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