-----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, RUnCxuockROB5udH7L8thz8K7GguBXxfaatEEjiZtoCfwD6WAGLekLRot0JjxMLm cpop1N1ACA7GbgDHcp+KPg== 0000750686-98-000021.txt : 19981123 0000750686-98-000021.hdr.sgml : 19981123 ACCESSION NUMBER: 0000750686-98-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMDEN NATIONAL CORP CENTRAL INDEX KEY: 0000750686 STANDARD INDUSTRIAL CLASSIFICATION: 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: 98753338 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 September 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 September 30, 1998: Common stock (no par value) 2,248,060 shares. CAMDEN NATIONAL CORPORATION Form 10-Q for the quarter ended September 30, 1998 TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT PART I. ITEM 1. FINANCIAL INFORMATION PAGE Consolidated Statements of Income Nine Months Ended September 30, 1998 and 1997 3 Consolidated Statements of Income Three Months Ended September 30, 1998 and 1997 4 Consolidated Statements of Comprehensive Income Nine Months Ended September 30, 1998 and 1997 5 Consolidated Statements of Comprehensive Income Three Months Ended September 30, 1998 and 1997 5 Consolidated Statements of Conditions September 30, 1998 and 1997 and December 31, 1997 6 Consolidated Statement of Cash Flows Nine Months Ended September 30, 1998 and 1997 7 Notes to Consolidated Financial Statements Nine Months Ended September 30, 1998 and 1997 8-9 Analysis of Change in Net Interest Margin Nine Months Ended September 30, 1998 and 1997 9 Average Daily Balance Sheets Nine Months Ended September 30, 1998 and 1997 10 Analysis of Volume and Rate Changes on Net Interest Income & Expenses September 30, 1998 over September 30, 1997 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-17 PART II. ITEM 4. Submission Matters to a Vote of Security holders 18 ITEM 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 EXHIBITS 20 PART I. ITEM I. FINANCIAL INFORMATION Camden National Corporation and Subsidiaries Consolidated Statement of Income (unaudited) (In Thousands, except number Nine Months Ended September 30, of shares and per share data) 1998 1997 Interest Income Interest and fees on loans $27,279 $23,556 Interest on U.S. Government and agency obligations 7,182 8,905 Interest on state and political subdivisions 83 209 Interest on interest rate swap agreements 33 344 Interest on federal funds sold and other investments 775 603 ------- ------- Total interest income 35,352 33,617 Interest Expense Interest on deposits 12,417 9,967 Interest on other borrowings 3,043 5,560 Interest on interest rate swap agreements 32 347 ------- ------- Total interest expense 15,492 15,874 ------- ------- Net interest income 19,860 17,743 Provision for Loans Losses 992 957 ------- ------- Net interest income after provision for loan losses 18,868 16,786 Other Income Service charges on deposit accounts 1,240 1,120 Other service charges and fees 1,586 1,398 Other 945 887 ------- ------- Total other income 3,771 3,405 Operating Expenses Salaries and employee benefits 6,244 5,303 Premises and fixed assets 1,504 1,606 Other 4,601 3,131 ------- ------- Total operating expenses 12,349 10,040 ------- ------- Income before income taxes 10,290 10,151 Income Taxes 3,301 3,417 ------- ------- Net Income $ 6,989 $ 6,734 ======= ======= Per Share Data Basic Earnings per share (Net income divided $3.09 $2.96 by weighted average shares outstanding) Diluted Earnings per share $3.03 $2.91 Cash dividends per share $1.23 $0.99 Weighted average number of shares outstanding 2,261,040 2,275,326
Camden National Corporation and Subsidiaries Consolidated Statements of Income (unaudited) (In Thousands, except number Three Months Ended September 30, of shares and per share data) 1998 1997 Interest Income Interest and fees on loans $ 9,437 $ 8,207 Interest on U.S. Government and agency obligations 2,241 3,022 Interest on state and political subdivisions 25 49 Interest on interest rate swap agreements 0 65 Interest on federal funds sold and other investments 286 223 ------- ------- Total interest income 11,989 11,566 Interest Expense Interest on deposits 4,439 3,418 Interest on other borrowings 658 1,976 Interest on interest rate swap agreements 0 73 ------ ------ Total interest expense 5,097 5,467 ------ ------ Net interest income 6,892 6,099 Provision for Loans Losses 344 385 ------ ------ Net interest income after provision for loan losses 6,548 5,714 Other Income Service charges on deposit accounts 457 380 Other service charges and fees 760 720 Other 342 271 ------ ------ Total other income 1,559 1,371 Operating Expenses Salaries and employee benefits 2,208 1,857 Premises and fixed assets 472 549 Other 1,748 1,197 ------ ------ Total operating expenses 4,428 3,603 Less minority interest in net income (loss) 0 1 ------ ------ Income before income taxes 3,679 3,481 Income Taxes 1,165 1,166 ------ ------ Net Income $ 2,514 $ 2,315 ======= ======= Per Share Data Basic Earnings per share $1.12 $1.02 (Net income divided by weighted average shares outstanding) Diluted Earnings per share $1.09 $1.00 Cash dividends per share $0.42 $0.34 Weighted average number of shares outstanding 2,249,185 2,267,336
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Nine Months Ended September 30 1998 1997 Net income $ 6,989 $ 6,734 Other comprehensive income, net of tax: Change in unrealized gains on securities 11 (26) ------- ------- Comprehensive income $ 7,000 $ 6,708 ======= =======
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Three Months Ended September 30 1998 1997 Net income $ 2,514 $ 2,315 Other comprehensive income, net of tax: Change in unrealized gains on securities 18 1 ------- ------ Comprehensive income $ 2,532 $ 2,316 ======= ======
Camden National Corporation and Subsidiaries Consolidated Statements of Condition (unaudited) (In Thousands, except number September 30, December 31, of shares and per share data 1998 1997 Assets Cash and due from banks $ 18,040 $ 13,451 Federal funds sold 6,007 1,100 Securities available for sale 17,440 4,312 Securities held to maturity 102,908 160,894 Other securities 14,085 14,084 Residential mortgages held for sale 16,125 7,094 Loans, less allowance for loan losses of $6,306 and $5,640 at September 30, 1998 and December 31, 1997 389,957 350,415 Bank premises and equipment 9,120 8,786 Other real estate owned 883 1,373 Interest receivable 3,524 3,924 Other assets 18,742 8,459 -------- -------- Total assets $596,831 $573,892 ======== ======== Liabilities Deposits: Demand $ 65,713 $ 51,422 NOW 53,514 42,796 Money market 46,962 23,452 Savings 72,942 66,723 Certificates of deposit 243,039 189,016 -------- -------- Total deposit 482,170 373,409 Borrowings from Federal Home Loan Bank 20,157 98,514 Other borrowed funds 20,647 33,964 Accrued interest and other liabilities 8,284 5,364 Minority interest in subsidiary 90 85 -------- -------- Total liabilities 531,348 511,336 -------- -------- 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 67,130 62,925 Net unrealized appreciation on securities available for sale, net of income tax 16 5 -------- -------- 70,992 66,776 Less cost of 128,020 and 105,870 shares of treasury stock on September 30, 1998 and December 31, 1997 5,509 4,220 -------- -------- Total stockholders' equity 65,483 62,556 -------- -------- Total liabilities and stockholders' equity $596,831 $573,892 ======== ========
Camden National Corporation and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (In Thousands) Nine Months Ended September 30, 1998 1997 Operating Activities Net Income $ 6,989 $ 6,734 Adjustment to reconcile net income to net cash provided by operating activities: Provision for loan losses 992 957 Depreciation and amortization 519 534 (Increase) Decrease in interest receivable 400 491 Increase in other assets (10,191) (4,262) Increase in other liabilities 2,920 1,463 Cash receipts from sale of residential loans 1,737 1,537 Origination of mortgage loans held for sale (10,768) (3,891) Loss on disposal of assets 0 0 Other, net 0 (1) ------- ------- Net cash provided by operating activities (7,402) 3,562 ------- ------- Investing Activities Proceeds from maturities of securities held to maturity 58,185 40,300 Proceeds from maturities of securities available for sale 2,864 8,000 Purchase of securities held to maturity 0 (63,620) Purchase of securities available for sale (16,013) 0 Purchase of Federal Home Loan Bank Stock (1) (5,887) Increase in loans (40,534) (33,574) Net decrease in other real estate 490 55 Purchase of premises and equipment (1,102) (725) Proceeds from sale of premises and equipment 0 0 Decrease (increase)in minority position (5) (3) Net purchase of federal funds (4,907) 2,075 ------- ------- Net cash used by investing activities (1,023) (53,379) ------- ------- Financing Activities Net increase (decrease) in demand deposits, NOW accounts, and savings accounts 54,738 12,498 Net increase in certificates of deposit 54,023 7,606 Net (decrease)increase in short-term borrowings (91,674) 34,704 Purchase of treasury stock (1,289) (1,336) Sale of treasury stock 0 0 Cash Dividends (2,784) (2,257) ------- ------- Net cash provided by financing activities 13,014 51,215 ------- ------- Increase in cash and equivalents 4,589 1,398 Cash and cash equivalents at beginning of year 13,451 17,233 ------- ------- Cash and cash equivalents at end of period $18,040 $18,631 ======= =======
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 balance sheets of Camden National Corporation, as of September 30, 1998, and December 31, 1997, the consolidated statements of income for the three and nine months ended September 30, 1998 and September 30, 1997, the consolidated statements of comprehensive income for the three and nine months ended September 30, 1998 and September 30, 1997 and the consolidated statements of cash flows for the nine months ended September 30, 1998, and September 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 date 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: Nine Months Ended September 30, 1998 1997 Net income, as reported 6,989 6,734 Weighted average shares 2,261,040 2,275,326 Effect of dilutive securities: Employee stock options 47,709 42,359 Dilutive potential common shares Adjusted weighted average shares and assumed conversion 2,308,749 2,317,685 Basic earnings per share $3.09 $2.96 Diluted earnings per share 3.03 2.91 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 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 Nine Months Ending Nine Months Ending September 30, 1998 September 30, 1997 ------------------- ------------------- Dollars in thousands Amount Average Amount Average of Yield/ of Yield/ interest Rate interest Rate -------- ------- -------- ------- Interest-earning assets: Securities - taxable $ 7,882 7.21% $ 9,507 6.75% Securities - nontaxable 125 6.95% 256 6.75% Federal funds sold 76 5.44% 41 5.02% Loans 27,440 9.60% 23,715* 9.56% ------- ------ ------- ------ Total earning assets 35,523 8.92% 33,519 8.52% Interest-bearing liabilities: NOW accounts 422 1.17% 405 1.32% Savings accounts 1,661 3.25% 1,588 3.35% Money Market accounts 1,117 3.76% 576 3.18% Certificates of deposit 9,078 5.57% 7,361 5.41% Short-term borrowings 3,046 5.30% 5,560 5.52% Broker Certificates of deposit 135 5.77% 37 6.36% ------- ------ ------- ------ Total interest-bearing liabilities 15,459 4.55% 15,527 4.65% Net interest income (fully-taxable equivalent) 20,064 17,992 Less: fully-taxable equivalent adjustment (204) (249) ------- ------- $19,860 $17,743 ======= ======= Net Interest Rate Spread (fully-taxable equivalent) 4.36% 3.87% Net Interest Margin (fully-taxable equivalent) 5.04% 4.57% *Includes net swap income figures (in thousands) - September 1998 $1 and September 1997 ($3). 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 Nine Months Ended September 30, 1998 1997 ---- ---- Interest-earning assets: Securities - taxable $145,702 $187,762 Securities - nontaxable 2,399 5,061 Federal funds sold 1,862 1,088 Loans 381,252 330,597 -------- -------- Total earning assets 531,215 524,508 Cash and due from banks 16,646 13,313 Other assets 37,281 22,659 Less allowance for loan losses (5,997) (4,723) -------- -------- Total assets $579,145 $555,757 ======== ======== Interest-bearing liabilities: NOW accounts $ 48,071 $ 40,952 Savings accounts 68,123 63,269 Money market accounts 39,637 24,147 Certificates of deposits 217,268 181,371 Short-term borrowings 76,655 134,263 Broker certificates 3,121 776 -------- -------- Total interest-bearing liabilities 452,875 444,778 Demand deposits 56,516 46,350 Other liabilities 5,734 5,249 Shareholders' equity 64,020 59,380 -------- -------- Total liabilities and stockholders' equity $579,145 $555,757 ======== ========
ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSES September 1998 Over September 1997 ---------------------------------- Change Change Due to Due to Total In thousands Volume Rate Change ------- ------- ------- Interest-earning assets: Securities--taxable (2,130) 505 (1,625) Securities--nontaxable (135) 4 (131) Federal funds sold 29 6 35 Loans 3,634 91 3,725 ------- ------- ------- Total interest income 1,398 606 2,004 Interest-bearing liabilities: NOW accounts 70 (53) 17 Savings accounts 122 (49) 73 Money market accounts 369 172 541 Certificates of deposit 1,457 260 1,717 Short-term borrowings (2,386) (128) (2,514) Broker certificates 112 (14) 98 ------- ------- ------- Total interest expense (256) 188 (68) Net interest income 1,654 418 2,072 (fully taxable equivalent) ======= ======= =======
ITEM II. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATION FINANCIAL CONDITION During the first nine months of 1998, consolidated assets increased by $22.9 million to $596.8 million. This increase was the result of an increase in the loan portfolio of $49.2 million or 13.6%. 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. However, during the latter part of the third quarter the reduction in interest rates, resulting in the price of some investment securities to be more attractive. Therefore, the Company started replacing some of the maturies occuring in the investment portfolio. 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 $108.8 million or 29.1%. 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 $91.7 million or 62.2% since December 31, 1997. The major reason for this decrease was the deposits acquired with the four new branches. The Company does however, views 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 nine months of 1998, $992,000 was added to the reserve for loan losses, resulting in an allowance of $6.3 million, or 1.53%, 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 September 30, 1998, of 15.19% and 16.44% 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 nine months of 1998 Camden National Bank paid dividends to the Company in the amount of $4.1 million. The Company paid dividends to shareholders in the amount of $2.8 million. The remaining amount of $1.3 million was used for treasury stock transactions by the Company. RESULTS OF OPERATIONS Net income for the nine months ended September 30, 1998 was $6,989,000, an increase of $255,000 or 3.8% above 1997's first nine month's net income of $6,734,000. The major contributing factor was the increase in loans, which resulted in an increase in net interest income. Third quarter earnings of $2,514,000 were up from third quarter 1997 earnings of $2,315,000. NET INTEREST INCOME Net interest income, on a fully taxable equivalent basis, for the nine months ended September 30, 1998 was $20.0 million, a 11.5% or $2.0 million increase over the net interest income for the first nine months of 1997 of $18.0 million. Interest income on loans increased by $3.7 million. This increase was primarily due the increase in loan volume, with a slight accompanying increase in yields from 9.56% during the first nine months of 1997 to 9.60% during the first nine months of 1998. The Company experienced a decrease in interest income on investments during the first nine 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 decreased slightly during the first nine months of 1998 compared to the same period in 1997. This decrease was the result of borrowed funds being replaced by lower costing deposits. 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 8-9 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 nine months ended September 30, 1998 and 1997. The second of these tables presents average assets liabilities and stockholders' equity for the six months ended September 30, 1998 and 1997. The third table presents an analysis of volume and rate change on net interest income and expense from Septebmer 30, 1997 to September 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 nine months of 1998 compared to a decrease of $3,000 in the first nine months of 1997. NONINTEREST INCOME There was a $366,000 or 10.7% increase in total noninterest income in the first nine months of 1998 compared to the first nine months of 1997. Service charges on deposit accounts increased $120,000 or 10.7% for the first nine months of 1998 compared to 1997. This increase was the result of increased deposits balances and an increase in overdraft fees. Other service charges and fees increased by $188,000 or 13.4% in the first nine months of 1998 compared to 1997. The largest contributing factor to this increase was the fee income generated by merchant assessments. Other income increased by $58,000 in the first nine months of 1998 compared to 1997. NONINTEREST EXPENSE There was a $2,309,000 or 23.0% increase in total noninterest expenses in the first nine months of 1998 compared to the first nine months of 1997. Salaries and employee benefits cost increased by $941,000 or 17.7% in the first nine 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 $1,368,000 or 28.9%. The major contributing factors for this increase were 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 $257,831 was recorded in 1998, which was the result of the new branches acquired in March 1998. YEAR 2000 The Year 2000 issue refers to the fact that many computers were originally programmed using two digits rather than four digits when referring to the applicable year. When the year 2000 occurs, these systems will read the year as 1900 rather than 2000. Unless software and hardware systems are corrected to be Year 2000 compliant, computers could generate miscalculations and create operational problems. Year 2000 compliant means having computer systems that accurately process date/time data (including, but not limited to, calculating, comparing, and sequencing) from, into, and between the twentieth and twenty- first centuries, and leap year calculations (correctly recognizes the date 02/29/2000). Furthermore, Year 2000 compliant information technology, when used in combination with other information technology, shall accurately process date/time data if the other information technology properly exchanges date/time data with it. To assist in identifying any and all exposures that the Company may have and to help make all the appropriate changes necessary to allow for a smooth transition into the new millennium the Company engaged an outside consulting firm (Vitex Inc.). The Company's Executive Operations and Technology Committee manages the Year 2000 project with the assistance of Vitex Inc. The Committee developed a Year 2000 Plan to address the Company's exposure to potential problems arising from the Year 2000. The plan is based on the Federal Financial Institution Examination Council (FFIEC) Guidelines. The Committee keeps senior management and the board of directors apprised of the status of the Year 2000 project monthly. The Company has completed the awareness and assessment phases of the plan. To heighten awareness training sessions were held to educate employees, customers and business relationships of the issues associated with the Year 2000. As part of the assessment phase the Company reviewed its inventory of all software and hardware and service providers, with the help of Vitex Inc. The priority of each system was determined by identifying each as either low, medium, high or mission critical. In addition, as part of the assessment phase the Company examined its business customers with which it have significant exposure. These customers were contacted to determine if they have adequately addressed their exposures to the Year 2000 problem. Implementation of the certification phase (contingency planning) will be completed by June 1999. The Company's Remediation Contingency Plan mitigates the risks associated with the failure to successfully complete renovation, validation, and implementation of mission critical systems. The Company has initiated a monitoring program to track the progress of each vendor or service provider whose product or company is currently not in compliance. Each mission critical service provider or product that is not already deemed compliant, will have a "trigger" date associated with it. If, by that date, the vendor or provider has not delivered a compliant product or service, the Company will examine and solicit an alternate solution for that particular service or product. In the renovation phase most fixes and upgrades have been made to non- compliant systems. The Company has only minor renovations to correct problems and these pertain mostly to medium and low priority items. As part of the validation phase the Company has tested the Core system and other mission critical and high priority systems will be tested by December 31, 1998. An essential component of preparing for the Year 2000 problem and beyond is developing options for the board of directors and senior management if any or all of the Company's systems fail or cannot be made Year 2000 ready. Therefore, the Company is developing Year 2000 contingency plans for all of its mission critical products and services. These plans are designed to mitigate the risks associated with (1) the failure to successfully complete renovation, validation, or implementation of our Year 2000 readiness plan (Remediation Plan); or (2) the failure to any of our systems at critical dates (Business Resumption Plan). Our Contingency Plan includes the development of a Crisis Management Team to handle any unforeseen problems. Although the Company does not expect there to be any problems, it will outline procedures to handle any if there is a mission critical system failure. A general contingency plan will be developed for non-mission critical systems. The Company's Year 2000 business resumption contingency plans will detail the pre-determined actions that will be executed in the event of failure of any mission critical service and product as defined in the Year 2000 inventory list. The intent of these plans is to describe how the Company will resume normal business operations if remediated systems do not perform as planned and required before or after the turn of the century. The basic priorities for restoring service will be based on the essential application processing required to provide the Company's financial services to its customers. The Company is conducting business impact analysis for each mission critical area to identify potential disruption and the effect such disruption could have on business operations should a service provider or software vendor be unable to operate in Year 2000 compliant environment. The Company is analyzing strategies and identifying resources that will be required to restore systems and or business operations. As part of the emergency plan for each individual mission critical item, the Company will include a recovery program that identifies participants, processes, and equipment that might be needed for the Company to function at an adequate level. The program will ensure that all participants are aware of their roles, adequately trained, and able to do whatever is necessary to restore operations. The estimated cost to address all of the Year 2000 issues is between $300,000 - - - $500,000. On the high side this includes $250,000 to upgrade software and hardware systems, $100,000 for testing of systems, $50,000 for consulting fees, $100,000 for existing personnel costs to effectively implement the Year 2000 Plan. 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 $6,000,000 worth 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 October 13, 1998. 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 any registered broker or dealer. 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 Camden National Bank expressed, to the Comptroller of the Currency, in a letter dated September 3, 1998, its desire to change its capital structure by reducing its common stock or surplus in an amount not to exceed $6,000,000 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 September 25, 1998 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. 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 is scheduled to close on October 2, 1998. In addition, United Bank plans to open a branch location in the community of Winterport on October 2, 1998. 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) 11/16/98 - - ------------------------------------- -------- Keith C. Patten Date President and Chief Executive Officer Susan M. Westfall (signature) 11/16/98 - - ------------------------------------- -------- Susan M. Westfall Date Treasurer and Chief Financial Officer EX-27 2
9 9-MOS 12-MOS DEC-31-1997 DEC-31-1997 SEP-30-1998 DEC-31-1997 18,040 13,451 416,457 321,987 6,007 1,100 0 0 17,440 4,312 102,908 160,894 106,935 164,286 412,388 363,149 6,306 5,640 596,831 573,892 482,170 373,409 40,804 132,478 8,374 5,449 0 0 0 0 0 0 2,436 2,436 63,047 60,120 596,831 573,892 27,279 32,845 7,298 12,796 775 410 35,352 46,051 12,417 13,484 15,492 21,229 19,860 24,822 992 1,677 0 0 12,349 13,294 10,290 13,601 10,290 13,601 0 0 0 0 6,989 9,148 3.09 4.02 3.03 3.93 8.92 8.72 1,323 1,215 1,343 1,004 0 0 2,666 2,219 5,640 4,472 509 1,092 183 583 6,306 5,640 6,306 5,640 0 0 250 412
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