Camden National Corporation

Good day and welcome to Camden National Corporation's second quarter 2026 earnings conference call. My name is Marina Toft 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. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now turn the call over to Renée Smith, Executive Vice President, Chief Experience and Marketing Officer.

Welcome to Camden National Corporation's second quarter 2026 earnings conference call. With me today are Simon Griffiths, our President and Chief Executive Officer, and Mike Archer, our Executive Vice President and Chief Financial Officer. Before we begin, please note that today's remarks include forward-looking statements and actual results could differ materially from what we discuss on the call. You can find cautionary language about these statements in our second quarter 2026 earnings release issued this morning and in our other SEC filings. 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. We'll also refer to non-GAAP financial measures during the call. These measures provide additional insight into our performance in reconciliations to GAAP are included in today's earnings release. With that, I'll turn it over the call to Simon.

Good afternoon, everyone, and thank you, Renée. Earlier this morning, we reported record quarterly net income of 23 million and record diluted earnings per share of 135 for the second quarter. Both net income and diluted EPS increased 5% from the first quarter, underscoring the earnings power we are building across the franchise. Our performance was broad-based. We delivered loan growth expanded our committed loan pipeline, improved net interest margin, and generated strong fee income growth. Through the first six months of the year, we produced record net income of 44.9 million and diluted EPS of 264, reflecting focused execution across our core businesses. These results demonstrate that our strategy is working. We are growing the franchise with purpose and investing in capabilities that strengthen our competitive position and improve how we serve our customers and communities. Our performance is also reflected in national recognition and customer trust. So far this year, Camden National Bank was named to Time Magazine's list of America's Best Companies and recognized by Forbes as one of America's best banks. These achievements reflect our financial discipline, customer focus, continued momentum and long-term stability. We entered the second half of the year with a resilient balance sheet. Total assets were $7 billion at quarter end, credit quality metrics remained strong, capital levels remained well above regulatory requirements, and tangible book value per share grew 7% since year end. On the lending side, loans increased 1% during the quarter or 3% on an annualized basis. led by growth in home equity and commercial loans. HELOC balances increased 23% year over year supported by added depth among our HELOC lenders as well as by significant technology and process improvements which have reduced average funding time to 14 days. Forward-looking indicators are also encouraging. Our committed loan pipeline increased 45% from the prior quarter to 185.7 million, reflecting healthy customer demand, stronger banker productivity, and the benefit of recent additions to our commercial banking team. Since year end, we have added four experienced commercial bankers to our team, and we remain optimistic that we'll be able to continue to selectively add proven talent. We remain encouraged by the pipeline while expecting Q3 loan growth to remain measured. We recently announced the appointment of Kate Brunell as Chief Credit Officer. Kate joins Camden National's leadership team with more than two decades of banking experience, including senior credit leadership roles at TD Bank. Ryan Smith, with 14 years at Camden National and prior experience serving as both Chief Credit Officer and Director of Commercial Banking, will return to leading commercial banking. and Barbara Ratz will lead and expand our treasury management and government banking services, drawing on significant experience in corporate treasury. That added capacity is helping strengthen relationships with small and mid-market businesses and expand our role as a primary banking partner for lending and treasury management solutions. On deposits, we continue to optimize our funding mix by reducing broker deposits and Certificate of Deposits while maintaining stable core customer deposits. Total deposits were 5.6 billion at quarter end and our loan to deposit ratio was 90%. Our focus remains on durable relationship deposits supported by service, convenience and thoughtful pricing rather than rate driven volume. We are expanding financial advisory services to support customers through more stages of their financial lives and Diversify Revenue. Assets under administration across our wealth and brokerage businesses total $2.6 billion at quarter end, up 13% from the prior year, reinforcing the opportunity to broaden advisory relationships and build a more balanced earnings profile over time. Our AI-enabled transformation is gaining momentum with multiple use cases now in production, and digital enhancements tied to measurable business outcomes. These tools are helping us build a more efficient, responsive organization. From our recently refreshed website to new digital products, we are making banking easier for customers while creating more capacity for higher value interactions. In short, we are executing well and making measurable progress across the company. Our teams are focused on sustaining high quality growth and creating long-term value for our shareholders, customers, employees and communities. With that strategic overview, I'll turn it over to Mike to walk through the financial results in more detail.

Thanks, Simon, and good afternoon, everyone. As noted, we reported record net income for the second quarter of $23 million, or $1.35 per diluted share. Profitability metrics remain strong again this quarter, with a return on average assets of 1.33%, return on average tangible equity of 18.47% and a non-GAAP efficiency ratio of 53.2%. Revenues are up 5% on a linked quarter basis and we continue to manage operating expenses closely while continuing to invest in our franchise, driving strong pre-tax, pre-provision net revenue growth during the quarter of 5%.

Net interest income totaled $52.9 million, up 1% on a linked quarter basis.

Net interest margin increased by two basis points quarter over quarter to 3.26% for the second quarter, primarily reflecting lower funding costs. Over the same period, core net interest margin, which excludes net fair value mark accretion income, increased five basis points to 2.97%, aligning with the top of our guidance range provided last quarter. Net fair value mark accretion income was $4 million for the second quarter, down $335,000 from the first quarter. We continue to focus on improving our coordinate interest margin, and we're currently estimating additional expansion in the third quarter for approximately 5 to 10 basis points, driven by normal seasonal deposit inflows that support a more favorable funding mix and the ongoing reinvestment of lower yielding assets into current market rates. Non-interest income totaled $14.5 million, an increase of $2.5 million, or 21% from the first quarter. The improvement was broad-based across all fee income categories as we continue to see nice momentum across our complementary business lines. Investment appreciation that was driven by market performance and death benefits within BOLI income, totaling $491,000, contributed to our non-interest income this quarter. We are currently estimating a range for non-interest income for the third quarter of $13.5 to $14 million. Turning to expenses, non-interest expense totaled $37.4 million, up 5% from the first quarter. The increase is primarily attributable to annual salary increases, the timing of our annual director equity award grant, and the annual recognition event for top performing sales team members. We're currently estimating a range for non-interest expense for the third quarter at $37 to $38 million. On credit, our loan portfolio remains sound. Non-performing loans were 24 basis points of total loans. Past due loans were 15 basis points of total loans. And net charge-offs were four basis points of average loans on an annualized basis. Provision expense was $710,000, up from $553,000 in the first quarter, reflecting loan growth. The allowance for credit losses on loans was 0.91% of total loans at quarter end and the ACL coverage ratio was 3.8 times non-performing loans. Capital levels continue to expand nicely driven by strong and growing earnings and balanced returns to our shareholders through the first six months of 2026. Our regulatory capital levels remain well above regulatory requirements at quarter ends. The annual book value per share increased 3% during the second quarter to $31.64 at June 30, 2026. For the first six months of 2026, we returned 41% of our first half net income to shareholders in the form of cash, dividends, and share repurchases. Year-to-date, we repurchased 85,131 shares at a weighted average price of $46.55 per share under our share repurchase program. Overall, the quarter reflected solid link quarter revenue growth, disciplined expense management, strong credit metrics, and continued capital accretion. That concludes our prepared remarks. I'll turn it back to the operator.

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

Good afternoon. Maybe just starting off on the margin expansion here. Mike, you mentioned deposit inflows, but then you also mentioned lower-yielding assets repricing. Just kind of curious, what are you seeing for cash flows from the loan portfolio or security portfolio over the next six months? And just to think about that repricing dynamic.

Yeah, it's a great question, Steve. On the investment side, we internally model it right around $35 million a quarter, I believe, right in that neighborhood. and on the loan side, we have another call it 170, 180, I believe in total retreat around 200 million in total.

Okay. And that's for, okay, 170, 180 million on the loans per quarter?

Yes.

Okay, got it. And so kind of just to pick up the roll on, roll off phrase, we think about things, I'm assuming loan pricing is probably low to mid sixes, by picking up the 150, 200 base points?

Yeah, that's right. We're currently originating loans rate in that, you know, low sixes to six and a half range, if you will, on average.

Okay. Got it. And then in terms of, you know, good to see the pipeline here is strong. I guess just kind of curious in terms of, you know, 3-2 loan growth to be measured here. Just kind of curious, what are the factors driving that, just given, you know, a good pipeline here?

Yeah, thanks, Steve. I mean, I think certainly commercial activity has been strong and, you know, we're seeing sort of across the geography, nice momentum. Certainly home equity has been a significant growth engine for us. And I talked about my remarks, you know, not just We've expanded the sales team, but we've also improved and focused a lot on the customer experience with funding of 14 days. So I think there's a lot of momentum there, and that's certainly proving to be a really strong business. We're having a strong resi year as well, which is positive. So I think overall, you know, we're seeing a nice balanced story on the loan growth side, which I think is positive and certainly a reflection of our strategy and focus in this area.

Okay. that dovetails nicely with my next question. Just on the fee income here, you guys are having, you know, good trends on debit card year-over-year, service charges on deposit quite a bit year-over-year. I know you guys have been definitely, I know you've talked about for a while improving the customer activity and being more efficient and productive. You know, it sounds like from your guidance like you think this is more sustainable. it's kind of curious just was what component maybe was from price increases versus new customers or any call you can shed on on those dynamics there?

Yeah I'll start Stephen and Mike can add some additional I would say just generally across the fee income it was a balanced story for us you know we saw nice momentum across wealth management which we talked about you know certainly brokerage, debit card, deposit related fees, mortgage banking I think all played a role and certainly that's a Key area of focus for us, we've particularly been investing a lot of time and effort in a couple of key areas, certainly on the wealth side, building out and continue the momentum we have in the brokerage business. That's a sort of steady growth focus that we've had. We're also looking to expand the wealth offering and certainly obviously New Hampshire offers a lot of opportunities there. On the debit side, we've put a lot of focus into our digital, into our convenience, into our customer. We've just released new online portal, which I think is fantastic and getting, you know, really great customers. And I think that's a key part of attracting new customers, which actually directly drives the debit income for us. So it's a multitude of pieces. You know, I think these things are, you know, kind of moving in concert and continuing to strengthen the debit side, the fee income side of our business is certainly a key focus.

Okay, great. Now, next quarter here, and I'll step back in the queue. Thank you very much, guys.

Appreciate it. Thanks.

Your next question comes from the line of Matthew Breeds with Stevens Inc. Your line is open. Please go ahead.

Excuse me. Good afternoon. Mike, I appreciate the margin outlook and some of the data on where low yields are coming in. Just curious, as we think about kind of the fixed asset repricing, and the roll on, roll off, particularly loan yields. When do you stop seeing the pronounced benefits to the NIM? Is that late 27, 28 or longer for you all?

I mean, I think there's a lot of caveats to that answer there, Matt. I think it depends on a lot of things, certainly yield curve and so forth. I mean, I would say, at least for now, we see it. I mean, certainly through, you know, through 2026. We certainly could see benefit of investments and continuing to, you know, I think one real opportunity for us is just our investment book, being able to bring that down over time and frankly help fund some of the loan growth. That's a real opportunity. And I think specifically to your question on the loans, I mean, I wouldn't say we're sitting here thinking, you know, that far out in terms of 27, 28 and what that's going to look like. I think we think on the loan yield side and we just continue to see it tick up two to three basis points. That's something we've seen pretty consistently on a core basis. And I think that's generally our outlook here over the next few quarters.

Yeah, I would just add to that, Matt. I think overall the team has had tremendous focus and discipline around building the yield with just the kind of core fundamentals. We focus a lot on the primacy we've talked about in previous calls with you. just really attracting broad relationships. We're leaning into Treasury and other services that really kind of push into CNI lending, which I think certainly come with stronger deposits. Business banking is a focus for us as well. So that's another area that I think can continue to manage deposit costs. So I think these are sort of fundamental underlying. I think Mike's point, obviously, there's a lot of other pieces that kind of move and can shape the outlook into 27, 28, but certainly it's a, core focus of the management team. And we see this as a really important part of our growth strategy and continuing to move that forward at whatever speed, obviously, you know, we're able to do.

Great. Mike, just looking at fee income, was there like a bully death penalty gain this quarter within that line item? I just want to make sure I have everything in a row there.

Yeah, good question. The short answer is yes. I would say that was a smaller part of the real kind of tick up, if you will, in the BOLI income this past quarter. We do have some BOLI income where the underlying securities are more driven by the equity markets. That's something we picked up along with the Northway acquisition back in 25. So there is a level of, I'll call it, more volatility in that number. And I would even say that when we think about fee income guidance, if you will, looking at how to quarter out, that really plays into it because that's one of the unknowns certainly is what's going to happen with those equity securities. So if you're wondering why a little bit, why we're at 14 and a half and why taking down to 13 and a half to 14 is largely in part that bully income that you're referencing, which was about a half million dollars in incremental revenues this quarter, this past quarter.

That incremental revenue, 500,000 or so. How much that would get penalty?

I think was right around 50 MAP plus or minus 50,000. It wasn't overly significant.

OK, so the majority of this is core.

Yeah, core, core. Yes, I'd say core, but it's, you know, unrealized gains losses kind of pushing through that.

Got it. OK. Simon, maybe one for you just on M&A and conversations and how things are going on on that front, whether or not Camden is is ready to go on that front. It's been sluggish, kind of year-to-date in the Northeast Mid-Atlantic M&A-wise. I'm curious if you're seeing that on your end, conversation-wise.

Yeah, thanks, Matt. You know, just before remarking on that piece, I would just say I continue to feel really good about the Northway integration and the value that that's driving to the franchise. You know, we're just seeing across the board just tremendous engagement and leadership from Oscar and James and the team out there and just feel really good about that and the opportunity that that presents us. And I know Ryan's putting a lot of focus on continuing to grow the commercial side out there as well. So that's all been very, very positive. I think on the sort of look forward front, you know, as we've talked about, you know, continue to see, you know, be open to opportunities. And I think it always comes down to the right fit, you know, certainly the contiguous market and really finding the right partner and, you know, you know as you say things have been certainly a little bit slower in the last 6-12 months but you know certainly have a positive outlook that if the right deal is there we're a tremendous partner and we've demonstrated execution discipline and the ability to get the job done so I think should the right opportunity come along I think we're well positioned but you know feeling very good about our organic growth strategy so you know there's no pressure on from us from a timing perspective.

Great I'll leave it there thank you.

Thanks.

A kind reminder that if you would like to ask a question, please press star then one on your touchtone keypad. If you use a speakerphone, please pick up your handset before pressing the keys. We will pause momentarily for any final questions. Your next question comes from the line of Daniel Cardenas with Breen Capital. Your line is open. Please go ahead.

Good afternoon, everyone. Just a quick follow-up on the M&A question. Given your desire to continue to build fee income, what's your appetite for non-bank acquisitions?

I think that we're open to looking at the right opportunity, and certainly on that fee income side, there could be a couple of ideas in that space that could be interesting. But generally, the pricing on those pieces are pretty high. Yeah, I wouldn't say it's a primary consideration. We certainly will and are open and have conversations with different entities, but I would say generally that's not something that's been really prevalent in terms of obviously a lot of competition, particularly on the wealth side. So not something we've spent a lot of time on.

Okay. And then just a reminder for me in terms of optimal size of institution you would look to acquire, what's kind of that size range?

I think these things come along as they come along. We are conscious, of course, of crossing potentially at some point the $10 billion mark and the income implications of that. But I look at it sort of from just focusing on the fundamentals of the business, making sure that there's a there for the acquisition and partnership is there, the culture is there, the synergy is there. and we've talked about the contiguous markets as well. So I think it's really making sure we have the right fit and then obviously driving the revenue growth and really getting the leverage out of the transaction that really makes sense for investors. So I think and obviously our teams as well. So it's getting those pieces right and then I think at some point we would cross potentially that 10 billion mark and then from there there is obviously scale and getting to sort of the 12, 13, 14 certainly has some advantages from a revenue perspective. So we look at those pieces, but like everything, these things aren't always planned. It can be planned perfectly, but I think we're in a really, as I said earlier, great position, and we're just focused on our organic strategy, focused on growth, focused on doing the basics really well and driving just top-line growth through our existing franchise and businesses and just see tremendous opportunity for that in all of our markets and some of the markets that obviously are relatively new to us in sort of New Hampshire and other areas. So lots of positives on the organic growth front as well.

Great. Thank you. I'll step back.

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

Thank you for your time today and your continued interest in Camden National Corporation. We are pleased with the progress we made in the second quarter and remain focused on executing with discipline Investing in growth and delivering long-term value for our shareholders, customers, employees, and communities. And we continue to appreciate your support. Have a great day.

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