-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OuIpwxDqrSNqMy7L4/I0LyQw4+vbX6YbakURUTxe8Wu/+Md6wdeAyZC/YPTIBiMd VvmRmFtCHEn8OEaDzAR55w== 0000750686-98-000011.txt : 19980817 0000750686-98-000011.hdr.sgml : 19980817 ACCESSION NUMBER: 0000750686-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMDEN NATIONAL CORP CENTRAL INDEX KEY: 0000750686 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 010413282 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13227 FILM NUMBER: 98690460 BUSINESS ADDRESS: STREET 1: TWO ELM ST CITY: CAMDEN STATE: ME ZIP: 04843 BUSINESS PHONE: 2072368821 MAIL ADDRESS: STREET 1: 2 ELM ST CITY: CAMDEN STATE: ME ZIP: 04843 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1998 Commission File No. 0-28190 CAMDEN NATIONAL CORPORATION (Exact name of registrant as specified in its charter) MAINE 01-04132282 (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 2 ELM STREET, CAMDEN, ME 04843 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (207) 236-8821 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Outstanding at June 30, 1998: Common stock (no par value) 2,249,560 shares. CAMDEN NATIONAL CORPORATION Form 10-Q for the quarter ended June 30, 1998 TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT PART I. ITEM 1. FINANCIAL INFORMATION PAGE Consolidated Statements of Income Six Months Ended June 30, 1998 and 1997 3 Consolidated Statements of Income Three Months Ended June 30, 1998 and 1997 4 Consolidated Statements of Comprehensive Income Six Months Ended June 30, 1998 and 1997 5 Consolidated Statements of Comprehensive Income Three Months Ended June 30, 1998 and 1997 5 Consolidated Statements of Conditions June 30, 1998 and 1997 and December 31, 1997 6 Consolidated Statement of Cash Flows Six Months Ended June 30, 1998 and 1997 7 Notes to Consolidated Financial Statements Six Months Ended June 30, 1998 and 1997 8-9 Analysis of Change in Net Interest Margin Six Months Ended June 30, 1998 and 1997 9 Average Daily Balance Sheets Six Months Ended June 30, 1998 and 1997 10 Analysis of Volume and Rate Changes on Net Interest Income & Expenses June 30, 1998 over June 30, 1997 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-16 PART II. ITEM 4. Submission Matters to a Vote of Security holders 16 ITEM 6. Exhibits and Reports on Form 8-K 16-17 SIGNATURES 18 EXHIBITS 19 PART I. ITEM I. FINANCIAL INFORMATION Camden National Corporation and Subsidiaries Consolidated Statement of Income (unaudited) (In Thousands, except number Six Months Ended June 30, of shares and per share data) 1998 1997 Interest Income Interest and fees on loans $17,842 $15,349 Interest on U.S. Government and agency obligations 4,941 5,883 Interest on state and political subdivisions 58 160 Interest on interest rate swap agreements 33 279 Interest on federal funds sold and other investments 489 380 ------- ------- Total interest income 23,363 22,051 Interest Expense Interest on deposits 7,978 6,549 Interest on other borrowings 2,385 3,584 Interest on interest rate swap agreements 32 274 ------- ------- Total interest expense 10,395 10,407 ------- ------- Net interest income 12,968 11,644 Provision for Loans Losses 648 572 ------- ------- Net interest income after provision for loan losses 12,320 11,072 Other Income Service charges on deposit accounts 783 740 Other service charges and fees 826 678 Other 603 616 ------- ------- Total other income 2,212 2,034 Operating Expenses Salaries and employee benefits 4,036 3,446 Premises and fixed assets 1,276 1,057 Other 2,609 1,933 ------- ------- Total operating expenses 7,921 6,436 ------- ------- Income before income taxes 6,611 6,670 Income Taxes 2,136 2,251 ------- ------- Net Income $ 4,475 $ 4,419 ======= ======= Per Share Data Basic Earnings per share (Net income divided $ 1.97 $ 1.94 by weighted aveage shares outstanding) Diluted Earnings per share $ 1.93 $ 1.91 Cash dividends per share $ 0.81 $ 0.65 Weighted average number of shares outstanding 2,267,066 2,279,388
Camden National Corporation and Subsidiaries Consolidated Statements of Income (unaudited) (In Thousands, except number Three Months Ended June 30, of shares and per share data) 1998 1997 Interest Income Interest and fees on loans $ 9,162 $ 7,857 Interest on U.S. Government and agency obligations 2,365 3,176 Interest on state and political subdivisions 27 99 Interest on interest rate swap agreements 0 95 Interest on federal funds sold and other investments 248 212 ------- ------- Total interest income 11,802 11,439 Interest Expense Interest on deposits 4,299 3,298 Interest on other borrowings 846 2,077 Interest on interest rate swap agreements 0 98 ------- ------- Total interest expense 5,145 5,473 ------- ------- Net interest income 6,657 5,966 Provision for Loans Losses 324 285 ------- ------- Net interest income after provision for loan losses 6,333 5,681 Other Income Service charges on deposit accounts 423 383 Other service charges and fees 470 384 Other 310 352 ------- ------- Total other income 1,203 1,119 Operating Expenses Salaries and employee benefits 2,096 1,732 Premises and fixed assets 695 531 Other 1,453 1,009 ------- ------- Total operating expenses 4,244 3,272 Less minority interest in net income (loss) 1 3 ------- ------- Income before income taxes 3,291 3,525 Income Taxes 1,050 1,195 ------- ------- Net Income $ 2,241 $ 2,330 ======= ======= Per Share Data Basic Earnings per share $ 0.99 $ 1.03 (Net income divided by weighted average shares outstanding) Diluted Earnings per share $ 0.97 $ 1.01 Cash dividends per share $ 0.41 $ 0.33 Weighted average number of shares outstanding 2,263,956 2,271,777
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Six Months Ended June 30 1998 1997 Net income $ 4,475 $ 4,419 Other comprehensive income, net of tax: Change in unrealized gains on securities 4 (27) ------- ------- Comprehensive income $ 4,479 $ 4,392 ======= =======
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Three Months Ended June 30 1998 1997 [S] [C] [C] Net income $ 2,241 $ 2,330 Other comprehensive income, net of tax: Change in unrealized gains on securities (1) (4) ------- ------- Comprehensive income $ 2,240 $ 2,326 ======= ======= Camden National Corporation and Subsidiaries Consolidated Statements of Condition (unaudited) (In Thousands, except number June 30, December 31, of shares and per share data 1998 1997 Assets Cash and due from banks $ 17,757 $ 13,451 Federal funds sold 750 1,100 Securities available for sale 8,922 4,312 Securities held to maturity 124,847 160,894 Other securities 14,085 14,084 Residential mortgages held for sale 16,800 7,094 Loans, less allowance for loan losses of $6,059 and $5,640 at June 30, 1998 and December 31, 1997 367,422 350,415 Bank premises and equipment 9,106 8,786 Other real estate owned 1,117 1,373 Interest receivable 3,942 3,924 Other assets 18,568 8,459 -------- -------- Total assets $583,316 $573,892 ======== ======== Liabilities Deposits: Demand $ 58,972 $ 51,422 NOW 47,689 42,796 Money market 40,390 23,452 Savings 67,727 66,723 Certificates of deposit 232,245 189,016 -------- -------- Total deposits 447,023 373,409 Borrowings from Federal Home Loan Bank 40,173 98,514 Other borrowed funds 24,405 33,964 Accrued interest and other liabilities 7,650 5,364 Minority interest in subsidiary 87 85 -------- -------- Total liabilities 519,338 511,336 -------- -------- Stockholders' Equity Common stock, no par value; authorized 5,000,000, issued 2,376,080 shares 2,436 2,436 Surplus 1,410 1,410 Retained earnings 65,560 62,925 Net unrealized appreciation on securities available for sale, net of income tax (2) 5 -------- -------- 69,404 66,776 Less cost of 126,520 and 105,870 shares of treasury stock on June 30, 1998 and December 31, 1997 5,426 4,220 -------- -------- Total stockholders' equity 63,978 62,556 -------- -------- Total liabilities and stockholders' equity $583,316 $573,892 ======== ========
Camden National Corporation and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (In Thousands) Six Months Ended June 30 1998 1997 Operating Activities Net Income $ 4,475 $ 4,419 Adjustment to reconcile net income to net cash provided by operating activities: Provision for loan losses 648 572 Depreciation and amortization 411 357 (Increase) decrease in interest receivable (18) 72 Increase in other assets (10,095) (3,955) Increase in other liabilities 2,290 672 Cash receipts from sale of residential loans 169 1,537 Origination of mortgage loans held for sale (9,875) (1,469) Loss on disposal of assets 0 0 Other, net 0 1 ------- ------- Net cash provided by operating activities (11,995) 2,206 ------- ------- Investing Activities Proceeds from maturities of securities held to maturity 36,161 25,361 Proceeds from maturities of securities available for sale 2,350 2,000 Purchase of securities held to maturity 0 (63,620) Purchase of securities available for sale (6,993) 0 Purchase of Federal Home Loan Bank Stock (1) (5,181) Increase in loans (17,655) (26,786) Net decrease in other real estate 256 223 Purchase of premises and equipment (838) (599) Proceeds from sale of premises and equipment 0 0 Decrease (increase)in minority position 2 (2) Net purchase of federal funds 350 2,075 ------- ------- Net cash used by investing activities 13,632 (66,529) ------- ------- Financing Activities Net increase (decrease) in demand deposits, NOW accounts, and savings accounts 30,385 (8,525) Net increase in certificates of deposit 43,229 6,290 Net (decrease)increase in short-term borrowings (67,900) 70,124 Purchase of treasury stock (1,206) (1,111) Sale of treasury stock 0 0 Cash Dividends (1,839) (1,485) ------- ------- Net cash provided by financing activities 2,669 65,293 ------- ------- Increase in cash and equivalents 4,306 970 Cash and cash equivalents at beginning of year 13,451 17,233 ------- ------- Cash and cash equivalents at end of period $17,757 $18,203 ======= =======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by generally accepted accounting principles for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated statements of condition of Camden National Corporation, as of June 30, 1998, and December 31, 1997, the consolidated statements of income for the three and six months ended June 30, 1998 and June 30, 1997, the consolidated statements of comprehensive income for the three and six months ended June 30, 1998 and June 30, 1997 and the consolidated statements of cash flows for the six months ended June 30, 1998, and June 30, 1997. All significant intercompany transactions and balances are eliminated in consolidation. The income reported for 1998 period is not necessarily indicative of the results that may be expected for the full year. NOTE 2 - Earnings Per Share Earnings Per Share. Basic earnings per share data is computed based on the weighted average number of common shares outstanding during each year. Potential common stock is considered in the calculation of weighted average shares outstanding for diluted earnings per share. The following table sets forth the computation of basic and diluted earnings per share: Six Months Ended June 30, 1998 1997 Net income, as reported 4,475 4,419 Weighted average shares 2,267,066 2,279,388 Effect of dilutive securities: Employee stock options 51,285 40,782 Dilutive potential common shares Adjusted weighted average shares and assumed conversion 2,318,351 2,320,170 Basic earnings per share $1.97 $1.94 Diluted earnings per share 1.93 1.91 NOTE 3 - Excess of Cost Over Fair Value of Assets Acquired The excess of cost over fair value of net assets acquired in branch acquisitions is amortized to expense using the straight line method over ten years. In March, 1998 the Company's subsidiary, Camden National Bank acquired the Bucksport, Vinalhaven, Waldoboro, and Damariscotta, Maine branches of KeyBank of Maine. The acquisition was accounted for under the purchase method of accounting for business combinations. The following is a summary of the transaction: Loans Acquired 7,298 Fixed Assets 365 Premium on Deposits 4,760 Other Assets 651 Deposits Assumed 52,421 Other Liabilities 75 Net Cash Received 39,422 ANALYSIS OF CHANGE IN NET INTEREST MARGIN Six Months Ending Six Months Ending June 30, 1998 June 30, 1997 ------------------- ------------------- Dollars in thousands Amount Average Amount Average of Yield/ of Yield/ interest Rate interest Rate -------- ------- -------- ------- Interest-earning assets: Securities - taxable $ 5,399 6.81% $ 6,280 6.71% Securities - nontaxable 88 6.98% 180 6.74% Federal funds sold 31 5.80% 24 5.07% Loans 17,948 9.63% 15,454* 9.54% ------- ------ ------- ------ Total earning assets 23,466 8.77% 21,938 8.48% Interest-bearing liabilities: NOW accounts 280 1.21% 268 1.33% Savings accounts 1,108 3.32% 1,042 3.33% Money Market accounts 686 3.73% 379 3.16% Certificates of deposit 5,853 5.54% 4,826 5.36% Short-term borrowings 2,388 5.36% 3,584 5.46% Broker Certificates of deposit 48 5.81% 34 6.15% ------- ------ ------- ------ Total interest-bearing liabilities 10,363 4.59% 10,133 4.61% Net interest income (fully-taxable equivalent) 13,103 11,805 Less: fully-taxable equivalent adjustment (135) (161) ------- ------- $12,968 $11,644 ======= ======= Net Interest Rate Spread (fully-taxable equivalent) 4.18% 3.87% Net Interest Margin (fully-taxable equivalent) 4.90% 4.56% *Includes net swap income figures (in thousands) - June 1998 $1 and June 1997 $5. Notes: Nonaccrual loans are included in total loans. Tax exempt interest was calculated using a rate of 34% for fully-taxable equivalent. AVERAGE DAILY BALANCE SHEETS Dollars in thousands Six Months Ended June 30, 1998 1997 ---- ---- Interest-earning assets: Securities - taxable $158,612 $187,114 Securities - nontaxable 2,520 5,342 Federal funds sold 1,069 947 Loans 372,936 323,996 -------- -------- Total earning assets 535,137 517,399 Cash and due from banks 15,512 12,837 Other assets 28,750 22,351 Less allowance for loan losses (5,899) (4,643) -------- -------- Total assets $573,500 $547,944 ======== ======== Interest-bearing liabilities: NOW accounts $ 46,273 $ 40,437 Savings accounts 66,826 62,549 Money market accounts 36,788 23,961 Certificates of deposits 211,162 180,025 Short-term borrowings 89,031 131,209 Broker certificates 1,653 1,105 -------- -------- Total interest-bearing liabilities 451,733 439,286 Demand deposits 52,288 44,248 Other liabilities 6,207 5,690 Shareholders' equity 63,272 58,720 -------- -------- Total liabilities and stockholders' equity $573,500 $547,944 ======== ========
ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSES June 1998 Over June 1997 ---------------------------------- Change Change Due to Due to Total In thousands Volume Rate Change ------- ------- ------- Interest-earning assets: Securities--taxable (957) 76 (881) Securities--nontaxable (95) 3 (92) Federal funds sold 3 4 7 Loans 2,334 160 2,494 ------- ------- ------- Total interest income 1,285 243 1,528 Interest-bearing liabilities: NOW accounts 39 (27) 12 Savings accounts 71 (5) 66 Money market accounts 203 104 307 Certificates of deposit 835 192 1,027 Short-term borrowings (1,152) (44) (1,196) Broker certificates 17 (3) 14 ------- ------- ------- Total interest expense 13 217 230 Net interest income 1,272 26 1,298 (fully taxable equivalent) ======= ======= =======
ITEM II. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATION FINANCIAL CONDITION During the first six months of 1998, consolidated assets increased by $9.4 million to $583.3 million. This increase was the result of an increase in the loan portfolio of $26.7 million or 7.5%. This increase was in part the result of acquired loan assets from the purchase of four branches by one of the Company's bank subsidiaries, Camden National Bank. This purchase accounted for $7.2 million of the growth in the loan portfolio. The increase in loans was somewhat offset by a reduction in the investment portfolio. During the first half of 1998, the funds resulting from the cash flows and maturities in the investment portfolio were used to fund loan growth and to pay down borrowings. The Company did not want to aggressively purchase securities during a time of relatively low interest rates. The liquidity needs of the Company's financial institution subsidiaries require the availability of cash to meet the withdrawal demands of depositors and the credit commitments to borrowers. Deposits still represent the Company's primary source of funds. Since December 31, 1997, deposits have increased by $73.6 million or 19.7%. The major reason for this increase was the deposits acquired when the Company's subsidiary, Camden National Bank, purchased four branches from KeyBank during the first quarter of 1998. Total deposits obtained through the purchase of the four branches were $52.4 million. When the new branches were acquired, excess deposits were utilized by paying back borrowed funds to the Federal Home Loan Bank. Both of the Company's banking subsidiaries continue to experience extreme competition by competitors for deposits. Therefore, other funding sources continue to be pursued and utilized. Borrowings provide liquidity in the form of federal funds purchased, securities sold under agreements to repurchase, treasury tax and loan accounts, and borrowings from the Federal Home Loan Bank. Total borrowings have decreased by $68.9 million or 51.6% since December 31, 1997. The major reason for this decrease was the deposits acquired with the four new branches. However, the Company does view borrowed funds as a reasonably priced alternative funding source that should be utilized. Borrowings have continued to be a viable source of funding. In determining the adequacy of the loan loss allowance, management relies primarily on its review of the loan portfolio both to ascertain if there are any probable losses to be written off, and to assess the loan portfolio in the aggregate. Nonperforming loans are examined on an individual basis to determine estimated probable loss. In addition, management considers current and projected loan mix and loan volumes, historical net loan loss experience for each loan category, and current and anticipated economic conditions affecting each loan category. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio. The Company continues to monitor and modify its allowance for loan losses as conditions dictate. During the first six months of 1998, $648,000 was added to the reserve for loan losses, resulting in an allowance of $6.1 million, or 1.58%, of total loans outstanding. This addition to the allowance was made as a result of loan growth and not a reduction in loan quality. Management believes that this allowance is appropriate given the current economic conditions in the Company's service area and the overall condition of the loan portfolio. Under Federal Reserve Board (FRB) guidelines, bank holding companies such as the Company are required to maintain capital based on "risk-adjusted" assets. These guidelines apply to the Company on a consolidated basis. Under the current guidelines, banking organizations must maintain a risk-based capital ratio of eight percent, of which at least four percent must be in the form of core capital. The Company's risk based capital ratios for Tier 1 and Tier 2 ratios at June 30, 1998, of 16.04% and 17.29% respectively, exceed regulatory guidelines. The Company's ratios at December 31, 1997 were 18.2% and 19.5%. The principal cash requirement of the Company is the payment of dividends on common stock when declared. The Company is primarily dependent upon the payment of cash dividends by Camden National Bank to service its commitments. During the first six months of 1998 Camden National Bank paid dividends to the Company in the amount of $3.0 million. The Company paid dividends to shareholders in the amount of $1.8 million. The remaining amount of $1.2 million was used for treasury stock transactions by the Company. RESULTS OF OPERATIONS Net income for the six months ended June 30, 1998 was $4,475,000, an increase of $56,000 or 1.3% above 1997's first six month's net income of $4,419,000. The major contributing factor was the increase in loans, which resulted in an increase in net interest income. Second quarter earnings of $2,241,000 were down slightly from second quarter 1997 earnings of $2,330,000 but ahead of first quarter 1998 results of $2,234,000. NET INTEREST INCOME Net interest income, on a fully taxable equivalent basis, for the six months ended June 30, 1998 was $13.1 million, a 11.0% or $1.3 million increase over the net interest income for the first six months of 1997 of $11.8 million. Interest income on loans increased by $2.5 million. This increase was primarily due to the increase in loan volume, with a slight accompanying increase in yields from 9.54% during the first six months of 1997 to 9.63% during the first six months of 1998. The Company experienced a decrease in interest income on investments during the first six months of 1998 compared to the same period in 1997 due to decline in volume, which was offset slightly by an increase in yield. The Company's net interest expense on deposits and borrowings increased by $.2 million during the first six months of 1998 compared to the same period in 1997. This increase was due to a combination of volume and rate increases. The Analysis of Change in Net Interest Margin, the Average Daily Balance Sheets, and the Analysis of Volume and Rate Changes on Net Interest Income and Expenses are provided on pages 9-11 of this report to enable the reader to understand the components of the Company's interest income and expenses. The first table provides an analysis of changes in net interest margin on earnings assets; interest income earned and interest expense paid and average rates earned and paid; and the net interest margin on earning assets for the six months ended June 30, 1998 and 1997. The second of these tables presents average assets liabilities and stockholders' equity for the six months ended June 30, 1998 and 1997. The third table presents an analysis of volume and rate change on net interest income and expense from June 30, 1997 to June 30, 1998. The Company utilizes off-balance sheet instruments such as interest rate swap agreements that have an effect on net interest income. The net results were an increase in net interest income of $1,000 in the first six months of 1998 compared to an increase of $5,000 in the first six months of 1997. NONINTEREST INCOME There was a $178,000 or 8.8% increase in total noninterest income in the first six months of 1998 compared to the first six months of 1997. Service charges on deposit accounts increased $40,000 or 5.8% for the first six months of 1998 compared to 1997. This increase was the result of increased deposit balances. Other service charges and fees increased by $148,000 or 21.8% in the first six months of 1998 compared to 1997. The largest contributing factor to this increase was the fee income generated by merchant assessments. Other income decreased by $13,000 from $616,000 in the first six months of 1997 to $603,000 in 1998. The major contributing factor for the reduction was an investment recovery of $65,000 recorded in 1997. NONINTEREST EXPENSE There was a $1,485,000 or 23.1% increase in total noninterest expenses in the first six months of 1998 compared to the first six months of 1997. Salaries and employee benefits cost increased by $590,000 or 17.1% in the first six months of 1998 compared to 1997. This increase was the result of normal annual increases, additions to staff (including the staff at the branches acquired in March of 1998) and higher pension benefit costs. Other operating expenses increased by $895,000 or 30.0%. The major contributing factors for this increase were equipment costs, credit card expenses, data processing, marketing, supply costs, and amortization of deposit premium. With the addition of four new branches to the Camden National Bank subsidiary higher than normal expenses were incurred in the areas of data processing, marketing and supplies. In addition, the amortization of deposit premium of $139,000 was recorded in 1998, which was the result of the new branches acquired in March 1998. IMPACT OF INFLATION AND CHANGING PRICES The Consolidated Financial Statements and related Notes thereto presented elsewhere herein have been prepared in accordance with generally accepted accounting principles which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. Unlike many industrial companies, substantially all of the assets and virtually all of the liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company's performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as inflation. RECENT ACCOUNTING PRONOUNCEMENTS SFAS No. 125 and No. 127 relate to the accounting for transfers and servicing of financial assets and extinguishment of certain liabilities and are effective for years beginning January 1, 1997. The adoption of these standards did not have a material effect on the financial statements. The Financial Accounting Standards Board issued the following statements of accounting standards (SFAS) during 1997: SFAS No. 128 Earnings Per Share SFAS No. 129 Disclosure of Information about Capital Structure SFAS No. 130 Reporting Comprehensive Income SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information SFAS No. 133 Accounting for Derivative Instruments and Hedging Activites These four statements do not change the measurement or recognition methods used in the financial statement but rather deal with disclosure and presentation requirements. The financial statements for 1998 and all prior periods include the additional disclosure requirements relating to diluted earnings per share which are required under SFAS No. 128. Financial statement disclosures also comply with SFAS No. 129, which summarized but does not change the Company's requirements to disclosure information about capital structure. SFAS No. 130 and No. 131 are effective for periods beginning after December 15, 1997. The adoption of these standards did not have a material effect on the financial statements. In February 1998, the Financial Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 132, "Employers' Disclosures about Pensions and Other Post Retirement Benefits: effective for financial statements for the fiscal year beginning after December 15, 1997. SFAS No. 132, which supersedes the benefit disclosure requirements in FASB Statements No's 87, 77 and 106, requires entities to standardize the disclosure requirements for pension and other post retirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair value of plan assets that will facilitate financial analysis. The Company expects no material impact from adopting SFAS No. 132. OTHER MATTERS SHARE REPURCHASE PLAN. Camden National Corporation (CNC) will seek to repurchase up to five percent of its outstanding shares during the succeeding twelve months following the adoption of this plan. The Board of Directors approved funding of this plan on September 4, 1996. The repurchase will be effected as follows: 1. All of CNC's bids and repurchases of its stock during a given day shall be effected through a single broker or dealer, except that CNC may repurchase shares from others provided that the same have not been solicited by or on behalf of CNC. For this purpose, CNC shall utilize the services of Paine Webber, A.G. Edwards & Sons, Inc., Maine Securities Corp., Tucker Anthony, Means Investment Co., and Edward Jones. 2. All of CNC's repurchases of its stock shall be at a price which is not higher than the lowest current independent offer quotation determined on the basis of reasonable inquiry. Management shall exercise its best judgement whether to purchase stock at the then lowest current independent offer quotation; 3. Daily volume of CNC repurchases must be in an amount that (a) when added to the amounts of all of CNC's other repurchases through a broker or dealer on that day, except "block purchases," (i.e., 2,000 or more shares repurchased from a single seller) does not exceed one "round lot" (i.e., 100 shares) or (b) when added to the amounts of all of CNC's other repurchases through a broker or dealer during that day and the preceding five business days, except "block purchases" does not exceed one twentieth of one percent (1/20 of 1%) of the outstanding shares of CNC stock, exclusive of shares known to be owned beneficially by affiliates, (i.e., approximately 1,000 shares); 4. If at any time while this plan is in effect trading in CNC's shares of stock are reported through a consolidated system, compliance for rule 10b-18 of the Exchange Act Rules shall be complied with; 5. A press release was issued describing this plan. The Company's subsidiary, Camden National Bank expressed, to the Comptroller of the Currency, in a letter dated July 23, 1996, its desire to change its capital structure by reducing its common stock or surplus in an amount not to exceed $4,700,000 to accommodate the above described "Share Repurchase Plan." This will reduce the Company's excess capital position and should improve shareholder return on equity. In a letter dated August 16, 1996 from the Comptroller of the Currency's office approval was granted with the understanding that the reduction in capital will be accomplished through a reduction in Camden National Bank's surplus account and a corresponding distribution to Camden National Corporation, the bank's sole shareholder. As of June 30, 1998, a total of 97,090 shares had been repurchased through this plan. EXPANSION. The Company's subsidiary, Camden National Bank, entered into a definitive agreement to purchase four KeyBank branches in the Mid- Coast Maine area during the third quarter of 1997. These branches are located in the communities of Waldoboro, Damariscotta, Vinalhaven and Bucksport. The Company considered the acquisition of these branches a logical move in expanding its current service area. The acquisition of these branches was completed March 16, 1998. The Company's subsidiary, United Bank, entered into an agreement to purchase three branch offices from Fleet Bank of Maine. The three offices, are located in the communities of Dover-Foxcroft, Greenville and Milo. The Company considered the acquisition of these branches a logical extension of the markets we serve in Penobscot and Somerset Counties. This branch acquisition, which is subject to regulatory approval, is expected to close in early fall 1998. In addition to this acquisition, United Bank will be opening a new branch location in the community of Winterport, Maine. Item 4. Submission Matters to a vote of Security holders. (a) The annual meeting of shareholders was held on May 5, 1998. (c) Matters voted upon at the meeting. 1) To elect as director the nominees -- Peter T. Allen, Robert J. Gagnon, John S. McCormick, Jr., and Richard N. Simoneau. Total votes cast: 1,802,854, with 1,801,834 FOR, and 1,020 WITHHELD. 2) To ratify the selection of Berry, Dunn, McNeil & Parker as the Company's independent public accountants for 1998. Total votes cast: 1,802,854, with 1,801,924 FOR, 100 AGAINST, and 830 ABSTAIN. 3) In their discretion, the proxy holders are authorized to vote upon such other business as may be properly presented at the meeting or matters incidental to the conduct of the meeting. Total votes cast: 1,802,854, with 1,783,635 FOR, 7,270 AGAINST, and 11,949 ABSTAIN. Item 6. Exhibits and Reports on Form 8-K. (a). Exhibits (3.i.) The Articles of Incorporation of Camden National Corporation, are incorporated herein by reference. (3.ii.) The Bylaws of Camden National Corporation, as amended to date, Exhibit 3.ii. to the Company's Registration Statement on Form S-4 filed with the Commission on September 25, 1995, file number 33-97340, are incorporated herein by reference. (10.1) Lease Agreement for the facility occupied by the Thomaston Branch of Camden National Bank, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.2) Lease Agreement for the facility occupied by the Camden Square Branch of Camden National Bank, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.3) Lease Agreement for the facility occupied by the Audit Department and one other tenant, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.4) Lease Agreement for the facility occupied by the Hampden Branch of United Bank, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.5) Camden National Corporation 1993 Stock Option Plan, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.6) UnitedCorp Stock Option Plan, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (27) Financial Data Schedule. (b) Reports on Form 8-K. None filed. SIGNATURES Pursuant to the requirements of the Securities Acto of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMDEN NATIONAL CORPORATION (Registrant) Keith C. Patten (signature) 08/14/98 - ------------------------------------- -------- Keith C. Patten Date President and Chief Executive Officer Susan M. Westfall (signature) 08/14/98 - ------------------------------------- -------- Susan M. Westfall Date Treasurer and Chief Financial Officer EX-27 2
9 6-MOS YEAR DEC-31-1998 DEC-31-1997 JUN-30-1998 DEC-31-1997 17757 13451 388051 321987 750 1100 0 0 8922 4312 124847 160894 128471 164286 390281 363149 6059 5640 583316 573892 447023 373409 64578 132478 7737 5449 0 0 0 0 0 0 2436 2436 61542 60120 583316 573892 17842 32845 5488 12796 33 410 23363 46051 7978 13484 10395 21229 12968 24822 648 1677 0 0 7921 13294 6611 13601 6611 13601 0 0 0 0 4475 9148 1.97 4.02 1.93 3.93 8.77 8.72 1451 1215 1172 1004 0 0 2623 2219 5640 4472 327 1092 98 583 6059 5640 6059 5640 0 0 641 412
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