Camden National Corporation Reports Fourth Quarter and Year End 2008 Results

Business Wire, Jan 27, 2009

CAMDEN, Maine -- Gregory A. Dufour, president and chief executive officer of Camden National Corporation (NASDAQ: CAC; the "Company"), reported net earnings of $10.1 million, or $1.32 per diluted share, for the fourth quarter of 2008, and $15.3 million, or $2.00 per diluted share for the year ended December 31, 2008. The results compare to $5.6 million, or $0.85 earnings per diluted share, and $20.3 million, or $3.09 earnings per diluted share, for the fourth quarter of 2007 and year ended December 31, 2007, respectively. The 2008 results were impacted by investment securities losses and higher loan loss provisions, in part offset by the favorable earnings impact of the Union Bankshares Company ("Union") acquisition on January 3, 2008.

"Camden National is weathering the economic downturn by bolstering our balance sheet and reserves while focusing on our customers," said Dufour. "During the fourth quarter, we closed out our exposure to auction rate securities collateralized by Freddie Mac preferred stock and increased our allowance for loan losses while at the same time continuing to exceed regulatory capital guidelines to be a well-capitalized financial institution."

Commenting on Maine's business climate, Dufour said, "Even though the State has seen a slowdown related to the economic recession, our loan pipeline is solid as we have seen some competitors retrench and more rational pricing in the market. Our wealth management subsidiary, Acadia Trust, N.A., is also seeing continued demand for its services as its 2008 above-benchmark investment performance has attracted investors."

The Company recorded net losses on its investment securities portfolio totaling $15.6 million in 2008 with $1.0 million recorded in the fourth quarter. In addition, the fourth quarter results include a $4.9 million tax benefit related to the previous quarter's investment security loss in accordance with a change in tax treatment enacted in the Emergency Economic Stabilization Act of 2008.

For the year ended December 31, 2008, the returns on average equity and average assets were 9.15% and 0.67%, compared to 18.34% and 1.16%, respectively, for the year ended December 31, 2007. The decline in return on average equity is the result of the investment securities losses and the $37.9 million of goodwill created from the Union acquisition. For the year ended December 31, 2008, return on average tangible equity (which excludes goodwill and other intangibles) was 12.86% compared to 19.35% for the year ended December 31, 2007.

Operating earnings per diluted share, operating net income and other operating disclosures, determined in accordance with generally accepted accounting principles ("GAAP") excluding the effects of investment securities losses and related tax benefit noted above, provide a more meaningful comparison for effectively evaluating the Company's core operating results:

Core Operating Results

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Operating earnings per diluted share for the year ended December 31, 2008 were $3.31, a $0.22, or 7.1%, increase over the same period of 2007. Operating earnings per diluted share for the fourth quarter of 2008 were $0.76, a $0.09, or 10.6%, decrease compared to the fourth quarter of 2007. This decline is primarily due to the 1.2 million shares issued in the first quarter of 2008 related to the Union acquisition and an increase in the provision to the allowance for loan and lease losses ("ALLL") of $2.3 million in the fourth quarter of 2008.

Operating net income for the fourth quarter of 2008 was $5.8 million, a $262,000, or 4.7%, increase over the fourth quarter of 2007. Operating net income for the year ended December 31, 2008 was $25.5 million, a $5.2 million, or 25.5%, increase over the same period of 2007. Increases in both periods reflect the impact of the acquisition of Union's $547.4 million asset base, partially offset by an increase in the ALLL.

The Company's total assets at December 31, 2008 were $2.3 billion, an increase of $624.7 million compared to total assets at December 31, 2007, which includes the assets acquired from Union. Total loans at December 31, 2008 were $1.5 billion, an increase of $355.3 million compared to total loans at December 31, 2007. Excluding the $366.6 million of loans acquired from Union, the Company's loan balance declined $11.3 million primarily in the commercial and commercial real estate portfolios, in part offset by an increase in the consumer loan portfolio reflecting continued demand for home equity loans. Investments increased $184.2 million, which includes $121.4 million from the Union acquisition, and net purchases during the year of $62.8 million. Total deposits of $1.5 billion at December 31, 2008 increased $371.5 million over the same period a year ago, primarily reflecting the assumption of $331.5 million of deposits from the Union acquisition. The remaining $40.0 million of net deposit growth was primarily in retail certificate of deposit accounts.

Net interest income for the fourth quarter of 2008 increased 37.4% to $17.7 million, compared to $12.9 million for same period of 2007. This increase in net interest income was primarily attributable to an increase in average earning assets resulting from the Union acquisition. In addition, the net interest margin increased 28 basis points to 3.37% for the year ended December 31, 2008, compared to the year ended December 31, 2007, as a result of the 400 basis point reduction in the Fed Funds rate implemented by the Federal Reserve in 2008 and a positively sloped yield curve.