CAMDEN NATIONAL CORP
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
CAC$58.02+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000750686-24-000238
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000750686-24-000262
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 210 previous paragraphs and 230 current paragraphs.
134 unchanged; 66 reworded; 29 added; 10 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 33 previous and 33 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
•risks relating to the pending merger with NFI, including the following:
Current report
◦risk that the cost savings and other anticipated benefits from the merger may not be fully realized or may take longer than anticipated to be realized;
Current report
◦disruption to the Company’s or NFI’s business as a result of the announcement and pendency of the merger;
Current report
◦risk that the integration of NFI’s business and operations into the Company’s will be delayed or will be more costly or difficult than expected, or that the Company is unable to integrate NFI’s business into the Company’s successfully, including because of factors or events that may be beyond the Company’s control;
Current report
◦the possibility that required regulatory approvals are not received on a timely basis, or at all, or are received subject to conditions that could adversely affect the Company or the expected benefits of the merger;
Current report
◦the possibility that NFI shareholder approval is not received;
Current report
◦the failure of closing conditions to the merger to be satisfied, or any unexpected delay in completing the merger or the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement between the Company and NFI;
Current report
◦the dilution caused by the issuance of additional shares of the Company’s common stock in connection with the merger;
Current report
◦the possibility that the merger may be more expensive to complete than anticipated, including because of factors or events that may be beyond the Company’s control;
Current report
◦risks related to management and oversight of the Company’s expanded business and operations following the merger due to increased size and geographical scope;
Current report
◦the risk that expectations regarding the timing, completion and accounting and tax treatments of the merger are not met;
Current report
◦the risk that any announcements relating to the merger could have adverse effects on the market price of the Company’s common stock;
Current report
◦the diversion of management’s attention from ongoing business operations and other opportunities;
Current report
◦the risk that revenues following the merger may be lower than expected and/or the risk that certain expenses of NFI or the combined company may be greater than expected;
Current report
◦the Company’s success in managing the foregoing risks;
Current report
◦effects of the announcement, pendency or completion of the merger on the Company’s or NFI’s ability to retain customers and key employees; and
Current report
◦other factors that may affect the Company’s or NFI’s future results;
Current report
(1) Brokered deposits are excluded from total average deposits, as presented on the Average Balance, Interest and Yield/Rate analysis table.
Current report
On September 10, 2024, we announced the acquisition of Northway Financial, Inc. (“NFI”) with an expected closing date in the first quarter of 2025, subject to Northway shareholder approval, receiving required regulatory approvals and other customary closing conditions. NFI is the parent company of Northway Bank, a New Hampshire state-chartered bank, with 16 branches in New Hampshire. The merger will allow the Company to build upon its presence in New England and is forecasted to improve its future financial profile.
Current report
Net income and diluted EPS for the nine months ended September 30, 2024 was $38.3 million and $2.62, respectively, each an increase of 10% over the same period in 2023. Our operating results for the nine months ended September 30, 2024 and 2023, included certain non-recurring events, which included merger-related costs of $727,000 for the nine months ended September 30, 2024 (refer to "Non-GAAP Financial Measures and Reconciliation to GAAP" for additional details). On a non-GAAP basis, core net income for the nine months ended September 30, 2024, was $38.2 million and core diluted EPS was $2.61, each a decrease of 6% compared to the same period in 2023.
Current report
We continue to maintain a strong capital position with all regulatory capital ratios exceeding regulatory levels and growing over the nine months ended September 30, 2024. Additionally, the change in the interest rate environment since December 31, 2023, has provided relief with regard to the valuation of the Company’s investment portfolio and has resulted in elevated levels of shareholders’ equity and tangible capital. The Company’s common equity ratio increased 56 basis points since December 31, 2023 to 9.22% at September 30, 2024, and its tangible common equity ratio increased 58 basis points over the same period to 7.69% at September 30, 2024.
Current report
(4)Mortgage banking income, net: The increase for the three and nine months ended September 30, 2024, compared to the same periods of 2023, was due to the increase in net gains recognized on residential mortgage loan sales. For the three months ended September 30, 2024, the Company sold $62.4 million, or 63%, of its residential mortgages at an average net gain of 1.10%, compared to $66.2 million, or 59%, at an average net gain of 0.65% for the three months ended September 30, 2023. For the nine months ended September 30, 2024, the Company sold $157.3 million, or 57%, of its residential mortgages at an average net gain of 0.98%, compared to $137.3 million, or 47%, at an average net gain of 0.87% for the nine months ended September 30, 2023.
Current report
(5)Net loss on sale of securities: Represents the realized loss upon sale of debt investments in 2023, as we executed investment sales that resulted in pre-tax losses of $5.3 million. The trades were completed to reposition a portion of our balance sheet with an expectation of improved future earnings and profitability as we reinvested the cash proceeds for balance sheet optimization.
Current report
(4)Merger and acquisition costs: On September 10, 2024, the Company announced the acquisition of NFI with an expected closing date in the first quarter of 2025, subject to NFI shareholder approval, receiving required regulatory approvals and other customary closing conditions. NFI is the parent company of Northway Bank, a New Hampshire state-chartered bank, with 16 branches in New Hampshire. The Company accrued for acquisition associated legal, consulting and other related costs incurred through September 30, 2024.
Current report
(5)Other expenses: The decrease for the nine months ended September 30, 2024, compared to the same period in 2023, was driven by external recruiting costs associated with the CEO succession and transition that was effective on January 1, 2024.
Current report
•Purchases of MBS and CMO securities of $26.0 million, all of which were designated as AFS.
Current report
•Net amortization and accretion of $3.6 million
Current report
Borrowings. As of September 30, 2024, total borrowings were $560.7 million, an increase of $30.7 million, or 6%, since December 31, 2023 and were comprised of:
Current report
•The Company carries interest rate swaps on $325.0 million of FHLBB advances to manage our interest rate risk position and as part of our effort to optimize net interest income and net interest margin.
Removed paragraphs (10)
Previous report
(1) Assumed a 21% tax rate.
Previous report
(1) Assumed a 21% tax rate.
Previous report
Net income for the first half of 2024 was $25.3 million, an increase of $149,000, or 1%, compared to the same period in 2023, and diluted EPS was $1.72 for each of the six months ended June 30, 2024 and 2023. The Company's operating results for the first six months of 2024 included a $910,000 partial recovery from the sale of a Signature Bank corporate bond that we wrote-off in the first half of 2023, upon announcement of Signature Bank’s failure in March 2023. Excluding the sale of the corporate bond, net of tax, adjusted net income (non-GAAP) for the six months ended June 30, 2024 was $24.5 million and adjusted diluted EPS was $1.67, decreases of 10% and 8%, respectively, from the same period in 2023.
Previous report
While we have seen pressures on net interest income between periods, during the first half of 2024 we are seeing positive momentum building within non-interest income as evidenced by growth of 5% over the first half of 2023. Our wealth and brokerage business lines grew revenues 12% as assets under administration reached $2.1 billion as of June 30, 2024, and represented 12% growth over the past twelve months.
Previous report
(4) Other expenses: The decrease for the three and six months ended June 30, 2024 was driven by the decreased advertising costs for specific deposit campaigns in 2023 that were not needed in 2024, along with the decrease in external hiring costs due to CEO transition costs incurred in the second quarter of 2023.
Previous report
In 2022, we transferred securities from AFS to HTM to help manage our capital position in a rising interest rate environment. The securities were reclassified at fair value at the time of the transfer, which was a non-cash transaction. As of June 30, 2024, the net unrealized losses on the transferred securities reported within AOCI were $44.4 million, net of a deferred tax asset of $12.2 million, and the weighted-average life on these securities was 8.3 years. At December 31, 2023, the net unrealized losses on the transferred securities reported within AOCI were $46.9 million, net of a deferred tax asset of $12.8 million and the weighted-average life of these securities was 8.5 years.
Previous report
Borrowings. As of June 30, 2024, total borrowings were $596.9 million, an increase of $67.0 million, or 13%, since December 31, 2023. Throughout 2024, we have taken several actions to optimize our funding costs and to improve net interest income and net interest margin. These include refinancing our existing BTFP advances and increasing our BTFP advances. In January 2024, we increased our BTFP position by $90.0 million to $225.0 million and subsequently, in May 2024, we prepaid $55.0 million of the outstanding BTFP, without penalty. The Company’s borrowings as of June 30, 2024, consisted of:
Previous report
•Borrowings from the BTFP totaling $170.0 million that are at a fixed rate of 4.76% and scheduled to mature in January 2025. The Company may prepay the BTFP borrowing at any time without penalty.
Previous report
Deposits. Deposits continue to represent our primary source of funds. As of June 30, 2024 and December 31, 2023, total deposits, including brokered deposits, were $4.5 billion and $4.6 billion, respectively. The decrease in the first half of 2024 was driven by the decrease in core deposits (which exclude CDs and brokered deposits) (non-GAAP) of $99.3 million, or 3%, due to the decrease from a two higher-cost deposit relationship we manage and normal business activity withdrawals from a larger deposit customer. Additionally, CDs decreased $32.9 million, or 5%, in the first six months of 2024.
Previous report
As of June 30, 2024, the Company had $686.1 million in borrowing capacity from the FHLBB. As of June 30, 2024, the Company has $170.0 million in borrowings under the BTFP at a rate of 4.76%, which are secured by the Company's investment securities at par. The BTFP loan is scheduled to mature in January 2025, and may be prepaid at any time without penalty. The BTFP is no longer a source for additional liquidity as new advances can no longer be issued under the program.
Reworded paragraphs (66)
Previous wording
In addition to evaluating the Company’s results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures such as: adjusted net income; adjusted diluted earnings per share; adjusted return on average assets; adjusted return on average equity; pre-tax, pre-provision income; return on average tangible equity and adjusted return on average tangible equity; the efficiency and tangible common equity ratios; net interest income (fully-taxable equivalent); tangible book value per share; core deposits and average core deposits. We utilize these non-GAAP financial measures for purposes of measuring performance against the Company's peer group and other financial institutions, as well as for analyzing its internal performance. The Company also believes these non-GAAP financial measures help investors better understand the Company's operating performance and trends and allows for better performance comparisons to other banks. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions.
Current wording
In addition to evaluating the Company’s results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures such as: core net income; core diluted earnings per share; core return on average assets; core return on average equity; pre-tax, pre-provision income; return on average tangible equity and core return on average tangible equity; the efficiency and tangible common equity ratios; net interest income (fully-taxable equivalent); tangible book value per share; core deposits and average core deposits. We utilize these non-GAAP financial measures for purposes of measuring performance against the Company's peer group and other financial institutions, as well as for analyzing its internal performance. The Company also believes these non-GAAP financial measures help investors better understand the Company's operating performance and trends and allows for better performance comparisons to other banks. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions.
Previous wording
Adjusted Net Income; Adjusted Diluted Earnings per Share; Adjusted Return on Average Assets; and Adjusted Return on Average Equity. The following table provides a reconciliation of net income, diluted EPS, return on average assets and return on average equity to adjusted net income, adjusted diluted EPS, adjusted return on average assets and adjusted return on average equity. Certain transactions have been excluded to calculate adjusted net income, adjusted diluted EPS, adjusted return on average assets and adjusted return on average equity. We believe the following adjusted financial metrics assist users of our financial statements with their financial analysis period-over-period as it adjusts for certain non-recurring items.
Current wording
Core Net Income; Core Diluted Earnings per Share; Core Return on Average Assets; and Core Return on Average Equity. The following table provides a reconciliation of net income, diluted EPS, return on average assets and return on average equity to core net income, core diluted EPS, core return on average assets and core return on average equity. Certain transactions have been excluded to calculate core net income, core diluted EPS, core return on average assets and core return on average equity. We believe the following adjusted financial metrics assist users of our financial statements with their financial analysis period-over-period as it adjusts for certain non-recurring items.
Previous wording
Adjusted Return on Average Tangible Equity: Adjusted return on average tangible equity is the ratio of (i) adjusted net income (as defined in the table above) adjusted for (a) amortization of core deposit intangible assets and the tax impact of the adjustment and (b) goodwill impairment, as necessary, to (ii) average shareholders' equity, adjusted for average goodwill and core deposit intangible assets.
Current wording
Adjusted Return on Average Tangible Equity: Adjusted return on average tangible equity is the ratio of (i) core net income (as defined in the table above) adjusted for (a) amortization of core deposit intangible assets and the tax impact of the adjustment and (b) goodwill impairment, as necessary, to (ii) average shareholders' equity, adjusted for average goodwill and core deposit intangible assets.
Previous wording
Throughout the first half of the year, the Company's earnings continue to be affected by the interest rate environment, having now operated in an inverted yield curve environment for approximately two years. On an annual basis, net interest income accounts for approximately 75% of the Company’s total revenues, which, in part, is driven by net interest margin. For the first half of 2024, the Company’s net interest margin was 2.32%, compared to 2.47% for the same period of 2023. The decrease speaks to the interest rate environment and the impact of the inverted yield curve as the increase in deposit and borrowing costs has outpaced the benefit from higher interest on our interest-earning asset yield. We continue to take steps to optimize our net interest margin, and in the second quarter of 2024 the Company's net interest margin increased 6 basis points from the first quarter of 2024 to 2.36%. During the first half of 2024, we took several actions to optimize our net interest margin, including, but not limited to: (1) continued with our strategy to redeploy investment cash flows to fund new loan originations at current market interest rates; (2) we maintained disciplined new loan origination pricing; (3) we introduced a new high-yield savings deposit account focused on driving on new relationships and expanding existing relationships; (4) we repriced and drove outflow of certain high-cost, non-core deposit customer relationships and replaced with more cost-effective funding; and (5) $100.0 million balance sheet derivative matured in June 2024, which contributed to the yield increase in the commercial real estate loan portfolio.
Current wording
The Company’s financial results for the nine months ended September 30, 2024 continued to be impacted by the change in the interest rate environment between periods, which directly affected net interest income. Net interest income for the nine months ended September 30, 2024, decreased 3% compared to the same period of 2023, and was primarily driven by net interest margin compression of seven basis points between periods to 2.37% for the nine months ended September 30, 2024. Our net interest margin bottomed-out in the first quarter of 2024 at 2.30%, and we have seen steady improvements since that time as highlighted by a reported net interest margin of 2.46% for the third quarter of 2024. We have taken actions to optimize our net interest margin throughout 2023 and 2024, including, but not limited to: (1) redeploying investment cash flows to fund new loan originations at current market interest rates; (2) maintaining disciplined new loan origination pricing; (3) introducing a new high-yield savings deposit account focused on driving new and expanding existing relationships; (4) repricing and driving the outflow of certain high-cost, non-core deposit customer relationships and replacing funding with more cost-effective alternatives; and (5) leveraging interest rate swap derivatives. We continue to be liability sensitive as of September 30, 2024 (refer to “Risk Management — interest Rate Risk”) and anticipate the recent 50 basis point cut of the Federal Funds Rate that occurred in mid-September 2024, and future Federal Funds Rate cuts, to prove beneficial to our net interest margin in future periods.
Previous wording
Along with optimizing net interest margin, asset quality has remained a top priority for the Company throughout this most recent economic cycle. We continue to actively monitor the loan portfolio for potential risks, including thorough reviews and stress analysis on our commercial real estate loan portfolio, particularly those sub-segments of this portfolio that have been in the news. Through our reviews and analyses, we have not identified any systemic signs of distress within our loan portfolios, which speaks to our continued disciplined and consistent underwriting of loans in all economic environments and cycles. As of June 30, 2024, loans 30-89 days past due to total loans was 0.05%, which was 7 basis points lower than December 31, 2023 and consistent with that reported as of March 31, 2024. Annualized net charge-offs for the six months ended June 30, 2024 and 2023 were 0.03% of average loans for each period. Due to these strong credit quality metrics, combined with a more favorable macroeconomic forecast between periods, the Company’s allowance for credit losses ("ACL") on loans decreased to 0.86% as of June 30, 2024, compared to 0.90% at December 31, 2023 and consistent with that reported as of March 31, 2024.
Current wording
Asset quality continues to be a top focus in the current economic cycle. We continue to actively monitor our loan portfolio, including those segments and industries that have been identified as having higher credit risk in the current economic cycle (such as nonowner occupied commercial real estate office loans), through reviews and stress analyses. Through these reviews and analyses, we have not identified any increased risks or signs of systemic distress within any segments in our loan portfolios as of September 30, 2024. We continue to maintain our lending discipline and did not have any credit concentrations exceeding internal or regulatory limits as of September 30, 2024. For the nine months ended September 30, 2024, we continued to track favorably across our key credit quality indicator metrics, highlighted by past due loans of 0.03% of total loans, non-performing assets of 0.12% of total assets, and annualized net charge-offs of 0.03%. When combining these strong credit quality metrics, with a more favorable macroeconomic forecast since December 31, 2023, the allowance for credit losses ("ACL") on loans decreased to 0.86% as of September 30, 2024, compared to 0.90% at December 31, 2023.
Previous wording
Net interest income is the interest earned on loans, securities, and other interest-earning assets, adjusted for net loan fees, origination costs, and accretion or amortization of fair value marks on loans and/or CDs created in purchase accounting, less the interest paid on interest-bearing deposits and borrowings. Net interest income is our largest source of revenue ("revenue" is defined as the sum of net interest income and non-interest income). For the quarter ended June 30, 2024, net interest income was 75% of total revenues, compared to 76% for the quarter ended June 30, 2023. For the six months ended June 30, 2024, net interest income was 75% of total revenues, compared to 77% for the same period of 2023. Net interest income is affected by factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies and competitive conditions, loan prepayment speeds, the volume and mix of interest-earning assets and interest-bearing liabilities, and the level of non-performing assets.
Current wording
Net interest income is the interest earned on loans, securities, and other interest-earning assets, adjusted for net loan fees, origination costs, and accretion or amortization of fair value marks on loans and/or CDs created in purchase accounting, less the interest paid on interest-bearing deposits and borrowings. Net interest income is our largest source of revenue ("revenue" is defined as the sum of net interest income and non-interest income). For the quarter ended September 30, 2024, net interest income was 75% of total revenues, compared to 87% for the same period in 2023. For the nine months ended September 30, 2024, net interest income was 75% of total revenues, compared to 80% for the first nine months of 2023. Net interest income is affected by factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies and competitive conditions, loan prepayment speeds, the volume and mix of interest-earning assets and interest-bearing liabilities, and the level of non-performing assets.
Previous wording
Net Interest Income (Fully-Taxable Equivalent). Net interest income on a fully-taxable equivalent basis for the quarter ended June 30, 2024 was $32.3 million, a decrease of $582,000, or 2%, compared to the second quarter of 2023. Between periods the Company’s net interest margin on a fully-taxable equivalent basis decreased 4 basis points to 2.36% for the second quarter of 2024.
Current wording
Net Interest Income (Fully-Taxable Equivalent). Net interest income on a fully-taxable equivalent basis for the quarter ended September 30, 2024 was $33.8 million, an increase of $931,000, or 3%, compared to the third quarter of 2023. Between periods the Company’s net interest margin on a fully-taxable equivalent basis increased 7 basis points to 2.46% for the third quarter of 2024.
Previous wording
•Interest income on a fully-taxable equivalent basis increased $6.0 million between periods primarily driven by the higher interest rate environment between years. For the second quarter of 2024, the Company’s yield on average interest-earning assets was 4.58%, compared to 4.12% for the same period in 2023.
Current wording
•Interest income on a fully-taxable equivalent basis increased $6.1 million, or 10%, between periods primarily driven by the higher interest rate environment between years. For the third quarter of 2024, the Company’s yield on average interest-earning assets was 4.69%, compared to 4.23% for the same period in 2023.
Previous wording
The Company’s average loan yield was 5.14% for the three months ended June 30, 2024, an increase of 41 basis points over the same period in 2023. In mid-June 2024, a $100.0 million balance sheet interest rate swap on the commercial real estate portfolio matured and contributed to the yield expansion between periods. We continue to redeploy loan and investment cash flows primarily to fund new loan originations at current market interest rates and further support our loan yield expansion.
Current wording
The Company’s average loan yield was 5.29% for the three months ended September 30, 2024, an increase of 44 basis points over the same period in 2023. In mid-June 2024, a $100.0 million balance sheet interest rate swap on the commercial real estate loan portfolio matured, and the third quarter of 2024 marked the first complete quarter in which the benefit of this maturity was realized, contributing to improved expansion between periods. Throughout 2024, we redeployed loan and investment cash flows primarily to fund new loan originations at current market interest rates and further support our loan yield expansion.
Previous wording
The Company’s average investment yield was 2.64% for the second quarter of 2024, an increase of 46 basis points over the same period in 2023. The increase between periods is the result of the continued cash flow from lower-yielding investments combined with the sale of investments in the second half of 2023 to reposition the Company's balance sheet. The increase in our investment yield drove an increase in interest income on investments year-over-year and fully offset the impact of a decrease in average investment balances of 7% between periods.
Current wording
The Company’s average investment yield was 2.59% for the third quarter of 2024, an increase of 32 basis points over the same period in 2023. The increase between periods is the result of the continued cash flow from lower-yielding investments combined with the sale of investments in the second half of 2023 to reposition the Company's balance sheet. The increase in our investment yield drove an increase in interest income on investments year-over-year and fully offset the impact of a decrease in average investment balances of 7% between periods.
Previous wording
•Interest expense increased $6.6 million between periods primarily due to a 54 basis point increase in our average cost of funds to 2.35% for the second quarter of 2024. Our deposit and borrowing costs increased throughout the past year due to the current interest rate.
Current wording
•Interest expense increased $5.0 million between periods primarily due to a 42 basis point increase in our average cost of funds to 2.35% for the second quarter of 2024. Our deposit and borrowing costs increased throughout the past year due to the higher interest rate environment.
Previous wording
The Company’s average deposit costs for the quarter ended June 30, 2024 were 2.05%, compared to 1.48% for the same period in 2023. Deposit costs have continued to be inflated throughout the first half of 2024 due to prolonged higher short-term rates. Increased deposit costs were also the result of strong deposit competition within our markets, and more broadly across depository institutions, as well as changes in the deposit mix as depositors move cash into higher interest-earning deposit accounts to obtain the best rates. These changes in deposit mix also drove significant increases within our money market and CD balances over the past year and significant decreases in lower cost checking and savings account balances.
Current wording
The Company’s average deposit costs for the quarter ended September 30, 2024 were 2.09%, compared to 1.67% for the same period in 2023. Deposit costs continued to be inflated throughout the first nine months 2024 due to prolonged higher short-term interest rates. Increases in deposit costs over the past year were also the result of strong deposit competition within our markets, and more broadly across depository institutions, as well as changes in the deposit mix as depositors have been more conscious to move excess cash into higher interest-earning deposit accounts.
Previous wording
The Company’s average cost of borrowings for the three months ended June 30, 2024, was 4.00%, compared to 3.77% for the three months ended June 30, 2023. The increase was driven by the continued higher short-term interest rates between years, and the increase in average borrowings of $35.4 million, or 5%.
Current wording
The Company’s average cost of borrowings for the three months ended September 30, 2024, was 3.90%, compared to 3.70% for the three months ended September 30, 2023. The increase was driven by the continued higher short-term interest rates between years and the change in mix of borrowings.
Previous wording
Net Interest Income (Fully-Taxable Equivalent). For the six months ended June 30, 2024, the Company's net interest income on a fully-taxable equivalent basis was $63.8 million, a decrease of $3.7 million, or 5%, compared to the same period in 2023. Between periods, the Company’s net interest margin on a fully-taxable equivalent basis decreased 15 basis points to 2.32% for the six months ended June 30, 2024.
Current wording
Net Interest Income (Fully-Taxable Equivalent). For the nine months ended September 30, 2024, the Company's net interest income on a fully-taxable equivalent basis was $97.5 million, a decrease of $2.7 million, or 3%, compared to the same period in 2023. Between periods, the Company’s net interest margin on a fully-taxable equivalent basis decreased 7 basis points to 2.37% for the nine months ended September 30, 2024.
Previous wording
•Interest expense increased $17.1 million between periods primarily due to a 68 basis point increase in our average cost of funds to 2.31% for the six months ended June 30, 2024, which included an increase in average deposit costs of 66 basis points between periods to 2.01% for the six months ended June 30, 2024.
Current wording
•Interest expense increased $22.1 million between periods primarily due to a 58 basis point increase in our average cost of funds to 2.32% for the nine months ended September 30, 2024, which included an increase in average deposit costs of 58 basis points between periods to 2.04% for the nine months ended September 30, 2024.
Previous wording
•Interest income on a fully-taxable equivalent basis increased $13.4 million between periods primarily driven by interest-earning assets yield expansion of 49 basis points to 4.51% for the six months ended June 30, 2024. This increase in yields more than offset the decrease in average interest-earning assets of $12.5 million. Between periods, our average loan yield expanded 46 basis points to 5.07% for six months ended June 30, 2024. For the first six months of 2024, our investment yield expanded to 2.62%, an increase of 42 basis points over the same period in 2023. These increased yields reflect the increase in interest rates between periods and the maturity of lower yielding assets.
Current wording
•Interest income on a fully-taxable equivalent basis increased $19.6 million between periods primarily driven by interest-earning assets yield expansion of 48 basis points to 4.57% for the nine months ended September 30, 2024. This increase in yields more than offset the decrease in average interest-earning assets of $10.5 million. Between periods, our average loan yield expanded 46 basis points to 5.15% for nine months ended September 30, 2024. For the first nine months of 2024, our investment yield expanded to 2.61%, an increase of 39 basis points over the same period in 2023. These increased yields reflect the increase in interest rates between periods and the maturity of lower yielding assets.
Previous wording
(1) Provision (credit) for loan losses: The Company recorded provision expense of $188,000 driven by modest loan growth while maintaining strong asset quality within the loan portfolios. For the six months ended June 30, 2024, negative provision expense (i.e., credit for credit losses) of $976,000 was recorded and was driven by the continued strong asset quality and an improved macroeconomic forecast seen in 2024.
Current wording
(1)Provision (credit) for loan losses: The Company recorded provision expense of $283,000 driven by increasing reserves on loans more adversely rated. The release of $456,000 in provision for the three months ended September 30, 2023 was primarily driven by the economic forecast improving from in the quarter and continued strong asset quality. For the nine months ended September 30, 2024, negative provision expense (i.e., credit for credit losses) of $693,000 was recorded and was primarily driven by the continued strong asset quality and the continued improvement of the macroeconomic forecast seen in 2024. The provision of $288,000 for the nine months ended September 30, 2023 was driven by 1% loan growth along with the economic forecast worsening slightly in the first nine months of 2023.
Previous wording
(2) Provision (credit) for credit losses on off-balance sheet credit exposures: As of June 30, 2024 and 2023, the ACL on off-balance sheet credit exposures was $2.8 million. The provision recorded in the second quarter of 2024 was driven by the increase in unfunded commitments of $71.5 million between periods and drove the increase for the first six months of 2024 as well.
Current wording
(2)(Credit) provision for credit losses on off-balance sheet credit exposures: As of September 30, 2024 and 2023, the ACL on off-balance sheet credit exposures was $2.7 million. The credit for credit losses recorded for the third quarter of 2024 was primarily due to the decrease in the commercial and residential loan pipelines of $24 million from the second quarter of 2024. The provision for credit losses recorded for the nine months ended September 30, 2024, was driven by a $76.9 million increase in unfunded commitments during the period.
Previous wording
(3) (Credit) provision for HTM debt securities: During the first six months of 2024, the Company sold its Signature Bank corporate bond that it had previously written-off in full in March 2023, for $1.8 million and recovered proceeds of $910,000.
Current wording
(3)(Credit) provision for HTM debt securities: In the first quarter of 2023, the Company fully wrote-off its Signature Bank corporate bond totaling $1.8 million, upon the announcement of Signature Bank’s failure. In the first quarter of 2024, the Company sold its Signature Bank corporate bond and recovered proceeds of $910,000.
Previous wording
(1)Service charges on deposit accounts: The increase for the three and six months ended June 30, 2024, was driven by the increase in overdraft utilization by customers that increased income of $129,000 and $328,000, respectively. Additionally, the Company saw an increase due to increased cash management fees of $104,000 and $206,000 between periods.
Current wording
(1)Service charges on deposit accounts: The increase for the three and nine months ended September 30, 2024, over the same periods in 2023, was driven by the increase in deposit customers’ overdraft utilization and cash management fees earned on corporate and municipal clients.
Previous wording
(2) Income from fiduciary services: The increase for the three and six months ended June 30, 2024 over the same periods in 2023, was driven by the increase in assets under management of 3% and 5% respectively, to $1.2 billion as of June 30, 2024.
Current wording
(2)Income from fiduciary services: The increase for the three and nine months ended September 30, 2024 over the same periods in 2023, was driven by the increase in assets under management of 6% and 12% respectively, to $1.2 billion as of September 30, 2024.
Previous wording
(3)Brokerage and insurance commissions: The increase for the three and six months of 2024 over the same periods in 2023, was driven by the increasing new business from existing customers along with the increase in assets under administration of 2% and 7%, respectively, to $855.8 million as of June 30, 2024.
Current wording
(3)Brokerage and insurance commissions: The increase for the three and nine months ended September 30, 2024 over the same periods in 2023, was driven by the increase in assets under administration of 6% and 14%, respectively, to $904.4 million as of September 30, 2024.
Previous wording
(4)Other income: The decrease for the six months ended June 30, 2024, was driven by a decrease in customer loan swap fees of $250,000 between periods.
Current wording
(6)Other income: The decrease for the nine months ended September 30, 2024, was driven by a decrease in customer loan swap fees of $273,000 between periods.
Previous wording
(1)Salaries and employee benefits: The increase in the three and six months ended June 30, 2024, compared to 2023, was primarily driven by increases in one-time expenses for executive transition related items and higher incentive accruals due to better company performance in the first half 2024.
Current wording
(1)Salaries and employee benefits: The increase in the three and nine months ended September 30, 2024, compared to the same periods in 2023, was primarily driven by higher incentive accruals due to the change in the operating environment between periods.
Previous wording
(2)Furniture, equipment and data processing: The increase for the three and six months ended June 30, 2024, reflects the continued investment in customer-facing technology platforms, internal systems and production platforms to drive increased productivity and efficiencies, and updates to various information security and resiliency-related systems and enhancements.
Current wording
(2)Furniture, equipment and data processing: The increase for the three and nine months ended September 30, 2024, compared to the same periods in 2023, reflects the continued investment in customer-facing technology platforms, internal systems and production platforms to drive increased productivity and efficiencies, and updates to various information security and resiliency-related systems and enhancements.
Previous wording
(3)Consulting and professional fees: The decreases in the three and six months ended June 30, 2024, compared to 2023, were driven by increased fees for 2023 for legal, consulting and director-related costs for the succession planning with no corresponding amounts recorded in 2024.
Current wording
(3)Consulting and professional fees: The decrease for the three and nine months ended September 30, 2024, compared to the same periods in 2023, were driven by legal, consulting and director-related costs associated with the CEO succession and transition that was effective on January 1, 2024.
Previous wording
Total cash and cash equivalents as of June 30, 2024, were $105.6 million, compared to $99.8 million at December 31, 2023. We continually monitor our cash levels as part of our liquidity risk management practices. Refer to the "—Liquidity" section for additional details.
Current wording
Total cash and cash equivalents as of September 30, 2024, were $139.5 million, compared to $99.8 million at December 31, 2023. We continually monitor our cash levels as part of our liquidity risk management practices. Refer to the "—Liquidity" section for additional details.
Previous wording
As of June 30, 2024, the reported value of the Company's total investments portfolio was $1.1 billion, a decrease of $55.6 million, or 5%, since December 31, 2023. This was driven by changes within our debt securities portfolio, including:
Current wording
As of September 30, 2024, the reported value of the Company's total investments portfolio was $1.2 billion, a decrease of $33.7 million, or 2.8%, since December 31, 2023. This was driven by changes within our debt securities portfolio, including:
Previous wording
•Paydowns, calls and maturities of $53 million.
Current wording
•Pay downs, calls, and maturities of $85.4 million.
Previous wording
•A net decrease in the fair value of the AFS debt securities portfolio of $6.8 million due to interest rate movement during the quarter.
Current wording
•The change in fair value of the Company’s AFS debt securities of $22.6 million due to the decrease in interest rates between periods.
Previous wording
Our AFS debt securities portfolio, which comprised 51% and 53% of our investment portfolio as of June 30, 2024 and December 31, 2023, respectively, was carried at fair value using Level 2 valuation techniques. Refer to Note 15 of the consolidated financial statements for further details on the Company's fair value techniques. Our HTM debt securities are carried at amortized cost and comprised 47% and 46% of our investment portfolio as of June 30, 2024 and December 31, 2023, respectively.
Current wording
Our AFS debt securities portfolio, which comprised 52% and 53% of our investment portfolio as of September 30, 2024 and December 31, 2023, respectively, was carried at fair value using Level 2 valuation techniques. Refer to Note 16 of the consolidated financial statements for further details on the Company's fair value techniques. Our HTM debt securities are carried at amortized cost and comprised 45% and 46% of our investment portfolio as of September 30, 2024 and December 31, 2023, respectively.
Previous wording
The book value of our debt securities as of June 30, 2024 and December 31, 2023, was $1.1 billion and $1.2 billion, respectively. Our debt securities portfolio has limited credit risk due to its composition, which includes securities backed by the U.S. government and government-sponsored agencies, and highly rated corporate and municipal bonds by nationally recognized rating agencies. The following table provides the make-up of the Company's investment portfolio as of June 30, 2024 and December 31, 2023, based on the book value of each security type as a percentage of total book value of the Company's debt securities:
Current wording
The book value of our debt securities as of September 30, 2024 and December 31, 2023, was $1.2 billion at each date. Our debt securities portfolio has limited credit risk due to its composition, which includes securities backed by the U.S. government and government-sponsored agencies, and highly rated corporate and municipal bonds by nationally recognized rating agencies. The following table provides the make-up of the Company's investment portfolio as of September 30, 2024 and December 31, 2023, based on the book value of each security type as a percentage of total book value of the Company's debt securities:
Previous wording
We continually monitor and evaluate our investment portfolio to identify and assess risks within our portfolio, including but not limited to, the impact of the current interest rate environment and the related prepayment risk, and the review of credit ratings. The overall mix of debt securities as of June 30, 2024, compared to December 31, 2023, remains consistent and the Company expects the portfolio will continue to be well positioned to provide a stable source of cash flow. As of June 30, 2024 and December 31, 2023, the duration of our debt investment securities portfolio, adjusting for calls when appropriate and consensus prepayment speeds, was 5.5 years and 5.7 years, respectively.
Current wording
We continually monitor and evaluate our investment portfolio to identify and assess risks within our portfolio, including but not limited to, the impact of the current interest rate environment and the related prepayment risk, and the review of credit ratings. The overall mix of debt securities as of September 30, 2024, compared to December 31, 2023, remains consistent and is believed to be well-positioned to provide a stable source of cash flow. As of September 30, 2024 and December 31, 2023, the duration of our debt investment securities portfolio, adjusting for calls when appropriate and consensus prepayment speeds, was
Previous wording
As of June 30, 2024 and December 31, 2023, municipal bonds were 5% of the book value of the total bond portfolio and all carried an investment-grade credit rating.
Current wording
As of September 30, 2024 and December 31, 2023, all of our municipal bonds carried an investment-grade credit rating.
Previous wording
As of June 30, 2024 and December 31, 2023, corporate bonds were 3% of the book value of the total bond portfolio and 69% of these corporate bonds carried an investment-grade credit rating. The remaining 31% of corporate bonds were non-rated corporate bonds of community banks within our markets. As of June 30, 2024, the corporate bond portfolio was made up of 18 different companies, which included 16 different banks. The banks in the portfolio range from the largest U.S. banks to community banks, with 32% of our exposure as of June 30, 2024, being to global systemically important banks, or "G-SIBs".
Current wording
As of September 30, 2024 and December 31, 2023, 69% of our corporate bonds carried an investment-grade credit rating. The remaining corporate bonds were non-rated corporate bonds of community banks within our markets. As of September 30, 2024, the corporate bond portfolio was made up of 18 different companies, which included 16 different banks. The banks in the portfolio range from the largest U.S. banks to community banks, with 32% of our exposure as of September 30, 2024 being to global systemically important banks, or "G-SIBs".
Previous wording
Our other investments on the consolidated statements of condition consist of FHLBB and FRB common stock. These investments are carried at cost. We are required to maintain a certain level of investment in FHLBB stock based on our level of FHLBB advances, and maintain a certain level of investment in FRB common stock based on the Bank's capital levels. As of June 30, 2024 and December 31, 2023, our investment in FHLBB stock totaled $11.7 million and $10.0 million, respectively, and our investment in FRB stock was $5.4 million at each date.
Current wording
Our other investments on the consolidated statements of condition consist of FHLBB and FRB common stock. These investments are carried at cost. We are required to maintain a certain level of investment in FHLBB stock based on our level of FHLBB advances, and maintain a certain level of investment in FRB common stock based on the Bank's capital levels. As of September 30, 2024 and December 31, 2023, our investment in FHLBB stock totaled $17.1 million and $10.0 million, respectively, and our investment in FRB stock was $5.4 million at each date.
Previous wording
Portfolio Concentrations. Our primary market continues to be Maine, making up 68% of the loan portfolio as of June 30, 2024 and December 31, 2023. Massachusetts and New Hampshire are our second and third largest markets that we serve, making up 15% and 10%, of our total loan portfolio as of June 30, 2024, respectively, and 16% and 10% as of December 31, 2023, respectively. As of June 30, 2024, our distribution channels included 55 branches within Maine, two locations in New Hampshire, including a branch in Portsmouth and a commercial loan production office in Manchester, and an online residential mortgage and small business digital loan platform.
Current wording
Portfolio Concentrations. Our primary market continues to be Maine, making up 68% of the loan portfolio as of September 30, 2024 and December 31, 2023. Massachusetts and New Hampshire are our second and third largest markets that we serve, making up 16% and 10% of our total loan portfolio, respectively, as of September 30, 2024 and December 31, 2023. As of September 30, 2024, our distribution channels included 55 branches within Maine, two locations in New Hampshire, including a branch in Portsmouth and a commercial loan production office in Manchester, and an online residential mortgage and small business digital loan platform.
Previous wording
As of June 30, 2024, the non-residential building operators' industry (operators of commercial and industrial buildings, retail establishments, theaters, banks and insurance buildings) and lessors of residential buildings industry (lessors of buildings used as residences, such as single-family homes, apartments and town houses) concentrations were 32% and 28% of our total commercial real estate portfolio and 13% and 12% of total loans, respectively. As of December 31, 2023, the non-residential building operators’ industry and lessors of residential building industry concentrations were 33% and 28%, respectively, of total commercial real estate portfolio and 14% and 11% of total loans. As of June 30, 2024, there were no other industry concentrations within our loan portfolio that exceeded 10% of total loans.
Current wording
As of September 30, 2024, the non-residential building operators' industry (operators of commercial and industrial buildings, retail establishments, theaters, banks and insurance buildings) and lessors of residential buildings industry (lessors of buildings used as residences, such as single-family homes, apartments and town houses) concentrations were 31% and 30% of our total commercial real estate portfolio and 13% and 12% of total loans, respectively. As of December 31, 2023, the non-residential building operators’ industry and lessors of residential building industry concentrations were 33% and 28%, respectively, of total commercial real estate portfolio and 14% and 11% of total loans. As of September 30, 2024, there were no other industry concentrations within our loan portfolio that exceeded 10% of total loans.
Previous wording
(a) Multi-family (5+ units) loans are primarily located in non-urban locations, including 79% in Maine, 11% in Massachusetts, 8% in New Hampshire, and 2% in other states as of June 30, 2024 and December 31, 2023, respectively.
Current wording
(a) Multi-family (5+ units) loans are primarily located in non-urban locations, including 80% in Maine, 11% in Massachusetts, 7% in New Hampshire, and 2% in other states as of September 30, 2024. As of December 31, 2023, there were 79% in Maine, 11% in Massachusetts, 8% in New Hampshire, and 2% in other states.
Previous wording
Related Party Transactions. The Bank is permitted, in its normal course of business, to make loans to certain officers and directors of the Company and Bank under terms that are consistent with the Bank’s lending policies and regulatory requirements. In addition to extending loans to certain officers and directors of the Company and Bank on terms consistent with the Bank’s lending policies, federal banking regulations also require training, audit and examination of the adherence to this policy (also known as “Regulation O” requirements). Note 3 and Note 8 of the consolidated financial statements provide information on related party lending and deposit transactions, respectively. We have not entered into significant related party transactions.
Current wording
Related Party Transactions. The Bank is permitted, in its normal course of business, to make loans to certain officers and directors of the Company and Bank under terms that are consistent with the Bank’s lending policies and regulatory requirements. In addition to extending loans to certain officers and directors of the Company and Bank on terms consistent with the Bank’s lending policies, federal banking regulations also require training, audit and examination of the adherence to this policy (also known as “Regulation O” requirements). Note 5 of the consolidated financial statements provide information on related party lending and deposit transactions, respectively. We have not entered into significant related party transactions.
Showing the first 40 of 66 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
5.3 years and 5.7 years, respectively.