CONTACT:
Michael Archer
Senior Vice President
Corporate Controller
Camden National Corporation
(800) 860-8821
marcher@camdennational.com
FOR IMMEDIATE RELEASE
CAMDEN NATIONAL CORPORATION REPORTS 2017 FINANCIAL RESULTS
CAMDEN, Maine, January 30, 2018/PRNewswire/--Camden National Corporation (NASDAQ: CAC; “Camden National” or the “Company”), a $4.1 billion bank holding company headquartered in Camden, Maine, reported net income for 2017 of $28.5 million and diluted earnings per share ("EPS") of $1.82 per share, compared to $40.1 million and $2.57 per share, respectively, a year ago. In the fourth quarter of 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Act") was passed, and the Company recognized $14.3 million of additional income tax expense upon the revaluation of its deferred tax assets and liabilities. The Company's 2017 adjusted operating income1, which excludes the effect of the Tax Act, was $42.7 million, representing an increase of 7% over last year.
"The Company produced another year of strong financial results in 2017 led by loan growth of 7%, deposit growth of 6%, and improved asset quality over last year,” said Gregory A. Dufour, President and Chief Executive Officer of the Company. "Like many other financial institutions and companies, we revalued our deferred tax balances using the lower federal corporate tax rate in the fourth quarter of 2017 that resulted in a one-time income tax charge. While the lower federal corporate tax rate drove a reported net loss for the fourth quarter and lowered our reported earnings for 2017, we expect that it will prove beneficial over the long-run through higher earnings and continued investment in our company to create long-term shareholder value."
The Company reported a net loss of $3.2 million for the fourth quarter of 2017. Adjusted operating income1, excluding the effect of the Tax Act, was $11.1 million, compared to $11.3 million for the third quarter of 2017.
“The anticipated future tax savings provided us an opportunity to recognize the dedication and contribution of our employees as we provided a special bonus to all non-executive employees. Additionally, we announced an increase in funds for future compensation practices and education to help ensure we attract and retain the best talent possible,” shared Dufour. “Complementing our employee investments, we announced that we will also increase our philanthropic efforts in 2018, reflecting our continued commitment to our communities.”
Mr. Dufour added, "In December, the Company announced a 9% increase in the fourth quarter 2017 dividend to $0.25 per share. At December 31, 2017, the Company exceeded all regulatory capital standards and reported a tangible common equity ratio1 of 7.66%.”
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1 This is a non-GAAP measure. Please refer to "Reconciliation of non-GAAP to GAAP Financial Measures" for further details.
1
YEAR-TO-DATE 2017 FINANCIAL HIGHLIGHTS
| • | Adjusted operating income1 was $42.7 million, representing a $2.7 million, or 7%, increase over last year |
| • | Adjusted operating return on average assets1 was 1.07% and adjusted operating return on average equity1 was 10.51% |
| • | Efficiency ratio1 was 57.05% |
| • | Total loans grew 7% in 2017 and deposits grew 6% over the same period |
| • | Increased the fourth quarter 2017 dividend $0.02 per share, or 9%, to $0.25 per share |
FINANCIAL CONDITION
Total assets at December 31, 2017 grew 5% over last year to $4.1 billion. The loan portfolio reached $2.8 billion at December 31, 2017, representing loan growth of $187.9 million, or 7%, in 2017. Commercial real estate loans led the way with growth of $113.2 million, or 11%, followed by residential mortgage loan growth of 7% and commercial loan growth of 6% in 2017. Over the same period, we experienced a 2% decline in consumer and home equity balances.
Total deposits at December 31, 2017 grew 6% over last year to $3.0 billion. Checking account growth led the way with an increase in demand and interest checking balances of 18% and 22%, respectively. Total borrowings for the Company increased 2% in 2017 to $552.6 million at December 31, 2017.
The Company's loan-to-deposit ratio at December 31, 2017 was 93%, compared to 92% at December 31, 2016.
Total shareholders' equity at December 31, 2017 increased 3% to $403.4 million since December 31, 2016. The Company's capital position remains in excess of regulatory requirements for "well capitalized" status with a total risk-based capital ratio of 14.14%.
ASSET QUALITY
The Company continues to have strong asset quality metrics with lower non-performing asset levels and lower net charge-offs. Non-performing loans at December 31, 2017 were $20.3 million, compared to $25.1 million at December 31, 2016. The Company's non-performing loans to total loans ratio at December 31, 2017 was 0.73%, compared to 0.97% at December 31, 2016.
The provision for credit losses for 2017 totaled $3.0 million, compared to $5.3 million last year. The decrease in expense of $2.2 million was driven by a decline in net charge-offs of $1.3 million and overall improved asset quality. The Company's annualized charge-offs to average loans ratio for 2017 was 0.07%, compared to 0.13% last year.
FINANCIAL OPERATING RESULTS (linked quarter)
The Company reported a net loss of $3.2 million for the fourth quarter of 2017 driven by additional income tax expense of $14.3 million as it revalued its deferred tax assets and liabilities for the lower federal corporate tax rate that was enacted in late December. Adjusted operating income1 for the fourth quarter decreased $249,000 to $11.1 million, compared to last quarter. The decrease in adjusted operating income1 between quarters was driven by:
| • | An increase in non-interest expense of $1.3 million due to: |
| ◦ | A discretionary cash bonus and related taxes totaling $709,000 awarded to all non-executive employees of the Company. |
| ◦ | An increase in furniture, equipment and data processing costs of $261,000 due to new technology investments in the fourth quarter of 2017, including a commercial loan platform and a deposit account platform. |
| • | A decrease in non-interest income of $459,000 as the Company recognized $827,000 of gains on sale of investment securities last quarter, compared to $28,000 in the fourth quarter, partially offset by an increase in fees generated from the back-to-back commercial loan swap program of $637,000. |
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1 This is a non-GAAP measure. Please refer to "Reconciliation of non-GAAP to GAAP Financial Measures" for further details.
2
| • | An increase in net interest income of $499,000 due to: |
| ◦ | An increase in our loan yield of 3 basis points to 4.26% as a portion of our loan portfolio repriced due to increases in short-term interest rates; and |
| ◦ | A change in our funding mix in the fourth quarter with strong core deposit growth driving a 2 basis point decrease in our cost of funds to 0.60%. |
| • | A decrease in the provision for credit losses of $579,000 driven by a decrease in net charge-offs of $301,000. |
FOURTH QUARTER 2017 DIVIDEND
The Company increased its fourth quarter 2017 dividend by $0.02 per share, or 9%, to $0.25 per share, payable on January 31, 2018, to shareholders of record as of January 15, 2018. This distribution represents an annualized dividend yield of 2.37%, based on the December 29, 2017 (last business day) closing price of Camden National's common stock at $42.13 per share as reported by NASDAQ.
ANNUAL MEETING
Camden National has scheduled its annual meeting of shareholders for Tuesday, April 24, 2018, at 3:00 p.m. local time, at Point Lookout Resort and Conference Center, 67 Atlantic Highway, Northport, Maine 04849. The date for determining the Company's shareholders of record for the annual meeting is February 23, 2018.
CONFERENCE CALL
Camden National will host a conference call and webcast at 3:30 p.m. eastern time on January 30, 2018 to discuss our fourth quarter and year-to-date 2017 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: http://services.choruscall.com/links/cac180130.html
A link to the live webcast will be will be available on Camden National's website under "Investors" at CamdenNational.com prior to the meeting. The transcript of the conference call will also be available on Camden National's website approximately two business days after the conference call.
ABOUT CAMDEN NATIONAL CORPORATION
Camden National Corporation (NASDAQ:CAC), founded in 1875 and headquartered in Camden, Maine, is the largest publicly traded bank holding company in Northern New England with $4.1 billion in assets and nearly 650 employees. Camden National Bank, its subsidiary, is a full-service community bank that offers an array of consumer and business financial products and services, accompanied by the latest in digital banking technology to empower customers to bank the way they want. The Bank provides personalized service through a network of 60 banking centers, 76 ATMs, and lending offices in New Hampshire and Massachusetts, all complemented by 24/7 live phone support. This year marks the 8th time Camden National Bank has received the “Lender at Work for Maine” Award from the Finance Authority of Maine. Comprehensive wealth management, investment, and financial planning services are delivered by Camden National Wealth Management. To learn more, visit CamdenNational.com. Member FDIC.
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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, 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 changes in general economic conditions, changes in the interest rate environment, increased competitive pressures, operational risks including, but not limited to, cybersecurity, fraud and natural disasters, legislative and regulatory changes that adversely affect the business in which the Company is engaged, changes in the securities markets, and other risks and uncertainties disclosed from time to time in in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as updated by other filings with the Securities and Exchange Commission ("SEC"). The Company 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 the efficiency ratio; tangible common equity ratio; adjusted operating income; adjusted operating diluted EPS; adjusted operating return on average assets; adjusted operating return on average equity; adjusted operating return on average tangible equity; and tangible book value per share. Management believes these non-GAAP financial measures help investors in understanding the Company's operating performance and trends and allow for better performance comparisons to other banks. 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.
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Selected Financial Data (unaudited) | ||||||||||||||||||||
At or For The Three Months Ended | At or For The Year Ended | |||||||||||||||||||
| (In thousands, except number of shares and per share data) | December 31, 2017 | September 30, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||
| Financial Condition Data | ||||||||||||||||||||
| Investments | $ | 907,642 | $ | 916,018 | $ | 897,679 | $ | 907,642 | $ | 897,679 | ||||||||||
| Loans and loans held for sale | 2,790,542 | 2,761,287 | 2,609,400 | 2,790,542 | 2,609,400 | |||||||||||||||
| Allowance for loan losses | 24,171 | 24,413 | 23.116 | 24,171 | 23,116 | |||||||||||||||
| Total assets | 4,065,398 | 4,039,943 | 3,864,230 | 4,065,398 | 3,864,230 | |||||||||||||||
| Deposits | 3,000,491 | 2,956,413 | 2,828,529 | 3,000,491 | 2,828,529 | |||||||||||||||
| Borrowings | 611,498 | 608,607 | 599,675 | 611,498 | 599,675 | |||||||||||||||
| Shareholders' equity | 403,413 | 414,366 | 391,547 | 403,413 | 391,547 | |||||||||||||||
| Operating Data | ||||||||||||||||||||
| Net interest income | $ | 29,659 | $ | 29,160 | $ | 28,244 | $ | 115,300 | $ | 113,072 | ||||||||||
| Provision for credit losses | 238 | 817 | 255 | 3,035 | 5,258 | |||||||||||||||
| Non-interest income | 9,840 | 10,299 | 10,151 | 38,599 | 39,621 | |||||||||||||||
| Non-interest expense | 23,099 | 21,825 | 22,508 | 88,510 | 89,896 | |||||||||||||||
| Income before income tax expense | 16,162 | 16,817 | 15,632 | 62,354 | 57,539 | |||||||||||||||
| Income tax expense | 19,335 | 5,478 | 4,730 | 33,878 | 17,472 | |||||||||||||||
| Net income (loss) | $ | (3,173 | ) | $ | 11,339 | $ | 10,902 | $ | 28,476 | $ | 40,067 | |||||||||
| Key Ratios | ||||||||||||||||||||
| Return on average assets | (0.31 | )% | 1.12 | % | 1.12 | % | 0.71 | % | 1.04 | % | ||||||||||
| Return on average equity | (3.02 | )% | 10.93 | % | 11.01 | % | 7.00 | % | 10.47 | % | ||||||||||
| Net interest margin | 3.24 | % | 3.19 | % | 3.26 | % | 3.23 | % | 3.32 | % | ||||||||||
| Non-performing loans to total loans | 0.73 | % | 0.72 | % | 0.97 | % | 0.73 | % | 0.97 | % | ||||||||||
| Non-performing assets to total assets | 0.50 | % | 0.50 | % | 0.67 | % | 0.50 | % | 0.67 | % | ||||||||||
| Annualized charge-offs to average loans | 0.07 | % | 0.11 | % | 0.07 | % | 0.07 | % | 0.13 | % | ||||||||||
| Tier I leverage capital ratio | 9.07 | % | 9.01 | % | 8.83 | % | 9.07 | % | 8.83 | % | ||||||||||
| Total risk-based capital ratio | 14.14 | % | 14.09 | % | 14.04 | % | 14.14 | % | 14.04 | % | ||||||||||
| Per Share Data | ||||||||||||||||||||
| Basic earnings per share | $ | (0.20 | ) | $ | 0.72 | $ | 0.70 | $ | 1.83 | $ | 2.59 | |||||||||
| Diluted earnings per share | $ | (0.20 | ) | $ | 0.72 | $ | 0.70 | $ | 1.82 | $ | 2.57 | |||||||||
| Cash dividends declared per share | $ | 0.25 | $ | 0.23 | $ | 0.23 | $ | 0.94 | $ | 0.83 | ||||||||||
| Book value per share | $ | 25.99 | $ | 26.71 | $ | 25.30 | $ | 25.99 | $ | 25.30 | ||||||||||
| Weighted average number of common shares outstanding | 15,521,447 | 15,515,189 | 15,457,498 | 15,509,665 | 15,422,160 | |||||||||||||||
| Diluted weighted average number of common shares outstanding | 15,521,447 | 15,589,008 | 15,569,346 | 15,588,347 | 15,504,239 | |||||||||||||||
Non-GAAP Measures(1) | ||||||||||||||||||||
| Adjusted operating income | $ | 11,090 | $ | 11,339 | $ | 10,902 | $ | 42,739 | $ | 40,067 | ||||||||||
| Adjusted operating return on average assets | 1.09 | % | 1.12 | % | 1.12 | % | 1.07 | % | 1.04 | % | ||||||||||
| Adjusted operating return on average equity | 10.56 | % | 10.93 | % | 11.01 | % | 10.51 | % | 10.47 | % | ||||||||||
| Adjusted operating return on average tangible equity | 14.20 | % | 14.85 | % | 15.26 | % | 14.35 | % | 14.76 | % | ||||||||||
| Tangible common equity ratio | 7.66 | % | 7.98 | % | 7.71 | % | 7.66 | % | 7.71 | % | ||||||||||
| Tangible book value per share | $ | 19.57 | $ | 20.26 | $ | 18.74 | $ | 19.57 | $ | 18.74 | ||||||||||
| Adjusted operating diluted earnings per share | $ | 0.71 | $ | 0.72 | $ | 0.70 | $ | 2.73 | $ | 2.57 | ||||||||||
| Efficiency ratio | 57.75 | % | 55.72 | % | 57.89 | % | 57.05 | % | 57.53 | % | ||||||||||
(1) Please see "Reconciliation of non-GAAP to GAAP Financial Measures."
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Consolidated Statements of Condition Data (unaudited) | ||||||||
| (In thousands, except number of shares) | December 31, 2017 | December 31, 2016 | ||||||
| ASSETS | ||||||||
| Cash and due from banks | $ | 102,971 | $ | 87,707 | ||||
| Investments: | ||||||||
| Available-for-sale securities, at fair value | 789,899 | 779,867 | ||||||
| Held-to-maturity securities, at amortized cost | 94,073 | 94,609 | ||||||
| Federal Home Loan Bank and Federal Reserve Bank stock, at cost | 23,670 | 23,203 | ||||||
| Total investments | 907,642 | 897,679 | ||||||
| Loans held for sale, at fair value | 8,103 | 14,836 | ||||||
| Loans: | ||||||||
| Residential real estate | 858,369 | 802,494 | ||||||
| Commercial real estate | 1,164,023 | 1,050,780 | ||||||
Commercial(1) | 418,520 | 394,051 | ||||||
| Consumer and home equity | 341,527 | 347,239 | ||||||
| Total loans | 2,782,439 | 2,594,564 | ||||||
| Less: allowance for loan losses | (24,171 | ) | (23,116 | ) | ||||
| Net loans | 2,758,268 | 2,571,448 | ||||||
| Goodwill | 94,697 | 94,697 | ||||||
| Other intangible assets | 4,955 | 6,764 | ||||||
| Bank-owned life insurance | 87,489 | 78,119 | ||||||
| Premises and equipment, net | 41,891 | 42,873 | ||||||
| Deferred tax assets | 22,776 | 39,263 | ||||||
| Other assets | 36,606 | 30,844 | ||||||
| Total assets | $ | 4,065,398 | $ | 3,864,230 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Liabilities | ||||||||
| Deposits: | ||||||||
| Demand | $ | 478,643 | $ | 406,934 | ||||
| Interest checking | 855,570 | 701,494 | ||||||
| Savings and money market | 985,508 | 979,263 | ||||||
| Certificates of deposit | 475,010 | 468,203 | ||||||
| Brokered deposits | 205,760 | 272,635 | ||||||
| Total deposits | 3,000,491 | 2,828,529 | ||||||
| Short-term borrowings | 541,867 | 530,129 | ||||||
| Long-term borrowings | 10,720 | 10,791 | ||||||
| Subordinated debentures | 58,911 | 58,755 | ||||||
| Accrued interest and other liabilities | 49,996 | 44,479 | ||||||
| Total liabilities | 3,661,985 | 3,472,683 | ||||||
| Shareholders’ equity | 403,413 | 391,547 | ||||||
| Total liabilities and shareholders’ equity | $ | 4,065,398 | $ | 3,864,230 | ||||
(1) Includes the Healthcare Professional Funding Corporation ("HPFC") loan portfolio.
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Consolidated Statements of Income Data (unaudited) | ||||||||||||
For The Three Months Ended | ||||||||||||
| (In thousands, except per share data) | December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
| Interest Income | ||||||||||||
| Interest and fees on loans | $ | 29,728 | $ | 29,350 | $ | 27,107 | ||||||
| Interest on U.S. government and sponsored enterprise obligations | 4,091 | 4,177 | 4,027 | |||||||||
| Interest on state and political subdivision obligations | 685 | 686 | 709 | |||||||||
| Interest on federal funds sold and other investments | 536 | 497 | 433 | |||||||||
| Total interest income | 35,040 | 34,710 | 32,276 | |||||||||
| Interest Expense | ||||||||||||
| Interest on deposits | 3,243 | 3,027 | 2,278 | |||||||||
| Interest on borrowings | 1,283 | 1,665 | 896 | |||||||||
| Interest on subordinated debentures | 855 | 858 | 858 | |||||||||
| Total interest expense | 5,381 | 5,550 | 4,032 | |||||||||
| Net interest income | 29,659 | 29,160 | 28,244 | |||||||||
| Provision for credit losses | 238 | 817 | 255 | |||||||||
| Net interest income after provision for credit losses | 29,421 | 28,343 | 27,989 | |||||||||
| Non-Interest Income | ||||||||||||
| Debit card income | 2,192 | 2,061 | 1,928 | |||||||||
| Service charges on deposit accounts | 1,897 | 1,852 | 1,854 | |||||||||
| Mortgage banking income, net | 1,797 | 2,076 | 1,337 | |||||||||
| Income from fiduciary services | 1,277 | 1,229 | 1,224 | |||||||||
| Bank-owned life insurance | 620 | 603 | 695 | |||||||||
| Brokerage and insurance commissions | 546 | 600 | 505 | |||||||||
| Other service charges and fees | 471 | 589 | 468 | |||||||||
| Net gain on sale of securities | 28 | 827 | 47 | |||||||||
| Other income | 1,012 | 462 | 2,093 | |||||||||
| Total non-interest income | 9,840 | 10,299 | 10,151 | |||||||||
| Non-Interest Expense | ||||||||||||
| Salaries and employee benefits | 13,083 | 12,359 | 12,438 | |||||||||
| Furniture, equipment and data processing | 2,690 | 2,429 | 2,400 | |||||||||
| Net occupancy costs | 1,650 | 1,599 | 1,736 | |||||||||
| Consulting and professional fees | 706 | 714 | 625 | |||||||||
| Debit card expense | 721 | 662 | 477 | |||||||||
| Regulatory assessments | 559 | 574 | 615 | |||||||||
| Amortization of intangible assets | 392 | 473 | 476 | |||||||||
| Other real estate owned and collection costs, net | 413 | 258 | 1,099 | |||||||||
| Other expenses | 2,885 | 2,757 | 2,642 | |||||||||
| Total non-interest expense | 23,099 | 21,825 | 22,508 | |||||||||
| Income before income tax expense | 16,162 | 16,817 | 15,632 | |||||||||
| Income tax expense | 19,335 | 5,478 | 4,730 | |||||||||
| Net income (loss) | $ | (3,173 | ) | $ | 11,339 | $ | 10,902 | |||||
| Per Share Data: | ||||||||||||
| Basic earnings per share | $ | (0.20 | ) | $ | 0.72 | $ | 0.70 | |||||
| Diluted earnings per share | $ | (0.20 | ) | $ | 0.72 | $ | 0.70 | |||||
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Consolidated Statements of Income Data (unaudited) | ||||||||
Year Ended December 31, | ||||||||
| (In thousands, except per share data) | 2017 | 2016 | ||||||
| Interest Income | ||||||||
| Interest and fees on loans | $ | 114,563 | $ | 109,224 | ||||
| Interest on U.S. government and sponsored enterprise obligations | 16,879 | 16,082 | ||||||
| Interest on state and political subdivision obligations | 2,764 | 2,836 | ||||||
| Interest on federal funds sold and other investments | 1,898 | 1,484 | ||||||
| Total interest income | 136,104 | 129,626 | ||||||
| Interest Expense | ||||||||
| Interest on deposits | 11,811 | 8,633 | ||||||
| Interest on borrowings | 5,585 | 4,506 | ||||||
| Interest on subordinated debentures | 3,408 | 3,415 | ||||||
| Total interest expense | 20,804 | 16,554 | ||||||
| Net interest income | 115,300 | 113,072 | ||||||
| Provision for credit losses | 3,035 | 5,258 | ||||||
| Net interest income after provision for credit losses | 112,265 | 107,814 | ||||||
| Non-Interest Income | ||||||||
| Debit card income | 8,079 | 7,578 | ||||||
| Service charges on deposit accounts | 7,529 | 7,210 | ||||||
| Mortgage banking income, net | 7,363 | 6,258 | ||||||
| Income from fiduciary services | 5,108 | 4,960 | ||||||
| Bank-owned life insurance | 2,370 | 2,594 | ||||||
| Brokerage and insurance commissions | 2,147 | 2,074 | ||||||
| Other service charges and fees | 2,029 | 1,962 | ||||||
| Net gain on sale of securities | 855 | 51 | ||||||
| Other income | 3,119 | 6,934 | ||||||
| Total non-interest income | 38,599 | 39,621 | ||||||
| Non-Interest Expense | ||||||||
| Salaries and employee benefits | 49,965 | 48,072 | ||||||
| Furniture, equipment and data processing | 9,894 | 9,557 | ||||||
| Net occupancy costs | 6,884 | 7,088 | ||||||
| Consulting and professional fees | 3,118 | 3,234 | ||||||
| Debit card expense | 2,755 | 2,584 | ||||||
| Regulatory assessments | 2,166 | 2,777 | ||||||
| Amortization of intangible assets | 1,809 | 1,903 | ||||||
| Other real estate owned and collection costs, net | 971 | 3,128 | ||||||
| Merger and acquisition costs | — | 866 | ||||||
| Other expenses | 10,948 | 10,687 | ||||||
| Total non-interest expense | 88,510 | 89,896 | ||||||
| Income before income tax expense | 62,354 | 57,539 | ||||||
| Income tax expense | 33,878 | 17,472 | ||||||
| Net income | $ | 28,476 | $ | 40,067 | ||||
| Per Share Data: | ||||||||
| Basic earnings per share | $ | 1.83 | $ | 2.59 | ||||
| Diluted earnings per share | $ | 1.82 | $ | 2.57 | ||||
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Quarterly Average Balance, Interest and Yield/Rate Analysis (unaudited) | |||||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||||
| Average Balance | Yield/Rate | ||||||||||||||||||||
| (In thousands) | December 31, 2017 | September 30, 2017 | December 31, 2016 | December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||||||||
| Assets | |||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||
| Securities - taxable | $ | 811,006 | $ | 819,778 | $ | 791,565 | 2.28 | % | 2.28 | % | 2.25 | % | |||||||||
Securities - nontaxable(1) | 101,371 | 101,507 | 103,904 | 4.16 | % | 4.16 | % | 4.20 | % | ||||||||||||
Loans(2)(3): | |||||||||||||||||||||
| Residential real estate | 861,658 | 851,828 | 813,846 | 4.15 | % | 4.09 | % | 4.15 | % | ||||||||||||
| Commercial real estate | 1,153,842 | 1,136,851 | 1,051,346 | 4.15 | % | 4.07 | % | 3.92 | % | ||||||||||||
Commercial(1) | 343,921 | 347,469 | 299,425 | 4.12 | % | 4.18 | % | 3.96 | % | ||||||||||||
Municipal(1) | 18,442 | 24,847 | 20,971 | 3.73 | % | 3.24 | % | 2.90 | % | ||||||||||||
| Consumer and home equity | 343,942 | 345,533 | 349,202 | 4.54 | % | 4.58 | % | 4.23 | % | ||||||||||||
| HPFC | 46,565 | 49,619 | 63,662 | 8.14 | % | 8.38 | % | 8.44 | % | ||||||||||||
| Total loans | 2,768,370 | 2,756,147 | 2,598,452 | 4.26 | % | 4.23 | % | 4.14 | % | ||||||||||||
| Total interest-earning assets | 3,680,747 | 3,677,432 | 3,493,921 | 3.82 | % | 3.79 | % | 3.72 | % | ||||||||||||
| Other assets | 358,349 | 352,711 | 368,323 | ||||||||||||||||||
| Total assets | $ | 4,039,096 | $ | 4,030,143 | $ | 3,862,244 | |||||||||||||||
| Liabilities & Shareholders' Equity | |||||||||||||||||||||
| Deposits: | |||||||||||||||||||||
| Demand | $ | 486,753 | $ | 450,350 | $ | 428,057 | — | % | — | % | — | % | |||||||||
| Interest checking | 824,247 | 727,959 | 728,563 | 0.28 | % | 0.19 | % | 0.15 | % | ||||||||||||
| Savings | 497,929 | 493,447 | 481,630 | 0.06 | % | 0.07 | % | 0.06 | % | ||||||||||||
| Money market | 489,426 | 469,458 | 503,688 | 0.58 | % | 0.53 | % | 0.41 | % | ||||||||||||
Certificates of deposit(3) | 490,779 | 454,013 | 477,569 | 0.90 | % | 0.83 | % | 0.80 | % | ||||||||||||
| Total deposits | 2,789,134 | 2,595,227 | 2,619,507 | 0.36 | % | 0.31 | % | 0.28 | % | ||||||||||||
| Borrowings: | |||||||||||||||||||||
| Brokered deposits | 217,328 | 310,207 | 276,347 | 1.35 | % | 1.30 | % | 0.65 | % | ||||||||||||
| Customer repurchase agreements | 254,529 | 222,386 | 229,020 | 0.50 | % | 0.51 | % | 0.29 | % | ||||||||||||
| Subordinated debentures | 58,892 | 58,853 | 58,736 | 5.76 | % | 5.78 | % | 5.81 | % | ||||||||||||
| Other borrowings | 257,420 | 386,643 | 231,688 | 1.48 | % | 1.42 | % | 1.25 | % | ||||||||||||
| Total borrowings | 788,169 | 978,089 | 795,791 | 1.45 | % | 1.43 | % | 1.10 | % | ||||||||||||
| Total funding liabilities | 3,577,303 | 3,573,316 | 3,415,298 | 0.60 | % | 0.62 | % | 0.47 | % | ||||||||||||
| Other liabilities | 44,979 | 45,330 | 52,942 | ||||||||||||||||||
| Shareholders' equity | 416,814 | 411,497 | 394,004 | ||||||||||||||||||
| Total liabilities & shareholders' equity | $ | 4,039,096 | $ | 4,030,143 | $ | 3,862,244 | |||||||||||||||
| Net interest rate spread (fully-taxable equivalent) | 3.22 | % | 3.17 | % | 3.25 | % | |||||||||||||||
| Net interest margin (fully-taxable equivalent) | 3.24 | % | 3.19 | % | 3.26 | % | |||||||||||||||
Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans(3) | 3.17 | % | 3.11 | % | 3.14 | % | |||||||||||||||
(1) Reported on tax-equivalent basis calculated using a tax rate of 35%, 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 December 31, 2017, September 30, 2017 and December 31, 2016 totaling $689,000, $804,000 and $1.0 million, respectively.
9
Year-to-Date Average Balance, Interest and Yield/Rate Analysis (unaudited) | ||||||||||||||
| For the Year Ended | ||||||||||||||
| Average Balance | Yield/Rate | |||||||||||||
| (In thousands) | December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||||
| Assets | ||||||||||||||
| Interest-earning assets: | ||||||||||||||
| Securities - taxable | $ | 826,749 | $ | 796,423 | 2.27 | % | 2.21 | % | ||||||
Securities - nontaxable(1) | 101,898 | 103,086 | 4.17 | % | 4.23 | % | ||||||||
Loans(2)(3): | ||||||||||||||
| Residential real estate | 838,781 | 822,690 | 4.12 | % | 4.18 | % | ||||||||
| Commercial real estate | 1,120,591 | 1,004,169 | 4.11 | % | 4.11 | % | ||||||||
Commercial(1) | 336,685 | 292,709 | 4.21 | % | 4.22 | % | ||||||||
Municipal(1) | 19,428 | 19,238 | 3.43 | % | 2.97 | % | ||||||||
| Consumer and home equity | 343,457 | 358,098 | 4.45 | % | 4.22 | % | ||||||||
| HPFC | 52,031 | 70,188 | 8.53 | % | 8.82 | % | ||||||||
| Total loans | 2,710,973 | 2,567,092 | 4.25 | % | 4.28 | % | ||||||||
| Total interest-earning assets | 3,639,620 | 3,466,601 | 3.80 | % | 3.80 | % | ||||||||
| Other assets | 348,986 | 370,096 | ||||||||||||
| Total assets | $ | 3,988,606 | $ | 3,836,697 | ||||||||||
| Liabilities & Shareholders' Equity | ||||||||||||||
| Deposits: | ||||||||||||||
| Demand | $ | 430,706 | $ | 386,189 | — | % | — | % | ||||||
| Interest checking | 750,543 | 724,222 | 0.21 | % | 0.13 | % | ||||||||
| Savings | 492,483 | 461,794 | 0.06 | % | 0.06 | % | ||||||||
| Money market | 480,119 | 490,155 | 0.52 | % | 0.42 | % | ||||||||
Certificates of deposit(3) | 466,418 | 489,040 | 0.88 | % | 0.78 | % | ||||||||
| Total deposits | 2,620,269 | 2,551,400 | 0.32 | % | 0.28 | % | ||||||||
| Borrowings: | ||||||||||||||
| Brokered deposits | 296,261 | 231,610 | 1.13 | % | 0.69 | % | ||||||||
| Customer repurchase agreements | 232,762 | 198,403 | 0.46 | % | 0.28 | % | ||||||||
| Subordinated debentures | 58,834 | 58,718 | 5.79 | % | 5.82 | % | ||||||||
| Other borrowings | 329,988 | 359,281 | 1.37 | % | 1.10 | % | ||||||||
| Total borrowings | 917,845 | 848,012 | 1.35 | % | 1.12 | % | ||||||||
| Total funding liabilities | 3,538,114 | 3,399,412 | 0.59 | % | 0.49 | % | ||||||||
| Other liabilities | 43,864 | 54,778 | ||||||||||||
| Shareholders' equity | 406,628 | 382,507 | ||||||||||||
| Total liabilities & shareholders' equity | $ | 3,988,606 | $ | 3,836,697 | ||||||||||
| Net interest rate spread (fully-taxable equivalent) | 3.21 | % | 3.31 | % | ||||||||||
| Net interest margin (fully-taxable equivalent) | 3.23 | % | 3.32 | % | ||||||||||
Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans(3) | 3.14 | % | 3.15 | % | ||||||||||
(1) Reported on tax-equivalent basis calculated using a tax rate of 35%, 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 year ended December 31, 2017 and 2016 totaling $3.2 million and $6.2 million, respectively.
10
| Asset Quality Data (unaudited) | ||||||||||||||||||||
| (In thousands) | At or For The Year Ended December 31, 2017 | At or For The Nine Months Ended September 30, 2017 | At or For The Six Months Ended June 30, 2017 | At or For The Three Months Ended March 31, 2017 | At or For The Year Ended December 31, 2016 | |||||||||||||||
| Non-accrual loans: | ||||||||||||||||||||
| Residential real estate | $ | 4,979 | $ | 4,465 | $ | 4,890 | $ | 4,105 | $ | 3,945 | ||||||||||
| Commercial real estate | 5,642 | 5,887 | 16,291 | 12,858 | 12,849 | |||||||||||||||
| Commercial | 2,000 | 1,830 | 2,056 | 1,994 | 2,088 | |||||||||||||||
| Consumer | 1,650 | 1,626 | 1,371 | 1,552 | 1,624 | |||||||||||||||
| HPFC | 1,043 | 838 | 1,083 | 1,014 | 207 | |||||||||||||||
| Total non-accrual loans | 15,314 | 14,646 | 25,691 | 21,523 | 20,713 | |||||||||||||||
| Loans 90 days past due and accruing | — | — | 76 | — | — | |||||||||||||||
| Accruing troubled-debt restructured loans not included above | 5,012 | 5,154 | 4,809 | 4,558 | 4,338 | |||||||||||||||
| Total non-performing loans | 20,326 | 19,800 | 30,576 | 26,081 | 25,051 | |||||||||||||||
| Other real estate owned: | ||||||||||||||||||||
| Residential real estate | — | — | — | 14 | 14 | |||||||||||||||
| Commercial real estate | 130 | 341 | 341 | 607 | 908 | |||||||||||||||
| Total other real estate owned | 130 | 341 | 341 | 621 | 922 | |||||||||||||||
| Total non-performing assets | $ | 20,456 | $ | 20,141 | $ | 30,917 | $ | 26,702 | $ | 25,973 | ||||||||||
| Loans 30-89 days past due: | ||||||||||||||||||||
| Residential real estate | $ | 5,277 | $ | 3,169 | $ | 3,020 | $ | 2,379 | $ | 2,470 | ||||||||||
| Commercial real estate | 1,135 | 2,297 | 3,442 | 2,531 | 971 | |||||||||||||||
| Commercial | 518 | 712 | 269 | 168 | 851 | |||||||||||||||
| Consumer | 1,197 | 1,256 | 1,378 | 1,008 | 1,018 | |||||||||||||||
| HPFC | 887 | 938 | 639 | 777 | 1,029 | |||||||||||||||
| Total loans 30-89 days past due | $ | 9,014 | $ | 8,372 | $ | 8,748 | $ | 6,863 | $ | 6,339 | ||||||||||
| Allowance for loan losses at the beginning of the period | $ | 23,116 | $ | 23,116 | $ | 23,116 | $ | 23,116 | $ | 21,166 | ||||||||||
| Provision for loan losses | 3,026 | 2,786 | 1,984 | 581 | 5,269 | |||||||||||||||
| Charge-offs: | ||||||||||||||||||||
| Residential real estate | 482 | 433 | 195 | 5 | 356 | |||||||||||||||
| Commercial real estate | 124 | 81 | 12 | 3 | 315 | |||||||||||||||
| Commercial | 1,014 | 650 | 281 | 136 | 2,218 | |||||||||||||||
| Consumer | 558 | 493 | 454 | 15 | 409 | |||||||||||||||
| HPFC | 290 | 274 | 81 | — | 507 | |||||||||||||||
| Total charge-offs | 2,468 | 1,931 | 1,023 | 159 | 3,805 | |||||||||||||||
| Total recoveries | (497 | ) | (442 | ) | (317 | ) | (183 | ) | (486 | ) | ||||||||||
| Net charge-offs (recoveries) | 1,971 | 1,489 | 706 | (24 | ) | 3,319 | ||||||||||||||
| Allowance for loan losses at the end of the period | $ | 24,171 | $ | 24,413 | $ | 24,394 | $ | 23,721 | $ | 23,116 | ||||||||||
| Components of allowance for credit losses: | ||||||||||||||||||||
| Allowance for loan losses | $ | 24,171 | $ | 24,413 | $ | 24,394 | $ | 23,721 | $ | 23,116 | ||||||||||
| Liability for unfunded credit commitments | 20 | 22 | 7 | 9 | 11 | |||||||||||||||
| Allowance for credit losses | $ | 24,191 | $ | 24,435 | $ | 24,401 | $ | 23,730 | $ | 23,127 | ||||||||||
| Ratios: | ||||||||||||||||||||
| Non-performing loans to total loans | 0.73 | % | 0.72 | % | 1.12 | % | 0.99 | % | 0.97 | % | ||||||||||
| Non-performing assets to total assets | 0.50 | % | 0.50 | % | 0.77 | % | 0.68 | % | 0.67 | % | ||||||||||
| Allowance for loan losses to total loans | 0.87 | % | 0.89 | % | 0.89 | % | 0.90 | % | 0.89 | % | ||||||||||
| Net charge-offs to average loans (annualized) | ||||||||||||||||||||
| Quarter-to-date | 0.07 | % | 0.11 | % | 0.11 | % | — | % | 0.07 | % | ||||||||||
| Year-to-date | 0.07 | % | 0.07 | % | 0.05 | % | — | % | 0.13 | % | ||||||||||
| Allowance for loan losses to non-performing loans | 118.92 | % | 123.30 | % | 79.78 | % | 90.95 | % | 92.28 | % | ||||||||||
| Loans 30-89 days past due to total loans | 0.32 | % | 0.30 | % | 0.32 | % | 0.26 | % | 0.24 | % | ||||||||||
11
Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)
| Efficiency Ratio: | ||||||||||||||||||||
For the Three Months Ended | For the Year Ended | |||||||||||||||||||
| (In thousands) | December 31, 2017 | September 30, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||
| Non-interest expense, as presented | $ | 23,099 | $ | 21,825 | $ | 22,508 | $ | 88,510 | $ | 89,896 | ||||||||||
| Less: merger and acquisition costs | — | — | — | — | (866 | ) | ||||||||||||||
| Adjusted non-interest expense | $ | 23,099 | $ | 21,825 | $ | 22,508 | $ | 88,510 | $ | 89,030 | ||||||||||
| Net interest income, as presented | $ | 29,659 | $ | 29,160 | $ | 28,244 | $ | 115,300 | $ | 113,072 | ||||||||||
Add: effect of tax-exempt income(1) | 525 | 535 | 533 | 2,105 | 2,121 | |||||||||||||||
| Non-interest income, as presented | 9,840 | 10,299 | 10,151 | 38,599 | 39,621 | |||||||||||||||
| Less: net gain on sale of securities | (28 | ) | (827 | ) | (47 | ) | (855 | ) | (51 | ) | ||||||||||
| Adjusted net interest income plus non-interest income | $ | 39,996 | $ | 39,167 | $ | 38,881 | $ | 155,149 | $ | 154,763 | ||||||||||
| Non-GAAP efficiency ratio | 57.75 | % | 55.72 | % | 57.89 | % | 57.05 | % | 57.53 | % | ||||||||||
| GAAP efficiency ratio | 58.48 | % | 55.31 | % | 58.62 | % | 57.51 | % | 58.87 | % | ||||||||||
(1) Assumed a 35% tax rate.
| Tangible Book Value Per Share and Tangible Common Equity Ratio: | ||||||||||||
| December 31, 2017 | September 30, 2017 | December 31, 2016 | ||||||||||
| (In thousands, except number of shares and per share data) | ||||||||||||
| Tangible Book Value Per Share: | ||||||||||||
| Shareholders' equity, as presented | $ | 403,413 | $ | 414,366 | $ | 391,547 | ||||||
| Less: goodwill and other intangible assets | (99,652 | ) | (100,044 | ) | (101,461 | ) | ||||||
| Tangible equity | $ | 303,761 | $ | 314,322 | $ | 290,086 | ||||||
| Shares outstanding at period end | 15,524,704 | 15,515,577 | 15,476,379 | |||||||||
| Tangible book value per share | $ | 19.57 | $ | 20.26 | $ | 18.74 | ||||||
| Book value per share | $ | 25.99 | $ | 26.71 | $ | 25.30 | ||||||
| Tangible Common Equity Ratio: | ||||||||||||
| Total assets | $ | 4,065,398 | $ | 4,039,943 | $ | 3,864,230 | ||||||
| Less: goodwill and other intangibles | (99,652 | ) | (100,044 | ) | (101,461 | ) | ||||||
| Tangible assets | $ | 3,965,746 | $ | 3,939,899 | $ | 3,762,769 | ||||||
| Tangible common equity ratio | 7.66 | % | 7.98 | % | 7.71 | % | ||||||
| Shareholders' equity to total assets | 9.92 | % | 10.26 | % | 10.13 | % | ||||||
12
| Adjusted Operating Return on Average Tangible Equity and Adjusted Operating Return on Average Equity: | ||||||||||||||||||||
| For the Three Months Ended | For the Year Ended | |||||||||||||||||||
| (In thousands) | December 31, 2017 | September 30, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||
| Net income (loss), as presented | $ | (3,173 | ) | $ | 11,339 | $ | 10,902 | $ | 28,476 | $ | 40,067 | |||||||||
| Add: impact of the Tax Act | 14,263 | — | — | 14,263 | — | |||||||||||||||
| Adjusted operating income | 11,090 | 11,339 | 10,902 | 42,739 | 40,067 | |||||||||||||||
Add: amortization of intangible assets, net of tax(1) | 255 | 307 | 309 | 1,176 | 1,237 | |||||||||||||||
| Tangible net income, adjusted for the Tax Act | $ | 11,345 | $ | 11,646 | $ | 11,211 | $ | 43,915 | $ | 41,304 | ||||||||||
| Average equity | $ | 416,814 | $ | 411,497 | $ | 394,004 | $ | 406,628 | $ | 382,507 | ||||||||||
| Less: average goodwill and other intangible assets | (99,823 | ) | (100,273 | ) | (101,689 | ) | (100,513 | ) | (102,711 | ) | ||||||||||
| Average tangible equity | $ | 316,991 | $ | 311,224 | $ | 292,315 | $ | 306,115 | $ | 279,796 | ||||||||||
| Adjusted operating return on average tangible equity | 14.20 | % | 14.85 | % | 15.26 | % | 14.35 | % | 14.76 | % | ||||||||||
| Adjusted operating return on average equity | 10.56 | % | 10.93 | % | 11.01 | % | 10.51 | % | 10.47 | % | ||||||||||
| Return on average equity | (3.02 | )% | 10.93 | % | 11.01 | % | 7.00 | % | 10.47 | % | ||||||||||
(1) Assumed a 35% tax rate.
| Adjusted Operating Income; Adjusted Operating Diluted EPS; and Adjusted Operating Return on Average Assets: | ||||||||||||||||||||
| For the Three Months Ended | For the Year Ended | |||||||||||||||||||
| (In thousands, except per share data) | December 31, 2017 | September 30, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||
| Adjusted Operating Income: | ||||||||||||||||||||
| Net income (loss), as presented | $ | (3,173 | ) | $ | 11,339 | $ | 10,902 | $ | 28,476 | $ | 40,067 | |||||||||
| Add: impact of the Tax Act | 14,263 | — | — | 14,263 | — | |||||||||||||||
| Adjusted operating income | $ | 11,090 | $ | 11,339 | $ | 10,902 | $ | 42,739 | $ | 40,067 | ||||||||||
| Adjusted Operating Diluted EPS: | ||||||||||||||||||||
| Diluted EPS, as presented | $ | (0.20 | ) | $ | 0.72 | $ | 0.70 | $ | 1.82 | $ | 2.57 | |||||||||
| Add: impact of the Tax Act | 0.91 | — | — | 0.91 | — | |||||||||||||||
| Adjusted operating diluted EPS | $ | 0.71 | $ | 0.72 | $ | 0.70 | $ | 2.73 | $ | 2.57 | ||||||||||
| Adjusted Operating Return on Average Assets: | ||||||||||||||||||||
| Return on average assets, as presented | (0.31 | )% | 1.12 | % | 1.12 | % | 0.71 | % | 1.04 | % | ||||||||||
| Add: impact of the Tax Act | 1.40 | % | — | % | — | % | 0.36 | % | — | % | ||||||||||
| Adjusted operating return on average assets | 1.09 | % | 1.12 | % | 1.12 | % | 1.07 | % | 1.04 | % | ||||||||||
13