Earnings call transcript Q1 2023

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Operator

Good day, and welcome to Camden National Corporation’s First Quarter 2023 Earnings Conference Call. My name is Danielle, and I will be your operator for today’s call. All participants will be in a listen-only mode during today’s presentation.

Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note that this presentation contains forward-looking statements, which involve significant risks and uncertainties that may cause actual results to vary materially from the projected in the forward-looking statements.

and that in actual described on such company’s press factors materially to in Form concerning the earnings those material, filings from forward-looking release SEC. XX-K information and could annual with results cause differ the company’s other Additional XXXX earnings the report supplemental statements are statements to or events that The company obligation any circumstances undertake to update after reflect forward-looking are does not any made. forward-looking statements occur provide financial references and meaningful today’s to to are Any in release. insight non-GAAP reconciled press measures GAAP in with are intended presentation your

Greg the Officer; At that recorded. are and over Please Dufour. conference this Executive sir. presenters Chief Dufour, Mike President turn being is this Today’s to President Greg time, and Executive Vice ahead, note event go and I Chief Financial would Please Officer. to Archer, like

Greg Dufour

Thank to you, first earnings call. National quarter XXXX Corporation’s Danielle welcome Camden and

million comments. share results overall quarter This the XXXX, few the normal decrease market-based fourth net resulted of on average these return income on flattening of equity impact return pricing Before interest outflows, deposit tangible make rate capital to in in I volatility seasonal from XX.XX%. a to XXXX. $XX.X a $X.XX increases like Driving XX.XX% turn Mike, quarter We deposit the and of reported our of the of a a were and rates. I’d first or discussion per opening XX% over of for diluted

maturity more in our the only we positions hold minutes. million that and comfortable pretax held am Bank, in was will was our a detail portfolio, on for sorry, feel $X.X Signature I X% to which in losses Mike portfolio in just provision we few our loss investment our bonds. to a also portfolio We – in held and line. speak in recorded subordinated recorded recorded reviewed loss investment with a bond was credit We’ve corporate held which with

sharper is hasn’t altered. past banking during drastically the sector in not turmoil focused the quarter The but

Our and deposits, the asset priorities same: quality. remain margin

leverage several training, investments our past management. the to and pricing. through view our we’ve franchise shared strategies And corporate just the I retail Over made loan in regarding treasury sales quarters, management I’ve quarter, last our shared outlined

strong, a culture Our underwriting starts asset and through strong it credit be all and standards with to continues maintaining quality cycles.

to continues so to do with and to be in current important maximizing Lending environment, on our us, focus lend will we’ll margins. a the but continue

as the our billion to of $X.X we margins have December. the at the We capacity from the XXXX we up near end the $X.X loans, in to over billion first end and We on of the XX yields XXXX excluding will of quarter selective loan increasing With X% rate growth quarter XXXX. focus that term. than deposits, lend, with broker XXXX temper of of to with deposits, X% of which expected need environment is just the but said, be basis interest ended overall loan from are first the less points with balances ended

remained results deposit believe winter balances and seasonality one that down indicate months X% core for deposit in We base were relationship months. year-end. adjusting municipal earnings release, the our Further discussed during reflect past deposit large a only is base during these depositor customer from our with the few has the solid

did and a the also declared quarter, the dividend $X.XX quarter. not during repurchase we shares of During per share

over turn now will the Mike. to I discussion

Mike Archer

banking deck as and and a in earnings which addresses This we industry. more and release. deposits, provide our release supplemental good today, events afternoon, Greg, that as well that our our given information earnings, we we believe investments information liquidity, normally detail is recent helpful in the included relevant loans you, to than the Thank supplemental in additional community provides normal Earlier investor earnings reported everyone. quarterly

strong speak asset each capital the base, lenders National’s Selin firm supported to of footing do, starts with share that to remains I but quality Camden on that strong underwriters I our financial and deposit want a and levels. more I’ll excellent diverse shortly, detail based in before point fundamentals by

company’s of of As to deposits and to of retail being and the uninsured uncollateralized with as remaining our deposits XX% of compared March base muni being commercial December uninsured deposits deposits. the customer XX, XXXX. XX% the This level deposits total XX% were of of XX, approximately speaks diversification and uncollateralized our

on from the the billion, at and with earnings and $X.X including X earlier release. deposits Greg uncollateralized on is of uninsured March earnings when deposits municipal Page our Total XX down our in can were discussed be release. deposit large filed earnings information morning More the supplemental this for found deposits, adjusting that X% just further mentioned X% broker year-end down and relationship material

markets. years our and some seasonality As quarter, of The first quarter in pandemic. see seen generally during we of previous similar those the prior deposit first discussed a previous calls, quarter XXXX in to seen the our COVID-XX first level given the earnings release decrease was in the of to the across outflows in

deposits available cash, securities, As and of of sources capacity March consisted XX, FHLB FRB of March which billion, the uninsured XX. and liquidity about company’s total totaled our as primary X.Xx uncollateralized is $X.X

supplemental on of to our the materials for refer information Page can liquidity more position. You earnings X

a in X risk loans which total future just quarter balances basis asset year-end, economy. strength our remained or down of allowance reflects The portfolio was throughout point Our first for credit quality X.XX% very both than from credit at the end, the consistent the better the loan slightly quarter, our and year-end. and our downturn were of losses credit across metrics at those quality with of quality strong

specifically. our expected, there time. proactively within recently CRE deep at concerns on We did and credit monitor sector office results continue in this real The confirm a were to are into we focus portfolio no dive our given as portfolio, and heightened the that estate portfolio this this significant commercial

markets. X% of about all are represents loans portfolio of total within and XX office March CRE Our as our loans

the off X earnings fully supplemental or portfolio non-accrual portfolio of office material. on status this In of was a end, the in loss due. due and on $X.X the Bank recognized provision driving statement CRE found As past This quarter, provision details is credit first expense the bond we in the wrote within income the Signature More investment none on the on losses be can is the failure. quarter bank’s for Page million quarter. for to

essentially earnings the Our materials. risk on Page on do additional be portfolio these portfolios further municipal corporate quality, details at high We of and to bond have and not provided these see we and portfolios credit any credit time. evaluated this supplemental X of continues

was March XX, portfolio loss position unrealized XXXX. loss our portfolio of unrealized was of an of the March portfolio in was an an $XX at $XX million. held and – investment an at to maturity loss to million unrealized million loss $XXX of The available-for-sale XX, XX, of $XXX.X the December compared As unrealized million

weighted X.X At the HTM years years, average was and the duration AFS respectively, of life and end, and quarter of average the X.X weighted the years respectively. and years, life and duration portfolio was portfolio XX X.X

not compared at first first both X.XX% strong, basis. As capital the quarter of regulatory X.XX% quarter, XXXX, the TCE GAAP our continue first shares to stock of We on quarter year-end, was under during any a repurchase of and repurchase our regulatory of current XXX,XXX of program. in excess to At ratio the available and have measured the ratios capital repurchase position end shares well remains of end the continue and be to our capital the did for requirements.

Now to earnings.

during company quarter million of mentioned, too of XX% we $XX.X money the others mix had the and from and first savings diluted higher income and were although reported margin. ‘XX. shift net we we first basis last income we’ve quarters borrowing XX of affected the the non-GAAP industry, reported net communicated ‘XX, first the a such As the we points driving net January And earnings to seen markets of decrease and $X.XX, in basis to points due checking the anticipated that fourth was interest into between each in down $XX XX pretax estimated, from products down basis, first cost by to On quarter quarter for primarily rising of we X% further EPS and Like as compression quarter of interest costs, banking deposit Greg lower CDs. pre-provision compared quarter, quarter. many interest beyond the across million, margin the deposit XX net non-interest

write-off The the other primary quarters driver Bank for the lower of the earnings discussed earlier. bond between was Signature

FED X%. the and points fourth the funding short-term FED of first back interest by million betas points Again, quarter XX XXX quarter the X.XX% continue deposits to basis was increases additional Net speed ‘XX. as increased of basis $X.X a full for of compression we of was or decline totaling ‘XX. rates primary quarter driver as The on rate margin and in the of a rate absorbed on income the in linked-quarter rise basis of first impact increases two the to quarter lower

have past we our For more several the seen become interest as the risen. rates have within competitive markets deposit months, much landscape

We strategies. actively continue to manage various costs funding through

beta, with of first execution quarter. the cycle for interest rate broker for Our during far excludes million floating interest thus fixed the which deposit deposits income from XX%. as swaps through of quarter was income $XXX,XXX the of Included was quarter received first pay XX% and $XXX the

retail We’ve and new seen million our quarter each commercial, the continue look first around all the million to rate interest $XX.X both originations in committed environment. for loan $XX Loans of appropriately as X%. for price to XXXX we current hold pipelines increased or

our larger originated are now We mortgages. of also a percentage selling residential

than be As in recent year to lower a what we anticipate result, growth loan we’ve this years. seen

for quarter the last sold decrease basis of quarter between the the income increase totaled over in a valuations quarter. driven $X.X ‘XX XX% first changes XX% by compared quarter of quarter to Overall, on income banking of in linked an in first ‘XX. The Non-interest our mortgage quarters. for production fourth were we residential mortgage million, of X%

has production strategy sell residential qualifying mortgage as shifted to net focus interest Our optimizing we on margin. all

quarter last down Non-interest is the previously totaled compared quarter, from which to to X% favorable expense our X% X% increase million, $XX.X first communicated. for expected

manage will and the revenues. net expenses prudently to and on given have continue interest margin pressure We

strategy However, on franchise our long-term value. we and remain focused

Our last non-GAAP efficiency quarter XX.XX% quarter. compared ratio was first of the to XX.XX% XXXX for

X.XX% XXXX. remains for management to first Our by cost XXXX ratio our demonstrates compared of strong and quarter highlighted of for X.XX% the overhead the of a fourth quarter practices, ratio

This concludes our results. comments our first on quarter

the for now We will questions. open call

Operator

Moss Raymond James. Instructions] proceed. from Thank you. question Our first of comes [Operator Steve Please

Steve Moss

Hi, good afternoon.

Greg Dufour

Steve. Hi,

Steve Moss

see on margin become Curious to maybe how and a starting guys maybe a forward, you of we to think about here expectations put long it. just the think terms terms Maybe to this in little little the the color how or margin more going around how here. – about you that on helps swaps neutral

Greg Dufour

Yes. Sure. I Steve. could take that one,

swaps, float our overnight residential average hedging now. the received rate fix $XXX.X pay Fed weighted and XXX me, million $XXX potentially part I closer that, which added book the – is excuse we that So on essentially real right funds is, OIS estate rate, of paying we’re to – think, receiving

So we are positive getting right now. carrier

getting million margin up which We is get for see we into quarter assuming rates benefit the points are $X.X you in probably perspective. X we full to once that anticipate least to X the more, a from neighborhood as quarter, the will that and quarter a go roughly benefit basis of at second

Mike Archer

And question, Steve. part a your then hear I you of think latter

the well, Just I sensitivity. to as really get interest an to certainly, be over some from particularly us is does to closer risk want where asset rate we in drive the position short-term. think really – that It

Steve Moss

in Or around. swaps curious the just Okay. how or kind long for And years? X X of be of like are they’ll terms just

Mike Archer

Sure.

little flexibility and provides We some swaps X accounting – that for certainly X, did cash but that than normal years. more your have the get on us X are again, more as flexibility provides There some a as it are of to well, these part edge a well. And out. flow little ramifications we bit

Steve Moss

Got it.

margin we is so think the costs. meaningful a everybody And deposit seeing about as here, in step-up

shake margin fourth beta? are Fed thinking deposit And X%, let’s by a could quarter around you guys about Just kind say, through-the-cycle curious of that out where if, year? holds of this the your how

Mike Archer

the the around a certainly. would a rest there, kind XX% again, to that in for of there of that assuming unknowns total that funding And of plus assuming I we’re lot on out I gets right anticipating, of XX% right beta, want cumulative – now, or based neighborhood Yes. say we’re the the Fed we’re X.XX to from hangs But modeling, minus. year up say

Steve Moss

And XX% on deposits or rate interest-bearing? deposit total on

Mike Archer

funding Excuse beta. me, total on the – funding

Steve Moss

funding Total beta.

the the more just pricing, you Okay, And of came what loan and how cautious guidance portfolio loans that around that’s to terms think type of we curious in came what’s as of this about on quarter, the growth. helpful. on kind then saw rate loan books just the

Mike Archer

Sure.

I Internally, at rate up think average certainly for books believe XX% weighted we on it, I around are ramping new our, for call originations rates. the quarter.

to is $Xat is commercial residential anywhere that, And start on this rates basis. of rates higher Our generally point $X than weighted a north where we’re from seeing $X.XX certainly a on basis. the certainly with weighted pricing that

Steve Moss

Okay.

terms the to the growth mid-single just year, the so end of that just about maybe of loan flattish quarter of kind in guys the it relatively low And or out. are for I digits. flesh versus you rest of thinking

Greg Dufour

we going right the that do are right to as margin low say line to Steve, this feel capacity lend, mentioned, to we’re to only now. I’d single is digits now. like on our Greg. it we flat would rates And have benefiting I but

not on we’re side. So growth the overstretching

Steve Moss

Well, Okay. the Appreciate much very color. all all for you it. Appreciate it. fair. thank That’s

Greg Dufour

You are welcome.

Mike Archer

Steve. Thanks,

Operator

next Thank line comes proceed. question Damon DelMonte KBW. you. of The the from Please of

Damon DelMonte

Hi, all doing wanted my hope good questions tight a I linked to just taking afternoon, well, held pretty ask outlook, guys. about thanks expense Mike, I quarter. the you’re and here. for

do wondering where Just we of go the over coming you of see modest growth from quarters? here, kind kind

Greg Dufour

Damon. do, Yes. I

those first being year in think run incentive XX%. that are I our the the remaining to in of closer rate that reflected rate we I it, will for as We type will accounted out year, numbers. run some, call – had accrual to parts normal true-ups we the be quarter go

and we do on think comments, basis, to in a that we said that I in we pressure be my with expense revenue are management, focused said, closer the XX%. will go-forward I all certainly But so So, are there. on particularly

Damon DelMonte

Got it.

of a remarks kind residential then expect And like mortgage or the in north little last Okay. commentary that? loans. of a line? banking to we around a you million see trying side, expect bit mean to of of the quarter. last more kind Should that shift to I the strategy per of on of up we in were pickup those fee included quarter over ramp income $X year, Do – mortgage prepared sell somewhat

Greg Dufour

don’t I No, believe so.

XXs, as currently think a pipeline doing. what mid-XXs think we for XX% to more I will certainly than higher designated been we I right percentage would sale. I is sell say, have our now, low

We will continue to drive that higher.

just industry mortgage, just supply of mortgage production. with with levels much function the rates a ultimately forth the and think being and there I call overall so it, the lower, is compression in

where think So, percentage is I we production I our certainly do as will down. think higher coming do a

between think So, to a as this $X.X for half I – probably right from somewhere us now. perspective, are for think I around little million decent a a over half quarters pretty quarter, we spot three guidance

Damon DelMonte

Okay. Got it.

books. be off deposits. do deposits But respect that to deposit large And total are the would composition Okay. based kind composition non-interest out right your with going accounts I of then to to and you you model the the relationship NIB you that could closer of XX% which north on moved of levels, or the kind that closer – think had keep And the of do the XX%? of customers bearing portfolio, probably understand mid-teens, pre-pandemic to that now of we now,

Greg Dufour

Yes.

mix certainly, now, have. anticipating we of I pre-pandemic do rates categories just non-interest stabilize. not other where think folks shift But from earning low certainly are, – to see to go have it we certainly the Damon. anticipate right without we levels – did not to moving they as hopefully are we we internally, with that We seen

terms certainly, it’s are number we here that sitting percentage that thinking good to don’t to down might I again, today in But for have of get again. not be. what mid-teens So going you a

Damon DelMonte

I further going Okay. direction compression the on mean the slower was see margin That’s and in at this much helpful. forward. as a peak at you margin. kind And But continued compression, help the guys, back going like then but I I understand decline, the we we for are guess you circling kind of pace. think the of swaps kind and a margin of the overall quarter do could the bit to look

Greg Dufour

Yes.

I think part fair. your statement is of last that

anticipate I to we it we compression months do is just are is think that’s we seen over how positive next slow we have a are starting some sign. But it in about – thinking recent quarter. little which bit, further a

as many as a So, we higher-single about we from well. margin points digits basis think as quarter, second down as are probably few probably

estimate good now. pretty that’s think I right

the close internally. deposit think or are a I mix mix is we something on the shift eye that keeping

anticipate later back be. to focused coming we and shape what very am seasonal we At and that up also into that have are I to in, point, that see June it, how at not seasonal signal to come about deposits this May as deposits concerns trying call starts in We to in.

more do. it’s think what I when they is that mix

Damon DelMonte

it. Got

for do month the And happen month of cost the of for Okay. March and/or March? you deposits the of have to the margin

Greg Dufour

million. margin Our was March $XXX for

Damon DelMonte

helpful. had. much. Alright. That’s That’s all you I Okay. very Thank

Greg Dufour

Damon. Thanks

Operator

And Thank you. our Please question Matthew Breese proceed. comes with from Stephens. next

Matthew Breese

the repeat? afternoon. Michael, something the I higher-single digits. part then you that but missed Could Good about last Hi. X of margin basis you I guide. points, just heard said

Mike Archer

Sure. Yes.

we call million. in think as low see from that now. anticipate it, of don’t million I low-single what it’s to next right we – margin higher think is $XXX digit quarter, ballpark compression I again, are the So, to know thinking as – end. could anywhere But will I if we $XXX that’s, be kind

Matthew Breese

terms in What growth, deposit ex-brokered? you a appreciate growth the remainder overall growth? for Okay. year core are What And deposit that. then about of slowdown expecting loan kind in of totally you discussed of of kind the

Mike Archer

Yes.

we core next fairly for it quarter, basis. that think think do from on some an on we And pick in inflows. would the I tell end we deposits, realistically, average I hard. start an see is will channel get to the of think front, to at you the flat anticipate I just think potentially as the that least near-term we working on seasonal will that are up that deposit I that end, I I be again, mean

mid-single We is kind going of operating forecast and estimating or various but lots on internally, are, accounts But money certainly certainly it’s of digits are well. checking working would for. right now, or would whether it have we say, low to the markets, hope to promotions is hard we CDs as we what I accounts

Greg Dufour

this Maybe what is to components to And the flow. Greg. out saying is highlight Matt, seasonal was of just it deposit Mike the and play

We will it, activities next up as it banks all ramping understand our as and marketing over just the very with undercurrent for that underneath for few sales activities that all well the months right is are in pricing deposits all, and it markets as competitive call now.

Matthew Breese

four in terms down expect Should it’s portfolio, five Maybe quarters, there? overall Understood. last for securities quarters. the of the we continued been runoff

Greg Dufour

Yes.

answer in near-term, yes, think short the the I Matt. is

continue – also thinking we level think growth flows at help as We to we to fund loan that it cash the the I to terms point this of about But fund are growth borrowings level paying redeploy well. of just those of have. down loan in

Matthew Breese

capital discuss was maybe then if so, that? isn’t Okay. discuss Is management, on flow loan for if buybacks, the paying growth securities hoping and down borrowings. are there you opposite there And cash the any appetite could side, I

Mike Archer

Yes.

price, we planning will at with but look it capital any as at overall a, want call the a see. front, opportunity it’s to buyback now, looking it we it, into tempting right stock price, that definitely the measure we at On it,

Matthew Breese

I had. all leave will it Thank I you. there. Okay. That’s

Greg Dufour

you. Thank

Operator

Thank you.

this to question-and-answer further Greg no like any back would conference closing concludes I to turn have the remarks. Dufour for we our As questions, over session.

Greg Dufour

and questions you, all Great. Damon the and Steve, thank Matt and here. participants for Thank

want your across I really some to the close, here thank also Camden employees I Camden work As you to interest for all stellar but in do the are at National, that National board. recognize doing

deposits really hands am all priorities, is margin team doing. I and and our of are that. quality truly and what And about talk the asset on we proud on they deck As

and much a So day. thank you very with great have that,

Operator

today’s now presentation. The conference for concluded. has Thank attending you

now may disconnect. You

Camden National (CAC) 25 Apr 232023 Q1 Earnings call transcript