Camden National - Earnings Call - Q3 2025

Executive Summary

• Record net income of $21.2M and diluted EPS of $1.25; EPS beat S&P Global consensus Primary EPS of $1.1825 while revenue of $62.4M was modestly below the $63.3M consensus, driven by NIM expansion and lower provision versus Q2, offset by a syndicated telecom loan charge-off.
• Net interest margin expanded 10 bps q/q to 3.16% and the non-GAAP efficiency ratio improved to 52.47% as Northway integration synergies flowed through; pre-tax, pre-provision income rose 19% q/q to $29.5M.
• Asset quality remained strong (NPAs 0.12% of assets; ACL/loans 0.91%), with a $10.7M charge-off resolving the previously disclosed syndicated telecom participation; coverage stood at 5.5x NPLs.
• Management guided Q4 non-interest expense to $36–$36.5M and expects another 5–10 bps of NIM expansion with Fed cuts, supported by deposit cost tailwinds; dividend maintained at $0.42/share payable Oct 31.
• Potential catalyst: continued core earnings momentum and margin tailwinds from rate cuts plus visible cost synergy realization; watch reliance on purchase accounting accretion (core NIM 2.82% vs reported 3.16%).

What Went Well and What Went Wrong

What Went Well

• “Record third quarter earnings of $21.2 million… and diluted EPS of $1.25, marking our strongest quarterly performance since 2021,” underscoring Northway integration success and operating leverage.
• NIM up 10 bps to 3.16%, ROATCE at 19.14%, and non-GAAP efficiency ratio improved to 52.47% on synergy capture and disciplined expense management.
• Non-interest income momentum (AUA reached $2.4B); mortgage activity robust; digital adoption surged (131% increase in digital account origination; 143 bots processed 5M+ items, saving 74k hours).

What Went Wrong

• Deposits fell 2% q/q (loan-to-deposit ratio rose to 93%), increasing reliance on wholesale funding; brokered deposits declined 41% q/q while short-term borrowings rose 25% q/q.
• $10.7M charge-off on the previously reserved syndicated telecom loan pressured provision (additional $4.7M) and net charge-offs (0.89% annualized QTD), though overall credit metrics remain solid.
• Revenue was modestly below consensus despite EPS beat, reflecting cadence of accretion, mixed loan growth (commercial down 5% q/q), and deposit dynamics.

Transcript

Operator (participant)

Okay, and welcome to Camden National Corporation's third 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 will conduct a question-and-answer session. If you require operator assistance at any time during the call, please press star, then zero. I'll now turn the call over to Renée Smyth, Executive Vice President, Chief Experience and Marketing Officer.

Renée Smyth (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.

Simon Griffiths (CEO)

Good afternoon, everyone, and thank you, Renée. 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 in the Northway Financial integration strategy, following our acquisition of Northway that we closed early this year on January 2, 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 30. 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 30, 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 30. Last quarter, we proactively disclosed and reserved $6 million for a syndicated telecommunications 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 30, 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 a 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 our unwavering commitment to serving our customers and executing our strategy. The momentum we have built positions us 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. I'd like to hand over to Mike to provide some financial highlights regarding the quarter.

Mike Archer (CFO)

Thank you, Simon, and good afternoon, everyone. We're very pleased with our third quarter 2025 financial results, as they signify the earnings power and future potential of Camden National, having completed the acquisition of Northway Financial and successfully executed the integration and cost takeout plans. For the third quarter, we reported net income of $21.2 million and diluted earnings per share of $1.25, both representing increases of 51% over the second quarter of 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, or, excuse me, expansion of 10 basis points grew to 3.16% to the third quarter, fueled our net interest income growth of 4% between quarters. Our asset yield increased 4 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 6 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 $675,000 from the sale of two non-branch properties. Adjusting for this non-recurring net gain, non-interest income grew 3% on a linked quarter basis and totaled $13.5 million. Reported net 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 of $36 million-$36.5 million. For 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 during the third quarter for the syndicated telecommunications 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 macroeconomic outlook and a decrease in our committed unfunded loan pipeline during the quarter. As of September 30, 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.

Operator (participant)

Thank you. We will now begin the question-and-answer session. To ask a question, press star, then one on your touchtone phone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star, then two. 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.

Steve Moss (Analyst)

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

Simon Griffiths (CEO)

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, you know, certainly been some softening in the last 60, 90 days, but still holding up, you know, fairly strong. I think this is a nice opportunity.

We've probably seen a little bit of softening of loan volumes in the back, you know, 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.

Steve Moss (Analyst)

Okay, great. In terms of the margin here, you know, good step up as expected. The Federal Reserve has 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.

Mike Archer (CFO)

Sure, hey, Steve. Yeah, we are well positioned certainly for the Federal Reserve rate cut, and in our base model, we do have that cut in tomorrow and one in for December. Certainly from there, it depends on the yield curve, kind of where we go, but I think in our base model, we have a margin expansion up five, 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.

It's really, I think, for at least around our base model for now, we're thinking that a lot of that benefits from the cost of funds.

Steve Moss (Analyst)

Got it. Okay. Appreciate that color. 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, 5 to 7 basis points per rate cut? Kind of how to think about it?

Mike Archer (CFO)

Yeah, I think we were modeling somewhere around 3%-4% annualized, but I think both are kind of not hard.

Steve Moss (Analyst)

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

Simon Griffiths (CEO)

Yeah, thanks. I think that's been a key message from us and a focus as a management team, really just disciplined expense management. Obviously, they're very pleased with the efficiency ratio coming in at just under 55%, and I think it 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, continued 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. I think that continues in a steady pace next year. I think it's something that we just continue wanting 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.

Steve Moss (Analyst)

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

Simon Griffiths (CEO)

Thanks, Steve.

Operator (participant)

Now it's over to Damon DelMonte with KBW. Your line is open. Please go ahead.

Damon DelMonte (Equity Research Analyst)

Good afternoon, guys. Hope you're doing well. Just wanted to circle back on the expense question. I think, Mike, you said your guide for next quarter is like $36 million-$36.5 million. Just kind of wondering what some of the dynamics are in the step-up on the quarter-over-quarter basis. As you look across 2026, do you think kind of, you know, the 3%-4% annual growth rate is reasonable?

Mike Archer (CFO)

Yeah, thanks, Damon, for the question. Good question there. As we think about the fourth quarter, I think there's 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 tick up a notch. Also, as part of just the acquisition of Northway, they just had a legacy contract with an individual there that there's some accounting for that has to be done at year-end. 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. There's some additional expense that we were anticipating could run through in the fourth quarter. Really, those two factors are the primary drivers for kind of our outlook, at least currently for the fourth quarter.

As we think about going into next year, I would just say we're still certainly in the planning phase, but as Simon just mentioned, that efficiency ratio and paying particularly attention to that, trying to manage to mid-50s-ish, something in that space is kind of where we want to be. We'll continue to do that as we think about our outlook for expenses.

Damon DelMonte (Equity Research Analyst)

Gotcha. Great. Appreciate that color. With regards to the margin, I appreciate the commentary around the core margin there. As you think about the fair value accretion that gets run through each quarter, do you see that kind of slowing down or tailing off here in the fourth quarter and as we go through 2026, or does it kind of stay elevated like we've seen in the last couple of quarters?

Mike Archer (CFO)

I mean, I think it's pretty, you know, $4.5 million-$5 million is a pretty good number for us all in, honestly. 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 2026. We're not certainly not baking that into our base, you know, model, if you will, but I think that $4.5 million-$5 million is a pretty solid run rate for us, at least for now.

Damon DelMonte (Equity Research Analyst)

Okay, great. Lastly, with the charge-off, obviously you 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. 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?

Simon Griffiths (CEO)

Yeah, thanks, Damon. We feel very comfortable about in that range. I think it represents our confidence in the underlying portfolio. We've certainly felt very good about the overall credit this year in terms of the portfolio that we have and the diverse, we have a very strongly diversified portfolio. I think that leads us to feeling good about the allowance for credit losses in the current kind of guided range.

Damon DelMonte (Equity Research Analyst)

Great. That's all that I had. Thank you.

Mike Archer (CFO)

Thanks, Damon.

Operator (participant)

We now turn to Matthew Breese with Stephens. Your line is open. Please go ahead.

Matthew Breese (Analyst)

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

Mike Archer (CFO)

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 a basis point or two, I think it's a good spot for us. I think we feel comfortable there. Certainly with, you know, loan growth, of course, more provision will be had. 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-acquisition, a few basis points higher, I think it reflects a similar macroeconomic outlook for us right now. 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, you know, I think right now that's kind of what we're thinking.

Matthew Breese (Analyst)

Got it. Okay. What is the blended rate, the blended loan yields on the pipeline? I heard your comments, Mike, loud and clear on the NIM. 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 60, 90 days, it just feels like, you know, some positive loan yield repricing and then room to reprice deposits a bit lower. I would feel net-net like a year from now, the NIM is a bit higher, but wanted to hear your thoughts on that.

Mike Archer (CFO)

Yeah, I think that's fair, Matt. I mean, I think for the five to 10 basis points for next quarter, I think that's a pretty good range for us. Certainly, I think there's some opportunity there where we could outperform that as well. Thus far in the cycle, we've been pretty aggressive on pricing down some of the deposits and funding. I think as we even gear up for tomorrow, internal discussions around that are just changing. We want to certainly be thoughtful in terms of the customer base and trying to balance that with growth and deposits as well. I think as we continue on this path, I want to say on the way up, we're a low 40s beta. I would say on the way down, at least right now, we're probably inching a little bit higher than that.

I think we could settle in 35-40 when it's all said and done. It's kind of how we're thinking about it. Yes, really just trying to TM that. I think from here we probably, maybe we don't move as fast, but certainly our full expectation is to move and get that funding benefit.

Matthew Breese (Analyst)

Got it. Okay. 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. Within that, you know, Simon, you pointed this out, but consumer and home equity, even though it's a smaller portfolio, has been growing nicely. Maybe some thoughts there and to what extent we might see that type of growth continue.

Simon Griffiths (CEO)

Yeah, thanks, Matt. I mean, certainly loan growth, as I talked about earlier, I think fourth quarter flat up to up 2% feels about the right sort of guide. Then sort of, you know, mid-single digits, mid, 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. I said residential has been very strong for us as well as home equity, commercial, small business. There are certainly areas that have nice momentum. The home equity business, 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. I certainly think this year has been exceptional growth.

I mean, up 54%, but it may not be as high as that, but certainly I think forward momentum from here. A lot of that growth actually on the home equity side is in the Maine market. I think some of that opportunity next year could be in the New Hampshire market, and certainly that would continue that forward trajectory.

Matthew Breese (Analyst)

Great. 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 also service charges have been up nicely. To what extent might we see some of these positive trends continue into next year?

Simon Griffiths (CEO)

Yeah, we're really proud of the fee income growth, particularly in the CFC side of our business, the brokerage side of the business. I mean, up 15% and certainly overall 11% organic growth in assets under management, which is great. We talked about hitting $2.4 billion, so that momentum is really positive. We continue to invest in those businesses. I think it's just a tremendous opportunity. Also, in the wealth business, we've mentioned, I think on the last call, we've added a couple of folk into that business. There's opportunities down the road to potentially expand into the New Hampshire market as well on the wealth side. We do have brokerage coverage, but not, you know, modest wealth coverage.

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. 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.

Matthew Breese (Analyst)

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

Simon Griffiths (CEO)

Thanks, Matt.

Operator (participant)

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.

Simon Griffiths (CEO)

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.

Operator (participant)

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