-----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, TOUCOP55g5/EBQPn0vfyQ8nmMCZsJZq/1H1tMRIKQekbFRmqMMqSDyFuYZz3Tqsp eXLwdlFzTqACTOoihHtM2g== 0000750686-99-000015.txt : 19990816 0000750686-99-000015.hdr.sgml : 19990816 ACCESSION NUMBER: 0000750686-99-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: 99688772 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, 1999 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, 1999: Common stock (no par value) 6,558,530 shares. CAMDEN NATIONAL CORPORATION Form 10-Q for the quarter ended June 30, 1999 TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT PART I. ITEM 1. FINANCIAL INFORMATION PAGE - -------------------------------------------------------------------------- Consolidated Statements of Income Six Months Ended June 30, 1999 and 1998 ............................. 3 Consolidated Statements of Income Three Months Ended June 30, 1999 and 1998 ........................... 4 Consolidated Statements of Comprehensive Income Six Months Ended June 30 1999 and 1998 .............................. 5 Consolidated Statements of Comprehensive Income Three Months Ended June 30 1999 and 1998 ............................ 5 Consolidated Statements of Condition June 30, 1999 and December 31, 1998 ................................. 6 Consolidated Statements of Cash Flows Six Months Ended June 30, 1999 and 1998 ............................. 7 Notes to Consolidated Financial Statements Six Months Ended June 30, 1999 and 1998 ........................... 8-9 Analysis of Change in Net Interest Margin Six Months Ended June 30, 1999 and 1998 ............................. 9 Average Daily Balance Sheets Six Months Ended June 30, 1999 and 1998 ............................ 10 Analysis of Volume and Rate Changes on Net Interest Income & Expenses June 30, 1999 over June 30, 1998 ........................ 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 Statements of Income (unaudited) (In Thousands, except number Six Months Ended June 30, of shares and per share data) 1999 1998 Interest Income Interest and fees on loans $20,101 $17,842 Interest on U.S. Government and agency obligations 5,574 4,941 Interest on state and political subdivisions 201 58 Interest on interest rate swap agreements 0 33 Interest on federal funds sold and other investments 843 489 ------- ------- Total interest income 26,719 23,363 Interest Expense Interest on deposits 8,962 7,978 Interest on other borrowings 2,686 2,385 Interest on interest rate swap agreements 0 32 ------- ------- Total interest expense 11,648 10,395 ------- ------- Net interest income 15,071 12,968 Provision for Loan Losses 940 648 ------- ------- Net interest income after provision for loan losses 14,131 12,320 Other Income Service charges on deposit accounts 1,123 783 Other service charges and fees 1,014 733 Other 925 696 ------- ------- Total other income 3,062 2,212 Operating Expenses Salaries and employee benefits 4,877 4,036 Premises and fixed assets 1,335 1,265 Other 3,263 2,619 ------- ------- Total operating expenses 9,475 7,920 Less minority interest net income 13 1 ------- ------- Income before income taxes 7,705 6,611 Income Taxes 2,476 2,136 ------- ------- Net Income $ 5,229 $ 4,475 ======= ======= Per Share Data Basic Earnings per share (Net income $0.79 $0.66 divided by weighted average shares outstanding) Diluted Earnings per share $0.79 $0.65 Cash dividends per share $0.30 $0.27 Weighted average number of shares outstanding 6,624,978 6,801,198
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) 1999 1998 Interest Income Interest and fees on loans $10,214 $ 9,162 Interest on U.S. Government and agency obligations 2,849 2,365 Interest on state and political subdivisions 100 27 Interest on interest rate swap agreements 0 0 Interest on federal funds sold and other investments 446 248 ------- ------- Total interest income 13,609 11,802 Interest Expense Interest on deposits 4,484 4,299 Interest on other borrowings 1,507 846 Interest on interest rate swap agreements 0 0 ------- ------- Total interest expense 5,991 5,145 ------- ------- Net interest income 7,618 6,657 Provision for Loan Losses 505 324 ------- ------- Net interest income after provision for loan losses 7,113 6,333 Other Income Service charges on deposit accounts 587 423 Other service charges and fees 583 377 Other 432 403 ------- ------- Total other income 1,602 1,203 Operating Expenses Salaries and employee benefits 2,502 2,096 Premises and fixed assets 778 800 Other 1,532 1,348 ------- ------- Total operating expenses 4,812 4,244 Less minority interest in net income 9 1 ------- ------- Income before income taxes 3,894 3,291 Income Taxes 1,269 1,050 ------- ------- Net Income $ 2,625 $ 2,241 ======= ======= Per Share Data Basic Earnings per share $0.40 $0.33 (Net income divided by weighted average shares outstanding) Diluted Earnings per share $0.38 $0.32 Cash dividends per share $0.15 $0.14 Weighted average number of shares outstanding 6,595,990 6,791,868
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Six Months Ended June 30, 1999 1998 Net income $ 5,229 $ 4,775 Other comprehensive income, net of tax: Change in unrealized gains on securities (2,077) (7) ------- ------- Comprehensive income $ 3,152 $ 4,768 ======= =======
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Three Months Ended June 30, 1999 1998 Net income $ 2,265 $ 2,241 Other comprehensive income, net of tax: Change in unrealized gains on securities (2,051) (15) ------- ------- Comprehensive income $ 214 $ 2,226 ======= =======
Camden National Corporation and Subsidiaries Consolidated Statements of Condition (unaudited) (In Thousands, except number of shares and per share data) June 30, December 31, 1999 1998 Assets Cash and due from banks $ 16,207 $ 14,938 Federal funds sold 1,243 0 Securities available for sale 121,339 84,159 Securities held to maturity 69,474 88,570 Other securities 14,085 14,084 Residential mortgages held for sale 0 24,637 Loans, less allowance for loan losses of $7,062 and $6,512 at June 30, 1999 and December 31, 1998 459,990 407,798 Bank premises and equipment 9,321 9,530 Other real estate owned 776 905 Interest receivable 4,478 3,820 Other assets 20,820 19,510 -------- -------- Total assets $717,733 $667,951 ======== ======== Liabilities Deposits: Demand $ 63,176 $ 64,303 NOW 28,456 27,955 Money market 85,428 87,532 Savings 83,383 80,908 Certificates of deposit 254,033 247,875 -------- -------- Total deposits 514,476 508,573 Borrowings from Federal Home Loan Bank 101,969 60,265 Other borrowed funds 32,207 29,893 Accrued interest and other liabilities 6,763 5,028 Minority interest in subsidiary 103 90 -------- -------- Total liabilities 655,518 603,849 -------- -------- Stockholders' Equity Common stock, no par value; authorized 10,000,000, issued 7,128,240 shares 2,436 2,436 Surplus 1,142 1,142 Retained earnings 71,039 68,785 Net unrealized depreciation on securities available for sale, net of income tax (2,206) (129) -------- -------- 72,411 72,234 Less cost of 569,710 and 471,930 shares of treasury stock on June 30, 1999 and December 31, 1998 10,196 8,132 -------- -------- Total stockholders' equity 62,215 64,102 -------- -------- Total liabilities and stockholders' equity $717,733 $667,951 ======== ========
Camden National Corporation and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (In Thousands) Six Months Ended June 30, 1999 1998 Operating Activities Net Income $ 5,229 $ 4,475 Adjustment to reconcile net income to net cash provided by operating activities: Provision for loan losses 940 648 Depreciation and amortization 248 411 Increase in interest receivable (658) (18) Increase in other assets (1,217) (10,095) Increase in other liabilities 2,805 2,290 Cash receipts from sale of residential loans 1,987 169 Origination of mortgage loans held for sale 0 (9,875) ------- ------- Net cash provided (used) by operating activities 9,334 (11,995) ------- ------- Investing Activities Proceeds from maturities of securities held to maturity 19,296 36,161 Proceeds from maturities of securities available for sale 13,971 2,350 Purchase of securities available for sale (54,343) (6,993) Purchase of Federal Home Loan Bank Stock (1) (1) Increase in loans (30,482) (17,655) Net decrease in other real estate 129 256 Purchase of premises and equipment (287) (838) Decrease (increase)in minority position 13 2 Net purchase of federal funds (1,243) 350 ------- ------- Net cash provided (used) by investing activities (52,947) 13,632 ------- ------- Financing Activities Net increase (decrease) in demand deposits, NOW accounts, and savings accounts (255) 30,385 Net increase in certificates of deposit 6,158 43,229 Net increase (decrease) in short-term borrowings 44,018 (67,900) Purchase of treasury stock (2,064) (1,206) Exercise and repurchase of stock options (975) 0 Cash Dividends (2,000) (1,839) ------- ------- Net cash provided by financing activities 44,882 2,669 ------- ------- Increase in cash and equivalents 1,269 4,306 Cash and cash equivalents at beginning of year 14,938 13,451 ------- ------- Cash and cash equivalents at end of period $16,207 $17,757 ======= =======
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, 1999, and December 31, 1998, the consolidated statements of income for the three and six months ended June 30, 1999 and June 30, 1998, the consolidated statements of comprehensive income for the three and six months ended June 30, 1999 and June 30, 1998 and the consolidated statements of cash flows for the six months ended June 30, 1999, and June 30, 1998. All significant intercompany transactions and balances are eliminated in consolidation. The income reported for the period ended June 30,1999 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, 1999 1998 Net income, as reported 5,229 4,475 Weighted average shares 6,624,978 6,801,198 Effect of dilutive securities: Employee stock options 33,269 51,285 Dilutive potential common shares Adjusted weighted average shares and assumed conversion 6,658,247 6,852,483 Basic earnings per share $0.79 $0.66 Diluted earnings per share 0.79 0.65 NOTE 3 - Excess of Cost Over Fair Value of Assets Acquired During 1998 the Company's two bank subsidiaries acquired seven branch locations. The core deposit intangible acquired in these branch acquisitions is amortized to expense using the straight-line method over ten years. The acquisition was accounted for under the purchase method of accounting for business combinations. The following is a summary of the transaction: Loans acquired $18,541 Fixed assets 546 Core deposit intangibles 7,466 Other assets 1,202 Deposits assumed 87,332 Other Liabilities 112 Net Cash received 59,689 ANALYSIS OF CHANGE IN NET INTEREST MARGIN Six Months Ending Six Months Ending June 30, 1999 June 30, 1998 ------------------- ------------------- Dollars in thousands Amount Average Amount Average of Yield/ of Yield/ interest Rate interest Rate -------- ------- -------- ------- Interest-earning assets: Securities - taxable $ 6,361 7.03% $ 5,399 6.81% Securities - nontaxable 305 6.49% 88 6.98% Federal funds sold 56 6.17% 31 5.80% Loans 20,312* 8.92% 17,948* 9.63% ------- ------ ------- ------ Total earning assets 27,034 8.35% 23,466 8.77% Interest-bearing liabilities: NOW accounts 311 1.03% 280 1.21% Savings accounts 1,167 2.82% 1,108 3.32% Money Market accounts 929 3.53% 686 3.73% Certificates of deposit 6,381 5.20% 5,853 5.54% Short-term borrowings 2,690 4.80% 2,388 5.36% Broker Certificates of deposit 170 5.66% 48 5.81% ------- ------ ------- ------ Total interest-bearing liabilities 11,648 4.16% 10,363 4.59% Net interest income (fully-taxable equivalent) 15,386 13,103 Less: fully-taxable equivalent adjustment (315) (135) ------- ------- $15,071 $12,968 ======= ======= Net Interest Rate Spread (fully-taxable equivalent) 4.19% 4.18% Net Interest Margin (fully-taxable equivalent) 4.75% 4.90% *Includes net swap income figures (in thousands) - June 1999 $0 and June 1998 $1. 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, 1999 1998 ---- ---- Interest-earning assets: Securities - taxable $181,033 $158,612 Securities - nontaxable 9,401 2,520 Federal funds sold 1,814 1,069 Loans 455,112 372,936 -------- -------- Total earning assets 647,360 535,137 Cash and due from banks 15,467 15,512 Other assets 35,050 28,750 Less allowance for loan losses (6,798) (5,899) -------- -------- Total assets $691,079 $573,500 ======== ======== Interest-bearing liabilities: NOW accounts $ 60,528 $ 46,273 Savings accounts 82,790 66,826 Money market accounts 52,561 36,788 Certificates of deposits 245,375 211,162 Short-term borrowings 112,093 89,031 Broker certificates 6,006 1,653 -------- -------- Total interest-bearing liabilities 559,353 451,733 Demand deposits 62,221 52,288 Other liabilities 6,347 6,207 Shareholders' equity 63,158 63,272 -------- -------- Total liabilities and stockholders' equity $691,079 $573,500 ======== ========
ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSES June 1999 Over June 1998 ---------------------------------- Change Change Due to Due to Total In thousands Volume Rate Change ------- ------- ------- Interest-earning assets: Securities--taxable $ 763 $ 199 $ 962 Securities--nontaxable 240 (24) 216 Federal funds sold 22 2 24 Loans 3,957 (1,591) 2,366 ------- ------- ------- Total interest income 4,982 (1,414) 3,568 Interest-bearing liabilities: NOW accounts 86 (54) 32 Savings accounts 265 (206) 59 Money market accounts 294 (51) 243 Certificates of deposit 948 (420) 528 Short-term borrowings 618 (317) 301 Broker certificates 126 (4) 122 ------- ------- ------- Total interest expense 2,337 (1,052) 1,285 ------- ------- ------- Net interest income $2,645 $ (362) $2,283 (fully taxable equivalent) ======= ======= =======
ITEM II. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATION FINANCIAL CONDITION During the first six months of 1999, consolidated assets increased by $49.8 million to $717.8 million. This increase was the result of an increase in the loan portfolio, including residential mortgages held for sale, of $28.1 million or 6.4% and an increase in the investment portfolio of $18.1 million or 10.5%. The increase in loans can be attributed to strong loan demand during the first half of 1999. With a relatively low interest rate environment it has been the Company's asset/liability strategy to hold fixed rate mortgages in its portfolio for the past 18 months. The yields on these assets have been higher than yields available in the investment portfolio. Therefore, the loan balances in our residential mortgages held for sale at December 31, 1998 were transferred into the fixed-rate residential portfolio. This transfer reflects the Company's intent to hold these loans on its balance sheet. Additions were also made to the investment portfolio during the second quarter of 1999, taking advantage of a steeper yield curve. 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, 1998, deposits have increased by $5.9 million or 1.2%. 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 increased by $44.0 million or 48.8% since December 31,1998. The majority of the borrowings were from the Federal Home Loan Bank of Boston. FHLB advances remain the largest nondeposit-related interest-bearing funding source for the Company. These borrowings are secured by qualified residential real estate loans, certain investment securities and certain other assets available to be pledged. The Company views borrowed funds as a reasonably priced alternative funding source that should be utilized. 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 1999, $940,000 was added to the reserve for loan losses, resulting in an allowance of $7.1 million, or 1.51%, 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, 1999, of 11.2% and 12.4% respectively, exceed regulatory guidelines. The Company's ratios at December 31, 1998 were 12.8% and 14.0%. 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 1999 Camden National Bank paid dividends to the Company in the amount of $5.6 million. The Company paid dividends to shareholders in the amount of $2.0 million. The remaining amount of $3.6 million was used for treasury stock and stock option transactions by the Company. RESULTS OF OPERATIONS Net income for the six months ended June 30, 1999 was $5.229 million, an increase of $754,000 or 16.8% above 1998's first six month's net income of $4.475 million. The major contributing factor was the increase in loans and investments, which resulted in an increase in net interest income. NET INTEREST INCOME Net interest income, on a fully taxable equivalent basis, for the six months ended June 30, 1999 was $15.4 million, a 17.4% or $2.3 million increase over the net interest income for the first six months of 1998 of $13.1 million. Interest income on loans increased by $2.4 million. This increase was due to the increase in loan volume, despite a decrease in yields from 9.63% during the first six months of 1998 to 8.92% during the first six months of 1999. The Company also experienced an increase in interest income on investments during the first six months of 1999 compared to the same period in 1998 due to both increased volume and yield. The Company's net interest expense on deposits and borrowings increased during the first six months of 1999 compared to the same period in 1998. This increase was the result of increased volumes in all categories. 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, 1999 and 1998. The second of these tables presents average assets liabilities and stockholders' equity for the six months ended June 30, 1999 and 1998. The third table presents an analysis of volume and rate change on net interest income and expense from June 30, 1998 to June 30, 1999. The Company utilizes off-balance sheet instruments such as interest rate swap agreements that have an effect on net interest income. There was no effect on net interest income in the first six months of 1999 compare to a slight increase of $1,000 in the first six months of 1998. NONINTEREST INCOME There was a $850,000 or 38.4% increase in total noninterest income in the first six months of 1999 compared to the first six months of 1998. Service charges on deposit accounts increased $340,000 or 43.4% for the first six months of 1999 compared to 1998. This increase was the result of increased deposit balances. The increase in deposit balances was affected by the acquisition of seven branches by the Company in 1998. Four branches were acquired in March 1998 and three in October 1998. Other service charges and fees increased by $281,000 or 38.3% in the first six months of 1999 compared to 1998. The largest contributing factor to this increase was the fee income generated by merchant assessments. Other income increased by $229,000 in the first six months of 1999 compared to 1998. The major reason for this increase in other income was a $150,000 gain on the sale of securities. NONINTEREST EXPENSE There was a $1.555 million or 19.6% increase in total noninterest expenses in the first six months of 1999 compared to the first six months of 1998. Salaries and employee benefits cost increased by $841,000 or 20.8% in the first six months of 1999 compared to 1998. This increase was the result of normal annual increases, additions to staff (including the staff at the seven branches acquired in 1998) and higher pension benefit costs. Other operating expenses increased by $644,000 or 24.6%. The major contributing factor for this increase the costs related to the seven branch locations acquired in 1998. The Company experienced increases in premises and fixed assets, credit card expenses, data processing, and amortization of deposit premium and various other general operating expenses. The amortization of deposit premium of $387,000 was recorded in 1999, which was the result of the new branches acquired in 1998. YEAR 2000 The statements in the following section include "Year 2000 readiness disclosure" within the meaning of the Year 2000 Information and Readiness Disclosure Act of 1998. 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 and time data from, into, and between the twentieth and twenty-first centuries. Furthermore, Year 2000 compliant information technology, when used in combination with other information technology, will accurately process date and time data if the other information technology properly exchanges date and 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 Vitex Inc. to assist in development of a Year 2000 Plan. 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 Company has been working since June 1997 to identify, test, and if necessary, upgrade key systems such as checking, savings, general ledger, wire transfer, consumer and commercial loans, and other core computer systems. These are the Company's "mission critical" systems. Currently, 100% of the company's "mission critical" systems are ready for the Year 2000. In addition, all other systems were tested in our own environment. Independent validation of the testing results of "mission critical" systems has been completed. The Company also operates in a highly interconnected local and wide area network environment. The Company's entire network has been renovated to Year 2000 ready versions of both hardware and software. In addition, a thorough inventory of the company's facilities, elevators and security systems for potential Year 2000 issues was completed in September 1998. All software used by the company is provided by outside vendors, which are selected based on the quality of their products and their proven ability to deliver to the Company and its customers. The Company is actively monitoring its approximate 50 software and hardware suppliers for Year 2000 compliance. The progress of these vendors is tracked as they deliver Year 2000 compliant upgrades to their applications. The Company strives to strengthen customer awareness of the Year 2000 issue in various forms. An internal awareness training program is ongoing with employees. This will enable our staff to effectively answer customers' concerns. Inserts have been mailed with monthly statements to customers of the Company's bank subsidiaries to assure them of the Company's readiness to serve them in the new millennium. The Company has sponsored several seminars for the community on the Year 2000 issues. The Company has requested compliance statements from over 150 companies upon which the Company relies. Some examples of these companies are utility providers, insurance companies, investment firms, other banks, and human resource service providers. If providers fail to demonstrate adequate Year 2000 compliance progress, the Company has set deadlines for implementation of contingency plans. An essential component of preparing for the Year 2000 problem and beyond is developing a contingency plan if any or all of the Company's systems fail or cannot be made Year 2000 ready. The Company developed Year 2000 contingency plans for all of its mission critical products and services. These plans were designed to mitigate the risks associated with (1) the failure to successfully complete renovation, validation, or implementation of our Year 2000 readiness plan; or (2) the failure to any of our systems at critical dates. The Company's Contingency Plan includes a Crisis Management Team to handle any unforeseen problems. Although the Company does not expect there to be any problems, it has outlined procedures to handle any if there is a mission critical system failure. A general contingency plan was developed for non-mission critical systems. The intent of these plans is to describe how the Company will resume normal business operations if 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 has conducted business impact analyses 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 a Year 2000 compliant environment. The Company analyzed strategies and identified 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 has included a recovery program that identifies participants, processes, and equipment that might be needed for the Company to function at an adequate level. The program ensure that all participants are aware of their roles, adequately trained, and able to do whatever is necessary to restore operations. The Company will monitor cash levels during 1999 in order to determine usage trends. The Company has a plan to increase its currency and coin levels starting in the fall of 1999 in anticipation of higher liquidity levels required to meet cash needs during the transition to the year 2000. In addition, the Company has confirmed its available lines of credit with correspondent banks, the Federal Home Loan Bank, and the Federal Reserve Bank to insure available liquidity in meeting unanticipated cash demands. The estimated cost to address all of the Year 2000 issues approximates $450,000. This includes $200,000 to upgrade software and hardware systems, $100,000 for testing of systems, $100,000 for consulting fees, and $50,000 for existing personnel costs to effectively implement the Year 2000 Plan. The information provided above regarding the Company's Year 2000 compliance includes forward-looking statements based on management's best estimates of future events. Such forward-looking statements involve risks and uncertainties including the availability of resources, the ability to identify and correct potential Year 2000 sensitive problems that could have a serious impact on the operations and the ability of third party suppliers to bring their systems into Year 2000 compliance. There can be no assurance that any of the factors or statements regarding the Company's Year 2000 preparedness will not change and that any change will not affect the accuracy of the Company's forward looking statements. 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 During 1998, the Company adopted SFAS No. 130, No. 131 and No. 132. The adoption of SFAS No. 130 "Reporting Comprehensive Income," required that certain items be reported under a new category of income, "Other Comprehensive Income." Unrealized gains and losses on securities available for sale is the only item included in other comprehensive income. SFAS No. 131 and No. 132 relate to disclosures about segments and employee benefits, respectively. The financial statements, where applicable, include the required additional disclosures for SFAS No. 130, No. 131 and No. 132. SFAS No. 133, "Accounting For Derivative Instruments and Hedging activities," and SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise," are effective for fiscal years beginning after June 15, 1999, and the first fiscal quarter beginning July 1, 1999. SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of SFAS 133" defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000 and the first quarter beginning July 1, 2000. Management has not determined the impact of SFAS No. 134 and No. 137 on the financial statements. SFAS No. 135 and No. 136 do not apply to the Corporation. OTHER MATTERS SHARE REPURCHASE PLAN. The Company 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 the Company's bids and repurchases of its stock during a given day shall be effected through a single broker or dealer, except that the Company may repurchase shares from others provided that the same have not been solicited by or on behalf of the Company. For this purpose, the Company shall utilize the services of any registered broker or dealer. 2. All of the Company'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 Company repurchases must be in an amount that (a) when added to the amounts of all of the Company'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 the Company'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 Company 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 the Company'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. The Company will not affect any repurchases of its stock during any period in which doing so would violate its insider trader policy or otherwise would not be in accordance with the law. 6. The share repurchase plan will be used for stock options. 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." 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. MERGER. On July 27, 1999, Camden National Corporation, a Maine corporation (the "Company"), Camden Acquisition Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, KSB Bancorp Inc., a Delaware corporation ("KSB") and Kingfield Savings Bank, a Maine-chartered savings bank and wholly owned subsidiary of KSB entered into an Agreement and Plan of Merger (the "Merger Agreement"). The Merger Agreement provides for a series of related transactions pursuant to which KSB will be merged with and into the company (the "Merger"), with the Company being the surviving corporation. The Boards of Directors of the company and KSB approved the Merger Agreement, and all of the transactions contemplated thereby, at their respective meetings held on July 27, 1999. The consummation of the Merger is subject to certain customary conditions, including, without limitation, the approval of the stockholders of each of the Company and KSB and certain regulatory approvals. PART II Item 4. Submission Matters to a vote of Security holders. (a) The annual meeting of shareholders was held on May 4, 1999. (c) Matters voted upon at the meeting. 1)To elect as director nominees -- Royce M. Cross and John W. Holmes to serve a three year term to expire at the annual meeting in 2002. Total votes cast: 5,092,810, with 5,080,412 for, and 12,398 withheld. 2) To ratify the selection of Berry, Dunn, McNeil & Parker as the Company's independent public accountants for 1999. Total votes cast: 5,093,109, with 5,085,706 for, 1,950 against, and 5,453 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 Hampden Branch of United Bank, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.4) Camden National Corporation 1993 Stock Option Plan, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.5) UnitedCorp Stock Option Plan, filed with Form 10-K, December 31, 1995, and is incorporated herein by reference. (10.6) Lease Agreement for the facility occupied by the Damariscotta Branch of Camden National Bank, between Keybank National Association (Lessor) and Camden National Bank (Lessee). (10.7) Lease Agreement for the facility occupied by the Milo Branch of United Bank, between Bangor Savings Bank (Lessor) and United Bank (Lessee). (27) Financial Data Schedule. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Act 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) Robert W. Daigle (signature) 08/13/99 - ------------------------------------- -------- Robert W. Daigle Date President and Chief Executive Officer Susan M. Westfall (signature) 08/13/99 - ------------------------------------- -------- Susan M. Westfall Date Treasurer and Chief Financial Officer EX-27 2
9 6-MOS YEAR DEC-31-1999 DEC-31-1998 JUN-30-1999 DEC-31-1998 16,207 14,938 451,300 444,270 1,243 0 0 0 121,339 98,243 69,474 88,570 70,763 91,579 467,052 438,947 7,062 6,512 717,733 667,951 514,476 508,573 134,176 90,158 6,866 5,118 0 0 0 0 0 0 2,436 2,436 59,779 61,666 717,733 667,951 20,101 37,845 6,618 10,937 0 33 26,719 48,815 8,962 17,017 11,648 20,750 15,071 28,065 940 1,376 150 0 9,475 17,073 7,705 14,114 7,705 14,114 0 0 0 0 5,229 9,645 0.79 1.43 0.79 1.41 8.35 8.88 3,385 1,710 405 612 0 0 3,790 2,322 6,512 5,640 458 770 68 266 7,062 6,512 6,421 5,927 0 0 641 585
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