Camden National Corporation 2026 Q3 Earnings Call

Welcome to Camden National Corporation's third 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 third 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 will also refer to non-GAAP financial measures during this call. These measures provide additional insight into our performance, and reconciliations to GAAP are included in today's earnings release. With that, I will turn the call over to Simon.

Good afternoon, everyone, and thank you, Renée. Early this morning, we reported third quarter net income of $22.8 million and diluted earnings per share of $1.34. Compared with third quarter 2025, net income rose 8% and diluted EPS rose 7%, reflecting strong earnings momentum driven by continued execution across our core franchise. These results were driven by strong core deposit growth that led to an improved funding mix and drove 15 basis points of net interest margin expansion over the last quarter. I am pleased to report disciplined expense management complemented this performance, even as we continue to invest in the franchise. Pre-tax, pre-provision income for the third quarter rose 4% from the second quarter and 6% from a year ago to $31.2 million, reflecting stronger core operating performance and improved operating leverage.

That momentum also showed in record total revenue, which rose to $68.7 million from $67.4 million in the second quarter. We ended the quarter with approximately $7.1 billion in total assets and a strong balance sheet, supported by ample liquidity, solid capital, and sound credit quality. This strength positions us well to support future growth across evolving market conditions. Total loans were essentially unchanged from both the prior quarter and a year ago at $5 billion. Home equity remains a notable growth driver, up 7% during the quarter and 25% year over year, reaching a high of $392 million, while residential real estate grew modestly. Commercial balances declined slightly during the quarter, reflecting payoffs and the planned exit of certain credits that no longer aligned with our portfolio objectives. During the quarter, we added four experienced commercial bankers, two covering the Massachusetts market and two in the southern Maine market.

While they are ramping up, we are encouraged by the strength of the pipelines they are building. Their decision to join Camden also speaks to the appeal of our strategy, culture, and growth prospects. We expect these additions to support commercial growth over time while we remain disciplined on structure and pricing. On the funding side, seasonal deposit inflows, strong customer retention, and new customer relationships supported deposit growth and improved our funding mixture in the third quarter. Total deposits increased 5% from the second quarter and 8% from a year ago to $5.8 billion. This outstanding performance improves our balance sheet flexibility and supports future asset growth, particularly in a rising rate environment. Within our fee-based businesses, we remain focused on expanding recurring fee streams and diversifying our revenue mix. Our strategy to expand financial advisory services and deepen customer relationships is yielding positive results.

Wealth and brokerage assets under administration reached $2.6 billion at the quarter end, up 10% year-over-year, highlighting our ability to maintain a balanced revenue mix over time. To support deeper customer relationships and more effective execution, we are investing in our data capabilities. Our early partnership with Snowflake is already changing how we operate. For example, business teams are actively using Snowflake Explorer to access customer and performance insights directly, reducing reliance on manual analysis and enabling faster, better-informed decisions. This is already supporting more targeted sales outreach and demonstrating how our early adopter technology investments can improve execution, productivity, and customer engagement. In summary, the third quarter demonstrated the strength of our relationship-based model, continued progress on our growth strategy, and record year-to-date earnings.

We are investing in experienced talent, deeper customer relationships, and technology capabilities that position Camden for sustainable growth. We feel good about our Q4 outlook, and we believe we are well-positioned for 2027. With that strategic overview, I'll turn over to Mike to walk through the financial results in more detail.

Good afternoon, everyone. As Simon highlighted, for the third quarter, we delivered strong financial results, headlined by net income of $22.8 million and diluted EPS of $1.34. Both were up nicely from a year ago and fell just short of last quarter's record results. Profitability also remained strong with a return on average assets of 1.31% and a return on average tangible common equity of 17.47%. Net interest income totaled $55.4 million for the third quarter. Reported net interest margin rose 15 basis points from the second quarter to 3.41%, exceeding our guidance range provided on our last call. On a non-GAAP basis, core net interest margin increased 13 basis points to 3.10%. The increase reflected a more favorable funding mix and lower funding costs. Average funding costs for the third quarter declined to 1.63% from 1.7% in the second quarter, and average deposit costs edged down to 1.55%.

For the fourth quarter, we are estimating our net interest margin to be relatively consistent with the third quarter. Turning to fee income, non-interest income was $13.2 million for the third quarter, down 8% from the second quarter and 6% from a year ago. The linked-quarter decline was driven by lower BOLI and mortgage banking income, both of which are sensitive to market conditions. On a linked-quarter basis, the change in fair value accounting was $921,000 lower between periods. For the fourth quarter, we currently estimate non-interest income to increase to $13.5 million-$14.5 million. Non-interest expense totaled $37.5 million for the third quarter, essentially unchanged from the second quarter and up 4% from a year ago. We continue to actively manage our expense base while making targeted investments in the franchise, including the key hires Simon mentioned earlier.

As a result, we reported a non-GAAP efficiency ratio of 52.44% for the third quarter, down from 53.23% in the second quarter. We anticipate non-interest expense for the fourth quarter to approximate our current quarterly run rate, and we are currently estimating a range of $37.5 million-$38 million. Over the longer term, we remain focused on managing our efficiency ratio in the mid-50s, plus or minus. We believe this level balances continued investment in the franchise with strong shareholder returns. On credit, key metrics improved from the second quarter. Non-performing loans declined to 16 basis points of total loans at September 30 from 24 basis points last quarter, and past due loans were 14 basis points of total loans at quarter end, down from 15 basis points last quarter.

Net charge-offs were seven basis points of average loans on an annualized basis for the third quarter and five basis points on a year-to-date basis. As of September 30, the allowance for credit losses was 0.92% of total loans, up one basis point from last quarter. The increase in the ACL coverage ratio contributed to provision expense of $1.9 million for the third quarter of 2026, compared to $710,000 the second quarter. The increase in provision expense reflected changes in the economic outlook and an increase in unfunded reserves driven by strong HELOC production. Overall credit performance remained sound throughout the third quarter. Capital remained strong at the end of the third quarter. The total risk-based capital ratio increased to 14.82%, and the Tier 1 leverage ratio increased to 9.92% during the quarter.

At quarter end, the tangible common equity ratio was 7.73%, and tangible book value per share was $31.40. Both declined from June 30 due to the impact of higher market interest rates on accumulated other comprehensive loss. Overall, the quarter reflected solid profitability, improved operating leverage, sound credit performance and strong capital. We believe these results demonstrate the strength of our core earnings profile and position us well heading into the fourth quarter. That concludes our prepared remarks. Operator, please open the line for questions.