Camden National Corporation (CAC) Earnings Call Transcript & Summary

Thank you. Good day and welcome to Camden National Corporation's second quarter 2026 earnings conference call. My name is Marina Toft and I will be your operator for today's call. All participants will be in a listen-only mode during today's presentation. Following we will conduct a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now turn the call over to Renee Smith, Executive Vice President, Chief Experience and Marketing Officer.

Welcome to Camden National Corporation second quarter 2026 earnings conference call. With me today are Simon Griffiths, our President and Chief Executive Officer, and Mike Archer, our Executive Vice President and Chief Financial Officer. Before we begin, please note that today's remarks include forward-looking. and actual results could differ materially from what we discuss on the call. You can find cautionary language about these statements in our second quarter 2026 earnings release issued this morning and in our other SEC filings. All of these materials and public filings are available on our investor relations website at camdennational.com. Bank. Camden National Corporation trades on NASDAQ under the symbol CAC. We'll also refer to non-GAAP financial measures during the call. These measures provide additional insight into our performance in reconciliations to GAAP are included in today's earnings release. With that, I'll turn it over to Simon.

Good afternoon everyone and thank you Renee. Earlier this morning we reported record quarterly net income of 23 million and record diluted earnings per share of 135 for the second quarter. Both net income and diluted EPS increased 5% from the first quarter, underscoring the earnings power we are building across the franchise. Our performance was broad-based. We delivered loan growth, expanded our committed loan pipeline, improved net interest margin, and generated strong fee income growth. Through the first six months of the year, we produced record net income of 44.9 million and diluted EPS of 264, reflecting focused execution across our core businesses. These results demonstrate that our strategy is working. We are growing the franchise with purpose and investing in capabilities that strengthen our competitive position and improve how we serve our customers and communities. Our performance is also reflected in national recognition and customer trust. So far this year, Camden National Bank was named to Time Magazine's list of American – America's Best Companies, and recognized by Forbes as one of America's best banks. These achievements reflect our financial discipline, customer focus, continued momentum, and long-term stability. We enter the second half of the year with a resilient balance sheet. Total assets were $7 billion at quarter end. Credit quality metrics remained strong. Capital levels remained well above regulatory requirements. And tangible book value per share grew 7% since year end. On the lending side, loans increased 1% during the quarter, or 3% on an annualized basis, led by growth in home equity and commercial loans. HELOC balances increased 23% year over year, supported by added depth among our HELOC lenders, as well as by significant technology and process improvements, which have reduced average funding time to 14 days. Forward-looking indicators are also encouraging. Our committed loan pipeline increased 45% from the prior quarter to 185.7 million. reflecting healthy customer demand, stronger banker productivity, and the benefit of recent additions to our commercial banking team. Since year end, we have added four experienced commercial bankers to our team, and we remain optimistic that we'll be able to continue to selectively add proven talent. We remain encouraged by the pipeline while expecting Q3 loan growth to remain measured. We recently announced the appointment of Kate Brunell as Chief Credit Officer. Kate joins Camden National's leadership team with more than two decades of banking experience, including senior credit leadership roles at TD Bank. Ryan Smith, with 14 years at Camden National and prior experience serving as both Chief Credit Officer and Director of Commercial Banking, will return to leading commercial banking. And Barbara Ratz will lead and expand our treasury management and government banking services, drawing on significant experience in corporate banking. Treasury. That added capacity is helping strengthen relationships with small and mid-market businesses and expand our role as a primary banking partner for lending and Treasury management solutions. On deposits, we continue to optimize our funding mix by reducing broker deposits and certificate of deposits while maintaining stable core customer deposits. Total deposits were 5.6 billion at quarter end and our loan to deposit ratio was 90%. Our focus remains on durable relationship deposits supported by service, convenience, and thoughtful pricing, rather than rate-driven volume. We are expanding financial advisory services to support customers through more stages of their financial lives and diversify revenue. Assets under administration across our wealth and brokerage businesses totaled 2.6 billion at quarter end, up 13% from the prior year. reinforcing the opportunity to broaden advisory relationships and build a more balanced earnings profile over time. Our AI-enabled transformation is gaining momentum, with multiple use cases now in production and digital enhancements tied to measurable business outcomes. These tools are helping us build a more efficient, responsive organization. From our recently refreshed website to new digital products, we are making banking easier for customers while creating more capacity for higher value interactions. In short, we are executing well and making measurable progress across the company. Our teams are focused on sustaining high quality growth and creating long term value for our shareholders, customers, employees, and communities. With that strategic overview, I'll turn it over to Mike to walk through the financial results in more detail.

Thanks, Simon, and good afternoon, everyone. As noted, we reported record net income for the second quarter of $23 million, or $1.35 per diluted share. Profitability metrics remain strong again this quarter, with a return on average assets of 1.33%, return on average tangible equity of 18.47%, and a non-GAAP efficiency ratio of 53.2%. Revenues are up 5% on a linked quarter basis, and we continue to manage operating expenses closely, all continuing to invest in our franchise, driving strong pre-tax, pre-provision net revenue growth during the quarter of 5%. Net interest income totaled $52.9 million, up 1% on a linked quarter basis. Core net interest margin increased by two basis points quarter over quarter to 3.26% for the second quarter, primarily reflecting lower funding costs. Over the same period, core net interest margin, which excludes net fair value mark accretion income, increased five basis points to 2.97%, aligning with the top of our guidance range provided last quarter. Net fair value mark accretion income was $4 million for the second quarter, down $335,000 from the first quarter. We continue to focus on improving our core net interest margin, and we are currently estimating additional expansion in the third quarter for approximately 5 to 10 basis points, driven by normal seasonal deposit inflows, that support a more favorable funding mix and the ongoing reinvestment of lower-yielding assets into current market rates. Not interest income totaled $14.5 million, an increase of $2.5 million, or 21% from the first quarter. The improvement was broad-based across all fee income categories as we continue to see nice momentum across our complementary business lines. Investment appreciation that was driven by market performance and death benefits within BOLI income totaling $491,000 contributed to our non-interest income this quarter. We are currently estimating a range for non-interest income for the third quarter of $13.5 to $14 Turning to expenses, non-interest expense totaled $37.4 million, up 5% from the first quarter. This increase is primarily attributable to annual salary increases, the timing of our annual director equity award grant, and the annual recognition event for top performing sales team members. We are currently estimating a range for non-interest expense for the third quarter at $37 to $38 million. On credit, our loan portfolio remained sound. Non-performing loans were 24 basis points of total loans. Past due loans were 15 basis points of total loans. And net charge-offs were four basis points of average loans on an annualized basis. Provision expense was $710,000 up from $553,000 in the first quarter, reflecting loan growth. The allowance for credit losses on loans was 0.91% of total loans at quarter end, and the ACL coverage ratio was 3.8 times non-performing loans. Capital levels continue to expand nicely driven by strong and growing earnings and balanced returns for our shareholders through the first six months of 2026. Our regulatory capital levels remain well above regulatory requirements at quarter ends. Tangible book value per share increased 3% during the second quarter to $31.60. at June 30, 2026. For the first six months of 2026, we returned 41% of our first half net income to shareholders in the form of cash, dividends, and share repurchases. Year to date, we repurchased 85,131 shares at a weighted average price of $46.55 per share under our share repurchase program. Overall, the quarter reflected solidly in quarter revenue growth, disciplined expense management, strong credit metrics, and continued capital accretion. That concludes our prepared remarks. I'll turn it back to the operator.

Thank you. We will now begin the question and answer session. To ask a question, please press star, then one on your touchtone phone keypad. If you use a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then one. we will pause momentarily to assemble the roster. Your first question comes from the line of Steve Moss with Raymond James. Your line is open, please go ahead.

Good afternoon. Good afternoon, Steve. Maybe just, hey, Simon, maybe just starting off on, you know, the margin expansion here. Mike, you mentioned deposit inflows, but then you also mentioned lower yielding assets repricing. Just kind of curious, what are you seeing for cash flows from the loan portfolio or security portfolio over the next six months? And just to think about that repricing dynamic.

Yes, it's a great question, Steve. On the investment side, we internally model it right around $35 million a quarter, I believe, right in that neighborhood. And then on the loan side, we have another, call it, $170, $180, I believe. In total, we're trading around $200 million.

in total. Okay. And that's for, okay. A hundred, 780 million on the loans per quarter. YES. OKAY. AND SO TIME JUST TO PICK UP THE ROLL ON ROLL OFF RACE WE THINK ABOUT THINGS I'M ASSUMING LOAN PRICING IS PROBABLY IN THE LOW TO MID SIXES BY PICKING UP THE HUNDRED AND THIRD.

150, 200 base points? Yes, that's right. We're currently originating loans rate in that, you know, low sixes to six and a half range, if you will.

ON AVERAGE. ON AVERAGE. OKAY. OKAY. GOT IT. GOT IT. AND THEN IN TERMS OF, YOU KNOW, AND THEN IN TERMS OF, YOU KNOW, GOOD TO SEE THE PIPELINE HERE IS I guess just kind of curious in terms of, you know, three, two loan growth to be measured here, Just kind of curious, what are the factors driving that, just given a good pipeline here?.

Yes, thanks, Steve. I mean, I think certainly commercial activity has been strong and, you know, we're seeing sort of across the geography, nice momentum. Certainly home equity has been a significant growth engine for us. And I talked about my remarks, you know, not just we've expanded the sales team, but we've also improved and focused a lot on the customer experience with funding of 14 days. So I think there's a lot of momentum and that's certainly proving to be a really strong business. We're having a strong resi year as well, which is positive. So I think overall, you know, we're seeing a nice balanced story on the loan growth side, which I think is positive and certainly a reflection of our strategy and focus in this area.

Okay. And that dovetails nicely with my next question. Just on the fee income here, you guys, as we're having, you know, good trends on debit card, year over year, service charges on deposit quite a bit year over year. I know you guys have been definitely, I know you've talked about for a while, improving the customer activity and being more efficient and productive. Sounds like from your guidance, like you think this is more sustainable. It's kind of curious just was what component maybe was from price increases versus new customers or any call you can shed on on those dynamics there?.

Yes, I'll start, Steven, and Mike can add some additional. I would say just generally across the fee income, it was a balanced story for us. nice momentum across wealth management, which we talked about, certainly brokerage, debit card, deposit-related fees, mortgage banking, I think all played a role. And certainly that's a key area of focus for us. We've particularly been investing a lot of time and effort in a couple of key areas, certainly on the wealth side, building out and continue the momentum we have in the brokerage business. That's the sort of steady growth focus that we've had. We're also looking to expand the wealth offering and certainly obviously New Hampshire offices, a lot of opportunities there. On the debit side, we've put a lot of focus into our digital, into our convenience, into our customer. We just released new online, portal, which I think is fantastic and getting really great customers and I think that's a key part of attracting new customers directly drives the debit income for us. So it's a multitude of pieces. I think these things are kind of moving in constant and continuing to strengthen the debit side of the fee income side of the.

of our business is certainly a key focus. Okay, great. Now next quarter here and I'll step back in the queue. Thank you very much, guys.

Appreciate it. Thanks. Your next question comes from the line of Matthew Breeds with Stevens Inc. Your line is open. Please go ahead.

Excuse me. Good afternoon. Mike, I appreciate the the margin outlook and some of the data on where new loan yields are coming in. Just curious, as we think about kind of the fixed asset repricing and the roll on, roll off, particularly with loan yields, when you stop seeing the pronounced benefits to the NIM? Is that late 27, 28 or longer for you all?.