Camden National Corporation

Good day and welcome to Camden National Corporation's fourth quarter 2025 earnings conference call. My name is Elliot and I'll be your operator for today's call. All participants will be in listen-only mode during today's presentation. Following the presentation, we'll conduct a question and answer session. If you require operator assistance at any time during the call, please press star then zero. And I'll turn the call over to Renee Smith, Executive Vice President, Chief Experience and Marketing Officer.

Thank you. Good afternoon and welcome to Camden National Corporation's conference call for the fourth 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 on our fourth 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 marks another meaningful milestone in Camden National's continued momentum and strong financial performance. Earlier this morning, we reported fourth quarter earnings of 22.6 million, representing yet another record-setting achievement for the organization. This strong finish to the year reflects a 6% increase in earnings from the prior quarter, underscoring the consistent execution and discipline across our teams. We are pleased that several key financial performance indicators continue to trend positively this quarter, including 13 basis points of net interest margin expansion over the prior quarter to 3.29%, a non-gap efficiency ratio below 52%, and a return on average assets of 1.3%. These results underscore the durability of our operating model, validate management's effective assimilation of the Northway franchise, and reaffirm our focus on consistent, high-quality performance supported by sustainable growth and disciplined execution. With the benefits from Northway financial acquisition now fully delivering, we are pleased to report that we are ahead of our strategic and financial objectives in several areas. As we move into 2026, we are accelerating organic growth through a broader commercial footprint in our southern markets, continued expansion of retail products and digital capabilities across the franchise, and deeper leverage of the strength of our wealth and brokerage franchise. We had great success in 2025 across our wealth and brokerage divisions, highlighted by 15% organic growth of assets under administration to 2.4 billion at December 31st, 2025. Looking ahead, we see significant opportunity to deepen existing customer relationships through advice-led interactions and the continued expansion of treasury management solutions across our footprint. Our balance sheet remains a source of strength for our company. As of December 31st, 2025, our regulatory capital levels were above our internal target levels. Our loan loss reserve was 91 basis points of total loans and reflects the quality of our loan portfolio and liquidity position continues to be solid. Loans grew organically by 2% for the year. demonstrating our continued emphasis on profitable expansion, supported by strategic talent investments. We remain bullish on home equity lending and saw strong performance in this category throughout the year, highlighted by 6% growth in the quarter and 18% organic growth for the year. While total loans were down 1% for the fourth quarter, our overall production levels for the third quarter and fourth quarters were comparable. This quarter's decrease was driven by higher loan payoffs and prepayments, muting an otherwise strong quarter of production. As of year end, our credit metrics remain strong, underscoring the quality of our underwriting and disciplined risk management approach. None performing assets as of December 31st, 2025 were 10 basis points of total assets, and total past due loans were 16 basis points of total loans. Our credit teams continue to proactively address issues as they arise. During the fourth quarter, we had the opportunity to complete a short sale on a commercial real estate office loan that had been designated as classified for nearly two years. After a comprehensive assessment, we determined that entering into a short sale arrangement was the most prudent and proactive step to limit our future exposure and further strengthen our credit profile. The transaction closed late in the fourth quarter resulting in a $3 million charge-off and an 88% recovery of the loan balance. We remain confident in the overall health of our well-diversified loan portfolio. We continue to advance our digital strategy to attract and retain highly engaged customers. This quarter we introduced Family Wallet, a no-fee, parent-controlled youth banking platform that helps families build healthy financial habits within Camden National Bank trusted brand, and integrated digital environment. Family Wallet enhances our broader digital suite, including Roundup Savings, which now reflects nearly 1 million transactions with users, saving on average $103 each since its implementation earlier this year. These investments contributed to a 19% year-over-year increase in digital engagement among customers under the age of 45, as measured by monthly logins. we are actively managing operating expenses by accelerating enterprise adoption of our automation platform. Through the use of over 143 bots, we have processed more than 5 million tasks since implementation several years ago, freeing up capacity and allowing our teams to focus on higher value customer interactions. Our performance this year coincided with our 150th anniversary. to the effectiveness of our strategy, maintaining a resilient balance sheet, driving high-quality growth, and staying relentlessly focused on delivering value for our customers, communities, and shareholders. We believe we are well positioned as we look ahead to 2026. And of course, none of this would be possible without the dedication of our experienced and caring colleagues across Camden National. Their hard work, commitment to our customers and communities, and collaboration with one another brings these results to life, strengthening our franchise and delivering meaningful value to shareholders. With that, I'll hand over to Mike to provide additional financial details for the quarter.

Thank you, Simon, and good afternoon, everyone. We are very pleased with our finish of the year, reporting net income of $22.6 million and diluted earnings per share of $1.33 for the fourth quarter. net income of $65.2 million and diluted earnings per share of $3.84 for the year ended December 31st, 2025. In the second half of 2025, we began to see the earnings power of Canada National following the acquisition of Northway at the start of the year and the execution of our cost takeout initiatives during the first half of 2025. Our financial performance in the fourth quarter resulted in strong profitability metrics including a return on average assets of 1.28%, a return on average tangible equity of 19.06%, and an efficiency ratio of 51.69%. Given this strong performance, we've been able to rebuild capital used in the Northway acquisition at a pace that exceeded our initial projections. In the fourth quarter, we again saw strong revenue growth of 4% over the third quarter. Net interest income increased 5% between quarters, driven by a 13 basis point expansion in net interest margin to 3.29% in the fourth quarter. Funding costs between quarters decreased 11 basis points to 1.79% in the fourth quarter, as we've been able to successfully manage deposit costs following the most recent Fed rate cuts. Additional drivers of net interest income growth between quarters were average loan growth of 1% Average deposit growth of 2% and higher fair value mark accretion of $735,000, which is driven by elevated payoffs on acquired loans. In the fourth quarter, we saw nice momentum in deposits, which were up 2% since September 30th. Our growth and savings balances driven by our high yield savings product continues to be a great story for us, increasing 5% during the fourth quarter and 28% organically for the year. Interest checking balances are also up 11% in the fourth quarter compared to last quarter, primarily driven by seasonal municipal deposit flows. We anticipate our first quarter of 2026 deposit balances will be relatively flat with the fourth quarter, despite normal seasonality in our deposit base during the winter months, given the impact of recent deposit relationship wins across our sales teams. Non-interest income for the fourth quarter totaled $14.1 million, and it was fairly flat quarter over quarter. However, it's worth noting the change in revenue makeup between quarters. Our fourth quarter non-interest income included our annual visa bonus incentive, which totaled $979,000 this year, and elevated fees earned on back-to-back loan swaps, which totaled $594,000 in the fourth quarter. Given seasonality considerations and normalization of certain fees, We currently estimate non-interest income will range from $12 to $13 million for the first quarter of 2026. Reported non-interest expense for the fourth quarter was $36.9 million, which was an increase over the last quarter as anticipated. The increase reflects continuing investment in the franchise, strong performance across our revenue lines, seasonality in our expense base, including year-end performance, incentive true-ups, and health care costs, and other corporate matters. We currently estimate our first quarter operating expenses will range from $36 to $37 million. For the fourth quarter, we reported a provision for credit losses of $3 million driven by the single charge-off Simon mentioned earlier. As of December 31st, our loan loss reserves totaled $45.3 million, which was 91 basis points of total loans and was 6.4 times non-performing loans. We continue to believe we have sufficient loan loss reserves set aside given the strength and historical performance of our loan portfolio, its diversification, and our credit trends at year end. Lastly, I wanted to note that in early January, we announced a new share repurchase program that gives us the ability to repurchase up to 840, excuse me, 850,000 shares of the company's common stock, or approximately 5% of shares currently outstanding. This concludes our comments. We'll now open up the call for questions.

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

Thank you, guys. Maybe just starting with the margins here, you know, nice pickup quarter-over-quarter pretty much as we expected. Just kind of curious, you know, Where are deposit costs trending here for all the Fed rate cuts? And kind of how much more expansion are you thinking here going forward?

Yeah, great question, Steve. So I think as we were thinking about this, I think for the first quarter, we got some different dynamics in play here. I would say overall, to answer your question directly, you know, we're kind of in a couple basis points here for the first quarter of core margin expansion. Um, you know, we have generally some seasonality and deposit flow. So there'll be a level of remix there that we'd otherwise see, which is pretty customary for us. I'm on the funding cost side. You know, we do see that continued improvement there. I would say in the neighborhood of 7 to 10 basis points, potentially for the quarter. That said, I think we'll also see some yield compression to just given some of the pricing characteristics that didn't occur in December with the latest Fed rate cut. But overall, we're expecting a couple basis points plus or minus for the 1st quarter. And just to be clear that that is on a core basis. I think I think just just long term Steve, as we look out, we continue to see. You know, favorable margin expansion, I would just say bearing any additional Fed rate cuts. It'll probably be a bit slower than what we certainly than what we saw this this last quarter. But we continue to see a potential upside here.

Okay, great. And then on the loan growth front, you know, I hear you, Simon, in terms of payoffs here. It looks like they were late in the quarter. Just kind of curious, you know, how the pipeline is and kind of like how you think about dynamic with payoffs here just as kind of, you know, rates have generally or spreads have generally come in over the last quarter or so.

Yeah, thanks for the question, Steve. You know, I think just generally we continue to see a decent pipeline. You know, residential pipeline is just over 83 million. Commercial pipeline is just over 77 million, which certainly is solid for January and puts us in good, really good footing for the rest of the year. We expect loan growth this quarter, as Mike indicated, to be sort of flat to up 2%. But certainly as we get into the rest of the year, we see a pickup in that April-May timeframe and certainly mid-single digits is certainly our outlook. We did see a slight uptick in prepay towards the end of the quarter, and I think certainly in the rate environment, there's the potential that that sort of sustains. But generally, we feel very positive in terms of loan growth. We're seeing really nice pickup in the southern end of our market. New Hampshire continues to be a place of strength for us. We continue to build out our teams. We continue to put a lot of resources, training, and other pieces into those markets and see a lot of opportunity there and really of the partnership with Northway, the integration with Northway. So very, very strong on those fronts.

Okay, great. And then just on capital with the buyback here, just kind of curious how you guys are thinking about, you know, deploying that or using that authorization.

Yeah, I would say our focus right now continues just to be to return capital, continue to build, but certainly we'll be opportunistic on leveraging the repurchase program. But I think our initial priority is continuing to build capital there and position ourselves for whatever the future may hold. But I would say organic growth is the first priority. And from there, Steve, it really is a bit more opportunistic, if you will. Okay, great.

I appreciate all the color here next quarter.

Thank you.

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

Hey, good afternoon, guys. Hope you're both doing well. Just wanted to circle back on the fair value accretion that you mentioned, Mike, this quarter. Do you have the dollar amount of what that accretion was?

Yeah, in total it is $5.3 million, I believe, for the quarter.

Okay. And I know you noted that it was somewhat accelerated because of some payoffs, but what would be a good range to model on a scheduled basis?

Yeah, I mean, I guess like internally, Damon, we're more in that call four and a half, maybe four and three quarters. I think to the extent that, you know, of course, if prepaid accelerated, it could creep up like we saw it, but I think on a base perspective, that's pretty solid.

Okay, that's helpful. Thank you. And then, you know, with regards to the outlook for loan growth, you know, it sounds like the pipelines are pretty healthy. Do you guys intend to try to make any commercial hires this year or any team of lenders? Do you feel that you're pretty adequately staffed for, you know, for the foreseeable future?

Yeah, Damon, we certainly continue to look for talent, particularly in the key markets. We've had a couple of really nice hires recently, and we're finding people attracted to the Camden story and continue to build out and deepen the bench of those teams. We've also elevated a couple of folk internally within the Portland market and just starting to push into some different segments. So really, that whole focus is really on growth. And building expertise is also I've talked about in previous schools, just this opportunity to connect commercial into other businesses. We're seeing some great partnership across the world franchise. It's time to really bring the Camden team to bear. And I think that's a really important focus for us.

Okay, great. And then just lastly, as we try to think about the provision, heard the comments on the comfort level with the reserve. But if you look at the last couple quarters of 2025, the provision was kind of in that $3 million range. Do you think that was just necessitated by addressing particular credit issues that came up? Or do you feel like that kind of higher level of charge also is kind of a normalization of the credit cycle and we should factor in a little bit more in provision?

Um, that's a great question. I think that, you know, the 3Million that we saw was more necessitated by, you know, some of the credits over the last few quarters there. And as we highlight and certainly. 1 off from our perspective there, I think right now, I would say overall, we feel pretty good around the 9091 basis points on a, you know, you see all the loans ratio. Uh, Damon, so, um, I would stick there and I think we begin to see net charge off start to normalize more things. We're accustomed to from here.

Got it. Great. That's all that I had. Thanks so much.

Cheers, Damon.

Thank you.

We now turn to Daniel Cardenas with Jannie Montgomery Scott. Your line is open. Please go ahead.

Good afternoon, guys. As you guys think about the positive growth in 2026, do you think it's going to be able to keep up with expectations for growth on the lending front? I know there's a little bit of room on your loan-to-deposit ratio, but how are you guys thinking about overall deposit growth in the coming year?

Yeah, thanks, Daniel. Appreciate the question. We continue to feel we're putting a lot of resources and focus on deposit growth from a number of fronts and feel very good about how we're attracting clients, move into primacy, and really focus on primary relationships. We see low to mid single-digit growth this year. We saw, as we talked earlier in the recorded remarks, some very nice growth on high-yield savings, so lots of opportunity there. We certainly feel there is plenty of opportunity. We like the southern markets where we see growth in households and lots of opportunities for us to leverage our digital franchise and capabilities. And I think that'll, you know, really kind of lead us to a positive outlook on our deposit growth this year.

Excellent. Good. And then as I think about operating expenses kind of on a year-over-year basis, kind of low single-digit type of growth, is that a good way to think about the outlook for 2026?

Hey, Dan. I guess what I would say I think for more you know, an annual outlook, if you will. I think from an efficiency ratio, is the way I might phrase it, is I think that mid-50s is probably a good spot and normal for us. Certainly, we've been tracking a little bit lower, but I was thinking, you know, kind of mid-50s as we reinvest in the franchise is a decent spot for us.

And just to add to that, Dan, just, you know, I just would add that, you know, that balance uh investments and continue to invest is is sunny but doing it through a lot of self-funding a lot of discipline i think that theme you know we've been focused on that i think we're continuing to leverage some of the automation that we talked about on the call opportunities to be more efficient and then reinvesting that in in growth and building out our our teams whether it's on the commercial side or the wealth side uh really is the is the sort of philosophy of the team and uh and i think that's you know, showing the results and certainly very prudent and a great way to manage the resources of Canada National Bank.

Excellent. And then last question for me is how should I think about your tax rate on a go forward basis? You've kind of been in that 20, 21% level here in the last two quarters. Is that kind of a reasonable assumption for you guys?

I think we'll sneak up a little bit. I think we'll be a little bit higher from an effective tax rate perspective. We've had some tax credit benefits that we had this year that won't be occurring, at least as of now, from a forecast perspective in 26. So I think we'll see that maybe sneak up a percent. Great. Thank you, guys.

Robert Marlayson, As another reminder, if you'd like to ask a question, please press star one on the telephone keypad now. Robert Marlayson, We now turn to Matthew Brees with Stevens. The line is open, please go ahead. Matthew Brees, hey good afternoon.

Matthew Brees, A lot of my answers, but maybe a few you know, the first one is just in regards to the I think you said it was an office. James Onley- Commercial real estate charge off that has been classified for a couple of years would just love a little bit of story there, why was it on classified for a couple of years, and then, when it came to. James Onley- The actual exit, how was pricing relative to where you underwrote it and relative to your expectations does give you any sort of confidence or reemerging confidence in kind of commercial real estate pricing here just curious.

let me uh take that question so we had a borrower which we talked about had been expressing some fatigue with an underperforming property that was in a stressed asset class and that obviously being office the loan tied to this properly property had a special mention and classified loan for us for nearly two years so has certainly been in that situation for a while with a reserve on our books of a million dollars so during the quarter We had an opportunity to discuss a sale with a few potential buyers in the property, and we were successful in negotiating a deal that provided 88% recovery on the loan, which was, I think, a good outcome for us. There still is some softness in the Boston market, and I think this certainly was an opportune moment to take a decisive approach and really put our credit on an even stronger footing. When you step back from this, office is a We have a very well balanced portfolio and office represents 3.7% of the entire portfolio and is in extremely good condition. And we have 35 loans over a million dollars and all are pass rated with positive and acceptable debt service coverage. We've got good occupancy and very good LTVs overall. So we feel, continue to feel good about that segment for us. Our criticized and classified asset levels remain very solid against historical norms. So we feel very good there as well. You know, the pricing, we certainly, you know, obviously had a lot of discussion as a team, and I think the pricing represented a good balance of risk for us to get this to a stronger footing, given some of the, you know, I think there's some softness you still do see in the office space, but generally I think that's a trending positive. So it was a balanced decision. I think I would just footnote the comments with, as a management leadership team, you know, I think we tend to continue to be very proactive I think we see opportunities like this and just take a decisive view on the situations like this. And I think it really sets us up for an even continued momentum and a very strong year across both the credit front and across our loan growth that we were talking about earlier.

Great. I appreciate all that. Michael, maybe just on some of the deposit items, thinking about what could What could reprice lower? What is the new blended cost of CDs, including some of the promotional items? And as you think about what's repricing over the next couple of quarters, you know, what might we see your time deposit or your cost of time deposits kind of ratchet down to?

Yeah, I think over the next three months, essentially, about 40% of our CDs are repricing. And I think those are at a blended rate, right around 335 in that neighborhood. So we certainly see some continued opportunity there based on our current CD pricing. And I'd also say matches over the next 12 months is nearly, I think, right around 95% that's repricing. So I think that's one of the levers as we look forward and think about the continued upside for us, particularly with, you know, Knock on woods and maybe some couple of federal cuts here in the future. We see some continued opportunity there and optimism as we think about our funding costs and just overall margin from here.

Is that the current rate or the? The rate on which they'll come back on the books is estimated at 335.

Sorry that that's the that's the rate they're currently on our books at. And I believe. Our current rate is is well, slower than that off time and it depends on. Different tiers and so forth, but I would say it's kind of, you know, 3% that neighborhood. Great, um, maybe the only thing. Sorry, I just say, I say, Matt, I think the only thing I would add is, is just, we, we, we continue to be focused on relationship pricing there. You know, we're not chasing certainly hot money. That's not relationship price on the CD, you know, from a CD perspective or otherwise. We'll also, you know, where we need to, we'll do exceptions. We'll make sure we retain that relationship, just thinking about the overall deposit and loan makeup of that, you know, of that customer. So we'll be, you know, we're certainly being thoughtful about this as you think about overall total deposits in our balance sheet.

Got it. Is there anything significant on the securities front maturing or repricing this year? It still looks like you're about 150 bps below market rates on securities.

No, I don't think there's anything significant per se. I mean, our cash flow continues to be pretty steady. I think it's in the neighborhood 10, 11 million, call it a month. We'll continue to see that and expect that and that'll continue to run off. I think the ideal opportunity for there is just continue to be able to take those cash flows and

know put it into higher earning assets and certainly the ideal situation would be loan growth and then last one um i would just love to hear about m a conversations and activity and you know maybe frame for us you know what you would be interested in uh in a target both in terms of sizing and geography yeah i think um

Matt, I appreciate the question and I think it's very much a continued path for us, very focused on organic growth and really leveraging the opportunity that New Hampshire and Northway is providing us. And I think there's lots of runway there to continue to grow and accelerate growth in that market. On the M&A side, We continue to be opportunistic. I mean, it needs to be the right deal. We certainly look at contiguous markets. I think that sort of fit is really important to us. What we really liked about Northway is the template of that business felt very similar to our own, very strong and similar credit kind of mindset, similar sort of geography, and really was allowing us to put the overlay of some of our digital capabilities and our treasury capabilities onto that franchise. And so I think we'd be looking for something similar to that. Obviously, the number of pieces on the chessboard are getting fewer. So, you know, I think we have to, you know, continue to look. But, you know, we're certainly very comfortable with the opportunities around organic growth. But if the right opportunity came along, I think we certainly would be interested.

I know your footprint and your market stretch is into northern Massachusetts. Would you consider a deal in Boston at this point, or is that market still a bit too far?

I think that's stretching the envelope. You know, I know Boston very well, obviously, with my time 10 or so years down there. I mean, it's certainly a great market, but it's certainly a very different footprint to our own. Never say never, Matt. But, you know, I think that certainly doesn't feel within our sort of sweet spot, if you like. But, you know, you'd have to look at everything on an individual case-by-case basis.

Understood. I'll leave it there. Thanks for taking all my questions.

Thank you for the questions.

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

Well, thank you for your time today and continued interest in Camden National Corporation. We truly appreciate your support. Have a great rest of your day.

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