Camden National Corporation

And I'll turn the call over to Renee Smith, Executive Vice President, Chief Experience and Marketing Officer.

Thank you and good afternoon and welcome to Camden National Corporation's conference call for the third quarter of 2025. Joining us this afternoon are members of Camden National Corporation's executive team, Simon Griffiths, President and Chief Executive Officer, and Mike Archer, Executive Vice President and Chief Financial Officer. Please note that today's presentation contains forward-looking statements and actual results could differ materially from what is discussed on today's call. Cautionary language regarding these forward-looking statements is included in our third quarter 2025 earnings release issued this morning and in other reports we file with the SEC. All of these materials and public filings are available on our investor relations website at camdennational.bank. Camden National Corporation trades on NASDAQ under the symbol CAC. In addition, today's presentation includes a discussion of non-GAAP financial measures. Any references to non-GAAP financial measures are intended to provide meaningful insights and are reconciled with GAAP in our earnings release, which is also available on our investor relations website. I am pleased to introduce our host, President and Chief Executive Officer, Simon Griffiths.

Good afternoon, everyone, and thank you, Renee. Today represents a pivotal moment in Camden National's continued growth and success. Earlier today, we announced record third quarter earnings of 21.2 million, setting a new high watermark for the organization. This achievement represents a 51% increase in earnings over the previous quarter. Equally important, pre-tax, pre-provision income for the third quarter rose 19% over the prior quarter signaling the momentum across our franchise. This significant achievement underscores the strength of our successful execution of the Northway financial integration strategy following our acquisition Northway that we closed early this year on January 2nd and the value of our expanded capabilities made possible by the dedication of our team and the continued trust of our customers and shareholders. Our strong quarterly earnings continue to support the rebuilding of capital levels following the Northway acquisition, while enhancing long-term shareholder value. This progress is reflected in our tangible common equity ratio, which grew 32 basis points in the third quarter to 7.09%, and a 6% increase in tangible book value in the quarter, reaching $28.42 per share as of September 30th. We are well positioned for continued tangible book value accretion through core earnings and a disciplined capital deployment strategy focused on dividends. Several key performance indicators continue to trend positively this quarter. Our net interest margin expanded by 10 basis points to 3.16%. Our non-GAAP efficiency ratio improved to 52.5% and we reported a return on average tangible equity of 19.1% for the third quarter. These results reaffirm our commitment to delivering top tier financial performance driven by sustainable growth and operational excellence. We delivered robust annualized loan growth of 4% this quarter, reflecting our continued commitment to profitable organic expansion and strategic investments in talent acquisition. Our scale, combined with deep local expertise in the communities we serve, remains a key competitive advantage, enabling us to build lasting relationships and unlock new business opportunities. Our committed loan pipeline was robust as of September 30th, totaling $116 million, and our customers continue to demonstrate resilience despite broader economic uncertainties. In the third quarter, average core deposits grew 2%, reflecting the benefit of seasonal deposit inflows and continued customer confidence and franchise strength. During the third quarter, saving deposit balances grew 5%, continuing the momentum from recent quarters. This product continues to be a strong vehicle for development of new and growth of existing customer relationships. Credit trends remain strong, underscoring the quality of our underwriting and vigilant risk management approach. We continue to address issues swiftly and prudently as reflected in key credit metrics, including a 14 basis point decrease in non-performing assets in the third quarter to just 12 basis points of total assets at September 30th. Last quarter, we proactively disclosed and reserved $6 million for a syndicated loan participation involving a telecommunications services company that entered bankruptcy. In the third quarter of 2025, we charged off 10.7 million of the 12.2 million carrying value of this loan. We remain confident in the overall health of our well-diversified loan portfolio. We sustained strong momentum in our non-interest income this quarter, with assets under management and administration reaching a record high of 2.4 billion. Fiduciary and brokerage fee income for the nine months ending September 30th, 2025 grew organically by 16% year over year, reflecting strong client engagement and demand for our trusted advisory services. Summer mortgage activity was robust, contributing to another solid quarter of mortgage banking income. We continue to identify meaningful opportunities to deepen relationships within our existing customer base particularly as we focus on advice-driven engagement and expand treasury management services into the New Hampshire market. Our innovation agenda and strategic investments are focused on attracting and retaining a digitally engaged customer base. Since launching our enhanced digital account opening platform in January of this year, we have seen 131% increase in consumer accounts originated digitally. We continue to introduce tools like Roundup Savings and digital financial literacy resources. Digital engagement among customers under 45 has grown 11% year over year, measured by monthly logins. We are also advancing automation across the enterprise to drive operational excellence and elevate service delivery. With over 143 bots in production, We have processed more than 5 million items, saving over 74,000 cumulative hours since implementation, freeing up capacity to focus on high-value customer interactions. Our deep community roots continue to drive customer loyalty and long-term growth. To mark our 150th anniversary, we hosted a half-day Community Wellbeing Day in September, closing offices to support volunteerism across the region. More than 600 employees contributed over 1,900 hours across 65 nonprofit organizations, in addition to their annual paid volunteer time. Our record-breaking third quarter performance energizes us as we look ahead. These outstanding results reflect the dedication of nearly 700 teammates and their unwavering commitment to serving our customers and executing our strategy. The momentum we have built positions as well to carry this success through the remainder of 2025 and beyond. With a strong foundation and a focused approach, we remain confident in our ability to deliver exceptional outcomes and create meaningful long-term value for our shareholders. And with that, I'd like to hand over to Mike to provide some financial highlights regarding the quarter.

Thank you, Simon, and good afternoon, everyone. We're very pleased with our 3rd quarter 2025 financial results as they signify the earnings power, the future potential of national having completed the acquisition of Northway financial. And successfully executed the integration and cost take out plans. For the 3rd quarter reported net income of 21.2M diluted earnings per share of a dollar 25. Both representing increases of 51% over the 2nd quarter 2025. On a non-GAAP basis, pre-tax, pre-provision income reached $29.5 million for the third quarter, an increase of 19% over the prior quarter. Strong revenue growth for the third quarter of 5% on a linked quarter basis, coupled with continued expense discipline and achievement of synergies from the Northway acquisition resulted in improvement across several key financial metrics, including a return on average assets of 1.21%, and a non-GAAP return on average tangible equity just over 19% for the quarter. Average loan growth of 1% and net interest margin expansion of 10 basis points during the third quarter, excuse me, expansion of 10 basis points grew to 3.16% in the third quarter, fueled our net interest income growth of 4% between quarters. Our asset yield increased four basis points during the third quarter to 4.98%, driven by steady repricing and origination of new assets in the current interest rate environment. At the same time, our funding costs improved by six basis points during the quarter to 1.9%, driven by seasonal deposit market flows as average deposits increased 2% during the third quarter, relieving pressure on more costly borrowings. With a liability-sensitive interest rate risk position, we're well positioned for future Fed rate cuts. We continue to see favorable momentum in non-interest income revenue, reaching $14.1 million in the third quarter, an increase of 8% over the second quarter. Included within non-interest income this quarter was a net gain of $575,000 from the sale of two non-branch properties. Adjusting for this non-recurring net gain, non-interest income grew 3% on an in-quarter basis, a total of $13.5 million. Reported non-interest expense for the third quarter was $35.9 million. Our third quarter operating expenses reflect our expected cost savings and synergies from the Northway acquisition. As we look forward, we are estimating fourth quarter non-interest expense $36 to $36.5 million. The third quarter of 2025, we reported a provision for credit losses of $3 million, down from $6.9 million in the previous quarter. As Simon noted in his comments, we recorded a charge-off of $10.7 million in the third quarter for the syndication loan we previously disclosed last quarter. At June 30, we carried a specific reserve of $6 million on this loan, and upon charge-off, we recognized an additional provision expense of $4.7 million this quarter. This additional provision expense was partially offset by changes in our macro economic outlook and a decrease in our committed unfunded loan pipeline during the quarter. As of September 30th, the allowance totaled $45.5 million and covered 5.5 times total non-performing loans. As shown in our earnings release, our credit quality metrics at quarter end remain solid. This concludes our comments and we'll now open the call up for questions.

Thank you. We will now begin the question and answer session. To ask a question, press star then 1 on your touch-tone phone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then 2. And at this time, we'll pause momentarily to assemble our roster. First question comes from Steve Moss with Raymond James. Your line is open. Please go ahead. Good afternoon.

Maybe just start on loan growth here. Afternoon, Simon. You know, good quarter for commercial real estate growth. And I hear you, Simon, in terms of the pipeline being robust. I'm just kind of curious, you know, where is loan pricing and kind of, you know, are you seeing a pickup in activity and maybe more opportunities in your markets these days?

Yeah, thanks for the question, Steve. I'd say overall, you know, we have seen some nice momentum in a number of our businesses, commercial, certainly small business and home equity. which is up about 54% year over year. Certainly part of that story is coming out of the New Hampshire market, and that's something we've been talking about now. It's a tremendous market. We've got some great stakeholders, and we've made some recent hires in the market. On the pricing front, there's certainly been some softening in the last 60, 90 days, but still holding up fairly strong. So I think this is a nice opportunity. We probably see a little bit of softening of loan volumes in the back fourth quarter compared to sort of what we saw in the third quarter, but still lots of good momentum and, you know, really pleased with some of those businesses and how they're performing.

Okay, great. And then in terms of the margin here, you know, a good step up as expected. You know, Fed is obviously cut in September here, probably getting another rate cut tomorrow. Just kind of curious as to how you guys are thinking about the margin going forward and some of the dynamics you have for assets repricing higher here. Sure, Steve.

Yeah, so we are well positioned certainly for the Fed rate cuts and in our base model, we do have that cut in tomorrow and one in for December. Certainly from there, of course, depends on the yield curve, kind of where we go. But I think in our base model, we have a margin expansion of 5-10 basis points next quarter. A lot of that coming from the cost of funds side of the house. We do think probably some of the, on the asset side, The expansion probably will start to slow down, almost I'll call it a little more flattish as we continue to put new loans on at higher rates, but that's being offset a little bit by just the repricing down of some of the variable rate loans. So it's really, I think, for at least our base model for now, we're thinking about all that benefits from the cost of funds.

Got you. Okay. Appreciate that, Collin. as we think about each rate cut, I realize the one in December is kind of late and obviously, you know, the September one was late for this quarter. Is it roughly kind of like, I guess, five to seven basis points per rate cut and how to think about it?

Yeah, I think we had, we were modeling somewhere around three to four annualized, but yeah, I think that's kind of not hard.

Got it. Okay. And then in terms of just, you know, the activities, Simon, you mentioned hiring in New Hampshire. Just kind of curious, you know, how many people you've hired, you know, how you're thinking about investment. I realize, you know, we're heading to the fourth quarter planning season for next year, but just color around that and kind of how you're thinking about expenses for next year.

Yeah, thanks. And, you know, I think that's been a key message from us and a focus as a management team, really, just disciplined expense management, and obviously they're very pleased with the efficiency ratio coming in at just under 55 percent, and I think reflects how we think about expenses and reinvesting and self-funding a lot of those investments. We have invested in a couple of commercial bankers, continue to build out the teams, fill in key areas, also looking from a home equity perspective and a mortgage perspective to continue to make sure we cover the market and make investments where they make sense. And I think that continues, you know, in a steady pace next year. I think it's, you know, something that we just continue to want to keep building on, but be very strategic in those investments. And as I say, make sure we continue to be disciplined in our approach.

Okay, great. Appreciate all the color here, and I'll step back. Thanks. Nice quarter. Thank you. Thanks, Steve.

We now turn to Damon Talmonti with KBW. Your line is open. Please go ahead.

Good afternoon, guys. Hope you're, uh, hope you're doing well. Um, just wanted to circle back on the, on the expense question. I think Mike, you said your, your guide for next quarter is like 36 to 36 and a half million. Just kind of wondering what some of the dynamics are in the step up on a quarter over quarter basis. And as you look across 26, you think kind of, you know, the three to 4% annual growth rate is, is reasonable.

Yeah. Thanks Dan for the question. Um, yeah, so good, good question there. We, we, As we think about the 4th quarter, I think there's some some stuff on the people side of the house, just in terms of some incentives and how the year shakes out Damon that we're thinking that some of our operating expenses could pick up a notch. Also, as part of just the acquisition Northway, they just had a legacy. You know, contract with an individual there that there's some accounting for that has to be done a year. And so. I wouldn't call that necessarily a recurring expense per se, as directly tied to the performance of the BOLI asset, which has done very well this year. And so there's some additional expense that we were anticipating could run through in the fourth quarter. So really, those two factors are the primary drivers for our outlook, at least currently, for the fourth quarter. As we think about going into next year, I would just say we're certainly in the planning phase. you know, Simon just mentioned that, that efficiency ratio and paying particularly attention to that, you know, trying to manage to mid fifties ish, you know, some, something in that space is kind of where we want to be. So we'll continue to do that as we think about our, our outlook for expenses.

Gotcha. Great. Appreciate that color. Um, and then with regards to the margin, uh, appreciate the commentary around the core margin there. As you think about like the fair value accretion that, that gets run through each quarter, um, Do you see that kind of slowing down or tailing off here in the fourth quarter as we go through 26? Or does it kind of stay elevated like we've seen in the last couple quarters?

I mean, I think it's pretty, you know, four and a half to five million is a pretty good number for us all in, honestly. You know, certainly for next quarter. I think if, you know, it becomes a bit of a refi boom or, you know, if the long end comes down a little bit more, we could see that potentially accelerate in 26. We're not. certainly not baking that into our base model, if you will. But I think that $4.5 to $5 million is a pretty solid run rate for us, at least for now.

Okay, great. And then I guess just lastly, with the charge-off, obviously released some reserves there. You're down to 91 basis points. Just kind of wondering how you think about that level when you consider the outlook for growth and that kind of being offset by the – healthy credit quality overall. I mean, do you think you kind of keep it in this low 90 range or do you think you need to kind of build it back up a bit? Thanks.

Yeah. Thanks, Damon. I, we feel very comfortable about in that range, you know, I think it represents, you know, our confidence in the, in the underlying portfolio. And, uh, you know, this is, uh, you know, we've certainly, uh, you know, felt very good about the, uh, the overall credit this year in terms of the, the, the portfolio that we have in the diverse, you know, we have a very strongly diversified portfolio and, uh, And I think that leads us to feeling good about the ACL in the current kind of guided range.

Great. That's all that I had. Thank you. Thanks, Damon.

We now turn to Matthew Brees with Stevens. Your line is open. Please go ahead.

Hey, good afternoon. Maybe just a related question. You know, it feels like you cleaned up the problem with syndicated credit this quarter. And I guess I'm curious, is that provision that we saw more indicative of what you expect going forward? And are we back to more or less kind of normal course of business for Camden from a credit perspective overall from here?

Yeah, I might answer that, Matt, just in terms of, you know, I think that low 90s, 91, you know, kind of that space plus or minus the basis point or two, I think it's a good spot for us. I think we feel comfortable there. Certainly with loan growth, of course, more provision will be had. But I think overall, I mean, I think that's a good proxy of where to be. That 91 basis points, if you were to go back and look at that compared to where we were at year-end pre-acquisitions, a few basis points higher. I think it reflects a similar macroeconomic outlook for us right now. And I would say based on just kind of our current thinking, I think it's a pretty fair spot. We know the world can turn pretty fast, but... I think right now that's kind of what we're thinking.

Got it. Okay. And then what is the blended rate, the blended loan yields on the pipeline? And I heard your comments, Mike, loud and clear on the NIM. But it feels like, you know, if we get a few more rate cuts, which seems like it's on the table, it feels like there's structurally more tailwinds to the NIM. You know, beyond the next six to nine days, it just feels like, you know, some positive loan yield repricing and then room to reprice deposits a bit lower. So I would feel net-net like a year from now the NIM is a bit higher, but wanted to hear your thoughts on that.

Yeah, I think that's fair, Matt. I mean, I think for, you know, the 5 to 10 basis points for next quarter, I mean, I think that's a pretty good range for us. I mean, certainly I think there's some opportunity there where we could outperform that as well. You know, thus far in the cycle, you know, we've been pretty aggressive on pricing down some of the deposits and funding. I think as we, you know, even gear up for tomorrow, you know, internal discussions around that are, you know, just changing. We want to certainly be thoughtful with, you know, in terms of the customer base and trying to, you know, balance that with growth and deposits as well. So, I think as we, you know, continue on this path, and I want to say on the way up, we're low 40s beta. I would say on the way down, at least right now, we're probably inching a little bit higher than that. And I think we could settle in 35 to 40 when it's all said and done. It's kind of how we're thinking about it. Just really just trying to tee on that. I think from here we probably, you know, maybe we don't move as staff, but certainly our full expectation is to move and get that funding benefit.

Got it. Okay. And then just two other ones for me. I was hoping you could help us out with, you know, kind of early reads on loan growth for 2026. And then within that, you know, Simon, you pointed this out, but consumer and home equity, even though it's a small portfolio, has been growing nicely. Maybe some thoughts there and to what extent we might see that type of growth continue.

Yeah, thanks, Matt. I mean, certainly loan growth, as I talked about earlier, you know, I think fourth quarter flat up to up 2% feels about the right sort of guide and then sort of, you know, mid single digits, mid you know, I think is sort of where we're heading next year, obviously, with a lot of that opportunity I talked about earlier, certainly in our New Hampshire market. And, you know, certainly, I said, you know, residential has been very strong for us, as well as home equity, commercial, small business, there's certainly areas that have nice momentum. The home equity business, you know, I think it's just a great relationship product for us. I think we really like the opportunity there to really connect and deepen relationships. We've also expanded The number of stakeholders that are able to originate home equities, that's been a big opening up of that door. So I certainly think, you know, this year has been exceptional growth. I mean, up 54%, but, you know, it may not be as high as that. But certainly, I think forward momentum from here and a lot of that growth actually on the home equity side is in the main market. So I think some of that opportunity next year could be in the New Hampshire market. And certainly that would, you know, continue that forward trajectory.

Great. And then just the last one is on fee income for next year. It feels like we've hit an inflection point on a couple of areas, you know, brokerage and insurance being one, but then also service charges have been up nicely. To what extent might we see some of these positive trends continue into next year?

Yeah, we're, we're really proud of the, uh, the fee income growth, particularly in the CFC side of our business, uh, the brokerage side of the business. I mean, you know, up 15% and, uh, you know, certainly, um, you know, overall 11% organic growth in assets under management, um, which is, which is great. And we talked about, you know, hitting 2.4 billion. So that momentum is, is really positive. We continue to invest in those businesses. I think it's just a tremendous opportunity. And also in the wealth business, we've, uh, mentioned, I think on the, on the last call, we've added a couple of folk into that business and there's opportunities down the road to potentially expand into the, into the New Hampshire market as well on the wealth side. So we do have brokerage coverage, but not modest wealth coverage. So I think those are areas that I think make a lot of sense for us and really connecting and partnering those businesses into the commercial business, the mortgage business, and really creating that full relationship opportunity. So I think it's a business where, again, just love the sort of current growth trajectory and just keep investing in it, but through that lens of self-funding and having that eye to our efficiency, which is, as you know, as a management team, really important to us.

Yeah, got it. Okay, great. I appreciate it. I'll leave it there. Thank you. Thanks, Matt.

As we have no further questions, this concludes our question and answer session. I would now like to turn the conference back over to Simon Griffiths for any final remarks.

Thank you for your time today and continued interest in Camden National Corporation. We truly appreciate your support throughout the year and wish you a productive close to the year and a restful holiday season. Take care, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.