CNC Posts 2008 Year-to-Date Results
10/28/2008
CAMDEN, Maine, October 28, 2008: Robert W. Daigle, president and chief executive officer of Camden National Corporation (NASDAQ: CAC; the "Company"), today announced 2008 year-to-date earnings per diluted share of $0.69, a $1.55 decrease from the first nine months of 2007, which includes the $14.0 million write-down of other-than-temporarily-impaired securities ("OTTI Write-down"). Reflecting the OTTI Write-down, the Company's third quarter 2008 loss per diluted share was ($1.05), which was $1.82 less than the $0.77 of earnings per diluted share for the third quarter of 2007. Net income for the first nine months of 2008 decreased to $5.3 million, compared to the $14.7 million reported for the nine months ended September 30, 2007, and net loss for the recently completed third quarter was ($8.0) million, a decrease of $13.0 million from the $5.0 million earned in the same three-month period in 2007.
For the nine months ended September 30, 2008, the returns on average equity and average assets were 4.16% and 0.31%, compared to 18.08% and 1.13%, respectively, for the nine months ended September 30, 2007. The decline in return on average equity is primarily the result of the OTTI Write-down and the $37.9 million of goodwill created from the Union Bankshares Company ("Union") acquisition. During the first three quarters of 2008, return on average tangible equity (which excludes goodwill and other intangibles) was 5.78% compared to 18.85% for the same period in 2007.
Operating earnings per diluted share, operating net income and other operating disclosures, determined in accordance with generally accepted accounting principles ("GAAP") excluding the effects of the non-cash OTTI Write-down noted above, provide a more meaningful comparison for effectively evaluating the Company's core operating results:
Core Operating Results
Operating earnings per diluted share (excluding the OTTI Write-down) for the nine months ended September 30, 2008 were $2.50, a $0.26, or 11.6%, increase over the same period of 2007. Operating earnings per diluted share for the third quarter of 2008 were $0.77, which was equal to the third quarter of 2007.
Operating net income (excluding the OTTI Write-down) for the nine months ended September 30, 2008 was $19.2 million, a $4.5 million, or 30.6%, increase over the same period of 2007, which includes the impact of the Company's acquisition of Union. Operating net income (excluding the OTTI Write-down) for the third quarter of 2008 was $5.9 million, a $932,000, or 18.6%, increase over the third quarter of 2007. Increases in both periods primarily reflect the impact of the January 3, 2008 acquisition of Union's $547.4 million asset base.
The Company's $14.0 million OTTI Write-down (included in non-interest income) resulted from investments in auction pass-through certificates issued by trusts that were sponsored by Merrill Lynch & Co. The assets of the trusts consisted of Federal Home Loan Mortgage Corporation ("Freddie Mac") preferred stock. On September 6, 2008, the U.S. Treasury Department placed Freddie Mac in conservatorship and, as a result of this action, the payment of dividends ceased on all Freddie Mac issued stock, including the preferred stock supporting the auction pass-through certificates. The Freddie Mac preferred stock collateralizing the securities severely declined in value resulting in the impairment of the Company's investment. The OTTI Write-down has been treated as a capital loss. However regulation or IRS guidance could change the tax treatment to ordinary loss. As an ordinary loss, the Company would be able to record a tax benefit related to the OTTI Write-down. If this treatment is allowed, the Company would record a $4.9 million, or $0.64 per diluted share tax benefit.
At September 30, 2008, the Company’s total risk-based capital ratio of 11.89% and Tier 1 capital ratio of 10.71% exceeded the minimum ratios of 10.0% and 6.0%, respectively, required by the Federal Reserve for a bank holding company to be considered "well capitalized."
Daigle commented, "Including the OTTI Write-down, the Company remains "well-capitalized," the highest designation accorded by our primary regulators, and continues to experience solid core operating earnings, which we expect will support future capital build-up and quarterly dividend distributions."
Net interest income for the third quarter of 2008 increased 43.0% to $17.4 million, compared to $12.2 million for same period of 2007. This increase in net interest income was primarily attributable to an increase in average earning assets resulting from the Union acquisition. In addition, the net interest margin increased 30 basis points to 3.36% for the first nine months of 2008, compared to the same period in 2007, as a result of the recent rate reductions by the Federal Reserve and a positively sloped yield curve.
During the third quarter of 2008, the Company provided $1.2 million to the allowance for loan and lease losses ("ALLL") compared to no provision to the ALLL for the same quarter of 2007. The increase in the provision to the ALLL resulted from an increase in net charge-offs and non-performing loans. Non-performing loans as a percentage of total loans amounted to 0.87% at September 30, 2008, compared to 0.50% at September 30, 2007. Additionally, net charge-offs to average loans increased to 0.19% for the nine months ended September 30, 2008, compared to 0.09% for the nine months ended September 30, 2007. The ALLL was 1.13% of total loans outstanding at September 30, 2008, compared to 1.19% of loans outstanding on the same date in 2007. The ALLL was 130.9% of total non-performing loans at September 30, 2008, compared to 237.3% at September 30, 2007.
With respect to credit quality, Daigle commented, "Quality remains a top priority and, to that end, underwriting criteria is being regularly re-examined to ensure that changing market dynamics are being factored into our decision-making process. Although we are adversely affected by a few larger real estate-related credits negatively impacted by the current economic cycle, we continue to have a healthy appetite for growth in all loan categories."
Non-interest income for the third quarter of 2008 was $3.8 million (excluding the OTTI Write-down) or 20.0% over the same quarter a year ago. The increase was driven by increases in service charges on deposit accounts, income from fiduciary services at Acadia Trust, N.A., and brokerage commission income at Acadia Financial Consultants resulting primarily from the customer relationships gained in the acquisition of Union, which was offset by an $804,000 loss on the sale of other equity securities.
Non-interest expense for the third quarter of 2008 was $11.7 million, an increase of $3.3 million, or 38.8%, over the same quarter in the prior year primarily due to the Union acquisition. The Company's operating efficiency ratio (excluding the OTTI Write-down) for the nine months ended September 30, 2008 was 54.85%, which compares favorably to the prior year. In addition, the core efficiency ratios for the first three quarters in 2008 were 54.97%, 54.80% and 56.85% for the quarters ended September 30, 2008, June 30, 2008 and March 31, 2008, respectively.
Daigle noted, "We believe these quarter-on-quarter results in core operations demonstrates our continued ability to successfully execute on cost savings targets and core earnings accretion goals established during the acquisition due diligence process."
The Company reported earlier that the Board of Directors approved a dividend of $0.25 per share, payable on October 31, 2008 for shareholders of record on October 15, 2008, which is a 4.2% increase over the dividend declared in the same period last year.
In closing, Daigle stated, "While we are disappointed with this quarter's adverse developments in the Company's investment portfolio, arising from outside influences in the turbulent credit markets, we continue to be encouraged by the positive results emanating from our core operating activities. Despite continued uncertainty in the global economic environment, we remain committed to pursuing our well-defined strategic growth objectives while focusing on capital preservation - both considered essential to ensuring the Company's long term prosperity."
Camden National Corporation, ranked in the top 20 in US Banker's 2008 list of top-performing mid-tier banks, headquartered in Camden, Maine, and listed on the NASDAQ® Global Select Market ("NASDAQ") under the symbol CAC, is the holding company employing 440 Maine residents for two financial services companies, including Camden National Bank (CNB), a full-service community bank with a network of 37 banking offices serving coastal, western, central, and eastern Maine, and Acadia Trust, N.A., offering investment management and fiduciary services with offices in Portland, Bangor, and Ellsworth. Acadia Financial Consultants is a division of CNB, offering full-service brokerage services.
This press release and the documents incorporated by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "will," "should," and other expressions which predict or indicate future events or trends and which do not relate to historical matters. Forward-looking statements should not be relied on, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.
Some of the factors that might cause these differences include the following: changes in general, national or regional economic conditions; changes in loan default and charge-off rates; reductions in deposit levels necessitating increased borrowing to fund loans and investments; changes in interest rates; changes in laws and regulations, including changes in tax treatment; changes in the size and nature of the Company's competition; and changes in the assumptions used in making such forward-looking statements. Other factors could also cause these differences. For more information about these factors please see our Annual Report on Form 10-K on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements.
These forward-looking statements were based on information, plans and estimates at the date of this press release, and the Company does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
Contact:
Suzanne Brightbill
Public Relations Officer
Camden National Corporation
207.230.2120
sbrightbill@camdennational.com
