-----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, VhWDWc76msvGT94hKFbE4yzAKnTeBty9rYuvYgKz4qCyMdSrOKUjM6J3kUpgb32y 5s4qOoagcyvtpQDGDwinqQ== /in/edgar/work/20000814/0000927016-00-003004/0000927016-00-003004.txt : 20000921 0000927016-00-003004.hdr.sgml : 20000921 ACCESSION NUMBER: 0000927016-00-003004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 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: 699292 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 0001.txt FORM 10-Q 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, 2000 Commission File No. 0-28190 CAMDEN NATIONAL CORPORATION (Exact name of registrant as specified in its charter) MAINE 01-04132282 (State or other jurisdiction of (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, 2000: Common stock (no par value) 8,167,358 shares. CAMDEN NATIONAL CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000 TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
PAGE PART I. ITEM 1. FINANCIAL INFORMATION Independent Accountants' Report 3 Consolidated Statements of Income Six Months Ended June 30, 2000 and 1999 4 Consolidated Statements of Income Three Months Ended June 30, 2000 and 1999 5 Consolidated Statements of Comprehensive Income Six Months Ended June 30, 2000 and 1999 6 Consolidated Statements of Comprehensive Income Three Months Ended June 30, 2000 and 1999 6 Consolidated Statements of Condition June 30, 2000 and December 31, 1999 7 Consolidated Statements of Cash Flows Six Months Ended June 30, 2000 and 1999 8 Notes to Consolidated Financial Statements Six Months Ended June 30, 2000 and 1999 9 Analysis of Changes in Net Interest Margin Six Months Ended June 30, 2000 and 1999 10 Average Balance Sheets Six Months Ended June 30, 2000 and 1999 11 Analysis of Volume and Rate Changes on Net Interest Income & Expenses June 30, 2000 over June 30, 1999 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12-17 PART II. ITEM 4. Submission Matters to a Vote of Security Holders. 17 ITEM 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18 EXHIBITS 19-20
Page 2 INDEPENDENT ACCOUNTANTS' REPORT The Shareholders and Board of Directors Camden National Corporation We have reviewed the accompanying interim consolidated financial information of Camden National Corporation and Subsidiaries as of June 30, 2000, and for the three-month and six-month periods then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is to express an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. Berry, Dunn, McNeil & Parker, LLC Portland, Maine August 11, 2000 Page 3 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) 2000 1999 INTEREST INCOME Interest and fees on loans $ 29,568 $ 26,068 Interest on U.S. Government and agency obligations 6,820 6,522 Interest on state and political subdivisions 197 201 Interest on interest rate swap agreements 333 155 Interest on federal funds sold and other investments 1,323 896 ---------- ---------- TOTAL INTEREST INCOME 38,241 33,842 INTEREST EXPENSE Interest on deposits 12,120 11,365 Interest on other borrowings 6,151 3,360 Interest on interest rate swap agreements 319 150 ---------- ---------- TOTAL INTEREST EXPENSE 18,590 14,875 ---------- ---------- NET INTEREST INCOME 19,651 18,967 PROVISION FOR LOAN LOSSES 1,288 1,240 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 18,363 17,727 OTHER INCOME Service charges on deposit accounts 1,466 1,393 Other service charges and fees 1,438 1,215 Other income 1,234 1,007 ---------- ---------- TOTAL OTHER INCOME 4,138 3,615 OPERATING EXPENSES Salaries and employee benefits 6,240 6,280 Premises and fixed assets 1,913 1,918 Other 4,912 4,000 ---------- ---------- TOTAL OPERATING EXPENSES 13,065 12,198 ---------- ---------- LESS MINORITY INTEREST NET INCOME 23 13 INCOME BEFORE INCOME TAXES 9,413 9,131 ---------- ---------- INCOME TAXES 2,896 2,958 ---------- ---------- Net Income $ 6,517 $ 6,173 ========== ========== PER SHARE DATA Basic earnings per share (Net income divided by weighted average shares outstanding) $0.80 $0.77 Diluted earnings per share 0.80 0.77 Cash dividends per share 0.31 0.26 Weighted average number of shares outstanding 8,167,358 8,031,986
Page 4 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) 2000 1999 INTEREST INCOME Interest and fees on loans $15,187 $13,270 Interest on U.S. Government and agency obligations 3,436 3,358 Interest on state and political subdivisions 99 100 Interest on interest rate swap agreements 157 76 Interest on federal funds sold and other investments 668 424 ------- ------- TOTAL INTEREST INCOME 19,547 17,228 INTEREST EXPENSE Interest on deposits 6,171 5,695 Interest on other borrowings 3,457 1,856 Interest on interest rate swap agreements 167 78 ------- ------- TOTAL INTEREST EXPENSE 9,795 7,629 ------- ------- NET INTEREST INCOME 9,752 9,599 PROVISION FOR LOAN LOSSES 644 655 ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,108 8,944 OTHER INCOME Service charges on deposit accounts 758 728 Other service charges and fees 788 680 Other income 620 470 ------- ------- TOTAL OTHER INCOME 2,166 1,878 OPERATING EXPENSES Salaries and employee benefits 3,116 3,209 Premises and fixed assets 888 1,063 Other 2,487 1,916 ------- ------- TOTAL OPERATING EXPENSES 6,491 6,188 ------- ------- LESS MINORITY INTEREST NET INCOME 2 9 INCOME BEFORE INCOME TAXES 4,781 4,625 ------- ------- INCOME TAXES 1,458 1,513 ------- ------- Net Income $ 3,323 $ 3,112 ======= ======= PER SHARE DATA Basic earnings per share (Net income divided by weighted average shares outstanding) $0.41 $0.39 Diluted earnings per share 0.41 0.39 Cash dividends per share 0.16 0.13 Weighted average number of shares outstanding 8,167,358 8,002,378
Page 5 CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
(In thousands) SIX MONTHS ENDED JUNE 30, 2000 1999 Net income $6,517 $ 6,173 Other comprehensive income, net of tax: Change in unrealized appreciation (depreciation) on securities available for sale (net of taxes of $332 and $(1,230) at June 30, 2000 and 1999, respectively) 645 (2,387) ------ ------- Comprehensive income $7,162 $ 3,786 ====== =======
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
(In thousands) THREE MONTHS ENDED JUNE 30, 2000 1999 Net income $3,323 $ 3,112 Other comprehensive income, net of tax: Change in unrealized appreciation (depreciation) on securities available for sale (net of taxes of $353 and $(1,189) at June 30, 2000 and 1999, respectively) 686 (2,308) ------ ------- Comprehensive income $4,009 $ 804 ====== =======
Page 6 CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except number of shares and per share data) JUNE 30, DECEMBER 31, 2000 1999 (unaudited) (audited) ASSETS Cash and due from banks $ 27,039 $ 24,230 Federal funds sold 1,585 415 Securities available for sale 168,416 147,939 Securities held to maturity (market value $52,123 and $68,049 at June 30, 2000 and December 31, 1999) 52,031 68,193 Other securities 16,232 16,058 Residential mortgages held for sale 6,921 6,906 Loans, less allowance for loan losses of $10,609 and $9,390 at June 30, 2000 and December 31, 1999, respectively 672,220 619,138 Bank premises and equipment 13,953 12,093 Other real estate owned 780 1,405 Interest receivable 6,141 5,041 Other assets 36,425 26,932 ---------- -------- TOTAL ASSETS $1,001,743 $928,350 ========== ======== LIABILITIES Deposits: Demand $ 81,970 $ 80,385 NOW 83,553 89,740 Money market 96,802 71,237 Savings 79,738 112,335 Certificates of deposit 334,721 314,023 ---------- -------- TOTAL DEPOSITS 676,784 667,720 Borrowings from Federal Home Loan Bank 195,338 128,866 Other borrowed funds 39,286 45,058 Accrued interest and other liabilities 7,951 8,968 Minority interest in subsidiary 139 115 ---------- -------- TOTAL LIABILITIES 919,498 850,727 ---------- -------- SHAREHOLDERS' EQUITY Common stock, no par value; authorized 10,000,000 shares, issued 8,167,358 shares 2,450 2,450 Surplus 5,979 5,990 Retained earnings 87,545 83,563 Net unrealized depreciation on securities available for sale, net of income tax (5,137) (5,782) Less cost of 442,540 shares of treasury stock on June 30, 2000 and December 31, 1999 8,592 8,598 ---------- -------- TOTAL SHAREHOLDERS' EQUITY 82,245 77,623 ---------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,001,743 $928,350 ========== ========
Page 7 CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands) SIX MONTHS ENDED JUNE 30, 2000 1999 OPERATING ACTIVITIES Net Income $ 6,517 $ 6,173 Adjustment to reconcile net income to net cash provided (used) by operating activities: Provision for loan losses 1,288 1,240 Depreciation and amortization 660 621 Increase in interest receivable (4,261) (726) Decrease (increase) in other assets 624 (1,227) Increase in other liabilities 1,906 2,818 Cash receipts from sale of residential loans 690 2,267 Origination of mortgage loans held for sale (705) (482) Decrease in obligation under ESOP and BRRP 0 112 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 6,719 10,796 INVESTING ACTIVITIES Proceeds from maturities of securities held to maturity 5,209 21,410 Proceeds from maturities of securities available for sale 3,310 16,125 Purchase of securities available for sale (11,956) (54,343) Purchase of Federal Home Loan Bank Stock (175) (1) Net increase in loans (54,370) (43,365) Net decrease in other real estate owned 625 300 Purchase of premises and equipment (2,629) (450) Purchase of life insurance policy (10,000) 0 Net purchase of federal funds (1,170) (1,243) -------- -------- NET CASH USED BY INVESTING ACTIVITIES (71,156) (61,567) FINANCING ACTIVITIES Net decrease in demand deposits, NOW accounts, and savings accounts (11,634) (3,261) Net increase in certificates of deposit 20,698 8,672 Net increase in short-term borrowings 60,700 52,132 Increase in minority position 24 13 Purchase of treasury stock 0 (2,236) Exercise and repurchase of stock options (5) (975) Proceeds from other stock issuance 0 4 Cash dividends (2,537) (2,089) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 67,246 52,260 NET INCREASE IN CASH AND CASH EQUIVALENTS 2,809 1,489 Cash and cash equivalents at beginning of year 24,230 18,175 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,039 $ 19,664 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Non-Cash transactions: Transfer from loans to real estate owned 155 73 Transfer from loans held for sale to loan portfolio 6,629 8,230
Page 8 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, 2000, and December 31, 1999, the consolidated statements of income for the six and three months ended June 30, 2000 and June 30, 1999, the consolidated statements of comprehensive income for the six and three months ended June 30, 2000 and June 30, 1999 and the consolidated statements of cash flows for the six months ended June 30, 2000, and June 30, 1999. All significant intercompany transactions and balances are eliminated in consolidation. The income reported for the period ended June 30, 2000 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:
SIX MONTHS ENDED JUNE 30, (Dollars in thousands) 2000 1999 Net income, as reported $ 6,517 $ 6,173 Weighted average shares 8,167,358 8,031,986 Effect of dilutive employee stock options 12,573 83,696 Adjusted weighted average shares and assumed conversion 8,179,931 8,115,682 Basic earnings per share $ 0.80 $ 0.77 Diluted earnings per share 0.80 0.77 THREE MONTHS ENDED JUNE 30, (Dollars in thousands) 2000 1999 Net income, as reported $ 3,323 $ 3,112 Weighted average shares 8,167,358 8,002,378 Effect of dilutive employee stock options 12,573 83,696 Adjusted weighted average shares and assumed conversion 8,179,931 8,086,074 Basic earnings per share $ 0.41 $ 0.39 Diluted earnings per share 0.41 0.39
NOTE 3 - RECENT DEVELOPMENTS On February 4, 2000, the Company completed the merger of two of its bank subsidiaries, United Bank, a state chartered bank based in Bangor, Maine and Kingfield Savings Bank, a state chartered bank based in Kingfield, Maine. The successor is UnitedKingfield Bank, a state chartered bank based in Bangor, Maine. Page 9 ANALYSIS OF CHANGES IN NET INTEREST MARGIN
JUNE 30, 2000 JUNE 30, 1999 ------------------- ------------------- AMOUNT AVERAGE AMOUNT AVERAGE of Yield/ of Yield/ Dollars in thousands INTEREST COST INTEREST COST -------- ------- -------- ------- INTEREST-EARNING ASSETS: Securities - taxable $ 8,125 7.16% $ 7,316 6.93% Securities - nontaxable 299 6.95% 305 6.49% Federal funds sold 31 6.09% 76 6.21% Loans 29,710* 9.04% 26,319* 8.91% ------- ---- ------- ---- TOTAL EARNING ASSETS 38,165 8.54% 34,016 8.36% INTEREST-BEARING LIABILITIES: NOW accounts 474 1.10% 533 1.29% Savings accounts 1,128 2.55% 1,480 2.75% Money market accounts 1,855 4.22% 1,073 3.51% Certificates of deposit 8,183 5.17% 8,105 5.23% Short-term borrowings 6,489 6.01% 3,364 4.84% Broker certificates of deposit 142 5.73% 170 5.66% ------- ---- ------- ---- TOTAL INTEREST-BEARING LIABILITIES 18,271 4.57% 14,725 4.17% NET INTEREST INCOME (FULLY-TAXABLE EQUIVALENT) 19,894 19,291 LESS: FULLY-TAXABLE EQUIVALENT ADJUSTMENT (243) (324) ------- ------- $19,651 $18,967 ======= ======= NET INTEREST RATE SPREAD (FULLY-TAXABLE EQUIVALENT) 3.97% 4.19% NET INTEREST MARGIN 4.45% 4.74% (FULLY-TAXABLE EQUIVALENT)
*Includes net swap income figures - 2000 $14,000 and 1999 $5,000. Notes: Nonaccrual loans are included in total loans. Tax exempt interest was calculated using a rate of 34% for fully-taxable equivalent. Page 10 AVERAGE BALANCE SHEETS
Dollars in thousands SIX MONTHS ENDED JUNE 30, 2000 1999 INTEREST-EARNING ASSETS: Securities - taxable $226,840 $211,008 Securities - nontaxable 8,610 9,401 Federal funds sold 1,017 2,447 Loans 657,514 591,029 -------- -------- TOTAL INTEREST-EARNING ASSETS 893,981 813,885 Cash and due from banks 26,190 18,174 Other assets 59,862 42,096 Less allowance for loan losses 10,212 8,490 -------- -------- TOTAL ASSETS $969,821 $865,665 ======== ======== INTEREST-BEARING LIABILITIES: NOW accounts $ 86,029 $ 82,772 Savings accounts 88,395 107,537 Money market accounts 87,974 61,080 Certificates of deposits 316,558 310,203 Short-term borrowings 216,026 138,963 Broker certificates 4,957 6,006 -------- -------- TOTAL INTEREST-BEARING LIABILITIES 799,939 706,561 Demand deposits 80,633 73,490 Other liabilities 9,315 8,524 Shareholders' equity 79,934 77,090 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $969,821 $865,665 ======== ========
Page 11 ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSES
June 30, 2000 Over June 30, 1999 -------------------------------- Change Change Due to Due to Total Dollars in thousands Volume Rate Change -------- ------- ------- INTEREST-EARNING ASSETS: Securities--taxable $ 549 $ 260 $ 809 Securities--nontaxable (26) 20 (6) Federal funds sold (44) (1) (45) Loans 2,961 430 3,391 ------ ------ ------ TOTAL INTEREST INCOME 3,440 709 4,149 INTEREST-BEARING LIABILITIES: NOW accounts 21 (80) (59) Savings accounts (263) (89) (352) Money market accounts 472 310 782 Certificates of deposit 166 (88) 78 Short-term borrowings 1,866 1,259 3,125 Broker certificates (59) 31 (28) ------ ------ ------ TOTAL INTEREST EXPENSE 2,203 1,343 3,546 NET INTEREST INCOME (FULLY TAXABLE EQUIVALENT) $1,237 $ (634) $ 603 ====== ====== ======
ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATION 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 to be 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 disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. Page 12 FINANCIAL CONDITION During the first six months of 2000, consolidated assets increased by $73.4 million, or 7.9% to $1.0 billion. This increase was the result of an increase in the loan portfolio, including residential mortgages held for sale, of $54.3 million or 8.5% and an increase in the investment portfolio of $4.5 million or 1.9%. The increase in loans can be attributed to strong loan demand during the first six months of 2000. Additions were made to the investment portfolio during the first few months of 2000, 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 represent the Company's primary source of funds. Since December 31, 1999, deposits have increased by $9.1 million. Both of the Company's banking subsidiaries continue to experience substantial competition 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 $60.7 million or 34.9% since December 31, 1999. 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 six months of 2000, $1,288,000 was added to the reserve for loan losses based upon the expansion of the loan portfolio, resulting in an allowance of $10.6 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 Tier 1 and total risk based capital ratios at June 30, 2000, of 10.6% and 11.9%, respectively, exceed regulatory guidelines. The Company's Tier1 and total risk based capital ratios at December 31, 1999 were 11.7% and 13.0%, respectively. 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 its subsidiary banks to service its commitments. The Company, as the sole shareholder of its subsidiary banks, is entitled to dividends when and as declared by each bank's Board of Directors from legally available funds. Camden National Corporation declared dividends in the aggregate amount of $2.5 million and $5.6 million in the first six months of 2000 and 1999, respectively. During the first six months of 2000, the dividends declared by Camden National Bank included $1.1 million related to payments to shareholders of Camden National Corporation and $1.4 million related to contributions of capital by Camden National Bank to equalize the capital of the two subsidiary banks for the year 2000. UnitedKingfield Bank declared no dividends during the first six months of 2000 and $92,000 payable to shareholders during the first six months of 1999. Page 13 RESULTS OF OPERATIONS Net income for the six months ended June 30, 2000 was $6.5 million, an increase of $344,000 or 5.6% from 1999's first six month's net income of $6.2 million. For the three months ended June 30, 2000, net income was $3.3 million an increase of $211,000 or 6.8%, compared to $3.1 million for the same period in 1999. The major contributing factor was the increase in loans, 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, 2000 was $19.9 million, a 3.1% or $0.6 million increase over the net interest income for the first six months of 1999 of $19.3 million. Net interest income, on a fully taxable equivalent basis, for the three months ended June 30, 2000 was $9.9 million, a 1.2% or $122,000 increase over the net interest income, on a fully taxable equivalent basis, for the three months ended June 30, 1999. Interest income on loans increased by $3.4 million, or 12.9% and $1.8 million, or 13.6% during the six and three month periods compared to the same periods of 1999, respectively. This increase was due to the increase in loan volume as well as the increase in yields, from 8.91% during the first six months of 1999 to 9.04% during the first six months of 2000. The Company also experienced an increase in interest income on investments during the first six months of 2000 compared to the same period in 1999 due to increased volume as well as an increase in yields. The Company's net interest expense on deposits and borrowings increased during the first six months of 2000 compared to the same period in 1999. This majority of this increase was the result of increased volumes in the majority of the categories. The Company also saw an increase in the cost of short-term borrowings, from 4.84% during the first six months of 1999 to 6.01% during the first six months of 2000. 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 10-12 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 net interest margin on earning assets for the six months ended June 30, 2000 and 1999. The second of these tables presents average assets, liabilities and stockholders' equity for the six months ended June 30, 2000 and 1999. The third table presents an analysis of volume and rate change on net interest income and expense from June 30, 1999 to June 30, 2000. The Company utilizes off-balance sheet instruments such as interest rate swap agreements that have an effect on net interest income. There was an increase in net interest income of $14,000 during the first six months of 2000 compared to an increase of $5,000 in the first six months of 1999. During the three month periods ended June 30, 2000 and 1999, the decrease to net interest income was $10,000 and $2,000 respectively. NONINTEREST INCOME Total noninterest income increased by $523,000 or 14.5% in the first six months of 2000 compared to the first six months of 1999. Service charges on deposit accounts increased $73,000 or 5.2% for the first six months of 2000 compared to 1999. Other service charges and fees increased by $223,000 or 18.4% in the first six months of 2000 compared to 1999. The largest contributing factor to this increase was the fee income generated by merchant assessments. Other income increased by $227,000 or 22.5% in the first six months of 2000 compared to 1999. The major reason for this increase in other income was an increase in trust fees. Total noninterest income increased by $288,000 or 15.3% in the three months ended June 30, 2000 compared to the three months ended June 30, 1999. Service charges on deposit accounts increased $30,000 or 4.1% for the second quarter of 2000 compared to 1999. Other service charges and fees increased by $108,000 or 15.9% in the second quarter of 2000 compared to 1999. The largest contributing factor to this increase was the fee income generated by merchant assessments. Other income increased by $150,000 or 31.9% in the second quarter of 2000 compared to 1999. The major reason for this increase in other income was an increase in trust fees. Page 14 NONINTEREST EXPENSE Total noninterest expense increased by $867,000 or 7.1% in the first six months of 2000 compared to the first six months of 1999. Salaries and employee benefits cost decreased by $40,000 or 0.6% in the first six months of 2000 compared to 1999. This decrease was the result of reductions in staff due to the merger of United Bank and Kingfield Savings Bank. Other operating expenses increased by $912,000 or 22.8%. A contributing factor for this increase was the expense incurred to merge United Bank and Kingfield Savings Bank into one new bank during the first quarter. The Company also experienced increases in credit card, data processing, and various other general operating expenses. Total noninterest expense increased by $303,000 or 4.9% in the three months ended June 30, 2000 compared to the three months ended June 30, 1999. Salaries and employee benefits cost decreased by $93,000 or 2.9% in the second quarter of 2000 compared to 1999. This decrease was the result of reductions in staff due to the merger of United Bank and Kingfield Savings Bank. Other operating expenses increased by $571,000 or 29.8%. The Company experienced increases in credit card, data processing, and various other general operating expenses. 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. MARKET RISK Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices such as interest rates, foreign currency exchange rates, commodity prices and equity prices. The Company's primary market risk exposure is interest rate risk. The ongoing monitoring and management of this risk is an important component of the Company's asset/liability management process which is governed by policies established by the bank subsidiaries' Boards of Directors that are reviewed and approved annually. Each bank's Board of Directors delegates responsibility for carrying out the asset/liability management policies to that bank's Asset/Liability Committee ("ALCO"). In this capacity ALCO develops guidelines and strategies impacting the Company's asset/liability management-related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels/trends. INTEREST RATE RISK Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with the Company's financial instruments also change, thereby impacting net interest income ("NII"), the primary component of the Company's earnings. ALCO utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure of NII to sustained interest rate changes. While ALCO routinely monitors simulated NII sensitivity over a rolling two-year horizon, it also utilizes additional tools to monitor potential longer-term interest rate risk. The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning assets and liabilities reflected on the Company's balance sheet as well as for off-balance sheet derivative financial instruments. None of the assets used in the simulation were Page 15 held for trading purposes. This sensitivity analysis is compared to ALCO policy limits which specify a maximum tolerance level for NII exposure over a one-year horizon, assuming no balance sheet growth, given both a 200 basis point (bp) upward and downward shift in interest rates. A parallel and pro rata shift in rates over a 12-month period is assumed. The following reflects the Company's NII sensitivity analysis as measured during the second quarter of 2000. Estimated Rate Change Changes in NII +200bp (6.01%) -200bp 4.63% The preceding sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including, among others, the nature and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment/replacement of asset and liability cashflows. The assumptions differed in each of the four periods included in the sensitivity analysis above. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences might change. When appropriate, the Company may utilize off-balance sheet instruments such as interest rate floors, caps and swaps to hedge its interest rate risk position. The Board of Directors' approved hedging policy statements govern the use of these instruments by the bank subsidiaries. All off-balance sheet positions are reviewed as part of the asset/liability management process at least quarterly. The instruments are factored into the Company's overall interest rate risk position. As of June 30, 2000, the Company had a notional principal of $10 million in an interest rate swap agreement and $10 million in floor contracts. The Company uses interest rate swaps and floor instruments to hedge against potentially lower yields on the variable prime rate loan category in a declining rate in environment If rates were to decline, resulting in reduced income on the adjustable rate loans, there would be an increase income flow from the interest rate swap and floor instruments. The interest rate swap matures in 2004. The floor contract has a strike rate of 6% and matures in 2005. ALCO monitors the effectiveness of its derivative hedges relative to its expectation that a high correlation be maintained between the hedging instrument and the related hedged assets/liabilities. All outstanding positions are estimated to remain effective. While it is not the Company's practice to unwind derivative hedges prior to their maturity, any recognized gains/losses would be deferred in the Statement of Condition and amortized to interest income or expense, as required, over the remaining period of the original hedge. To the extent that a hedge were to be deemed ineffective due to a lack of correlation with the hedged items or if the hedged items were to be settled/terminated prior to maturity of the hedging instrument, then unrecognized gains/losses associated with the hedging instrument would be recognized in the income statement with subsequent accruals and gains/losses also included in the consolidated income statement in the period they occur. RECENT ACCOUNTING PRONOUNCEMENTS During 1999, the financial Accounting Standards Board issued SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise;" SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical Corrections;" SFAS No. 136, "Transfers of Assets to a Not-For-Profit Organization of Charitable Trust that Raises or Holds Contributions for Others;" and SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No. 133." SFAS No. 134, 135 and 136 have no effect on the financial condition and results of operations of the Company. Page 16 SFAS No. 133, which established accounting reporting standards for derivative instruments and for hedging activity, was amended by SFAS No. 137. SFAS No. 137 defers the effective date of SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. Management has not determined the impact, if any, of SFAS No. 133 on the Consolidated Financial Statements. ITEM 4. SUBMISSION MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The annual meeting of shareholders was held on May 2, 2000. (c) Matters voted upon at the meeting. 1) To elect as director nominees - Ann W. Bresnahan, Robert W. Daigle, Rendle A. Jones, and Arthur E. Strout to serve a three year term to expire at the annual meeting in 2003. Total votes cast: 6,837,318, with 6,795,119 for, and 42,199 withheld. 2) To ratify the selection of Berry, Dunn, McNeil & Parker as the Company's independent public accountants for 2000. Total votes cast: 6,837,318, with 6,814,247 for, 19,186 against, and 3,885 abstain. 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, are incorporated herein by reference. (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., are incorporated herein by reference. (23.1) Consent of Berry, Dunn, McNeil & Parker, LLC relating to the financial statements of Camden. (27) Financial Data Schedule. (b) Reports on Form 8-K. Current Report on Form 8-K filed with the Securities and Exchange Commission on January 3, 2000, as amended by a Form 8-KA filed on January 7, 2000, relating to the merger. Page 17 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) /s/ Robert W. Daigle August 14, 2000 - ------------------------------------- ------------------------- Robert W. Daigle Date President and Chief Executive Officer /s/ Susan M. Westfall August 14, 2000 - ------------------------------------- ------------------------- Susan M. Westfall Date Treasurer and Chief Financial Officer Page 18 EX-23.1 2 0002.txt CONSENT OF BERRY, DUNN, MCNEIL & PARKER, LLC EXHIBIT #23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As the independent public accountants of Camden National Corporation, we hereby consent to the incorporation of our report included in this Form 10-Q, into the Company's previously filed Registration File Number 333-95157. Berry, Dunn, McNeil & Parker, LLC Portland, Maine August 11, 2000 EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
9 1,000 6-MOS YEAR DEC-31-2000 DEC-31-1999 JAN-01-2000 JAN-01-1999 JUN-30-2000 DEC-31-1999 27,039 24,230 0 0 1,585 415 0 0 184,648 163,997 52,031 68,193 52,123 68,049 689,750 635,434 10,609 9,390 1,001,743 928,350 676,784 667,720 234,624 173,924 8,090 9,083 0 0 0 0 0 0 2,450 2,450 79,795 75,173 1,001,743 928,350 29,568 54,838 8,340 15,553 333 172 38,241 70,563 12,120 23,187 18,590 30,504 19,651 40,059 1,288 3,670 0 0 13,088 27,604 9,413 15,412 9,413 15,412 0 0 0 0 6,517 10,229 0.80 1.27 0.80 1.27 8.54 8.53 5,653 6,136 695 195 0 0 6,348 6,331 9,390 8,092 449 2,660 380 288 10,609 9,390 9,911 8,862 0 0 698 528
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