Camden National Reports Record Net Income of $69.0 Million for 2021; Net Income of $16.5 million for the Fourth Quarter of 2021
CAMDEN, Maine, Jan. 25, 2022 /PRNewswire/ -- Camden National Corporation (NASDAQ: CAC; "Camden National" or the "Company"), a $5.5 billion bank holding company headquartered in Camden, Maine, reported record net income for the year ended 2021 of $69.0 million and diluted earnings per share ("EPS") of $4.60, each an increase of 16% over the year ended 2020. The Company finished off the year strong with solid fourth quarter 2021 earnings of $16.5 million, an increase of 13% over the third quarter of 2021. For the year ended 2021, the Company's return on average equity was 12.72% and return on average tangible equity (non-GAAP) was 15.61%, compared to 11.81% and 14.79% for the year ended 2020, respectively.
"We're excited and grateful to report a new high-water mark this year with record earnings of $69.0 million. Our success is a direct reflection of the outstanding team we have across all facets of our organization and their commitment to delivering exceptional customer experiences," said Gregory A. Dufour, President and Chief Executive Officer of the Company. "We're entering 2022 in great financial standing, highlighted by strong capital and reserve levels, a well-positioned balance sheet and significant momentum fueled by our dedicated team."
Dufour added, "In addition to our financial success this past year, I'm equally excited to share that we have taken several important steps and actions throughout the year to continue our efforts to promote fair and equitable treatment of all of our constituents, including our employees and communities. While certainly not a comprehensive list, a few highlights include: (1) we increased our minimum wage for all employees to $17.00 per hour and provided a wage increase of 3.0% or more to all employees, (2) the Board of Directors adopted a diversity statement outlining our commitment to diversity at the board-level, and (3) we formed a Diversity, Equity and Inclusion Council made up of employees at all levels across the Company and is sponsored by myself. We also continued to support our communities through charitable giving and volunteering, with an emphasis on homelessness and victims of domestic violence."
Net income for the fourth quarter of 2021 was $16.5 million and diluted EPS was $1.11, an increase of 13% and 14%, respectively, over the third quarter of 2021 and a decrease of 10% and 9%, respectively, compared to the fourth quarter of 2020. The decrease compared to the fourth quarter of 2020 was the result of (1) a strategic shift to hold more of our residential mortgage production in 2021, (2) lower Small Business Administration Paycheck Protection Program ("SBA PPP") loan income, and (3) strong loan growth in the fourth quarter of 2021 that led to higher provisions for loans.
"In December, we announced a $0.04 increase in our quarterly cash dividend rate to $0.40 per share, representing our second dividend increase this year and bringing our total cash dividend per share for the year to $1.48," said Dufour. "We continue to take measured steps to manage our capital, and this year we did so through returning capital to our shareholders in the form of dividend increases and repurchases of the Company's common stock. As we move into 2022, we'll continue to actively monitor and manage capital with a focus on shareholder return."
During 2021, through the combination of cash dividends and share repurchases, the Company returned $31.2 million of capital to shareholders. For the year ended 2021, the Company repurchased 217,931 shares of its outstanding common stock at a weighted average price of $46.25.
FOURTH QUARTER 2021 HIGHLIGHTS
Net income increased by $1.9 million, or 13%, over the third quarter of 2021, and decreased $1.8 million, or 10%, compared to the fourth quarter of 2020.
Earnings before income taxes and provision (non-GAAP) increased $2.3 million, or 12%, over the third quarter of 2021, and decreased $1.2 million, or 5%, compared to the fourth quarter of 2020, which was driven by: (1) a decrease in mortgage banking income of $3.5 million as the Company shifted its strategy in 2021 to hold more of its residential mortgage production in its loan portfolio and (2) lower SBA PPP income of $1.0 million.
Loans grew $116.2 million, or 4%, during the fourth quarter of 2021, and $162.2 million, or 5%, excluding SBA PPP loans (non-GAAP). Loans grew $211.7 million, or 7%, for the year ended 2021, and $310.8 million, or 10%, excluding SBA PPP loans.
Residential mortgage loan originations reached a new record in 2021 with $1.1 billion of volume, an increase of 5% over the previous record set just last year.
Fourth quarter 2021 dividend payable to shareholders increased $0.04, or 11%, to $0.40 per share, and was the Company's second dividend increase during 2021 for a total of $0.07 per share, or 21%. The Company's annualized dividend yield at December 30, 2021 (last business day) was 3.32%, based on the Company's closing stock price of $48.16.
Allowance for credit losses on loans ("ACL") coverage ratio was 0.97% to total loans at December 31, 2021, compared to 1.18% a year ago, but still above pre-pandemic levels of 0.81% at December 31, 2019.
Total assets grew 12% during 2021 to $5.5 billion as of December 31, 2021. Asset growth for the year ended 2021 was driven by an increase in investment balances of $390.7 million, or 34%, and an increase in loan balances of $211.7 million, or 7%.
For the year ended 2021, investment balances grew 34% to $1.5 billion at December 31, 2021, and were 28% of total assets at December 31, 2021, compared to 23% a year ago. The increase in investment balances during 2021 was directly tied to the run-up in liquidity across the industry as deposits grew 15% over this period. For the year ended 2021, the Company purchased $758.8 million of debt securities, which continue to be primarily mortgage-backed securities and collateralized mortgage obligations. As of December 31, 2021, the weighted-average life of the Company's debt securities portfolio was 5.9 years compared to 5.1 years as of December 31, 2020.
For the year ended 2021, loan balances grew 7% (and excluding SBA PPP loans grew 10%) to $3.4 billion at December 31, 2021. Loan growth occurred within the residential real estate loan portfolio – increasing $251.6 million, or 24%, to $1.3 billion at December 31, 2021 – and within the commercial real estate loan portfolio – increasing $126.0 million, or 9%, to $1.5 billion at December 31, 2021. The increase in these two loan portfolios more than offset the decreases across the commercial, consumer and home equity, and SBA PPP loan portfolios, which decreased 5%, 18% and 73%, respectively. At December 31, 2021, remaining SBA PPP loan balances were $36.0 million, which are net of unearned origination fees of $1.2 million yet to be recognized. The Company anticipates that its SBA PPP loan portfolio will continue to pay-down at an accelerated pace as borrowers apply for forgiveness.
As previously reported, during the first half of 2021 the Company shifted its strategy to hold more of its fixed rate residential mortgage production within its loan portfolio. For the year ended 2021, the Company held 56%, or $609.3 million, of its residential mortgage production within its loan portfolio, which includes holding 67% of its originations for the fourth quarter of 2021. As of December 31, 2021, 73% of the Company's residential mortgage pipeline was designated to be held in its portfolio.
Total deposits grew $603.6 million, or 15%, during 2021 to $4.6 billion as of December 31, 2021. Core deposits grew $726.8 million, or 22%, led by annual checking account growth of $550.1 million, or 26%, and annual savings and money market account growth of $176.6 million, or 14%. Core deposit growth during the year was driven by additional government stimulus programs in response to the COVID-19 pandemic. Given the increase in core deposits during 2021, other funding channels were closely managed in an effort to reduce more costly funding, including: (1) a decrease in certificates of deposit balances and brokered deposit balances of $48.0 million and $75.1 million, respectively, (2) the early termination of a $25.0 million long-term borrowing contract during the first quarter of 2021 and (3) full redemption of the Company's $15.0 million of subordinated notes during the second quarter of 2021, at par plus accrued interest.
The Company's loan-to-deposit ratio was 74% at December 31, 2021, compared to 80% at December 31, 2020.
As of December 31, 2021, the Company's capital position was strong, highlighted by:
Total risk-based capital ratio of 14.71% and a tier 1 leverage ratio of 8.92%, each well in excess of regulatory capital requirements.
Shareholders' equity to total assets ratio and tangible common equity ratio (non-GAAP) were 9.84% and 8.22%, respectively.
Book value per share of $36.72 at December 31, 2021, an increase of $1.22, or 3%, during 2021. Tangible book value per share (non-GAAP) increased $1.19, or 4%, during 2021 to $30.15 at December 31, 2021.
The Company repurchased 111,429 shares of its outstanding common stock during the fourth quarter and 217,931 shares for the year ended 2021. In January 2022, the Company announced a new share repurchase program for 750,000 shares of Company common stock, or approximately 5% of outstanding stock at December 31, 2021. The new share repurchase program replaces the prior program, which expired upon the announcement of the new program.
As of December 31, 2021, the Company's asset quality metrics remained very strong with non-performing assets of 0.13% of total assets and loans 30-89 days past due of 0.04% of total loans. In comparison, at December 31, 2020, non-performing assets were 0.22% of total assets, and loans 30-89 days past due were 0.10% of total loans.
As of December 31, 2021, the Company did not have any loans operating under a temporary deferment arrangement as permitted under the Coronavirus Aid, Relief and Economic Security Act, commonly referred to as the CARES Act, and the Consolidated Appropriations Act, 2021.
ALLOWANCE FOR CREDIT LOSSES ("ACL")
As of December 31, 2021 and 2020, the Company accounted for its ACL on loans in accordance with the current expected credit losses model, commonly referred to as "CECL." At December 31, 2021, the ACL on loans was $33.3 million, or 0.97% of total loans, compared to $32.3 million, or 0.97% of total loans, at September 30, 2021 and $37.9 million, or 1.18% of total loans, at December 31, 2020. In estimating the ACL on loans at December 31, 2021, the Company considered portfolio make-up and loan balances, current and forecasted macroeconomic and credit trends, as well as Company-specific factors. The decrease in the ACL on loans over this period reflects the general improvement across many of the macroeconomic factors observed, as well as accounts for the strong loan growth during 2021 of 7% (or 10% excluding SBA PPP loans). At December 31, 2021, the ACL on loans to total loans ratio of 0.97% accounts for the overall macroeconomic improvement and continued strong overall asset quality, as well as the continued dynamic environment and unique challenges that persist largely due to the pandemic.
FINANCIAL OPERATING RESULTS (Q4 2021 vs. Q3 2021)
Net income for the fourth quarter of 2021 was $16.5 million, an increase of $1.9 million, or 13%, over the third quarter of 2021. Diluted EPS for the fourth quarter of 2021 was $1.11, an increase of $0.14, or 14%, on a linked quarter-basis.
Earnings before income taxes, provision and SBA PPP income for the fourth quarter was $19.2 million, an increase of $1.6 million, or 9%, over the third quarter of 2021.
Net Interest Income and Net Interest Margin. Net interest income for the fourth quarter of 2021 was $36.8 million, an increase of $2.1 million, or 6%, over the third quarter of 2021. On a linked quarter-basis, interest income increased $2.1 million, or 6%, and interest expense was stable, increasing only $21,000, or 1%.
The increase in interest income between periods was driven by: (1) an increase in SBA PPP income of $734,000 as average SBA PPP loan balances decreased 47% during the fourth quarter of 2021, (2) an increase in average investment balances of $107.2 million, or 8%, and (3) an increase in average loan balances of $69.3 million, or 2%. The yield on average interest-earning assets for the fourth quarter was 3.02%, an increase of 5 basis points over the third quarter of 2021. However, adjusting for SBA PPP loans and excess liquidity, the yield on average-interest earning assets for the fourth quarter was 3.01%, a decrease of 3 basis points compared to the third quarter of 2021, driven primarily by lower residential real estate loan yields of 6 basis points between periods.
The increase in interest expense between periods was driven by an increase in average deposits of $175.0 million, or 4%, to $4.4 billion, but was partially offset by a decrease in costs of funds of 1 basis point to 0.21%.
Net interest margin for the fourth quarter of 2021 was 2.82%, an increase of 6 basis points over the third quarter of 2021. Adjusted net interest margin, which excludes SBA PPP loans and excess liquidity (non-GAAP), for the fourth quarter of 2021 was 2.79%, a decrease of 3 basis points compared to the third quarter of 2021.
Provision for Credit Losses. The change in provision for credit losses between periods is highlighted in the table below:
($ in thousands)
Provision for credit losses - loans
Provision for credit losses - off-balance sheet credit exposures
Provision (credit) for credit losses
On a linked quarter-basis, the increase in provision for credit losses on loans was primarily due to loan growth, excluding SBA PPP loans, of $162.2 million, or 5%, and was partially offset by continued improving current and forecasted market conditions.
The provision for credit losses on off-balance sheet credit exposures reflects the change between periods on the Company's future expected credit losses on funding commitments, which includes the unfunded portion of its construction loans, credit lines, and committed loan pipeline. On a linked quarter-basis, the Company's ACL on off-balance sheet credit exposures was stable, increasing $10,000 to $3.2 million at December 31, 2021.
Non-Interest Income. Non-interest income for the fourth quarter of 2021 was $12.1 million, an increase of $1.0 million, or 9%, over the third quarter of 2021. The increase was driven by an increase in debit card income of $701,000, which was primarily due to receipt of our annual incentive bonus of $741,000 and an increase in mortgage banking income of $171,000.
Non-Interest Expense. Non-interest expense for the fourth quarter of 2021 was $27.0 million, an increase of $705,000, or 3%, compared to the third quarter of 2021. The increase was driven by: (1) higher other expenses of $555,000 primarily due to a valuation adjustment on the Company's back-to-back loan swap program of $188,000, and an increase in marketing- and employee-related costs of $140,000 and $130,000, respectively, (2) higher furniture, equipment and data processing costs of $313,000, which includes timing of the annual core system upgrade in the fourth quarter and continued investments in information security infrastructure, (3) higher consulting and professional fees of $247,000, and (4) higher net occupancy costs of $150,000 due to the change in seasons and employees returning to the office in September 2021. These increases were partially offset by a decrease in salaries and benefits expense of $637,000 primarily driven by a decrease in bonus and incentive accruals between quarters, net of an increase in wages due to the off-cycle merit increase in early-October 2021 that provided employees with a wage increase of 3% or more and increased minimum wage by $2 to $17 per hour.
FINANCIAL OPERATING RESULTS (Q4 2021 vs. Q4 2020)
Net income for the fourth quarter of 2021 decreased $1.8 million, or 10%, compared to the fourth quarter of 2020. Diluted EPS for the fourth quarter of 2021 decreased of $0.11, or 9%, compared to the same period last year. The highlights include:
An increase in net interest income between periods of $1.3 million, or 4%, driven by higher average investment balances of 41%, and a decrease in cost of funds of 12 basis points, partially offset by lower SBA PPP loan income of $1.0 million.
A decrease in net interest margin between periods of 24 basis points to 2.82% for the fourth quarter of 2021. Adjusted net interest margin, which excludes SBA PPP loans and excess liquidity (non-GAAP), for the fourth quarter of 2021 was 2.79%, a decrease of 20 basis points compared to the fourth quarter of 2020.
An increase in provision for credit losses between periods of $972,000.
A decrease in non-interest income between periods of $2.2 million, or 16%, driven by a shift in strategy to hold more residential mortgage loans in 2021, which resulted in a decrease in mortgage banking income of $3.5 million, partially offset by an increase in debit card income of $718,000.
An increase in non-interest expense between periods of $276,000, or 1%. For the fourth quarter of 2021, our annualized ratio of non-interest expense to average assets was 1.94%, compared to 2.13% for the fourth quarter of 2020.
Q4 2021 CONFERENCE CALL
Camden National will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, January 25, 2022 to discuss its fourth quarter and year ended 2021 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):
Live dial-in (international):
Participant access code:
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 $5.5 billion in assets and approximately 600 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 three years, Camden National Bank was named a Customer Experience (CX) Leader by leading independent research firm, Greenwich Associates. In 2021, it received awards in two CX categories: U.S. Retail Banking and U.S. Commercial Small Business. The Finance Authority of Maine has awarded Camden National Bank as "Lender at Work for Maine" for eleven years, and the bank was included in the 2021 list of Best Places to Work in Maine. Comprehensive wealth management, investment and financial planning services are delivered by Camden National Wealth Management. To learn more, visit CamdenNational.com. Member FDIC.
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 Camden National's Annual Report on Form 10-K for the year ended December 31, 2020, 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 earnings before income taxes and provision and earnings before income taxes, provision and SBA PPP loan income; return on average tangible equity; the efficiency and tangible common equity ratios; tangible book value per share; core deposits and average core deposits; adjusted yield on interest-earning assets and adjusted net interest margin (fully-taxable equivalent); and total loans, excluding SBA PPP loans. 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.
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.
Selected Financial Data
At or For The
Three Months Ended
At or For The
(In thousands, except number of shares and per share data)
Financial Condition Data
Loans and loans held for sale
Allowance for credit losses on loans
Net interest income
Provision (credit) for credit losses
Income before income tax expense
Income tax expense
Return on average assets
Return on average equity
GAAP efficiency ratio
Net interest margin (fully-taxable equivalent)
Non-performing assets to total assets
Common equity ratio
Tier 1 leverage capital ratio
Total risk-based capital ratio
Per Share Data
Basic earnings per share
Diluted earnings per share
Cash dividends declared per share
Book value per share
Return on average tangible equity
Adjusted net interest margin (fully-taxable equivalent)
2 .79 %
Earnings before income taxes and provision for credit losses
Earnings before income taxes, provision for credit losses and SBA PPP loan income
Tangible common equity ratio
Tangible book value per share
Please see "Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)."
Consolidated Statements of Condition Data
Cash, cash equivalents and restricted cash
Available-for-sale securities, at fair value (book value of $1,508,981, $1,443,800 and $1,078,474, respectively)
Held-to-maturity securities, at amortized cost (fair value of $1,380, $1,390, and $1,411, respectively)
Loans held for sale, at fair value (book value of $5,786, 10,789, and $40,499 respectively)
Commercial real estate
Residential real estate
Consumer and home equity
Less: allowance for credit losses on loans
Goodwill and core deposit intangible assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Savings and money market
Certificates of deposit
Accrued interest and other liabilities
Total liabilities and shareholders' equity
Includes the Healthcare Professional Funding Corporation ("HPFC") loan portfolio.
Consolidated Statements of Income Data