.
We estimate that if CECL methodology had been adopted, our allowance for credit losses would have been $40.0 million to $44.0 million, or 1.20% to 1.32% of total loans, at June 30, 2020.
Although our non-performing loans to total loans at June 30, 2020 was 0.34%-a reduction from 0.48% at June 30, 2019-we anticipate a rapidly changing asset quality environment over
the next six months. We currently have deferred loan payments on $546.7 million of loans at June 30, 2020 and are in active restructuring discussions with those borrowers. Based on the strength of our operating earnings and capital, we are positioned to meet the needs of not only our impacted customers, but also our shareholders.
Capital Impact. Our conservative approach to capital management continues to serve us well, especially during the pandemic crisis. At June 30, 2020, our total risk-based capital ratio of 14.56% and our common equity Tier 1 ratio of 11.69% well exceeded regulatory requirements. Our tangible common equity ratio was 8.41% at June 30, 2020.
Our strong capital position allowed us to declare a cash dividend of $0.33 per share. We did not repurchase any shares during the second quarter of 2020, as we suspended this program during the first quarter of 2020 in response to the pandemic.
Supporting Employees, Guiding Customers, Giving Back. Since the start of the pandemic, the safety and health of our employees, customers, and community members have been our primary priorities. Throughout most of the second quarter of 2020, our retail banking centers continued serving customers at our drive-through facilities and held a minimal number of pre-scheduled appointments in our lobbies. Starting June 8, 2020, we began phasing in the reopening of our banking center lobbies on a limited-hour basis with masks, gloves, sanitizer, and social distancing. The majority of our employees who are not customer-facing continue to work remotely, with the technology support of our incredible IT team.
Other customer-facing departments, including our commercial lenders and wealth management group, continue serving customers and clients virtually by leveraging enhanced technology systems. Through video-conference meetings, informational webinars, and telephone meetings, our experts are connecting with clients to provide personal support and guidance.
We have also made meaningful investments in our community during this challenging time to support individuals and families in need of help. Through our Hope@Home program, we donated more than $17,000 to local homeless shelters as a result of homes purchased and financed by Camden National Bank in the second quarter of 2020. We expanded our support for those in unsafe home environments by making an additional $17,500 contribution to Finding Our Voices, an emerging grassroots organization that advocates for the victims of domestic abuse and connects them to local agencies and shelters for support.
Over the past several months, like many organizations, we have also reflected on the persistence of racism and injustice in our society. The board of directors and management have reaffirmed our belief that as an organization that is deeply rooted in our core values and a commitment to community, we do not tolerate any discrimination based on race, gender, sexual orientation or religion. We actively educate and listen to our employees on this important element of our workplace culture-including why we embrace diversity of all kinds in the workplace, and we provide safe avenues of support for anyone
Second Quarter Report - 2020
in need. We also believe it’s our responsibility to ensure that our products and services are available to all members of our communities.
Leveraging Future Opportunities. The pandemic and economic conditions have accelerated the adoption of technology for our customers, employees, vendors, and communities. Continuously investing in our technology platforms, such as cloud-based processing and digital banking, positions us to keep pace with changing behaviors and demands. During the past several months, we have seen a significant increase in digital banking usage and customers seeking support through virtual service channels such as live chat, email, and our 24/7 call center. We are adapting our methods quickly and efficiently to support our customers and develop new business in the months and years to come.
The critical link between how we did business before the pandemic and how we’ll do business in the future is our resilient, resourceful employees. They have done a remarkable job adjusting to new work conditions while simultaneously tackling
immense workloads. With more than 2,900 PPP loans, over 2,000 loan deferrals, record residential mortgage requests, and thousands of conversations with customers, our employees are leaning into what it means to deliver the best banking experience, while staying connected as teams and balancing demands in their personal lives as well. Their ability to persevere through these challenges is why we refer to our employees as “stakeholders,” because each employee has a meaningful stake in our shared success.
On behalf of our stakeholders, I want to thank you for your support.
Be healthy, be safe, be well.
Gregory A. Dufour
President and Chief Executive Officer
| Financial Highlights (unaudited) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended<br><br>June 30, | Six Months Ended<br><br>June 30, | |||||||||||
| (Dollars in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | ||||||||
| Earnings and Dividends | ||||||||||||
| Net interest income | $ | 34,539 | $ | 31,573 | $ | 66,365 | $ | 63,468 | ||||
| Non-interest income | 12,060 | 10,037 | 23,463 | 19,426 | ||||||||
| Non-interest expense | (23,509 | ) | (23,958 | ) | (48,070 | ) | (46,741 | ) | ||||
| Pre-tax, pre-provision earnings^(1)^ | 23,090 | 17,652 | 41,758 | 36,153 | ||||||||
| Provision for credit losses | (9,398 | ) | (1,173 | ) | (11,173 | ) | (1,917 | ) | ||||
| Income before taxes | 13,692 | 16,479 | 30,585 | 34,236 | ||||||||
| Income taxes | (2,752 | ) | (3,275 | ) | (6,152 | ) | (6,759 | ) | ||||
| Net income | $ | 10,940 | $ | 13,204 | $ | 24,433 | $ | 27,477 | ||||
| Diluted earnings per share | $ | 0.73 | $ | 0.85 | $ | 1.62 | $ | 1.76 | ||||
| Cash dividends declared per share | 0.33 | 0.30 | 0.66 | 0.60 | ||||||||
| Performance Ratios | ||||||||||||
| Return on average assets | 0.90 | % | 1.21 | % | 1.05 | % | 1.27 | % | ||||
| Return on average equity | 8.81 | % | 11.63 | % | 10.03 | % | 12.36 | % | ||||
| Net interest margin (fully-taxable equivalent) | 3.11 | % | 3.11 | % | 3.10 | % | 3.14 | % | ||||
| Efficiency ratio^1^ | 50.13 | % | 57.27 | % | 53.17 | % | 56.07 | % | ||||
| Balance sheet (end of period) | ||||||||||||
| Investments | $ | 1,064,089 | $ | 933,100 | ||||||||
| Loans and loans held for sale | 3,362,631 | 3,113,437 | ||||||||||
| Allowance for loan losses | 35,539 | 26,163 | ||||||||||
| Total assets | 4,959,016 | 4,447,038 | ||||||||||
| Deposits | 3,996,358 | 3,591,610 | ||||||||||
| Borrowings | 330,229 | 310,638 | ||||||||||
| Shareholders' equity | 506,467 | 467,759 | ||||||||||
| Book Value per Share and Capital Ratios | ||||||||||||
| Book value per share | $ | 33.85 | $ | 30.26 | ||||||||
| Tangible book value per share^1^ | 27.31 | 23.88 | ||||||||||
| Tangible common equity ratio^1^ | 8.41 | % | 8.49 | % | ||||||||
| Common equity tier 1 risk-based capital ratio | 11.69 | % | 11.47 | % | ||||||||
| Total risk-based capital ratio | 14.56 | % | 14.12 | % | ||||||||
| Asset Quality | ||||||||||||
| Allowance for loan losses to total loans | 1.07 | % | 0.84 | % | ||||||||
| Net charge-offs to average loans (annualized) | 0.05 | % | 0.03 | % | ||||||||
| Non-performing loans to total loans | 0.34 | % | 0.48 | % | ||||||||
| Non-performing assets to total assets | 0.23 | % | 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 July 28, 2020.
ex993presentationq220
Second Quarter 2020 Earnings Conference Call July 28, 2020 1
Forward Looking Statements and Non- GAAP Financial Measures FORWARD LOOKING STATEMENTS This presentation contains certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and other federal securities laws, 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 Camden National Corporation (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: 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 Financial Accounting Standards Board ("FASB"), and other accounting standard setters. Further, statements about the potential effects of the COVID-19 pandemic on the Company’s businesses and results of operations and financial conditions may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, action taken by government authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and the Company. 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 the Company’s filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2019, as updated by the Company's quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission. You 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 undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except to the extent required by applicable law or regulation. NOTE REGARDING PRESENTATION OF NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. Management uses these non-GAAP financial measures for purposes of measuring our performance against our peer group and other financial institutions and analyzing our internal performance. These non-GAAP financial measures also help investors better understand the Company’s operating performance and trends and allow for better performance comparisons to other financial institutions. These measures are not a substitute for GAAP operating results and may not be comparable to non-GAAP measures used by other financial institutions. Schedules that reconcile the non-GAAP financial measures to GAAP financial information are included in our Annual Report on Form 10-K and earnings releases filed with the SEC. 2
Responding to Our Employees, Customers and Communities • Majority of non-banking center employees continue to work remotely • Continue to provide swift and confidential economic support to our employees through our special Stakeholder Emergency Fund for personal or family circumstances • Provided special premium pay for banking center employees through June 30th • All Maine banking centers are now open (with limited hours) and 68 ATMs remain accessible • Continue to offer consumer and business loan payment relief and support • Continue to assist business customers with the SBA Paycheck Protection Program (PPP) • Continue to support nonprofit organizations • Increased support to an organization that supports victims of domestic abuse • Continue to fund homeless shelters through Hope@Home program All data is presented as of June 30, 2020. 3
Second Quarter 2020 Highlights Net Income • Pre-tax/pre-provision earnings (non- $10.9 million GAAP) up 24% over last quarter • Maintained a strong capital and liquidity Diluted Earnings Per Share position $0.73 Originated approximately 10% of Maine’s • Return on Average Assets SBA PPP loans 0.90% • CECL accounting standard will be adopted at the earlier of the end of the COVID-19 Efficiency Ratio (non-GAAP) national emergency or 12/31/20 50.13% • Continued our support to employees, customers, and communities Total Risk-Based Capital Ratio 14.56% 4
Income Statement Inc/(Dec) $ thousands 2Q20 1Q20 2Q19 Highlights Net interest income $34,539 $2,713 $2,966 • SBA PPP loans added $1.7mm to 2Q20 interest income • Linked quarter and year-over-year increase driven by Non-interest income $12,060 $657 $2,023 strong mortgage banking income Total revenue $46,599 $3,370 $4,989 • 8% linked quarter; 12% year-over-year growth • Linked quarter decrease driven by lower compensation Non-interest expense $23,509 ($1,052) ($449) expense Pre-tax, pre-provision earnings(1) $23,090 $4,422 $5,438 • 24% linked quarter; 31% year-over-year growth Provision for credit losses $9,398 $7,623 $8,225 • Increase over prior periods reflects pandemic impact Income tax expense $2,752 ($648) ($523) • Driven by higher provision expense in response to the Net income $10,940 ($2,553) ($2,264) COVID-19 pandemic 2Q20 1Q20 2Q19 Efficiency Ratio(1) 50.13% 56.45% 57.27% Net Interest Margin (FTE) 3.11% 3.08% 3.11% Diluted EPS $0.73 $0.89 $0.85 (1) Non-GAAP measure. 5
Net Interest Income and Net Interest Margin NII and NIM Total deposit costs 2020 ($ in millions) $34.5 5.00% $35 0.76% 0.75% $31.6 $31.8 0.60% $30 4.00% 3.11% 3.08% 3.11% 0.41% $25 3.00% 0.34% 0.31% $20 2.00% $15 1.00% 2Q19 1Q20 2Q20 NII NIM Jan Feb Mar Apr May Jun Estimated Changes in Net Interest Income(1) Recent actions and continued focus Year 1 Year 2 • Continue to manage deposit rates lower +200 bps 0.28% 6.04% • CD maturities: -100 bps 0.55% -4.44% • $108 million in next 90 days at average cost of 1.06% $81 million 4 to 6 months at average cost of 1.34%. (1) Assumes flat balance sheet, no changes in asset/funding mix, • and a parallel and pro rata shift in rates over a 12 month period. • $124 million 7 to 12 months at average cost of 1.16% In the down -100 bps scenarios, Prime is floored at 3.00%, Fed Funds and Treasury rates at 0.01%, and all other market rates at • Floors on new loan production 0.25%. As of June 30, 2020. • Q4 19 investment portfolio restructuring 6
Securities Portfolio Securities Portfolio Mix • Book value was $1.1 billion, up $79 million, or 8%, (Book Value at 6/30/20) linked-quarter U.S. Agencies and Other • Average yield of 2.60%, down 7 bps linked-quarter 6% Municipal 12% • Unrealized net gain of $38.5 million on AFS CMO - Agency compared to $29.4 million at 3/31/20 35% • 99.9% AFS, 0.1% HTM • Duration 4.12 years compared to 4.65 years at 12/31/19 • 98% of municipal holdings are rated A or better by MBS - at least one rating agency (50% carry additional Agency 47% credit support) ($ in millions) 2Q19 3Q19 4Q19 1Q20 2Q20 Average Book Value $930 $906 $917 $927 $961 Book Yield 2.65% 2.63% 2.63% 2.67% 2.60% Modified Duration 4.01 4.08 4.65 4.37 4.12 All data is presented as of June 30, 2020. 7
Balance Sheet: Strong Liquidity Position Well Positioned to Support Liquidity Needs Liquidity Sources (6/30/20) Amount ($ millions) Unpledged Investment Securities $243.0 Unpledged Municipal Securities $98.0 Over Collateralized Securities Pledging Position $145.1 Lines of Credit Exposure FHLB Borrowing Capacity $482.8 3% Increase in Utilization YoY Current Fed Discount Window Availability $60.0 $1,251.1 $1,292.4 $1,269.1 Unsecured Borrowing Lines $69.9 Total $1,098.8 Brokered Deposit Access of $762.5 million 49% 53% 50% • Planned construction funding represents the entire increase in outstanding balance at 6/30/2020 over the 47% 51% 50% year-ago balance • Daily credit line monitoring shows declining utilization in non-construction lines since 3/31/2020 6/30/2019 3/31/2020 6/30/2020 Outstanding Unfunded 8
Loan Portfolio Residential Real Estate Balances of $3.3 Billion (as of 6/30/20) • 71% located in Maine and 24% in Massachusetts Home Equity • 65% are primary residences, 25% second homes and 10% and Consumer investment property 9% Commercial 13% • 97% of balances at </= 80% LTV(1) (or supplemented with private mortgage insurance) SBA PPP Commercial Real Estate 7% • 71% of real estate located in Maine, 15% in New Hampshire, and 10% in Massachusetts (1) • 91% of balances at </= 80% LTV Residential Real Estate Commercial 32% • SBA PPP production of $237.0 million added $178.1 million to average loans for Q2 with an average yield of 3.79% Loan Repricing Commercial Real Estate • $1.0 billion repricing in the next 12 months (average yield 39% 3.07%) • Floating rate: $944.8 million, 19% with in-the-money floors, and 74% without floors • Adjustable rate: $95.8 million, 2% with in-the-money floors, and 51% without floors All data is presented as of June 30, 2020. (1) At origination date 9
Commercial Diversification CRE and Commercial Loans by Industry Real Estate Investment Breakdown (as of 6/30/20) (as of 6/30/20) Other (12 Industries Other Nonresidential <2%) Buildings 16% 7% 1-4 Family 8% Professional, Scientific, & Office Buildings Technical Services 29% 3% Real Estate Industrial / Warehouse Finance / Investment 11% Insurance 37% 3% $731 Restaurants 3% $2.0 million Construction 4% billion Retail Store 20% Manufacturing 5% Multi-Family / Apartments 25% Retail Trade 7% Exposure to COVID-19 impacted industries Lodging Health Care / Social 14% • $406.8 million, or 12% of total loan portfolio, is within Lodging, Sr. Asst. Living & Care Facilities, Restaurants, and Travel & Recreation 8% • Approximately 53% of Lodging are nationally branded franchises. 56% of Lodging located in Maine, 22% in Massachusetts, and 13% in New Hampshire 10
Loan Assistance Programs SBA PPP SBA Paycheck Protection Program (as of 6/30/2020) • Funded 10% of Maine’s SBA PPP loans by Balances dollar amount Units (in millions) Total Production 2,919 $237.0 Total Outstanding 2,893 $225.8 Loan Deferral Program Loan Deferral Program – granted extensions (as of 6/30/2020) and deferrals Balances Units • Businesses: 30 – 180 day grace period (in millions) Business 992 $410.3 • Consumer: 90 – 180 deferral Consumer 489 $101.3 • Not reporting payment deferrals to credit Original Original bureaus and waiving certain fees Deferment Total 1,481 $511.6 Business 31 $5.3 Consumer 251 $29.8 Second Deferment Total 282 $35.1 Total Deferrals 1,763 $546.7 11
Loan Deferral Details Deferred $ Deferred $ Deferred $ Category % of Category % of Category Volume at Volume at Volume at ($ in millions) Deferred(1) Deferred(1) 4/22/2020 6/30/2020 7/23/2020 Lodging $183.4 $174.8 66.2% $91.9 34.8% Real Estate Investment $84.7 $102.0 14.0% $78.9 10.8% Health Care/Social Asst. $35.2 $29.9 19.8% $21.3 14.1% Retail Trade $36.6 $28.1 19.4% $15.8 10.9% Restaurants $31.0 $19.3 28.8% $5.9 8.9% Other Business $64.7 $61.5 10.2% $43.5 7.2% Business $435.6 $415.6 21.2% $257.3 13.1% Consumer $112.0 $131.1 9.6% $93.7 6.8% Total $547.6 $546.7 16.4% $351.0 10.5% • 100% of the COVID-19 deferred loans were current at the time of their hardship request • Through 7/23/2020, weekly deferment requests have decreased 94% compared to April’s peak • Deferral requests are expected to continue declining in the coming months as modification terms expire • As of 7/23/2020, we have not extended any full P&I deferments beyond 180 days • We continue to work with our customers to address payment concerns on a case by case basis (1) Percent of total outstanding category balance at 6/30/2020 12
Solid Credit Quality NPAs / Total Assets ALL / NPLs 310.87% 12/31/2009 1.07% 225.77% 0.67% 171.17% 0.50% 118.92% 0.34% 92.28% 12/31/2009 0.25% 0.23% 109.31% 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 2Q20 NCOs / Average Loans ALL / Total Loans 12/31/2009 12/31/2009 0.37% 1.33% 1.07% 0.89% 0.87% 0.82% 0.81% 0.13% 0.07% 0.08% 0.05% 0.01% 2016 2017 2018 2019 2Q20(1) 2016 2017 2018 2019 2Q20 Data presented does not reflect the impact of CECL, as the Company has elected to delay implementation of CECL pursuant to the CARES Act. (1) Annualized 13
Incurred Loss vs CECL Allowance for Credit Losses(1) ($ in millions) 1/1/2020 6/30/2020 ACL $25.2 $35.6 ACL as % of Loans 0.81% 1.07% Incurred Loss YTD Provision for Credit Losses $11.2 YTD Provision for Credit Losses as 0.69% % of Average Loans (annualized) ACL $27.0 - $31.0 $40.0 - $44.0 ACL as % of Loans 0.87% - 1.00% 1.20% - 1.32% CECL (Estimates) YTD Provision for Credit Losses(2) $9.0 - $17.0 YTD Provision for Credit Losses as 0.56% - 1.05% % of Average Loans (annualized) • Continue to run parallel calculations under incurred loss and CECL • Will adopt CECL the earlier of (i) December 31, 2020 or (ii) the end of the COVID-19 national emergency (1) Includes the allowance for loan losses and off-balance sheet credit exposures (2) Effective date for CECL upon adoption 14
Strong Capital Position Tier 1 Leverage Ratio Total Risk Based Capital Ratio Common Equity Tier 1 (CET1) Ratio 14.56% 11.80% 9.53% 9.55% 14.04% 14.14% 14.36% 14.44% 11.27% 11.30% 11.62% 11.69% 8.83% 9.07% 8.95% Required Minimum(1), 10.50% Required Minimum(1), Required 7.00% Minimum(1), 4.00% 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 2Q20 Cushion Required Ratios at Capital Above Amount Minimum(1) Asset 6/30/20 Required Growth ($ in millions) Minimum Tier 1 Leverage 8.95% $423.7 4.00% $234.3 $5,857.6 Total Assets for Leverage Ratio $4,734.1 Common Equity Tier 1 11.69% $380.7 7.00% $152.7 $2,181.3 Total Risk Based Capital 14.56% $474.2 10.50% $132.3 $1,259.6 Total Risk Weighted Assets $3,256.8 Repurchased 488,052 shares in 2019 at an average price of $42.61. In March of 2020, as the COVID-19 pandemic expanded, the Company suspended its current share buyback program after repurchasing 217,031 shares at an average price of $36.74 in the first quarter of 2020. (1) “Required Minimum” ratios represent minimum required capital ratios plus, for the risk based ratios, the fully phased-in 2.50% CET1 capital conservation buffer. 15