-----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, P5RCiSFJpvFR+EgYXFJb1RoapzslHroi0Cmm68eVmHnP35b55SFWsz4Csx9EImOe Pwfbc6h+rLzVozXCzxoGpQ== 0000750686-99-000019.txt : 19991117 0000750686-99-000019.hdr.sgml : 19991117 ACCESSION NUMBER: 0000750686-99-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99754521 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, 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 September 30, 1999: Common stock (no par value) 6,557,650 shares. CAMDEN NATIONAL CORPORATION Form 10-Q for the quarter ended September 30, 1999 TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT PART I. ITEM 1. FINANCIAL INFORMATION PAGE Consolidated Statements of Income Nine Months Ended September 30, 1999 and 1998 3 Consolidated Statements of Income Three Months Ended September 30, 1999 and 1998 4 Consolidated Statements of Comprehensive Income Nine Months Ended September 30, 1999 and 1998 5 Consolidated Statements of Comprehensive Income Three Months Ended September 30, 1999 and 1998 5 Consolidated Statements of Condition September 30, 1999 and December 31, 1998 6 Consolidated Statements of Cash Flows Nine Months Ended September 30, 1999 and 1998 7 Notes to Consolidated Financial Statements Nine Months Ended September 30, 1999 and 1998 8-9 Analysis of Change in Net Interest Margin Nine Months Ended September 30, 1999 and 1998 9 Average Daily Balance Sheets Nine Months Ended September 30, 1999 and 1998 10 Analysis of Volume and Rate Changes on Net Interest Income & Expenses September 30, 1999 over September 30, 1998 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-17 PART II. ITEM 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18 EXHIBITS 19 PART I. ITEM I. FINANCIAL INFORMATION Camden National Corporation and Subsidiaries Consolidated Statements of Income (unaudited) (In Thousands, except number Nine Months Ended September 30, of shares and per share data) 1999 1998 Interest Income Interest and fees on loans $30,598 $27,279 Interest on U.S. Government and agency obligations 8,431 7,182 Interest on state and political subdivisions 301 83 Interest on interest rate swap agreements 0 33 Interest on federal funds sold and other investments 1,380 775 ------- ------- Total interest income 40,710 35,352 Interest Expense Interest on deposits 13,592 12,417 Interest on other borrowings 4,154 3,043 Interest on interest rate swap agreements 0 32 ------- ------- Total interest expense 17,746 15,492 ------- ------- Net interest income 22,964 19,860 Provision for Loan Losses 1,465 992 ------- ------- Net interest income after provision for loan losses 21,499 18,868 Other Income Service charges on deposit accounts 1,677 1,240 Other service charges and fees 1,920 1,586 Other 1,360 945 ------- ------- Total other income 4,957 3,771 Operating Expenses Salaries and employee benefits 7,368 6,244 Premises and fixed assets 1,993 1,504 Other 5,402 4,596 ------- ------- Total operating expenses 14,763 12,344 Less minority interest net income 20 5 ------- ------- Income before income taxes 11,673 10,290 Income Taxes 3,764 3,301 ------- ------- Net Income $ 7,909 $ 6,989 ======= ======= Per Share Data Basic Earnings per share (Net income divided $1.20 $1.03 by weighted average shares outstanding) Diluted Earnings per share $1.19 $1.01 Cash dividends per share $0.45 $0.41 Weighted average number of shares outstanding 6,602,323 6,783,120
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) 1999 1998 Interest Income Interest and fees on loans $10,497 $ 9,437 Interest on U.S. Government and agency obligations 2,857 2,241 Interest on state and political subdivisions 100 25 Interest on interest rate swap agreements 0 0 Interest on federal funds sold and other investments 537 286 ------- ------- Total interest income 13,991 11,989 Interest Expense Interest on deposits 4,630 4,439 Interest on other borrowings 1,468 658 Interest on interest rate swap agreements 0 0 ------- ------- Total interest expense 6,098 5,097 ------- ------- Net interest income 7,893 6,892 Provision for Loan Losses 525 344 ------- ------- Net interest income after provision for loan losses 7,368 6,548 Other Income Service charges on deposit accounts 554 457 Other service charges and fees 906 760 Other 435 342 ------- ------- Total other income 1,895 1,559 Operating Expenses Salaries and employee benefits 2,491 2,208 Premises and fixed assets 658 472 Other 2,139 1,744 ------- ------- Total operating expenses 5,288 4,424 Less minority interest in net income 7 4 ------- ------- Income before income taxes 3,968 3,679 Income Taxes 1,288 1,165 ------- ------- Net Income $ 2,680 $ 2,514 ======= ======= Per Share Data Basic Earnings per share (Net income divided $0.41 $0.37 by weighted average shares outstanding) Diluted Earnings per share $0.40 $0.36 Cash dividends per share $0.15 $0.14 Weighted average number of shares outstanding 6,557,750 6,747,555
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Nine Months Ended September 30, 1999 1998 Net income $ 7,909 $ 6,989 Other comprehensive income, net of tax: Change in unrealized gains on securities (3,351) 11 ------- ------- Comprehensive income $ 4,558 $ 7,000 ======= =======
Camden National Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (In Thousands) Three Months Ended September 30, 1999 1998 Net income Other comprehensive income, $ 2,680 $ 2,514 net of tax: Change in unrealized gains on securities (1,274) 18 ------- ------- Comprehensive income $ 1,406 $ 2,532 ======= =======
Camden National Corporation and Subsidiaries Consolidated Statements of Condition (unaudited) (In Thousands, except number of shares and per share data) September 30, December 31, 1999 1998 Assets Cash and due from banks $ 17,563 $ 14,938 Securities available for sale 120,087 84,159 Securities held to maturity 65,501 88,570 Other securities 14,085 14,084 Residential mortgages held for sale 1,013 24,637 Loans, less allowance for loan losses of $7,360 and $6,512 at September 30, 1999 and December 31, 1998 470,615 407,798 Bank premises and equipment 9,443 9,530 Other real estate owned 752 905 Interest receivable 4,710 3,820 Other assets 22,279 19,510 -------- -------- Total assets $726,048 $667,951 ======== ======== Liabilities Deposits: Demand $ 70,894 $ 64,303 NOW 28,201 27,955 Money market 95,863 87,532 Savings 88,515 80,908 Certificates of deposit 251,229 247,875 -------- -------- Total deposits 534,702 508,573 Borrowings from Federal Home Loan Bank 86,275 60,265 Other borrowed funds 33,083 29,893 Accrued interest and other liabilities 9,257 5,028 Minority interest in subsidiary 115 90 -------- -------- Total liabilities 663,432 603,849 -------- -------- 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 72,725 68,785 Net unrealized depreciation on securities available for sale, net of income tax (3,480) (129) -------- -------- 72,823 72,234 Less cost of 570,590 and 384,060 shares of treasury stock on September 30, 1999 and December 31, 1998 10,207 8,132 -------- -------- Total stockholders' equity 62,616 64,102 -------- -------- Total liabilities and stockholders' equity $726,048 $667,951 ======== ========
Camden National Corporation and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (In Thousands) Nine Months Ended September 30, 1999 1998 Operating Activities Net Income $ 7,909 $ 6,989 Adjustment to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,465 992 Depreciation and amortization 854 519 (Increase) decrease in interest receivable (890) 400 Increase in other assets (2,625) (10,191) Increase in other liabilities 5,955 2,920 Cash receipts from sale of residential loans 3,300 1,737 Origination of mortgage loans held for sale 0 (10,768) ------- ------- Net cash provided (used) by operating activities 15,968 (7,402) ------- ------- Investing Activities Proceeds from maturities of securities held to maturity 23,328 58,185 Proceeds from maturities of securities available for sale 15,754 2,864 Purchase of securities available for sale (56,842) (16,013) Purchase of Federal Home Loan Bank Stock (1) (1) Increase in loans (43,958) (40,534) Net decrease in other real estate 153 490 Purchase of premises and equipment (1,088) (1,102) Decrease (increase)in minority position 25 (5) Net purchase of federal funds 0 (4,907) ------- ------- Net cash used by investing activities (62,629) (1,023) ------- ------- Financing Activities Net increase in demand deposits, NOW accounts, and savings accounts 22,775 54,738 Net increase in certificates of deposit 3,354 54,023 Net increase (decrease) in short-term borrowings 29,200 (91,674) Purchase of treasury stock (2,075) (1,289) Exercise and repurchase of stock options (975) 0 Cash Dividends (2,993) (2,784) ------- ------- Net cash provided by financing activities 49,286 13,014 ------- ------- Increase in cash and equivalents 2,625 4,589 Cash and cash equivalents at beginning of year 14,938 13,451 ------- ------- Cash and cash equivalents at end of period $17,563 $18,040 ======= =======
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 September 30, 1999, and December 31, 1998, the consolidated statements of income for the three and nine months ended September 30, 1999 and September 30, 1998, the consolidated statements of comprehensive income for the three and nine months ended September 30, 1999 and September 30, 1998 and the consolidated statements of cash flows for the nine months ended September 30, 1999, and September 30, 1998. All significant intercompany transactions and balances are eliminated in consolidation. The income reported for the period ended September 30,1999 is not necessarily indicative of the results that may be expected for the full year. NOTE 2 - 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: Nine Months Ended September 30, 1999 1998 Net income, as reported 7,909 6,989 Weighted average shares 6,602,323 6,783,120 Effect of dilutive securities: Employee stock options 33,269 143,127 Dilutive potential common shares Adjusted weighted average shares and assumed conversion 6,635,592 6,926,247 Basic earnings per share $1.20 $1.03 Diluted earnings per share 1.19 1.01 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 Nine Months Ending Nine Months Ending September 30, 1999 September 30, 1998 ------------------- ------------------- Dollars in thousands Amount Average Amount Average of Yield/ of Yield/ interest Rate interest Rate -------- ------- -------- ------- Interest-earning assets: Securities - taxable $ 9,729 7.00% $ 7,882 7.21% Securities - nontaxable 456 6.56% 125 6.95% Federal funds sold 83 5.50% 76 5.44% Loans 30,905* 8.97% 27,441* 9.60% -------- ------- -------- ------- Total earning assets 41,173 8.37% 35,524 8.92% Interest-bearing liabilities: NOW accounts 483 1.04% 422 1.17% Savings accounts 1,848 2.93% 1,661 3.25% Money Market accounts 1,440 3.59% 1,117 3.76% Certificates of deposit 9,564 5.16% 9,082 5.57% Short-term borrowings 4,154 4.84% 3,043 5.30% Broker Certificates of deposit 257 5.71% 135 5.77% -------- ------- -------- ------- Total interest-bearing liabilities 17,746 4.17% 15,460 4.55% Net interest income (fully-taxable equivalent) 23,427 20,064 Less: fully-taxable equivalent adjustment (463) (204) -------- -------- $22,964 $19,860 ======== ======== Net Interest Rate Spread (fully-taxable equivalent) 4.20% 4.36% Net Interest Margin (fully-taxable equivalent) 4.76% 5.04% *Includes net swap income figures (in thousands) - September 1999 $0 and September 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 Nine Months Ended September 30, 1999 1998 ---- ---- Interest-earning assets: Securities - taxable $185,375 $145,702 Securities - nontaxable 9,274 2,399 Federal funds sold 2,006 1,862 Loans 459,191 381,252 -------- -------- Total earning assets 655,846 531,215 Cash and due from banks 16,429 16,646 Other assets 35,051 37,281 Less allowance for loan losses (6,958) (5,997) -------- -------- Total assets $700,368 $579,145 ======== ======== Interest-bearing liabilities: NOW accounts $ 61,949 $ 48,071 Savings accounts 84,006 68,123 Money market accounts 53,533 39,637 Certificates of deposits 246,887 217,268 Short-term borrowings 114,382 76,655 Broker certificates 6,009 3,121 -------- -------- Total interest-bearing liabilities 566,766 452,875 Demand deposits 65,085 56,516 Other liabilities 5,158 5,734 Shareholders' equity 63,359 64,020 -------- -------- Total liabilities and stockholders' equity $700,368 $579,145 ======== ========
ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSES September 1999 Over September 1998 ---------------------------------- Change Change Due to Due to Total In thousands Volume Rate Change ------- ------- ------- Interest-earning assets: Securities--taxable $ 2,145 $ (298) $ 1,847 Securities--nontaxable 358 (27) 331 Federal funds sold 6 1 7 Loans 5,612 (2,148) 3,464 ------- ------- ------- Total interest income 8,121 (2,472) 5,649 Interest-bearing liabilities: NOW accounts 122 (61) 61 Savings accounts 387 (200) 187 Money market accounts 392 (69) 323 Certificates of deposit 1,237 (755) 482 Short-term borrowings 1,500 (389) 1,111 Broker certificates 125 (3) 122 ------- ------- ------- Total interest expense 3,763 (1,477) 2,286 ------- ------- ------- Net interest income $ 4,358 $ (995) $ 3,363 (fully taxable equivalent) ======= ======= =======
ITEM II. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATION FINANCIAL CONDITION During the first nine months of 1999, consolidated assets increased by $58.1 million, or 8.7% to $726.0 million. This increase was the result of an increase in the loan portfolio, including residential mortgages held for sale, of $40.0 million or 9.1% and an increase in the investment portfolio of $12.9 million or 6.9%. The increase in loans can be attributed to strong loan demand during the first nine months of 1999. With a relatively low interest rate environment it has been the Company's asset/liability strategy for the past 18 months to hold fixed rate mortgages in its portfolio. 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 and third quarters of 1999, taking advantage of a steeper yield curve than in prior periods. 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 $26.1 million or 5.1%. Both of the Company's banking subsidiaries continue to experience substantial 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 $29.2 million or 32.4% since December 31, 1998. Federal Home Loan Bank of Boston 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 nine months of 1999, $1,465,000 was added to the reserve for loan losses based upon the expansion of the loan portfolio, resulting in an allowance of $7.4 million, or 1.54%, of total loans outstanding. 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, 1999, of 11.7% and 13.0% 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 nine months of 1999 Camden National Bank paid dividends to the Company in the amount of $6.8 million. The Company paid dividends to shareholders in the amount of $3.0 million. The remaining amount of $3.8 million was used for treasury stock, stock option and acquisition related transactions by the Company. RESULTS OF OPERATIONS Net income for the nine months ended September 30, 1999 was $7.9 million, an increase of $920,000 or 13.2% from 1998's first nine month's net income of $7.0 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 nine months ended September 30, 1999 was $23.4 million, a 16.8% or $3.4 million increase over the net interest income for the first nine months of 1998 of $20.1 million. Interest income on loans increased by $3.5 million, or 12.6%. This increase was due to the increase in loan volume, despite a decrease in yields from 9.60% during the first nine months of 1998 to 8.97% during the first nine months of 1999. The Company also experienced an increase in interest income on investments during the first nine months of 1999 compared to the same period in 1998 due to increased volume. The Company's net interest expense on deposits and borrowings increased during the first nine 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 nine months ended September 30, 1999 and 1998. The second of these tables presents average assets liabilities and stockholders' equity for the nine months ended September 30, 1999 and 1998. The third table presents an analysis of volume and rate change on net interest income and expense from September 30, 1998 to September 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 nine months of 1999 compared to a slight increase of $1,000 in the first nine months of 1998. NONINTEREST INCOME There was a $1.2 million or 31.5% increase in total noninterest income in the first nine months of 1999 compared to the first nine months of 1998. Service charges on deposit accounts increased $437,000 or 35.2% for the first nine months of 1999 compared to 1998. This increase was the result of increased deposit balances. The increase in deposit balances resulted primarily from 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 $334,000 or 21.1% in the first nine 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 $415,000, or 43.9% in the first nine 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 $2.4 million or 19.6% increase in total noninterest expenses in the first nine months of 1999 compared to the first nine months of 1998. Salaries and employee benefits cost increased by $1.1 million or 18.0% in the first nine 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 $806,000 or 17.5%. The major contributing factor for this increase was 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 $580,000 was recorded in 1999, which was the result of the new branches acquired in 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 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 the Company's 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 a high level of service to the Company and its customers. The Company is actively monitoring its approximately 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 the Company's 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 is $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. 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. 134, "Accounting for Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise," is effective for fiscal years beginning after June 15, 1999, and the first fiscal quarter beginning July 1, 1999. SFAS No. 133, "Accounting For Derivative Instruments and Hedging Activities," has been amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of SFAS 133". SFAS 137 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 Company. OTHER MATTERS 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. The stockholder meetings for such vote are scheduled for November 16, 1999. The Company can not assure that the merger will be consummated. FORWARD LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information contained in this report, including the information incorporated by reference in this report, are or may be considered as forward-looking. Forward-looking statements relate to the future operations, strategies, financial results or other developments, and contain words or phrases such as "may," "expects," "should" or similar expressions. Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the Company's control or are subject to change. Inherent in the Company's business are certain risks and uncertainties. Therefore, the Company cautions the reader that revenues and income could differ materially from those expected to occur depending on factors such as general economic conditions including changes in interest rates and the performance of financial markets, changes in domestic and foreign laws, regulations and taxes, competition, industry consolidation, credit risks and other factors. Other factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, loan losses, expenses, rates charged on loans and earned on investment securities, rates paid on deposits, competitive effects, fee and other noninterest income earned, as well as other factors. The Company's disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. Item 6. Exhibits and Reports on Form 8-K. (a). Exhibits (2.1) Agreement and Plan of Merger, dated as of July 27, 1999, by and among Camden National Corporation, Camden Acquisition Subsidiary, Inc., KSB Bancorp, Inc. and Kingfield Savings Bank. (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) Stock Option Agreement, dated as of July 27, 1999 between Camden National Corporation and KSB Bancorp, Inc. (27) Financial Data Schedule. (99.1) Press Release, dated July 27, 1999. (b) Reports on Form 8-K. Current Report on Form 8-K filed with the Securities and Exchange Commission on August 9, 1999, relating to the merger. 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) 11/15/99 - ------------------------------------- -------- Robert W. Daigle Date President and Chief Executive Officer Susan M. Westfall (signature) 11/15/99 - ------------------------------------- -------- Susan M. Westfall Date Treasurer and Chief Financial Officer EX-27 2
9 9-MOS YEAR DEC-31-1999 DEC-31-1998 SEP-30-1999 DEC-31-1998 17,563 14,938 463,808 444,270 0 0 0 0 134,172 98,243 65,501 88,570 66,531 91,579 478,988 438,947 7,360 6,512 726,048 667,951 534,702 508,573 119,358 90,158 9,372 5,118 0 0 0 0 0 0 2,436 2,436 60,180 61,666 726,048 667,951 30,598 37,845 10,112 10,937 0 33 40,710 48,815 13,592 17,017 17,746 20,750 22,964 28,065 1,465 1,376 150 0 14,763 17,073 11,673 14,114 11,673 14,114 0 0 0 0 7,909 9,645 1.20 1.43 1.19 1.41 8.37 8.88 3,986 1,710 185 612 0 0 4,171 2,322 6,512 5,640 769 770 152 266 7,360 6,512 6,800 5,927 0 0 560 585
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