Q1 2024 Camden National Corp Earnings Call
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Seb: Good day, and welcome to Camden National Corporation's first quarter 2024 earnings conference call. My name is Seb, and I will be your operator for today's call. All participants will be in a listen-only mode during today's presentation, and 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 will now turn the call over to Renee Smith, Executive Vice President, Chief Experience and Marketing Officer.
Seth: Good day and welcome to Camden National Corporation's first quarter 2024 earnings Conference call. My name is Seth 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.
Seth: If you require operator assistance at any time during the call. Please press Star then zero I will now turn the call over to Renee Smith Executive Vice President Chief experience and marketing officer.
Renee Smith: Thank you Sam and good afternoon, and welcome to Camden National Corporation's Conference call for the first quarter of 2024.
Renee Smith: Thank you, Seb. Good afternoon, and welcome to Camden National Corporation's conference call for the first quarter of 2024. 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, 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 contained in our first quarter 2024 earnings release, which was issued this morning, as well as in other reports we filed with the SEC.
Renee Smith: Turning us. This afternoon are members of Camden National Corporation's Executive team, Simon Griffith, President and Chief Executive Officer, and Mike Archer Executive Vice President Chief Financial Officer.
Renee Smith: Please note that today's presentation contains forward looking statements and actual results could differ materially from what is discussed on today's call.
Renee Smith: Mary language regarding these forward looking statements is contained in our first quarter 2024 earnings release, which was issued this morning as well as in other reports we file with the SEC.
Renee Smith: All these materials and public filings are available on our Investor Relations website at camdennational.bank. Camden National Corporation trades on the NASDAQ under the symbol CAC. In addition, today's presentation includes discussion of non-GAAP financial measures. Any reference to non-GAAP financial measures is intended to provide meaningful insights and is reconciled with GAAP in our earnings release, which is also available on our Investor Relations website. I'm pleased to introduce Camden National Corporation's host, President and Chief Executive Officer, Simon Griffiths.
Renee Smith: All of these materials in public filings are available on our Investor Relations website at Camden National Bank Camden National Corporation trades on the NASDAQ under the symbol Z. A C. In addition, today's presentation includes discussion of non-GAAP financial measures any reference to non-GAAP financial measures are intended.
Renee Smith: To provide meaningful insights and are reconciled with GAAP in our earnings release, which is also available on our Investor Relations website.
Renee Smith: I'm pleased to introduce Camden National Corporation's host, President and Chief Executive Officer, Simon Griffith.
Simon R. Griffiths: Thank you, Rene, and good afternoon, everyone, and thank you for joining us on our call today. We sincerely appreciate your time and interest. I will give some comments, and then Mike will dive into our first quarter performance, and then we will open up the call for Q&A.
Simon R. Griffiths: Thank you Renee.
Simon R. Griffiths: Good afternoon, everyone and thank you for joining us on our call today.
Simon R. Griffiths: We sincerely appreciate your time and interest I will give some comments and then Mike will dive into our first quarter performance and then we will open up the call for Q&A.
Simon R. Griffiths: First, I would like to report that as I'm now over 90 days into the role as President and Chief Executive Officer, I continue to be impressed with the depth and experience of the management team and the talented team members who execute diligently throughout the organization. Each team member is focused on executing on our strategies, including growing our primary banking relationships and leveraging our position of strength. Earlier this morning, we reported net income of $13.3 million, or $0.91 earnings per diluted share, for the first quarter of 2024.
Simon R. Griffiths: First I would like to report as of now over 90 days into the role as President and Chief Executive Officer I.
Simon R. Griffiths: I continue to be impressed with the depth and experience of the management team and the talented team members executing diligently throughout the organization.
Simon R. Griffiths: Each team member is focused on executing on our strategies, including growing our primary banking relationships and leveraging our position of strength.
Simon R. Griffiths: Earlier this morning, we reported net income.
Simon R. Griffiths: $13 3 million or <unk> 91 earnings per diluted share for the first quarter of 2024.
Simon R. Griffiths: Overall, we are pleased with our quarterly financial results, supported by strong capital, asset quality, and liquidity. Our regulatory capital ratios continue to be well in excess of required regulatory levels and steadily growing, as we close the first quarter with a reported Tangible Common Equity Ratio of 7.12%, up one basis point since year-end. We continue to manage credit rigorously, consistent with our disciplined credit culture, which continues to serve us well. For the first quarter, we reported strong asset quality evidence by non-performing assets at just 13 basis points of total assets. Our commercial loan portfolio remains well balanced, with no meaningful concentration risk.
Simon R. Griffiths: Overall, we are pleased with our quarterly financial results supported by strong capital asset quality and liquidity.
Simon R. Griffiths: Our regulatory capital ratios continue to be well in excess of required regulatory levels and steadily grow.
Simon R. Griffiths: As we close the first quarter with a reported tangible common equity ratio of seven 2% up one basis point since year end.
Simon R. Griffiths: We continue to manage credit rigorously consistent with our disciplined credit culture.
Simon R. Griffiths: Which continues to serve us well.
Simon R. Griffiths: For the first quarter, we reported strong asset quality evidenced by nonperforming assets at just 13 basis points of total assets.
Simon R. Griffiths: Commercial loan portfolio remains well balanced with no meaningful concentration risks.
Simon R. Griffiths: Our credit and special asset teams continue to proactively review our portfolio and have not found any systematic areas of concern. For example, we continue to look at areas such as interest rate risk in the context of rate resets on maturing loans, lease rollover in certain asset classes, and credit score migration amongst other early indicators. This is a testament to our significant due diligence, our efforts, strong relationships with our borrowers, and our in-depth knowledge of the communities that we serve.
Our credit and special asset teams continue to proactively review our portfolio and have not found any systemic systematic areas of concern.
Simon R. Griffiths: For example, we continue to look at areas interest rate risk in the context of rate reset some maturing loans lease rollover in certain asset classes and credit score migration amongst other early indicators.
Simon R. Griffiths: This is a testament to our significant due diligence effort strong relationships with our borrowers and in depth knowledge of the communities that we serve.
Simon R. Griffiths: As our credit team indicates, our commercial customers have depth and character, which continues to fuel our strength. We continue to see moderate loan demand in our communities, with our approved pipeline remaining reasonably consistent over the past few quarters. Our teams are developing new customers and relationships in both commercial and consumer categories. Expense control remains a key focus and was evident as non-interest expense for the first quarter of 2024 decreased 2% compared to the fourth quarter of 2023. During this quarter, we took actions to maintain and manage costs in response to revenue pressure caused by decreasing net interest margins.
Simon R. Griffiths: As our credit team indicates our commercial customers have depth and character, which continues to fuel our strength.
We continue to see moderate loan demand in our communities with our approved pipeline remaining reasonably consistent over the past few quarters.
Simon R. Griffiths: Our teams are developing new customers and relationships in both commercial and consumer categories.
Simon R. Griffiths: Expense control remains a key focus was evident as noninterest expense for the first quarter of 2024 decreased 2% compared to the fourth quarter of 2023.
Simon R. Griffiths: During this quarter, we took actions to maintain and manage costs in response to revenue pressure caused by decreasing net interest margin.
Simon R. Griffiths: This month, our Wealth Management Leader, Jennifer, retired after nearly 40 years in the industry, and we welcome Garrick McKnight to the executive team to lead our wealth transformation effort. Garrett is a former Senior Managing Director at the Northern Trust Company and has more than 20 years of experience leading wealth management teams and serving clients and their families in the areas of investment management, financial planning, and fiduciary services. We're incredibly excited to bolster our wealth management services by adding Gareth's expertise and our recent launch of a new wealth mobile app and client portal to provide our clients with unprecedented access to market intelligence and portfolio insight anytime, anywhere.
Simon R. Griffiths: This month, our wealth management leader.
Simon R. Griffiths: Jennifer retired after nearly 40 years in the industry and we welcomed Garrett Mcknight to the executive team to lead our wealth transformation efforts.
Simon R. Griffiths: Carriage as a former senior managing director at the Northern Trust company and has more than 20 years of experience, leading wealth management teams and serving clients and their families in the areas of investment management financial planning and fiduciary services, we're incredibly excited to bolster our wealth management services by adding Gary.
Simon R. Griffiths: Expertise and our recent launch of a new wealth mobile app and client portal to provide our clients with unprecedented access to market intelligence and portfolio insights anytime anywhere.
Simon R. Griffiths: Our technology advancements also include a new state-of-the-art mobile and online account opening platform scheduled to go live at year-end, allowing customers to open, fund, and use deposit accounts within minutes, whenever and wherever they choose. This is the latest milestone on our successful digital transformation roadmap, further unifying our digital and in-person customer experience and efforts to expand our customer base. In summary, although the financial services industry continues to face economic uncertainty, we are confident in our ability to adapt to the changing landscape and deliver solid returns despite the current challenges.
Simon R. Griffiths: Our technology advancements also include a new state of the art mobile and online account opening platform scheduled to go live at year end, allowing customers to open funds and used deposit accounts within minutes whenever and wherever they choose this is the latest milestone on our successful digital transformation roadmap further unifying on digital and <unk>.
Simon R. Griffiths: Customer experience and efforts to expand our customer base.
Simon R. Griffiths: In summary, although the financial services industry continues to face economic uncertainty.
Simon R. Griffiths: We're confident in our ability to adapt to the changing landscape and deliver solid returns through the current challenges.
Simon R. Griffiths: We are well positioned to capitalise on our exceptional customer relationships and are investing in our future. Our confidence comes from having a clear strategic plan to drive profitable growth and having a talented team focused on executing it. Now, Mike will provide some first quarter highlights.
Simon R. Griffiths: Well positioned to capitalize on our exceptional customer relationships and are investing in our future.
Simon R. Griffiths: Confidence comes from having a clear strategic plan to drive profitable growth and having a talented team focused on executing it now Mike will provide some first quarter highlights.
Michael R. Archer: Excellent. Thank you, Simon.
Thank you Simon and good afternoon, everyone.
Michael R. Archer: Good afternoon, everyone. This morning we reported a net income of $13.3 million and diluted earnings per share of $0.91 for the first quarter of 2024. Overall, we are pleased with these results as we continue to navigate through a challenging interest rate cycle. Net income for the first quarter was 57% higher than the last quarter and 4% higher than a year ago, on a non-GAAP basis, adjusting for realized investment losses and a $910,000 recovery on the sale of the signature bank bond that we previously wrote off in 2023. Adjusted net income increased 1% over the fourth quarter of last year and decreased 11% compared to the first quarter of 2023.
Michael R. Archer: This morning, we reported net income of $13 3 million and diluted earnings per share of <unk> 90, 91 for the first quarter of 2024.
Overall, we are pleased with these results as we continue to navigate through a challenging interest rate cycle.
Michael R. Archer: Net income for the first quarter was 57% higher than the last quarter and 4% higher than a year ago.
Michael R. Archer: On a non-GAAP basis, adjusting for realized investment losses in the $910000 recovery on the sale of the signature Bank bond that we previously wrote off in 2023, adjusted net income increased 1% over the fourth quarter of last year and decreased 11% compared to the first quarter of 2023.
Michael R. Archer: Our adjusted return on average assets was up one basis point to 0.88% for the first quarter of 2024, and our tangible capital continues to build, highlighted by an increase in tangible book value per share of 1% during the first quarter of 2024 and an increase of 10% over the past 12 months. In the first quarter, our net interest margin decreased 10 basis points to 2.30%, which was lower than the expectations we communicated on our last earnings call. Funding costs on a linked quarter basis increased 17 basis points to 2.27% for the first quarter. It was a few basis points higher than anticipated.
Michael R. Archer: Our adjusted return on average assets was up one basis point to <unk>, 88% for the first quarter of 2024, and our tangible capital continues to build highlighted by an increase in tangible book value per share of 1% during the first quarter 2024, and an increase of 10% over the past 12 months.
Michael R. Archer: In the first quarter, our net interest margin decreased 10 basis points to 230%, which was lower than the expectations. We communicated in our last earnings call.
Michael R. Archer: Funding costs on a linked quarter basis increased 17 basis points to 227% for the first quarter. It was a few basis points higher than anticipated.
Michael R. Archer: We experienced normal seasonal deposit outflows in our markets during the first quarter, and we continue to see the shift from lower to higher cost deposit products. Our attention continues to be on optimizing that interest margin to maintain and grow revenues and increase profitability. Through the first quarter, we continue to take calculated action to optimize our balance sheet and net interest margin. A few examples include replacing higher-cost deposits, which included $72 million of interest checking balances and $50 million of CDs, with more cost-advantageous funding alternatives, including the Bank Term Funding Program, Broker Deposits, and the Balance Sheet Derivatives.
Michael R. Archer: We experienced normal seasonal deposit outflows in our markets during the first quarter and we continue to see the remix from lowered our higher cost deposit products.
Michael R. Archer: Our attention continues to be on optimizing net interest margin to maintain and grow revenues and increased profitability.
Michael R. Archer: Through the first quarter, we continued to take calculated actions to optimize our balance sheet and net interest margin.
Michael R. Archer: A few examples include a replacing higher cost deposits, which included $72 million of interest checking balances and $50 million of Cds with more cost advantageous funding alternatives.
Michael R. Archer: <unk> the bank term funding program brokered deposits and the balance sheet derivative.
Michael R. Archer: As we look to the second quarter, we currently anticipate net interest margin will hold at or around 2.30%, with possible upside as certain balance sheet derivatives mature in early June and we anticipate normal seasonal deposit inflows picking up towards the back half of the second quarter. In response to continued pressure on our net interest margin, we took action during the first quarter to manage expenses closely. In doing so, we were able to manage expenses lower on a linked quarter basis by 2% to $227.4, which is well below our previously communicated expense forecast for the first quarter of 28 to 28 and a half million dollars. As we look forward, we do anticipate operating expenses will trend slightly higher for the rest of the year and closer in line with prior guidance.
Michael R. Archer: As we look to the second quarter. We currently anticipate net interest margin will hold at around 230% with possible upside at certain balance sheet derivatives mature in early June.
Michael R. Archer: Anticipating normal seasonal deposit inflows picking up towards the back half of the second quarter.
Michael R. Archer: In response to continued pressure on our net interest margin. We took actions during the first quarter to manage expenses closely and doing so we were able to manage expenses lower on a linked quarter basis by 2%.
Michael R. Archer: $227 4 million, which is well below our previously communicated expense forecast for the first quarter of 2008 to $28 5 million.
Michael R. Archer: As we look forward, we do anticipate operating expenses will trend slightly higher for the rest of the year and closer in line with prior guidance.
Michael R. Archer: In the first quarter, loans grew 1%, driven by commercial real estate loan balances increasing by $30.6 million. We continue to be disciplined with loan pricing across our products in the current interest rate environment. Based on our current loan pipelines and strategy, we currently anticipate similar loan growth and a mix for the second quarter. Our asset quality for the first quarter continues to be very strong, supported by excellent credit quality metrics, including non-performing loans of 0.19% of total loans, annualized net charge-off of two basis points of average loans, and past-due loans of five basis points of total loans.
Michael R. Archer: In the first quarter loans grew 1% driven by commercial real estate loan balances increasing by $30 6 million.
Michael R. Archer: We continue to be disciplined loan pricing across our products in the current interest rate environment based on our current loan pipeline and strategy. We currently anticipate similar loan growth in the mix for the second quarter.
Michael R. Archer: Our asset quality for the first quarter continued to be very strong supported by excellent credit quality metrics, including nonperforming loans, 0.19% of total loans annualized net charge offs of two basis points of average loans and past due loans of five basis points of total loans.
Michael R. Archer: The strength of our current and past asset quality, combined with modest loan growth and internal stress testing we have performed on certain loan segments, gave us the confidence to reduce our loan loss reserves to 0.86% of total loans at March 31. This resulted in a credit for loan losses of $1.2 million for the first quarter, and combined with the $910,000 recovery on the signature bank bond, we recognized a total negative provision expense of $2.1 million for the first quarter.
Michael R. Archer: Strength of our current and past asset quality combined with modest loan growth and internal stress testing, we performed on certain loan segments gave us the confidence to reduce our loan loss reserves to 0.86% of total loans at March 31.
Michael R. Archer: This resulted in a credit for loan losses of $1 2 million for the first quarter.
Michael R. Archer: And combined with the $910000 recovery on the signature bank bonds, we recognize a total negative provision expense of $2 1 million for the first quarter.
Michael R. Archer: Our capital and liquidity positions also continued to be strong our.
Michael R. Archer: Our capital and liquidity positions also continue to be strong. Our book and regulatory capital ratios improved across the board in the first quarter. Our tangible common equity ratio was 7.12% at March 31st, 2024, compared to 7.11% at December 31st, 2023 and 6.56% at March 31st, 2023. Our uninsured and uncollateralized deposits at March 31st, 2024 were 14.8% of total deposits, and our available liquidity sources were 2.1 times uninsured and uncollateralized deposits, which continues to be very consistent with previous periods. This concludes our comments. We'll now open the call for questions.
Michael R. Archer: Our book in regulatory capital ratios improved across the board in the first quarter.
Michael R. Archer: Our tangible common equity ratio was seven 1% and 2% at March 31 2024.
Michael R. Archer: Compared to seven 1% at December 31, 2023, and six 5%, 6% at March 31 2023.
Michael R. Archer: Our uninsured and uncollateralized deposits at March 31, 2024 were 14, 8% of total deposits and our available liquidity sources were two one times uninsured.
Michael R. Archer: And on collateralized deposits, which continues to be very consistent with previous periods.
Speaker Change: This concludes our comments, we'll now open the call up for questions.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Our first question comes from Steve Moss from Raymond James. Please go ahead.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question. Please press star two.
Speaker Change: Our first question comes from Steve Moss from Raymond James. Please go ahead.
Stephen M. Moss: Hi, good afternoon.
Stephen M. Moss: Maybe just starting with bookings.
Stephen M. Moss: Maybe just starting with loan pricing here. I'm curious as to what you're getting for loan pricing in your markets these days. Also, on that front, I noticed commercial loans went down by about 20 base points in yield quarter over quarter. I'm just kind of curious if there's anything unique there.
Stephen M. Moss: Loan pricing here curious as to what Youre getting for loan pricing in your markets. These days and also along that front I noticed commercial loans went down by about 20 basis points in yield quarter to quarter, just kind of curious what if there was anything unique there.
Michael R. Archer: Sure, just in the first part there, in terms of loan pricing, what we're currently seeing, we continue to hold really pretty steady in terms of keeping rates, keeping some of our interest rates higher. We originated, I think, for the quarter in the neighborhood of 7.5% to 8% was our origination yield, and our pipelines continue to be right in that neighborhood too, Steve. So we continue to be very focused on that and where we can get that price and be disciplined, on the second page there for the...
Speaker Change: Sure I'd just say on your first part there in terms of loan pricing. What we're currently seeing we continue to hold really pretty steady in terms of keeping rates are keeping some of our interest rates higher we would.
Speaker Change: Originated I think for the quarter in the neighborhood of seven 5% to 8% was our original origination yield and our pipelines continue to be right in that neighborhood to Steve.
So we continue to be very focused on that and where we can getting that getting that price and being disciplined.
Speaker Change: On the on the second okay. There.
Michael R. Archer: Oh, no, go ahead, Mike. I'm sorry.
I'm sorry go ahead Steve.
Stephen M. Moss: Oh No go ahead, Mike I'm sorry.
Michael R. Archer: So I was going to say on the C&I piece, we did have one syndication loans essentially repriced refinanced rather during the quarter and Thats. The primary driver for the C&I decrease, but nothing really atypical abnormal there.
Michael R. Archer: So I was going to say on the C&I piece, we did have one syndication loan that essentially repriced or refinanced during the quarter, and that's the primary driver for the C&I decrease. But nothing really atypical or abnormal there.
Michael R. Archer: Okay.
Michael R. Archer: Got you. And then in terms of the derivatives you referenced, Mike, it sounds like you added some during the quarter. And then just what do you have maturing come June, just to kind of help with some of the puts and takes as the balance sheet moves here?
Stephen M. Moss: Got you and then in terms of the derivatives you referenced Mike It sounds like you've added some during the quarter and then just.
Stephen M. Moss: What you have maturing come June just to kind of help with some of the puts and takes as the balance sheet moves here.
Michael R. Archer: Sure, so we actually executed the derivative in the December time frame, I think it was, with a forward start in January. I want to say it was either $50 million or $75 million off the top of my head, really with the sole idea of replacing that more expensive CD that we had mentioned that was $50 million, just again trying to be advantageous in terms of funding costs where we can. And then in terms of the derivatives rolling off in the June time frame, essentially, we have $100 million of balance sheet swaps that have been on our books for quite some time, and that really has been compressing some of our CRE yields that are showing up in our margin tables. So we do anticipate those rolling off here, and we do anticipate that should provide six, seven basis points to margin on a go-forward basis once we get past that point.
Michael R. Archer: Sure. So we actually executed the derivative in the.
Michael R. Archer: December timeframe I think it was with a forward start in January I want to say it was either 50% or $75 million off the top of my head.
Really with this whole idea of replace replacing that.
Michael R. Archer: More expensive CD that we had mentioned that was $50 million just again trying to be advantageous in terms of funding costs, where we can.
Michael R. Archer: And then in terms of the.
Michael R. Archer: Derivatives rolling off in the June timeframe, essentially we have a $100 million of balance sheet swaps they've been on our books for quite some time and that really has been compressing some of our key yields that are showing up in our margin tables. So we do anticipate those rolling off here and we do anticipate that should provide 67 basis points.
Michael R. Archer: To margin on a on a go forward basis, once we get past that point.
Michael R. Archer: Guy, I appreciate that. So, basically, kind of the margin if rates kind of hold in this range, 230-ish this quarter, and then, you know, some upside as we head into the third quarter.
Michael R. Archer: Okay.
Speaker Change: Got it I appreciate that so maybe kind of a margin.
Speaker Change: It's kind of homeless range $2 30, this quarter and then.
Speaker Change: Some upside as we head into the third quarter.
Speaker Change: Yes, I think Thats, a fair a fair summary.
Michael R. Archer: Yeah, I think that's a fair summary.
Speaker Change: Okay.
Stephen M. Moss: Appreciate that. And in terms of just on the mortgage side here, you guys, I saw sold more mortgages this quarter. Just kind of curious, you know, your appetite or the business mix. Should we think about just higher volumes given more scalable production here going forward?
Speaker Change: I appreciate that.
And in terms of just on the mortgage side here you guys are thoughtful sold more mortgages. This quarter, just kind of curious your appetite or the business mix should we think about.
Speaker Change: Higher volumes, given more saleable production here going forward.
Simon R. Griffiths: Hey Steve, Simon. You know, I'd say overall that low single-digit growth is where we're seeing it. We continue to see nice demand on the resi side, which is, you know, continues to reflect, I think, the strength of the economy and the consumer in general. So, you know, certainly modest growth, and that's sort of how we're positioning that within our loan growth, but we certainly continue to see some strong demand out there.
Speaker Change: Yes, Hey, Steve Simon I'd.
Stephen M. Moss: I'd say overall low single digit growth is what I was saying it would continue to see nice.
Stephen M. Moss: Nice demand on the resi side, which is continues to reflect I think the strength of the economy and the consumer in general so suddenly modest growth and that's sort of how we're positioning that within our loan growth, but certainly continue to see some strong demand out there.
Stephen M. Moss: Okay.
Stephen M. Moss: I appreciate that. And then also, Simon, just with regard to the reserve release, and I heard the reference about a deeper dive in credit. Just curious, you know, it gives a little more color as to how you looked at buckets and just the dynamics that maybe gave some comfort around the resort release this quarter and, you know, should we expect any more reviews in the upcoming quarter?
Speaker Change: Appreciate that and then also just with regard to the reserve release and.
Speaker Change: I heard the reference about a deeper dive and credit just curious gives a little more color as to.
Speaker Change: How you looked at buckets and just the dynamics that.
Speaker Change: Maybe you can give some comfort around around the reserve released this quarter should.
Speaker Change: Should we expect any more reviews in the upcoming quarter or two.
Yes, I think look.
Simon R. Griffiths: Yeah, I think, look, as we talked about in the opening remarks, we just have a very strong credit portfolio and see just very strong performance and continue to stress test. And I think the team identified this opportunity. I think going forward, we're going to just look at it case-by-case, but certainly felt this quarter made sense. Obviously, the outlook for the rest of the year, I think, is a key driver of how that potentially could change. The credit position is a very strong position, and we felt it was appropriate for a release on this quarter. I don't know, Mike, do you want to add anything?
Speaker Change: As we talked about in the opening remarks.
Speaker Change: We just have a very strong credit portfolio and see just very strong performance and continued to stress test and.
Speaker Change: I think the team identified this opportunity I think going forward, we're going to look at it as a case by case, but certainly felt this quarter certainly made sense, obviously the outlook for the rest of the year I think is a key driver of how that potentially could change.
Speaker Change: And there's obviously a lot of uncertainty right now in terms of the back half of the year, but I think overall the team feels just.
Speaker Change: The credit position, a very strong position and we felt it was appropriate for a release on this quarter and then Mike you want to add anything yes, I would just say specifically.
Michael R. Archer: Yeah, I would just say specifically our credit risk team really dove into some of the problem areas that we're seeing in the news around rent controls and some of the interest-only loans and so forth, Steve, just as examples, and stressing debt service and LTVs and other factors there from an interest rate perspective. We just felt, you know, we continue to have a very strong book. We're not seeing anything systemic or any material issues across those portfolios, and I think just coupled with, like I said in commentary, where we've been and how we've performed combined with, you know, our own stress testing and how we're continuing to monitor.
Michael R. Archer: Credit excuse me, our credit risk team really dove into some of the I'll call. It some of the problem headline areas that we're seeing in the news around rent controls and some of the interest only loans in and so forth Steve just as examples.
Michael R. Archer: Distressing debt service and Ltvs and other factors are from an interest rate perspective.
We just felt really we continue to have a very strong book, we're not seeing anything systemic or any material issues there across those portfolios and I think just coupled with like I said in our commentary is where we've been and how we performed combined with our own stress testing and how we're continuing to monitor we just felt it was prudent and appropriate.
Michael R. Archer: We just felt it was prudent and appropriate, you know, at this time to release some of the reserves, but we'll continue to monitor them, and if, you know, macroeconomic factors change, et cetera, we'll adjust accordingly, but certainly, we feel very good at this level.
Michael R. Archer: At this time to release some of the reserves, but we will continue to monitor macroeconomic factors change et cetera.
Michael R. Archer: We'll adjust accordingly, but certainly we feel very very good at this level.
Okay, Great really appreciate all the color and I'll step back in the queue.
Stephen M. Moss: Okay, great. I really appreciate all the calls, and I'll step back in the queue.
Yes.
Thanks, Steve.
Operator: Our next question comes from Damon DelMonte from KBW. Please go ahead.
Michael R. Archer: Next question comes from Damon Delmonte from <unk>. Please go ahead.
Damon Paul DelMonte: Hey, good afternoon, guys. I hope you're all doing well.
Damon Paul DelMonte: Hey, good afternoon, guys hope, you're all doing well.
Damon Paul DelMonte: Just to kind of follow up on the questioning on the credit and provision outlook. You know, if you're expecting kind of like low single-digit loan growth, you know, absent any net charge-offs, should we expect a little bit of provisioning just to cover the new loan growth? And if so, what would be like kind of a targeted reserve you guys would be putting on new loans that come on the books?
Damon Paul DelMonte: Kind of follow up on the question on the credit and provision outlook.
Damon Paul DelMonte: You are expecting kind of like low single digit loan growth.
Damon Paul DelMonte: Absent any net charge offs should we expect a little bit of provisioning just to cover then the new loan growth and if so like what would be like kind of a targeted reserve you guys would be putting on new loans that come on the books.
Michael R. Archer: Hey Damon, it's Mike. Yeah, I think if we anticipate some further loan growth there, like we said in our commentary, probably low single digits for next quarter. I mean, I do think just in terms of the ACL, we'll continue to hold around mid-you know mid-80s where we are right now, so to that end, probably pretty low provisions certainly if we have net charge-offs again, nothing expected or anticipated of size at this point, certainly, but if we were, we'll account for that accordingly, but really feel pretty strong about where we are right now at this level.
Michael R. Archer: Hey, David It's Mike.
David: Yes, I think if.
If we anticipate some further loan growth there like we said in our commentary probably low single digits for next quarter. I mean, I do think just in terms of the ACL will continue to hold around mid mid <unk>, where we are right now.
Speaker Change: So to that to that end and.
Speaker Change: Probably pretty low provisions certainly if we have net charge offs again, nothing expected or anticipated a size at this point certainly, but if we were we will will account for that accordingly, but really feel pretty strong about where we are right now at this level.
Michael R. Archer: Great, thank you for that. And then I think you guys noted that you increased your BTFP drawdown before the end of the quarter. Just wondering, is that being used for actual funding purposes, or did you guys use that as like kind of an ARB opportunity where you took the funds in and put them in cash and are able to kind of clip a small spread?
Speaker Change: Great. Thank you for that.
Speaker Change: I think you guys noted that you.
Speaker Change: <unk> increased your Bts P.
Speaker Change: Draw down before the end of the quarter. Just wondering is that being used for actual funding purposes or did you guys use that as a kind of an arb opportunity, where you took the funds and put it in cash and are able to kind of clip a small spread.
Speaker Change: No we didn't really use it for that in that regard to drive any incremental call. It NII expansion it was more from a.
Michael R. Archer: in that regard to drive any incremental, call it, NII expansion from just optimization and margin, truly. We were able to get into that before some of the program dynamics changed.
Speaker Change: From a just optimization of margin truly we were able to get into that before some of the program dynamics change. So at this point, we have $225 million locked in for a year in three different tranches at $4 76, and costly from an interest rate risk position and some of those other considerations. It's just really favorable given our.
Michael R. Archer: So at this point, we have $225 million locked in for a year in three different tranches at 476. And honestly, from an interest rate risk position and some of those other considerations, it's just really favorable given any risk to rising rates. It proves beneficial, rates come down, we can prepay. And so again, we just saw the opportunity and thought it made sense to really bolster that.
Speaker Change: Is there any risk to rising rates improves proves beneficial rates come down we can we can prepay or and so again, we just saw the opportunity and thought it made sense to really bolster that.
Speaker Change: Got it Okay and then just lastly, your commentary on expenses.
Damon Paul DelMonte: Got it okay, and then just lastly your commentary on expenses kind of ticking higher to your prior guidance. Could you just remind us of the prior guidance, like 28 to 28 and a half million per quarter?
Speaker Change: Ticking higher to your prior guidance could you just remind us is the prior guidance like 28% to $28 5 million per quarter.
Speaker Change: Yes, that's right David.
Michael R. Archer: Yes, that's right, Damon. Okay. I think, you know, just to provide some additional clarity, I think in the second quarter we could see... You know, we're closer to the 20, you know, somewhere in that mid-range there. I think after that, and it's back half the year, probably on the lower end, again, plus or minus, but just some of the seasonality items that flushed through in the second quarter. But that is certainly a good range still. Yeah.
Speaker Change: Okay, I think just to provide some additional clarity I think I think in the second quarter, we could see.
We are closer to the 2000 somewhere in that mid range there I think.
Speaker Change: After that in this back half of the year it probably on the lower end again, plus or minus but.
Speaker Change: Some of the seasonality items that flush through in the second quarter.
Speaker Change: But that is certainly a good range so yes.
Simon R. Griffiths: Yeah, if I can just add, Damon, we continue to balance the short term with the longer term, and getting that balance right, I think, as Mike said, pushes us up a little bit in the next quarter. But, you know, we've got, as we mentioned, some great investments on the technology side and will continue to invest in the long-term health and well-being of the franchise. Okay, great.
Speaker Change: And if I can just Damian we continued to.
Speaker Change: Balance the short term with the longer term.
Damian: That getting that balance right I think as Mike said pushes is probably up a little bit in the next quarter, but.
Damian: We've got.
Damian: As we mentioned some great investments on the technology side and.
Continuing to invest in the long term health and.
Damian: Health of the franchise.
Speaker Change: Okay great.
Damon Paul DelMonte: Okay, great. That's all that I had. Thank you.
Speaker Change: All that I had thank you.
Operator: The next question comes from Matthew Breese from Stephens Inc.; please go ahead.
Speaker Change: Thanks, Tim.
Speaker Change: The next question comes from Matthew Breese from Stephens, Inc. Please go ahead.
Matthew M. Breese: Hey, good afternoon, everybody.
Matthew M. Breese: Hey, good afternoon everybody.
Matthew M. Breese: Hey, Mike.
Matthew M. Breese: Hey Mike, I was hoping you could help me out with kind of the month-over-month trends in deposit costs and the margin and whether or not there are any signs of, you know, early signs of stability in either of those items.
Matthew M. Breese: I was hoping you could help me out with kind of the month over month trends in deposit costs and the margin in <unk>.
Are there or not there are any signs of early signs of stability given those those items.
Michael R. Archer: Yes, great Great question, Matt.
Michael R. Archer: Yeah, Great question, Matt. You know, we are pleased to see in more recent months that we're starting to see a level of maybe stabilized, is or isn't the right word, but certainly the increase in deposit costs and funding costs on a month-to-month basis is slowing. You know, I think, in part, it's starting to look like it's more in line with what we're seeing on the earning asset yield, and that kind of speaks to the 230, if you will, kind of staying relatively flat in the near term until we kind of start to see the seasonal inflows as well as the benefit from the derivative.
Michael R. Archer: We are pleased to see it in more recent months that we're starting to see a level.
Speaker Change: Maybe stabilized.
Is or isn't right wherever it is certainly the increase in deposit costs and funding costs on a month to month basis is slowing so.
I think in part is starting to look like it's more in line with what we're seeing on the earning asset yield and that kind of speak to the $2 30, if you will kind of staying relatively flat in the near term until we kind of start to see the seasonal inflows as well as the benefit from the derivative.
Matthew M. Breese: Got it. Okay.
Speaker Change: Got it Okay and then.
Matthew M. Breese: And then, you know, on the deposit-mixed front... It felt like, reading between the lines, a little bit of frustration or capitulation just in the continued mix-shift out of non-interest bearing into interest bearing. If you have to look ahead and say, hey, here's how I think we shake out a year from now in terms of deposit mix and deposit growth, I would love to get your thoughts on those two ones.
Speaker Change: On the deposit mix front.
Speaker Change: Felt like reading between the lines, a little bit of frustration or capitulation just in the continued.
Mix shift out of noninterest bearing into interest bearing.
Speaker Change: If you have to look ahead, and say hey, here's how I think we shake out a year from now in terms of deposit mix.
And then deposit growth I would love to get your thoughts on those two items.
Speaker Change: Yes, Hey, Matthew Simon.
Simon R. Griffiths: Yeah, hey Matthew, Simon. Yeah, it's a great question. And obviously, I think a lot of it depends on the rate environment and, you know, how the Fed moves. But I think, generally, you know, we've seen, as Mike indicated, sort of maturity on a customer base around sort of moving from low, no cost into higher cost. We are starting to see the CD, you know, certainly front book stabilizing in terms of volumes. And I think that sort of consistent sort of trend is likely to continue. But obviously, that's going to depend a lot on the Fed and the customer.
Speaker Change: He is a great question and obviously I think a lot of it depends on the rate environment.
Speaker Change: And how the fed moves, but I think generally.
Speaker Change: We've seen as Mike indicated sort of maturity in our customer base around sort of moving into from low no cost into higher cost.
Speaker Change: We start to see the CD suddenly from book.
Speaker Change: Stabilizing in terms of volumes and I think that sort of consistent sort of trend is likely to continue but obviously that's going to depend a lot on the fed and on the customer I would say as a team with was suddenly have a strong playbook around that potential downward rate environment, and we will look to manage that very effectively with our customers with a focus.
Simon R. Griffiths: I'd say as a team, we certainly have a strong playbook around that potential downward rate environment, and we'll look to manage that very effectively with our customers, with a focus on customer relationships and, you know, continuing to drive value. And that's one of the things I think the team did extremely well as well, as we've brought in new customers into the CD portfolio, we certainly look to build those relationships, deepen those relationships.
Speaker Change: On customer relationships and.
Speaker Change: Continuing to drive value and that's one of the things I think the team has done extremely well as well as we've brought new customers into the CD portfolio, we certainly look to build those relationships deepen those relationships.
Simon R. Griffiths: And, you know, we mentioned in the call, the earnings call at the beginning, the addition of Garrett to the team. And I think that's another tremendous opportunity for us in the communities we serve in Maine to take those relationships, deepen them, and leverage the capabilities we have, both digital, the new platform in wealth, and then the new leader that we mentioned. So I think those are things that can certainly be leveraged going forward basically.
Speaker Change: We mentioned in the coli earnings call at the beginning. The addition of Garrett to the team and I think thats another tremendous opportunity for us in the communities. We serve in mind to take those relationships deepen them and leverage the capabilities. We have both digital the new platform and wealth and then the new leader that we mentioned so I think those are things that can be.
Speaker Change: Certainly leverage going on a go forward basis.
Speaker Change: I appreciate all that and then just thinking about your NIM commentary.
Matthew M. Breese: I appreciate all that, and then just thinking about your NIM commentary sounds stable for the second quarter; it might be a little bit of a bump in the third quarter if we had to look out even a couple more quarters beyond that assuming no Fed cuts or no Fed hikes. Are you more optimistic about the year forward, Nim, as some of these dynamics, you know, more fully flush out in terms of deposits repricing and earnings asset yield expansion
Speaker Change: Stable for the second quarter might be a little bit of a bump in the third quarter. If we had to look out even a couple more quarters beyond that assuming no fed cuts or no fed hikes are.
Speaker Change: Are you more optimistic about the year forward NIM as some of these dynamics more fully flushed out in terms of.
Speaker Change: Positive repricing in earning asset yield expansion.
Speaker Change: Yes, I think the short answer is yes, Matt I think we're kind of a little bit of that inflection point honestly.
Michael R. Archer: Yeah, I think the short answer is yes, Matt. I think we're kind of at a little bit of that inflection point, honestly. I think for us, I do see an opportunity for us to continue to increase even in this environment and start seeing margin expansion from here. So I think, you know, certainly if the Fed were to make cuts, that would be beneficial and would call it, you know, be at it upside. If we can hold the year for longer, I think we're well-positioned to see margin expansion to get into the second half and, certainly, hopefully beyond.
Speaker Change: I think for us I do see opportunity for us to continue to increase even in this environment to start seeing seeing margin expansion from here. So I think certainly if the fed were to make cuts that would be beneficial and call. It be added upside if we hold year for longer I. So I think we're well positioned to see margin.
Speaker Change: Expansion to begin in the second half and certainly hopefully but beyond.
Matthew M. Breese: Got it. Okay.
Speaker Change: Got it Okay and then just the last one for me cash position at quarter end was a little bit elevated versus what we've seen historically, 3% cash to assets that where you want a beach.
Matthew M. Breese: And then just the last one for me, the cash position at quarter end was a little bit elevated versus what we've seen historically, 3% cash to assets. Is that where you want to be? Should we maintain that level of liquidity from here on out?
Speaker Change: Maintaining that level of liquidity from here on out.
Speaker Change: No I mean admittedly that was just some timing of flows.
Michael R. Archer: No. I mean, admittedly, that was just some timing of flows. I would share with you that, you know, right now, our cash positions are coming down to more normal levels. So, just timing, really, Matt.
Speaker Change: Share with you that right now our cash position has come down to more normal levels. So just timing really Matt.
Matthew M. Breese: That's all I had. I appreciate some of my questions. Thank you.
That's all I had I appreciate you all my questions. Thank you.
Speaker Change: Thanks, Matt.
Speaker Change: As a reminder for any further questions. Please press star one on your telephone keypad now.
Operator: As a reminder, for any further questions, please press star 1 on your telephone keypad now. We have no further questions on the call, so I'll hand the floor back to Simon Griffiths. Thank you, sir.
Speaker Change: Okay.
Speaker Change: We have no further questions on the call. So I'll hand, the floor back to Simon Griffith.
Simon R. Griffiths: Thank you Kevin I just want to thank all of you for your time today and for your interest in Camden National Corporation, and we wish you all a great rest of your day.
Simon R. Griffiths: I just want to thank all of you for your time today and for your interest in Camden National Corporation, and we wish you all a great rest of your day.
Operator: This concludes the conference call. Thank you all very much for joining us.
Speaker Change: This concludes the conference call. Thank you all very much for joining.
Speaker Change: [music].
Speaker Change: Okay.