CAC Camden National Corporation

Reports Fourth Quarter 2023 Net Income of $8.5 million and Diluted EPS of $0.58;
Capital and Asset Quality Remain Strong at Year End

CAMDEN, Maine, Jan. 30, 2024 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $5.7 billion bank holding company headquartered in Camden, Maine, reported net income of $8.5 million and diluted earnings per share ("EPS") of $0.58 for the fourth quarter of 2023, both decreases of 13% compared to the third quarter of 2023. Throughout 2023, financial institutions, including Camden National, were faced with many challenges due to the interest rate environment and well-publicized bank failures. In response to these dynamics, the Company prioritized actions designed to maintain long-term shareholder value and to position ourselves to be able to capitalize on future growth opportunities. We believe the actions we took during 2023 fortified our balance sheet, stabilized net interest margin and positioned the Company for future earnings capacity.

Included in the Company's fourth quarter 2023 financial results are pre-tax investment losses of $5.0 million. The Company sold lower yielding investments at a loss in the third and fourth quarters of 2023 to adjust its balance sheet and to improve future earnings and profitability. Adjusted pre-tax, pre-provision income, which excludes the impact of the investment losses (non-GAAP), was $15.8 million, a decrease of 6% from the third quarter of 2023.

On November 20, 2023, Simon Griffiths joined the Company, and he took on the role of President and Chief Executive Officer effective January 1, 2024. "I am honored to join this Company and lead this talented team," said Mr. Griffiths. "Our balance sheet is one of our strengths and is supported by strong fundamentals, including capital, liquidity and asset quality. As we begin 2024, we are positioned well to lean into this strength and drive future growth."

FOURTH QUARTER 2023 HIGHLIGHTS

• Our capital position remained strong and improved compared to the third quarter, highlighted by increases in our common equity ratio to 8.66% and our tangible common equity ratio (non-GAAP) to 7.11% at December 31, 2023, compared to 8.02% and 6.47%, respectively, at September 30, 2023.
• Our asset quality continues to be strong, highlighted by loans 30-89 days past due of 0.12% of total loans and non-performing assets of 0.13% of total assets at December 31, 2023.
• Our return on average assets was 0.59% and adjusted return on average assets (non-GAAP) was 0.87% for the fourth quarter of 2023.
• Our return on average equity was 7.20% and adjusted return on average equity (non-GAAP) was 10.53%, while our return on average tangible equity (non-GAAP) was 9.18% and adjusted return on average tangible equity (non-GAAP) was 13.38% for the fourth quarter of 2023.
• Uninsured and uncollateralized¹ deposits were 14.6% of total deposits and available liquidity sources were 2.0 times uninsured and uncollateralized deposits at December 31, 2023, compared to 15.3% and 2.1 times, respectively, at September 30, 2023.

FINANCIAL CONDITION

As of December 31, 2023, total assets were $5.7 billion, a decrease of 1% since September 30, 2023, and an increase of 1% since December 31, 2022.

Loans

Loans at December 31, 2023 totaled $4.1 billion, a 1% increase since September 30, 2023, and an increase of 2% since December 31, 2022.

• Loan growth for the fourth quarter of 2023 was spread across all of our loan portfolios, including residential real estate, commercial real estate and commercial loan portfolios each growing 1%, and the consumer and home equity loan portfolio growing 2%.
• The increase in loans for the year ended 2023 was driven by residential real estate loan growth of 4% and commercial real estate loan growth of 3%, partially offset by a decrease in commercial loans of 6%.
• The Company shifted its loan pricing strategy in 2023 to slow on-books loan production given the focus on deposits, net interest margin and asset quality, which included selling more of its residential mortgage production. The Company sold 48% of residential mortgages it originated for the year ended December 31, 2023, compared to 20% for the year ended December 31, 2022.

Investments

Investments totaled $1.2 billion as of December 31, 2023, an increase of 3% since September 30, 2023, and a decrease of 5% since December 31, 2022. Investment balances represented 21% of the Company's assets as of December 31, 2023, compared to 20% at September 30, 2023 and 22% at December 31, 2022.

• The Company sold $70.4 million of investments in the fourth quarter of 2023 with a weighted-average yield of 3.02% at a pre-tax loss of $5.0 million. The proceeds from the sale were used to fund loan growth or were reinvested into higher interest-earning investments.
• As of December 31, 2023, the Company's debt securities designated as available-for-sale ("AFS") and held-to-maturity ("HTM") were, collectively, in a net unrealized loss position of $111.5 million, decreasing from a net unrealized loss position of $182.4 million and $141.5 million as of September 30, 2023 and December 31, 2022, respectively.
• As of December 31, 2023 and 2022, the weighted-average life of the Company's debt securities was 7.8 years and the duration was 5.7 years and 5.8 years, respectively.

Deposits

As of December 31, 2023, deposits totaled $4.6 billion, a decrease of 2% since September 30, 2023, and a decrease of 5% since December 31, 2022.

• Checking and savings account balances decreased $115.4 million, or 4%, in the fourth quarter of 2023, primarily due to the combination of seasonal outflows and the shift from checking and savings accounts to higher interest-bearing deposit accounts.
• Certificates of deposit ("CD") balances grew $57.4 million, or 10%, and money market balances grew $8.9 million, or 1%, in the fourth quarter of 2023.
• The loan-to-deposit ratio was 89% at December 31, 2023, compared to 87% at September 30, 2023 and 83% at December 31, 2022.

Borrowings

As of December 31, 2023, borrowings totaled $529.9 million, an increase of 3%, since September 30, 2023, and an increase of 71%, since December 31, 2022.

• As of December 31, 2023, the Company's borrowings consisted of: (1) $200.7 million of customer repurchase agreements, (2) $135.0 million from the Bank Term Funding Program ("BTFP") at a fixed rate of 4.70% which the Company may prepay at any time without penalty, (3) $150.0 million of short-term Federal Home Loan Bank of Boston borrowings, of which $125.0 million supports interest rate swap derivatives, and (4) $44.3 million of junior subordinated debentures.

Capital

As of December 31, 2023, the Company's regulatory capital ratios were each well in excess of regulatory capital requirements. In addition, the Company's common equity ratio was 8.66%, and its tangible common equity ratio (non-GAAP) was 7.11%, compared to 8.02% and 6.47%, respectively, at September 30, 2023, and 7.96% and 6.37%, respectively, at December 31, 2022.

On December 19, 2023, the Company announced a cash dividend of $0.42 per share, representing an annualized dividend yield of 4.46%, based on the Company's closing share price of $37.63, as reported by NASDAQ on December 29, 2023 (the last business day of the fourth quarter of 2023), payable on January 31, 2024, to shareholders of record on January 15, 2024.

The Company repurchased 65,692 shares of its common stock at an average price of $30.44 per share during the year ended December 31, 2023. In January 2024, the Company announced a new share repurchase program for 750,000 shares of the Company common stock, or approximately 5% of outstanding stock as of December 31, 2023. The new share repurchase program replaces the prior program, which expired in early January 2024.

ASSET QUALITY

The Company's asset quality in the fourth quarter of 2023 and as of December 31, 2023 remained strong. The Company continues to actively monitor its loan portfolio, particularly its commercial real estate loan portfolio, for signs of credit stress.

• Loans 30-89 days past due were 0.12% of total loans at December 31, 2023, compared to 0.09% at September 30, 2023, and 0.06% of total loans at December 31, 2022.
• Non-performing loans were 0.18% of total loans at December 31, 2023, compared to 0.16% at September 30, 2023, and 0.13% at December 31, 2022.
• Annualized net charge-offs to average loans was 0.04% for the fourth quarter of 2023, compared to 0.01% for the third quarter of 2023, and 0.03% for the fourth quarter of 2022.

FINANCIAL OPERATING RESULTS (Q4 2023 vs. Q3 2023)

Net income for the fourth quarter of 2023 was $8.5 million, a decrease of $1.3 million, or 13%, compared to the third quarter of 2023. Excluding income taxes, provision for credit losses, investment losses and Small Business Administration Paycheck Protection Program ("SBA PPP") income (non-GAAP), net income for the fourth quarter of 2023 decreased $959,000, or 6%, compared to last quarter.

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2023 was $32.7 million, an increase of $125,000 compared to the third quarter of 2023. The increase was driven by a 1 basis point increase in net interest margin between periods to 2.40% for the fourth quarter of 2023, partially offset by a decrease in average interest-earning assets between periods of less than 1%. This increase was aided by the adjustments to the Company's investment portfolio that were made in the third and fourth quarters of 2023 and the balance sheet derivatives entered into during 2023.

Provision (Credit) for Credit Losses

Provision expense for the fourth quarter of 2023 was $569,000 and increased $1.1 million over the third quarter of 2023. The increase was driven by loan growth between periods of 1% and completion of our annual allowance model re-assessment in the fourth quarter, which resulted in higher loss rates across our forecast period.

At December 31, 2023, the allowance for credit losses ("ACL") on loans was 0.90% of total loans, consistent with September 30, 2023. At December 31, 2023, the ACL was 5.0 times total non-performing loans, compared to 5.5 times at September 30, 2023.

The change in provision for credit losses between periods is highlighted in the table below:

Non-Interest Income

Non-interest income for the fourth quarter of 2023 was $6.0 million, an increase of $914,000, or 18%, over the third quarter of 2023. The significant changes in non-interest income between periods included:

• An increase in mortgage banking income of $449,000, driven by a positive fair value adjustment on the residential mortgage loan pipeline designated for sale, which was primarily due to the sharp decrease in the 10-year U.S. Treasury interest rate at the end of the fourth quarter.
• A smaller loss on sale of investments of $360,000.
• An increase in debit card income of $336,000, as the Company recognized its annual Visa incentive bonus in the fourth quarter of $400,000.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2023 was $27.8 million, an increase of $1.6 million, or 6%, compared to the third quarter of 2023. The increase in operating expenses between periods was driven by: (1) executive transition-related costs, which includes compensation, legal and other consulting support, (2) an increase in data processing costs due to the timing of the annual upgrade to the Company's core system in the fourth quarter, (3) an increase in occupancy-related costs during the winter months, and (4) elevated customer fraud losses.

The Company's GAAP efficiency ratio and non-GAAP efficiency ratio for the fourth quarter of 2023 was 71.69% and 63.48%, respectively, compared to 69.60% and 60.63% for the third quarter of 2023.

Q4 2023 CONFERENCE CALL

Camden National will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, January 30, 2024, to discuss its fourth quarter 2023 financial results and outlook. Participants should dial into the call 10 - 15 minutes before it begins. Information about the conference call is as follows:

A link to the live webcast will be available on Camden National's website under "About — Investor Relations" at CamdenNational.bank 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 $5.7 billion in assets and was proudly listed as one of the Best Places to Work in Maine for the past three years. Founded in 1875, Camden National Bank is a full-service community bank dedicated to customers at every stage of their financial journey. With 57 banking centers and additional lending offices in New Hampshire and Massachusetts, Camden National Bank offers the latest in digital banking, complemented by award-winning, personalized service. To learn more, visit CamdenNational.bank. Member FDIC. Equal Housing Lender.

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; inflation; ongoing competition in labor markets and employee turnover; deterioration in the value of Camden National's investment securities; changes in consumer spending and savings habits; 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; turmoil and volatility in the financial services industry, including failures or rumors of failures of other depository institutions, including Camden National, which could affect Camden National's ability to attract and retain depositors, and could affect the ability of financial services providers, including the Company, to borrow or raise capital; actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions; changes to regulatory capital requirements in response to recent developments affecting the banking sector; changes in the securities markets and other risks and uncertainties disclosed from time to time in Camden National's Annual Report on Form 10-K for the year ended December 31, 2022, as updated by other filings with the Securities and Exchange Commission ("SEC"). Further, statements regarding the potential effects of the war in Ukraine, the COVID-19 pandemic, conflict in the Middle East and other notable and global current events on the Company's business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possible 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 the Company's control. 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: adjusted net income; adjusted diluted earnings per share; adjusted return on average assets; adjusted return on average equity; pre-tax pre-provision income; adjusted pre-tax pre-provision income; return on average tangible equity and adjusted 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 measures 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. Reconciliations to the comparable GAAP financial measures 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 is presented for illustrative purposes only.