Camden National Corporation (CAC) Earnings Call Transcript & Summary

Good afternoon, and welcome to the 2021 Annual Meeting of Shareholders of Camden National Corporation. It is my pleasure to turn today's meeting over to Lawrence Sterrs, Director and Chair of Camden National Corporation.

Thank you, and good afternoon, ladies and gentlemen. My name is Larry Sterrs, Director and Chair of the Board of Directors of Camden National Corporation. I want to welcome you to our 2021 Annual Meeting of Shareholders. Like last year, this year's annual meeting is a hybrid meeting as we continue to take the necessary precautions and steps to meet social distancing directives required by our governor. On a personal note, I hope that you're all healthy and safe in dealing with this crisis. At Camden National, we've been working hard to ensure the company remains a source of strength and stability for our communities, our customers and our employees. With that, I'd like to call the 2021 Annual Meeting of Shareholders to order, and welcome all of you. Also present on the telephone today are Greg Dufour, President and Chief Executive Officer; Greg White, Executive Vice President, Chief Financial Officer; Joanne Campbell, Executive Vice President, Risk Management, who will serve as Secretary and record minutes of today's meeting; and Mike Archer, Senior Vice President and Corporate Controller; who will serve as Inspector of the Election. Pat Mulloy from RSM, our independent registered public accounting firm; and Jared Fishman from Sullivan & Cromwell, our external Counsel, are also present on the telephone and available to answer questions. This year, we again use the SEC's notice and access rules that allow us to furnish our proxy materials over the Internet to our shareholders instead of mailing paper copies of those materials to each shareholder. Notice of this meeting, containing the instructions on how to access our proxy materials and vote was mailed on or about March 15, 2021, to all shareholders of record as of February 22, 2021. Shareholders who have logged into the meeting virtually with a control number have access to submit questions and vote online. Also the registered shareholder list as of February 22, record date and the minutes from last year's annual meeting of shareholders are available for inspection. For those shareholders who have joined us here at Camden National Corporation Family Center located at Rockland, Maine, they may ask a question during the general question-and-answer portion of the meeting and they submit their vote by placing their proxy card in the box on the table in the back of the room. Also on the table at the back of the room is a list of registered shareholders as of February 22 record date and the copies of the minutes from the last annual meeting, I think we're giving to you when you came in. Mr. Archer has reported that there are more than 12 million shares of common stock represented at this meeting, which constitutes approximately 82% of the outstanding shares entitled to vote today. Because holders of the majority of the shares entitled to vote at this meeting are present by proxy and a quorum is present, I declare this meeting to be duly convened for the purpose of transacting such business as may appropriately come before us. Please note that the polls are still open for shareholders to vote. Shareholders of record who have joined the meeting virtually by logging in with the control number and who have not yet cast a vote via proxy or the virtual meeting portal or wish to change their vote may do so in the virtual meeting portal. Shareholders of record who are attending in-person and have not yet submitted their vote or wish to change their vote, they do so now by placing his or her ballot in the box at the table of the back of the room. If you do not have a proxy card, there's also forms on the back table in the back of the room that you may complete and place in the box. Remember that if you have already sent your proxy card or voted by Internet or telephone, your shares have been voted accordingly. You do not need to vote today unless you are voting for the first time or want to change your previous vote. The polls will be closing in a few minutes, and I ask you to submit your vote now if you have not done so already in order for your vote to be counted. The order of business for today's meeting will be as follows: presentations or proposals to be considered and acted upon and voted upon the voting results, adjournment of the formal meeting, a brief financial update from Greg White, Executive Vice President and Chief Financial Officer; and then a brief update from Greg Dufour, President and Chief Executive Officer. Following completion of our formal remarks, we will hold a question-and-answer session. If you are a shareholder who has joined the virtual meeting using a control number and you have a question you'd like to ask, please go ahead and ask your question by typing it into the question box on the virtual meeting portal at any time. Questions from shareholders may be addressed only under the proposal under discussion. General questions from shareholders will be held at the end of the general session, question-and-answer session following our formal remarks. Questions from multiple shareholders on the same topic or that are otherwise related may be grouped summarized and answered together. Remind you that personal matters and claims are not appropriate subjects for the public discussion in today's meeting. If you need assistance with a personal financial matter, please contact our customer service team, and they'll be more than happy to help. The Board of Directors has proposed 3 matters to be considered at the annual meeting. Please note that the polls will be closed once I finish discussing these proposals. So again, any final vote should be cast now. The first proposal to be voted upon is the election of Ann Bresnahan, Gregory Dufour, S. Catherine Longley and Carl Soderberg to the company's Board of Directors, each to serve a term of 3 years or until his or her successor is elected and qualified. The second proposal to be voted upon is the approval of a nonbinding advisory vote on executive officer compensation, also called the Say-on-Pay proposal. The third proposal will be voted upon is the ratification of the appointment of RSM LLP as the company's independent registered public accounting firm for the fiscal year ended December 21 -- December 31, 2021. Mr. Archer, have any questions coming from the shareholders regarding these proposals?

No questions regarding the proposals that have been submitted, Larry.

Great. Thank you, Mike. So it's now time to move on to the voting. Please note that we're about to close the polls for voting at this meeting. We remind you again that if you've already sent in your proxy card or voted by Internet or telephone, your shares have been voted accordingly. You do not need to vote today unless you're voting for the first time or want to change your previous vote. I now declare the polls closed and direct the Inspector of Election to tabulate the voting results. Mike, can you please report on the results of the voting?

Thank you, Larry. Based upon the preliminary totals, all nominees for election to the Board of Directors have been elected. The nonbinding Say-on-Pay proposal has been approved and the appointment of RSM LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2021, has been ratified. The final vote tallies will be included in the company's Form 8-K, which will be filed with the SEC within the next 4 business days.

Thank you, Mike. With the completion of the voting, the formal business meeting is now adjourned. At this time, we will now also close access to the registered shareholder list. I will now turn the meeting over to Greg White, our Chief Financial Officer.

Thank you, Larry, and good afternoon, everyone. I'd like to remind you that any forward-looking statements made during today's meeting are subject to risks and uncertainty. Factors that could materially change our current forward-looking assumptions are described on Slide 2 of today's presentation and in our Form 10-K and subsequent reports on file with the SEC. We also referenced non-GAAP financial measures, which are reconciled in our Form 10-K and earnings releases filed with the SEC. Last year, our financial performance was very strong despite the challenges brought on by the pandemic. We had record net income of $59.5 million, up $2.3 million from $57.9 million in 2019, which was also a strong year performance wise. This page also shows some very strong financial metrics and trends, including a 7% increase in our diluted earnings per share to $3.95 in 2020 compared to $3.69 in 2019. Our dividends paid also increased by 7% in 2020 to $1.32 per share from $1.23 per share in 2019. For the first quarter of this year, we had a record quarterly net income of $19.7 million or $1.31 diluted earnings per share, up 46% and 47%, respectively, from $13.5 million in net income or $0.89 diluted earnings per share for the same period in 2020. On March 30 of this year, our Board of Directors approved a quarterly dividend of $0.36, which is up 9% from the $0.33 paid in the same period last year. Our return on tangible equity for the first quarter of this year was a record 18.47% compared to 14.35% for the same period last year. Asset quality remains strong as evidenced by our nonperforming asset ratio declining to 20 basis points as of the end of the first quarter of this year compared to 23 basis points as of March 31, 2020. Despite the decline in nonperforming assets, our allowance for credit losses to total loans increased to 1.1% as of March 31, 2001 (sic) [ 2020 ] up from 89 basis points a year ago. This increase is primarily due to the implementation of CECL or the current expected credit loss methodology for estimating our allowance for credit losses. The CECL methodology is largely driven by economic forecasts, which have improved recently and led to a $2 million reserve release during the first quarter of this year. Our regulatory capital levels are also strong and have been growing. Our total risk-based capital ratio is 16% as of the end of the first quarter of this year, up from 13.81% as of March 31, 2020. Lastly, the 5-year total return on Camden National Corporation stock is almost 89% compared to 73% for the referenced National Bank index and 56% for our proxy peer group average. That concludes my remarks, and I will now turn it over to our CEO and President, Greg Dufour.

Great. Thank you, Greg, and welcome, everybody, and I want to join Larry's wishes that I hope everyone is healthy during these times. As I started to prepare my remarks for this year's annual shareholder meeting, I reviewed what I shared with you all last year. At that time, we were a little over 30 days into our response for the pandemic. My comments centered around how we shifted resources to help our customers through loan deferral program, anticipating PPP lending, how we focused on certain areas to help our communities, increased support of our employees and the importance of the financial strength of Camden National as we brace for the economic uncertainty in front of us. As I look back, there are at least 3 areas that surprised me. First, I couldn't imagine then that we would now report record annual earnings for 2020. Second, while I have never underestimated the power of our employees, who we call stakeholders, their performance, resiliency and fortitude throughout the pandemic were far beyond what I or anyone could have imagined. Finally, there was no way in April 2020 that I could have imagined we would experience such a lockdown and change in our personal and business lives due to the pandemic. Even though a year ago, we faced daily challenges of shifting our organization to a remote environment under extreme circumstances, the executive team and I began to view the pandemic through a different lens. We were exposed to 1 business leader who coined the phrase that crisis does not change the paradigm, rather a crisis will accelerate trends within it. This provided us a foundation for how we address important daily issues and challenges while still building our organization for the future as trends around us accelerated. We chose to focus on 3 major accelerants: increased digital usage, financial empowerment and hyperconnectivity of people. Our dual focus on the daily challenges and strategic accelerants directly correlated with our 2020 results as well as our organization now being stronger than it was a year ago at the start of the pandemic. Now Greg White has shared with you the financial strength of our organization. And as much as I am proud of that accomplishment, I won't bore you with going through those numbers again. Further, I'd like to share with you my other source of pride of how we leverage these 3 accelerants to position our company and bank for the future. First, our responsiveness and readiness to serve our customers. We have been committed to expanding our digital capabilities for several years, which positioned us extremely well as we entered the pandemic. This allowed us not only to operate but to thrive in a remote environment as our customers shifted to digital services. We experienced over 17 million digital banking log-ins, a 23% increase over 2019, and it compares to 2.1 million teller transactions during 2020. Our call center saw a 32% increase in volume from 2019 to 2020. During 2020, 39% of our mortgage applications used our digital mortgage touch improved by 41% last year. Second accelerant really addresses the financial education and empowerment. Financial education has always been important to community banks, but we saw how the pandemic impacted financial empowerment. For some people, they became much more affluent and needed assistance while others experienced financial stress due to job loss and needed assistance in much different ways. We address this by focusing on enhancing our education capabilities from both groups. This range from webinars, sponsored by our wealth management group to other webinars that focused on savings, cybersecurity and how to manage money. We also deployed an online scheduling capability where a customer can go to our website and schedule an appointment at their time of choosing. This provides customers flexibility while helping the banking center manage customer flow for health and safety. The final accelerant we focused on was the hyperconnectivity which impacted both our customers as well as our employees. We leverage our existing investment in video conferencing technology by expanding to other ways to communicate in a virtual environment, including chat features for internal communications. In the first 2 months of this year, we had over 700,000 internal chat messages between employees and internally, we had over 4,500 video-based meetings. I joke, I think I went to 4,000 of those. Today, 75% of our nonbanking center employees still continue to work remotely. Meanwhile, we saw record levels of residential mortgage volumes impacting us from the frontline originators working with customers all the way to support teams to ensure the mortgages were booked properly and met regulatory requirements. We supported customers through loan deferrals and PPP lending. We even went through once in a generation change and how we account for credit loss reserves with the implementation of CECL, which Greg mentioned earlier. Finally, I'd be remiss if I didn't point out, the support we have received from you, our shareholders. Our stock price experienced the same rollercoaster as our business, and we're glad that we have seen a recovery in our price from a year ago. We're also pleased to have raised our quarterly dividend to $0.36 per common share in recognition of your support as well as the financial strength of the organization. I'd also like to mention that we had more organizational changes as we grow. Tim Nightingale, who, for years, was our EVP of Commercial Lending and Senior Lender, moved over to become our Executive Vice President for Credit Risk. Ryan Smith, who's been with us for many years as a commercial lender, more recently as Director of Credit Administration was promoted to be EVP of Commercial Lending taking over for Tim. Finally, our performance was recently recognized as we were named to the S&P Global List top community banks and also named by the investment firm Raymond James as a community cup award recipient, which recognizes the top 10% of community banks. I want to thank you all for your support and attendance virtually and some of you -- we actually have [ 4 ] shareholders who are not employees here joining us, and thank you for being here with us. Not only in your attendance and your attention, but also your support for the organization. We'll now proceed with a general question-and-answer portion of our meeting. Again, if you're attending the meeting virtually, you may enter your question in the question box on your screen. We'll take a moment to assemble our list of questions. And for those shareholders with us here, who would like to ask a question, please raise your hand, and we'll take your question. So with that, we'll assemble questions virtually and see if there's any questions here in the room? No. Okay. I don't see any hands raised. And now we'll see with technology of the questions out there in the virtual world. And I'll give it just a few more moments to make sure I don't -- I have to get used to this technology. Great. Well, with that, I see no questions to come before us. Thank you all for your attention. And Larry, I think all we need to do is adjourn the meeting.

Great. Well, again, thank you all for coming here in person. Thank you all for your attendance online. We appreciate you looking forward to another wonderful year. Thank you.

Thank you all.