Camden National Bank (CAC)

Maine-based regional bank Camden National (NASDAQ:CAC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 45.6% year on year to $65.74 million. Its non-GAAP profit of $1.24 per share was 4.2% above analysts’ consensus estimates.

Company Overview

Rooted in Maine's coastal communities since 1875, Camden National (NASDAQ:CAC) is a regional bank holding company that provides banking, wealth management, and financial services to consumers and businesses throughout Maine and New Hampshire.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Camden National competes with other regional banks operating in Maine and New Hampshire, including Bar Harbor Bankshares (NYSE:BHB), Bangor Bancorp (NASDAQ:BNGO), and Northeast Bank (NASDAQ:NBN), as well as larger national institutions such as Bank of America (NYSE:BAC) and TD Bank Group (NYSE:TD).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Unfortunately, Camden National Bank’s 5.4% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the banking sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Camden National Bank’s annualized revenue growth of 17.1% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Camden National Bank reported magnificent year-on-year revenue growth of 45.6%, and its $65.74 million of revenue beat Wall Street’s estimates by 4.6%.

Net interest income made up 76.7% of the company’s total revenue during the last five years, meaning lending operations are Camden National Bank’s largest source of revenue.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Camden National Bank’s efficiency ratio has increased by 3.2 percentage points, going from 54.9% to 55.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Camden National Bank’s efficiency ratio came in at 52.5% this quarter, beating analysts’ expectations by 388 basis points (100 basis points = 1 percentage point). This result was 9.6 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Camden National Bank to maintain its trailing one-year ratio with a projection of 54.7%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Camden National Bank’s EPS grew at a weak 1.5% compounded annual growth rate over the last five years, lower than its 5.4% annualized revenue growth. However, its efficiency ratio actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Camden National Bank, its two-year annual EPS growth of 4.7% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q3, Camden National Bank reported adjusted EPS of $1.24, up from $0.94 in the same quarter last year. This print beat analysts’ estimates by 4.2%. Over the next 12 months, Wall Street expects Camden National Bank’s full-year EPS of $4.11 to grow 29.7%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Camden National Bank’s TBVPS was flat over the last five years. However, TBVPS growth has accelerated recently, growing by 6.1% annually over the last two years from $25.24 to $28.42 per share.

Over the next 12 months, Consensus estimates call for Camden National Bank’s TBVPS to grow by 14.9% to $32.66, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Camden National Bank has averaged a Tier 1 capital ratio of 12%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Camden National Bank has averaged an ROE of 11.2%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

We enjoyed seeing Camden National Bank beat analysts’ revenue expectations this quarter. We were also happy its net interest income outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $43.87 immediately following the results.

Before deciding whether to buy Camden National Bank or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Camden National Bank isn’t a terrible business, but it doesn’t pass our quality test. For starters, its revenue growth was uninspiring over the last five years. And while its expanding net interest margin shows its loan book is becoming more profitable, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its TBVPS growth was weak over the last five years.

Camden National Bank’s P/B ratio based on the next 12 months is 1.1x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $47.50 on the company (compared to the current share price of $43.87).