UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1998
Commission File No. 0-28190
CAMDEN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
MAINE 01-0413282
(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
Securities registered pursuant to Section 12(g) of the Act
Common Stock, without par value
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 29, 1999 is: Common stock - $98,062,905
The number of shares outstanding of each of the registrant's classes of
common stock, as of December 31, 1998 is: Common stock - 6,656,310
Listed hereunder are documents incorporated by reference and the Part of
the form 10-K into which the document is incorporated:
(1) Portions of the Annual Report to Stockholders for the year ended
December 31, 1998 are incorporated by reference into Part II, Items 5, 6, 7 and
8.
(2) The definitive Proxy Statement for the 1999 Annual Meeting of
Shareholders to be filed with the commission prior to April 30, 1999 pursuant to
Regulation 14A of the General Rules and Regulations of The Commission is
incorporated into Part III of the Form 10-K.
Index
Item # Description Page
- ------ ----------- ----
1 Business 3
2 Properties 8
3 Pending Legal Proceeding 9
4 Submission of Matters to a Vote of Security Holders 9
5 Market for Registrant's Common Equity and Related
Stockholders Matters 9
6 Selected Financial Data 9
7 Management's Discussion and Analysis of Financial
Condition and Results of Operation 10
7A Quantitative and Qualitative Disclosures about
Market Risks 18
8 Financial Statements and Supplementary Data 18
9 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 18
10 Directors and Executive Officers of the Registrant 19
11 Executive Compensation 19
12 Security Ownership of Certain Beneficial Owners
and Management 19
13 Certain Relationships and Related Transactions 19
14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 19
PART I
Item 1. Business
Camden National Corporation, ("the Company") is a multi-bank and financial
services holding company headquartered in Camden, Maine. The Company was founded
on January 2, 1985 as a result of a corporate reorganization, in which the
shareholders of Camden National Bank, which was founded in 1875, exchanged their
stock for shares of the Company, and Camden National Bank became a wholly-owned
subsidiary of the Company. As of December 29, 1995 the Company acquired 100% of
the outstanding stock of United Bank and 51% of the outstanding stock of Trust
Company of Maine, Inc. by merging with their then parent company, UNITEDCORP,
Bangor, Maine. As of December 31, 1998, the Company's securities consisted of
one class of common stock, no par value, of which there were 6,656,310 shares
outstanding held of record by approximately 802 shareholders.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries,Camden National Bank and United
Bank, and its majority-owned subsidiary, Trust Company of Maine, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
The Company's wholly-owned bank subsidiaries are independent commercial
banks with branches serving both mid-coast and central Maine. The banks are
full-service financial institutions that focus primarily on attracting deposits
from the general public through their branches and using such deposits to
originate residential mortgage loans, commercial business loans, commercial real
estate loans, and a variety of consumer loans. Camden National Bank is a
national banking organization based in Camden, Maine, and offers services in the
communities of Camden, Union, Rockland, Thomaston, Belfast, Bucksport,
Vinalhaven, Damariscotta, and Waldoboro. Camden National Bank is the largest
independent commercial bank in Maine. United Bank is a banking organization
chartered under the laws of the State of Maine based in Bangor, Maine, and
offers services in the communities of Bangor, Corinth, Hampden, Hermon, Jackman,
Greeville, Dover-Foxcroft, Milo and Winterport Maine.
The Company's majority-owned trust company subsidiary, Trust Company of
Maine, Inc., offers a broad range of trust and trust investment services, in
addition to retirement and pension plan management services. The financial
services provided by the Trust Company of Maine, Inc., complement the services
provided by the Company's bank subsidiaries by offering customers investment
management services.
The Company competes principally in mid-coast Maine through its largest
subsidiary, Camden National Bank. Camden National Bank considers its primary
market areas to be in two counties, Knox and Waldo counties. These two counties
have a combined population of approximately 76,000 people. The economy of the
these counties is based primarily on tourism, and is also supported by a
substantial population of retirees. Major competitors in these markets include
local branches of large regional bank affiliates, as well as local independent
banks, thrift institutions and credit unions. Other competitors for deposits and
loans within Camden National Bank's market include insurance companies, money
market funds, consumer finance companies and financing affiliates of consumer
durable goods manufacturers.
The Company, through United Bank, also competes in the central Maine area.
United Bank has approximately a 5% share of the market in its service area and
competes principally on the basis of service. The greater Bangor area has a
population of approximately 100,000 people. Major competitors in these markets
include local branches of large regional bank affiliates, as well as local
independent banks, thrift institutions and credit unions. Other competitors for
deposits and loans within United Bank's market include insurance companies,
money market funds, consumer finance companies and financing affiliates of
consumer durable goods manufacturers.
The Company is committed to the philosophy of serving the financial needs
of customers in local communities. The Company, through Camden National Bank and
United Bank has branches that are located in small towns within the Company's
geographic market areas. The Company believes that the local needs, and its
comprehensive retail and small business products, together with rapid
decision-making at the branch level, enable its banks to compete effectively. No
single person or group of persons provides a material portion of the Company's
deposits, the loss of any one or more of which would have a materially adverse
effect on the business of the Company, nor is a material portion of the
Company's loans concentrated within a single industry or group of related
industries.
The Company had consolidated asset growth of 16.4% or $94.1 million during
1998. The primary contributing factors to this growth were the increase in
lending activity and the acquisition of seven branches by the Company's bank
subsidiaries. As the business continued to grow during this past year, each
subsidiary focused on customer service. Supporting this concept, is the
Company's performance-based compensation program. This program is designed to
create an environment where employees take a more personal interest in the
performance of the Company and are rewarded for balancing profit with growth and
quality with productivity. The addition of new branches by both bank
subsidiaries create growth opportunities, and allows the banks to better service
its many customers already that were already in those markets.
The Company employs approximately 233 people on a full-time equivalent
basis. Management believes that employee relations are good, and there are no
known disputes between management and employees. Employees who are at least 21
years of age and who have worked for the Company for at least one year are
eligible for participation in the Company's Retirement Savings 401(k) Plan and
Defined Benefit Retirement Plan. Certain eligible employees of the Company also
receive group insurance benefits. Certain Executive Officers of the Company may
also participate in the 1993 Stock Option Plan and the Supplemental Executive
Retirement Plan.
As a registered bank holding company under the Bank Holding Company Act of
1956 (the "BHC Act"), the Company is subject to the regulations and supervision
of the Federal Reserve Bank (FRB). The BHC Act requires the Company to file
reports with the FRB and provide additional information requested by the FRB.
The Company must receive the approval of the FRB before it may acquire all or
substantially all of the assets of any bank, or ownership or control of the
voting shares of any bank if, after giving effect to such acquisition of shares,
the Company would own or control more than 5 percent of the voting shares of
such bank.
The Company and its subsidiaries, including any it may acquire or organize
in the future, will be deemed to be affiliates of Camden National Bank and
United Bank under the Federal Reserve Act. That Act establishes certain
restrictions which limit bank transactions with affiliates. The Company will
also be subject to restrictions on the underwriting and the public sale and
distribution of securities. It is prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, sale or lease of
property, or furnishing of services.
The Company will be prohibited from engaging in, or acquiring direct or
indirect ownership or control of more than 5 percent of the voting shares of any
company engaged in non-banking activities, unless the FRB by order or regulation
has found such activities to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
Federal Reserve Regulation "Y" (12 C.F.R. Part 225) sets forth those
activities which are regarded as closely related to banking or managing or
controlling banks and, thus, are permissible activities that may be engaged in
by bank holding companies, subject to approval in individual cases by the FRB.
Litigation has challenged the validity of certain activities authorized by the
FRB for the bank holding companies, and the FRB has various regulations and
applications in this regard still under consideration.
Under Maine law, dividends and other distributions by the Company with
respect to its stock are subject to declaration by the Board of Directors at its
discretion out of net assets. Dividends cannot be declared and paid when such
payment would make the Company insolvent or unable to pay its debts as they come
due.
FRB policy prohibits a bank holding company from declaring or paying a cash
dividend which would impose undue pressure on the capital of subsidiary banks or
would be funded only through borrowings or other arrangements that might
adversely affect the holding company's financial position. The policy further
declares that a bank holding company should not continue its existing rate of
cash dividends on its common stock unless its net income is sufficient to fully
fund each dividend and its prospective rate of earnings retention appears
consistent with its capital needs, asset quality and overall financial
condition. Other FRB policies forbid the payment by bank subsidiaries to their
parent companies of management fees which are unreasonable in amount or exceed a
fair market value of the services rendered (or, if no market exists, actual
costs plus a reasonable profit).
In addition, the FRB has authority to prohibit banks that it regulates from
engaging in practices which in the opinion of the FRB are unsafe or unsound.
Such practices may include the payment of dividends under some circumstances.
Moreover, the payment of dividends may be inconsistent with capital adequacy
guidelines. The Company may be subject, under State and/or Federal law, to
assessment to restore the capital of the Bank should it become impaired.
The Company is subject to the minimum capital requirements of the FRB. As a
result of these requirements, the growth in assets of the Company is limited by
the amount of its capital accounts as defined by the FRB. Capital requirements
may have an effect on profitability and the payment of distributions by the
Company. If the Company is unable to increase its assets without violating the
minimum capital requirements, or is forced to reduce assets, its ability to
generate earnings would be reduced.
The FRB has adopted guidelines utilizing a risk-based capital structure.
These guidelines apply to the Company on a consolidated basis.
The risk-based guidelines require the Company to maintain a level of
capital based primarily on the risk of its assets and off-balance sheet items.
Assets and off-balance sheet items are placed in one of four risk categories.
Assets in the first category, such as cash, have no risk and, therefore, carry a
zero percent risk-weight and require no capital support. Capital support is
required for assets in the remaining three risk categories--those categories
having a risk-weight of 20 percent, 50 percent and 100 percent, respectively.
A banking organization's risk-based capital ratio is calculated by dividing
its qualifying total capital base by its risk-weighted assets. Qualifying
capital is divided into two tiers. Core capital (Tier 1) consists of common
shareholders' equity capital, noncumulative perpetual preferred stock and
minority interests in equity capital accounts of consolidated subsidiaries, less
goodwill and other intangible assets. Supplementary capital (Tier 2) consists
of, among other items, allowance for possible loan and lease losses, cumulative
and limited-life preferred stock, mandatory convertible securities and
subordinated debt. Tier 2 capital will qualify as a part of the Bank's total
capital up to a maximum of 100 percent of the Bank's Tier 1 capital. Amounts in
excess of these limits may be issued but are not included in the calculation of
the risk-based capital ratio.
Under current guidelines, banking organizations must maintain a risk-based
capital ratio of 8 percent, of which at least 4 percent must be in the form of
core capital. The Company is and expects to remain in compliance with these
guidelines.
The purposes of the risk-based capital guidelines are twofold--to make
capital requirements more sensitive to differences in risk profiled among
banking organizations, and to aid in making the definition of bank capital
uniform internationally. To achieve these purposes, the guidelines recognize the
riskiness of assets by lowering capital requirements for some assets that
clearly have less risk than others, and they recognize that there are risks
inherent in off-balance sheet activities. The guidelines require that banking
organizations hold capital to support such activities. In addition, the
guidelines establish a definition of capital and minimum risk-based capital
standards which are consistent on an international basis and that place a
greater emphasis on equity capital.
The FRB has also adopted a minimum leverage ratio which is intended to
supplement the risk-based capital requirements and to insure that all financial
institutions continue to maintain a minimum level of capital. As with the
risk-based capital guidelines, the leverage capital guidelines apply to the
Company on a consolidated basis.
The leverage-based capital requirement stipulates that banking
organizations maintain a minimum level of Tier 1 capital to total assets. The
most highly rated banks in terms of safe and sound operation that are not
experiencing or anticipating significant growth are required to have Tier 1
capital equal to at least 3 percent of total assets. All other banks are
expected to maintain a minimum leverage capital ratio (i.e., Tier 1 capital
divided by total assets) in excess of the 3 percent minimum level. The FDIC
regulations require a financial institution to maintain a minimum ratio of 4
percent to 5 percent, depending on the condition of the institution.
The Company's leverage ratio is and its management expects it to remain in
excess of regulatory requirements.
Camden National Bank is a national bank organized under the laws of the
United States. Camden National Bank is a member of the Federal Reserve System
and its deposits are insured by the FDIC. Camden National Bank is subject to
regulation, supervision and regular examination by the Office of the Comptroller
of the Currency (the "OCC"). The ability of Camden National Bank to pay
dividends is subject to the banking laws of the United States and to the powers
of the OCC and the FDIC. Under federal banking law, dividends can only be paid
out of the retained earnings of Camden National Bank's current and two preceding
fiscal years, or with the prior approval of the OCC. Under federal banking
regulation, a bank is prohibited from declaring a dividend or from making any
other capital distribution if the payment or distribution would cause the bank
to fail to meet minimum capital requirements.
United Bank is a banking organization chartered under the laws of the State
of Maine. United Bank is subject to regulation, supervision and regular
examination by the Federal Deposit Insurance Corporation (the "FDIC") and the
Maine State Bureau of Banking. Under Maine law, dividends are subject to
declaration by the Board of Directors at its discretion. Dividends cannot be
declared and paid when such payment would make the bank insolvent or unable to
pay its debts as they come due.
The principal sources of funds essential to the business of banks and bank
holding companies are deposits, stockholders' equity, and borrowed funds. The
availability of these various sources of funds and other potential sources, such
as preferred stock or commercial paper, and the extent to which they are
utilized, depends on many factors, the most important of which are the FRB's
monetary policies and the relative costs of different types of funds. An
important function of the FRB is to regulate the national supply of bank credit
in order to combat recession and curb inflationary pressure. Among the
instruments of monetary policy used by the FRB to implement these objectives are
open market operations in United States Government securities, changes in the
discount rate on bank borrowings, and changes in reserve requirement against
bank deposits. The monetary policies of the FRB have had a significant effect on
the operating results of commercial banks in the past and are expected to
continue to do so in the future. In view of the recent changes in regulations
affecting commercial banks and other actions and proposed actions by the federal
government and its monetary and fiscal authorities, including proposed changes
in the structure of banking in the United States, no predication can be made as
to future changes in interest rates, credit availability, deposit levels, the
overall performance of banks generally or of the Company.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was
enacted by Congress in September of 1994. Under the Act, beginning on September
29, 1995, bank holding companies may acquire banks in any state, notwithstanding
contrary state law, and all banks commonly owned by a bank holding company may
act as agents for one another. An agent bank may receive deposits, renew time
deposits, accept payments, and close and service loans for its principal bank,
but will not be considered a branch of that principal bank.
A bank may also merge with a bank in another state or operate either office
as a branch, notwithstanding pre-existing contrary state law. This interstate
merger provision became automatically effective in all states on June 1, 1997,
unless 1) the law became effective in a given state at any earlier date selected
by legislation in that state; or 2) the law did not become effective at all in a
given state because by legislation enacted before June 1, 1997 that state opts
out of coverage by the interstate merger provision. Upon consummation of an
interstate merger, the resulting bank may acquire or establish branches on the
same basis that any participant in the Merger could have if the Merger had not
taken place.
Banks may also merge with branches of banks in other states without merging
with the banks themselves, or may establish de novo branches in other states, if
the laws of the other states expressly permit such mergers or such interstate de
novo branching.
Item 2. Properties
The Company operates in thirteen facilities. The Main Office of the
Company and Camden National Bank is at Two Elm Street, Camden, Maine, and is
owned by Camden National Bank. The building has 15,500 square feet of space on
three levels. Camden National Bank also owns three of its branches and the
facility in which the operations departments of the Company are located. None of
the owned facilities is subject to a mortgage. Camden National Bank also leases
three branches under long-term leases,which expire in May of 2010, January of
2020 and December of 2077.
The Main Office of United Bank is at 145 Exchange Street, Bangor, Maine,
and is owned by United Bank. The building has 25,600 square feet of space on two
levels. United Bank occupies 16,975 square feet of space on both floors. The
Trust Company of Maine, Inc., a non-depository trust company and a subsidiary of
the Company leases 2,100 square feet of office space on the second floor of the
facility and its wholly owned subsidiary, Fiduciary Services, Inc., leases 2,042
square feet on the first floor of the facility. Other occupants of the facility
include the Law Firm of Russell, Lingley & Silver, P.A., 2,533 square feet on
the second floor and L&H Investors, a property management firm and Cullen
Williams, CPA, who have a joint lease on 1,920 square feet on the second floor.
United Bank also owns three of its other facilities, none of which is subject to
a mortgage. United Bank also leases three branches, which expire in December of
1999, May of 2001 and September of 2002.
Item 3. Pending Legal Proceedings
The Company is not involved in any material pending legal proceedings,
other than ordinary, routine litigation incidental to the business of the
Company and its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
There were no items submitted to a vote of security holders of the Company
during the fourth quarter of 1998.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders
Matters
The information required is contained on page 13 of the Company's Annual
Report to Shareholders for the year ended December 31, 1998 and is incorporated
herein by reference.
Item 6. Selected Financial Data
Selected year-end financial information for the past five years is
contained on page 15 of the Company's Annual Report to Shareholders for the year
ended December 31, 1998 and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information contained in the section captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 8
through 13 of the Company's Annual Report to Shareholders for the year ended
December 31, 1998 should be read in conjunction with the following text and
tables, and is incorporated herein by reference.
The following table set forth the Company's investment securities at book
carrying amount as of December 31, 1998, 1997, and 1996.
<TABLE>
Dollars in thousands 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available for sale:
U.S. Treasury and agency $ 7,095 $ 4,312 $ 12,616
Mortgage-backed securities 60,852 -0- -0-
State and political subdivisions 8,143 -0- 31
Other debt securites 2,025 -0- -0-
Equity securities 20,128 14,084 7,516
-------- -------- --------
98,243 18,396 20,163
-------- -------- --------
Securities held to maturity:
U.S. Treasury and agency 6,093 48,566 58,433
Mortgage-backed securities 81,139 109,373 79,259
State and political subdivisions 1,338 2,955 5,524
-------- -------- --------
88,570 160,894 143,216
-------- -------- --------
$186,813 $179,290 $163,379
======== ======== ========
</TABLE>
To enhance the Company's ability to manage liquidity, the investment
portfolio is divided into two parts: Investments available for sale and
investments held to maturity. The ability to use securities as collateral for
Federal Home Loan Bank loans enables the Company to hold a portion of the
portfolio to maturity. The following table summarizes the investment portfolio
maturities and yields at December 31, 1998.
<TABLE>
Available for sale Held to maturity
------------------ --------------------
Book Yield to Amortized Yield to
Value maturity Cost maturity
------- -------- --------- --------
Dollars in thousands
<S> <C> <C> <C> <C>
U.S. Treasury and Agency:
Due in 1 year or less $ 704 6.15% $ 5,793 6.99%
Due in 1 to 5 years 1,326 5.82% 300 3.71%
Due in 5 to 10 years 5,065 5.91% -0- 0.00%
Due after 10 years -0- 0.00% -0- 0.00%
------- -------- -------- --------
7,095 5.92% 6,093 6.83%
------- -------- -------- --------
Mortgage-backed securities:
Due in 1 year or less -0- 0.00% -0- 0.00%
Due in 1 to 5 years -0- 0.00% 3,562 6.35%
Due in 5 to 10 years 10,349 5.79% 8,556 7.88%
Due after 10 years 50,503 6.53% 69,021 8.23%
------- -------- -------- --------
60,852 6.41% 81,139 8.12%
------- -------- -------- --------
State and political subdivisions:
Due in 1 year or less -0- 0.00% 176 7.27%
Due in 1 to 5 years -0- 0.00% 1,063 6.93%
Due in 5 to 10 years 2,720 4.03% -0- 0.00%
Due after 10 years 5,423 4.18% 99 9.56%
------- -------- -------- --------
8,143 4.13% 1,338 7.17%
------- -------- -------- --------
Other debt security:
Due in 1 year or less -0- 0.00% -0- 0.00%
Due in 1 to 5 years -0- 0.00% -0- 0.00%
Due in 5 to 10 years -0- 0.00% -0- 0.00%
Due after 10 years 2,025 7.19% -0- 0.00%
------- -------- -------- --------
2,025 7.19% -0- 0.00%
------- -------- -------- --------
Other equity securities:
Due in 1 year or less -0- 0.00% -0- 0.00%
Due in 1 to 5 years -0- 0.00% -0- 0.00%
Due in 5 to 10 years -0- 0.00% -0- 0.00%
Due after 10 years 20,128 6.67% -0- 0.00%
------- -------- -------- --------
20,128 6.67% -0- 0.00%
------- -------- -------- --------
$98,243 6.25% $ 88,570 8.01%
======= ======== ======== ========
</TABLE>
Total loans increased by $75.8 million, or 20.9%, in 1998. The following
table provides a summary of the loan portfolio for the past five years.
Management does not foresee any significant changes occurring in the loan mix
during the coming year.
<TABLE>
Dollars in thousands
<CAPTION>
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial, other $142,270 $121,093 $ 99,694 $ 82,622 $ 77,126
Commercial, real estate 91,399 69,558 55,104 56,397 53,766
Real estate construction 3,726 3,731 2,706 2,123 3,445
Residential real estate 141,071 121,363 116,520 107,412 96,456
Consumer 60,481 47,404 37,222 36,548 34,683
-------- -------- -------- -------- --------
$438,947 $363,149 $311,246 $285,102 $265,476
======== ======== ======== ======== ========
</TABLE>
Loan demand also affects the Company's liquidity position. However, of the
loans maturing over one year, approximately 60% are variable rate loans. The
following table presents the maturities of loans at December 31, 1998.
<TABLE>
Dollars in thousands Through More Than
<1 Year 5 Years 5 Years Total
------- ------- -------- ------
<S> <C> <C> <C> <C>
Maturity Distribution:
Fixed Rate:
Commercial, other $10,570 $23,578 $ 9,126 $43,274
Commercial, real estate 5,157 14,611 3,470 23,238
Real estate construction 3,726 0 0 3,726
Residential real estate 800 524 69,022 70,346
Consumer 4,348 14,074 11,658 30,080
Variable Rate:
Commercial, other 26,541 17,812 37,444 81,797
Commercial, real estate 7,545 8,302 52,314 68,161
Real estate construction 0 0 0 0
Residential real estate 5 587 70,133 70,725
Consumer 5,301 6,240 18,860 30,401
State and municipal 14,365 697 2,137 17,199
------- ------- -------- --------
$78,358 $86,425 $274,164 $438,947
======= ======= ======== ========
</TABLE>
Management considers both the adequacy of the collateral and the other
resources of the borrower in determining the steps to be taken to collect
non-accrual and charged-off loans. Alternatives that are considered are
foreclosure, collecting on guarantees, restructuring the loan, or collection
lawsuits.
The following table sets forth the amount of the Company's non-performing
assets as of the dates indicated:
<TABLE>
Dollars in thousands
<CAPTION>
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonperforming loans:
Non-accrual loans $1,710 $1,215 $1,674 $2,631 $1,660
Accruing loans past due
90 days or more 612 1,004 599 353 1,217
Restructured loans (in
compliance with
modified terms) -0- -0- -0- -0- -0-
------ ------ ------ ------ ------
Total nonperforming loans 2,322 2,219 2,273 2,984 2,877
Other real estate owned 905 1,373 1,264 1,086 1,606
------ ------ ------ ------ ------
Total Nonperforming assets $3,227 $3,592 $3,537 $4,070 $4,483
====== ====== ====== ====== ======
Ratios:
Nonperforming loans to
total loans 0.53% 0.61% 0.73% 1.05% 1.08%
Allowance for loan losses
to nonperforming loans 280.45% 254.17% 196.74% 136.73% 130.38%
Nonperforming assets to
total assets 0.48% 0.63% 0.69% 0.85% 0.98%
Allowance for loan losses
to nonperforming assets 201.80% 157.02% 126.43% 100.25% 83.67%
</TABLE>
Interest foregone on non-accrual loans was approximately $130,000,
$147,000, $178,000, $207,000 and $98,000 for 1998, 1997, 1996, 1995 and 1994,
respectively. Interest income recognized on non-accrual loans during 1998 was
$89,023.
Management believes that the level of the allowance for loan losses at
December 31, 1998 of $6.5 million, or 1.48% of total loans outstanding was
appropriate given the current economic conditions in the Company's service area
and the overall condition of the loan portfolio. When determining the amount of
provision for loan losses annually management relies on its review of the loan
portfolio both to ascertain whether there are probable losses to be written off,
projected loan mix and loan volumes, historical net loan loss experience, and to
assess the loan portfolio in the aggregate.
The following table summarizes the activity in the allowance for loan
losses for the years ended December 31, 1998, 1997, 1996, 1995 and 1994.
<TABLE>
Dollars in thousands
<CAPTION>
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance beginning
of period $5,640 $4,472 $4,080 $3,751 $4,050
Provisions for loan losses 1,376 1,677 838 899 216
Charge-offs:
Commercial 201 629 222 413 392
Residential real estate 264 135 191 248 188
Consumer 305 328 243 198 106
------ ------ ------ ------ ------
Total Charge-offs 770 1,092 656 859 686
Recoveries:
Commercial 136 425 55 174 62
Residential real estate 9 36 27 4 3
Consumer 121 122 128 111 106
------ ------ ------ ------ ------
Total Recoveries 266 583 210 289 171
Net Charge-offs 504 509 446 570 515
------ ------ ------ ------ ------
Balance end of period $6,512 $5,640 $4,472 $4,080 $3,751
====== ====== ====== ====== ======
Average loans
outstanding $393,214 $336,030 $298,596 $282,094 $253,439
Net charge-offs as a
percentage of average loans 0.13% 0.15% 0.15% 0.20% 0.20%
Provision for loan losses
to average loans 0.35% 0.50% 0.28% 0.32% 0.09%
Ending allowance for loan losses to:
Total loans at end
of period 1.48% 1.55% 1.44% 1.43% 1.42%
Net charge-offs during
period 1292.06% 1108.06% 1002.69% 715.79% 728.35%
Nonperforming loans at
end of period 280.45% 254.17% 196.74% 136.73% 130.38%
</TABLE>
The following table summarizes the allocation of the allowance for loan
losses among the Company's loan categories for the years ended December 31,
1998, 1997, 1996, 1995 and 1994.
<TABLE>
Dollars in thousands
<CAPTION>
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Balance at
end of period
applicable to: Amount % Amount % Amount % Amount % Amount %
------ -- ------ -- ------ -- ------ -- ------ --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, other $2,164 33% $2,418 34% $1,780 32% $1,536 30% $1,516 30%
Commercial,
real estate 903 20% 1,261 19% 1,100 18% 753 20% 658 20%
Residential
real estate 1,872 33% 601 34% 551 39% 347 37% 451 37%
Consumer 664 14% 582 13% 492 11% 447 13% 443 13%
Unfunded commitments 324 NA 366 NA 252 NA 211 NA 221 NA
Unallocated 585 NA 412 NA 297 NA 786 NA 462 NA
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Total $6,512 100% $5,640 100% $4,472 100% $4,080 100% $3,751 100%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
The maturity of certificates of deposit in denominations of $100,000 or
more is set forth in the following table. These deposits are generally
considered to be more rate sensitive than other deposits and, therefore, more
likely to be withdrawn to obtain higher yields elsewhere if available.
<TABLE>
Dollars in thousands
<CAPTION>
December 31, 1998
----
<S> <C>
Time remaining until maturity:
Less than 3 months $12,060
3 months through 6 months 12,170
6 months through 12 months 14,990
Over 12 months 10,902
-------
$50,022
=======
</TABLE>
The dividend payout ratio was 38.88%, 33.34%, 27.59%, 18.67%, and 12.78%
for 1998, 1997, 1996, 1995 and 1994 respectively. The average equity to average
assets ratio was 10.63%, 10.86%, 11.32%, 10.92%, and 10.24% for 1998, 1997,
1996, 1995 and 1994 respectively.
The borrowings utilized by the Company primarily have been advances from
the FHLB of Boston. In addition, the Company utilizes fed funds, treasury, tax
and loan deposits, and repurchase agreements, secured by the United States
Government or Agency securities. The major portion of all borrowings matures or
reprices within the next six months. The following table sets forth certain
information regarding borrowed funds for the years ended December 31, 1998,
1997, and 1996.
<TABLE>
Dollars in thousands
<CAPTION>
Total borrowings:
At or For the year ended
December 31, 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Average balance outstanding $ 72,300 $132,297 $73,069
Maximum amount outstanding at
any month-end during the year 133,378 163,884 93,760
Balance outstanding at end of year 90,158 132,478 93,760
Weighted average interest rate
during the year 5.18% 5.53% 5.45%
Weighted average interest rate
at end of year 4.74% 5.49% 5.35%
</TABLE>
Interest rate sensitivity or "Gap" management involves the maintenance of
an appropriate balance between interest sensitive assets and interest sensitive
liabilities to reduce interest rate risk exposure while also providing liquidity
to satisfy the cash flow requirements of operations and to meet customers'
fluctuating demands for funds, either in terms of loan requests or deposit
withdrawals. Major fluctuations in net interest income and net earnings could
occur due to imbalances between the amounts of interest-earning assets and
interest-bearing liabilities, as well as different repricing characteristics.
Gap management seeks to protect earnings by maintaining an appropriate balance
between interest-earning assets and interest-bearing liabilities in order to
minimize fluctuations in the net interest margin and net earnings in periods of
volatile interest rates.
The following table set forth the amount of interest-earning assets and
interest-bearing liabilities outstanding, at December 31, 1998 which are
anticipated by the Company, based upon certain assumptions, to reprice or mature
in each of the future time periods shown.
<TABLE>
<CAPTION>
Dollars in thousands Through More Than
<1 Year 5 Years 5 Years Total
Interest-earning assets: -------- -------- -------- -----
Interest-earning assets:
<S> <C> <C> <C> <C>
Loans
Fixed $ 38,966 $ 53,484 $ 95,413 $187,863
Variable 251,084 -0- -0- 251,084
Investment securities
Available for sale 704 1,326 96,213 98,243
Held to maturity 5,969 4,925 77,676 88,570
-------- -------- -------- --------
Total interest-earning assets 296,723 59,735 269,302 625,760
-------- -------- -------- --------
Interest-bearing liabilities:
Savings accounts 15,000 -0- 65,908 80,908
NOW accounts -0- -0- 62,094 62,094
Money market accounts 53,393 -0- -0- 53,393
Certificate accounts 188,083 59,325 467 247,875
Borrowings 90,158 -0- -0- 90,158
-------- -------- -------- --------
Total interest-bearing
liabilities 346,634 59,325 128,469 534,428
-------- -------- -------- --------
Interest sensitivity gap
per period $(49,911) $ 410 $140,833
======== ======== ========
Cumulative interest
sensitivity gap $(49,911) $(49,501) $ 91,332
======== ======== ========
Cumulative interest
sensitivity gap as a
percentage of total assets (8%) (7%) 14%
Cumulative interest-earning
assets as a percentage of
interest-sensitive liabilities 86% 88% 117%
</TABLE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
Included in the Company's 1998 Annual Report to Shareholders on pages 15-16 and
is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following financial statements and report of independent accountant,
included in the Company's 1998 Annual Report to Shareholders, are incorporated
herein by reference. Page references are to pages of the Company's 1998 Annual
Report to Shareholders.
PAGE
Report of Independent Public Accountant 41
Consolidated Statements of Financial Condition
December 31, 1998 and 1997 19
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996 20
Consolidated Statements of Changes in the Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996 21
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 22
Notes to Consolidated Financial Statements 23-40
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
During the past two years the Company has not made changes in and has not
had disagreements with its independent accountant.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Company responds to this item by incorporating herein by reference the
material responsive to such item in the Company's definitive Proxy Statement for
the 1999 Annual Meeting of Shareholders to be filed with the Commission prior to
April 30, 1999.
Item 11. Executive Compensation
The Company responds to this item by incorporating herein by reference to
the material responsive to such item in the Company's definitive Proxy Statement
for the 1999 Annual Meeting of Shareholders to be filed with the Commission
prior to April 30, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Company responds to this item by incorporating herein by reference to
the material responsive to such item in the Company's definitive Proxy Statement
for the 1999 Annual Meeting of Shareholders to be filed with the Commission
prior to April 30, 1999.
Item 13. Certain Relationships and Related Transactions
The Company responds to this item by incorporating herein by reference to
the material responsive to such item in the Company's definitive Proxy Statement
for the 1999 Annual Meeting of Shareholders to be filed with the Commission
prior to April 30, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Index to Financial Statements:
A list of the consolidated financial statements of the Company and
report of independent public accountant incorporated herein is included in Item
8 of this Report.
2. Financial Statement Schedules:
Schedules have been omitted because they are not applicable or are not
required under the instructions contained in Regulation S-X or because the
information required to be set forth therein is included in the consolidated
financial statements or notes thereto.
3. Exhibits filed herewith:
(3.i) The Articles of Incorporation of Camden National Corporation, as
amended to date, Exhibit 3.i to the Company's Registration statement
Form S-4 filed with the Commission on September 25, 1995, file number
33-97340, are incorporated herein by reference.
(3.i) 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, between Knox Hotel Associates(Lessor) and
Camden National Bank (Lessee)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, between Milliken, Tomlinson Company (Lessor)
and Camden National Bank (Lessee) filed with Form 10-K, December 31,
1995, and is incorporated herein by reference.
(10.3) Lease Agreement for the facility occupied by the Hampden Branch of
United Bank, Parway Realty Development Corporation (Lessor) and United
Bank (Lessee) filed with Form 10-K, December 31, 1995, and is
incorporated herein by reference.
(10.4) Camden National Corporation 1993 Stock Option Plan, filed with Form
10-K, December 31, 1995, and is incorporated herein by reference.
(10.5) UNITEDCORP Stock Option Plan, filed with Form 10-K, December 31, 1995,
and is incorporated herein by reference.
(10.6) Lease Agreement for the facility occupied by the Damariscotta Branch
of Camden National Bank, between Keybank National Association (Lessor)
and Camden National Bank (Lessee).
(10.7) Lease Agreement for the facility occupied by the Milo Branch of United
Bank, between Cabrel company (Lessor) and United Bank (Lessee).
(10.8) Lease Agreement for the facility occupied by the Dover-Foxcroft Branch
of United Bank, between Bangor Savings Bank (Lessor) and United Bank
(Lessee).
(13) Camden National Corporation's 1998 Annual Report to Shareholders.*
(21) Subsidiaries of the Company
(27) Financial Data Schedule
*Deemed filed only with respect to those portions thereof incorporated herein by
reference
(b) Reports on Form 8-K. None filed.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
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)
Keith C. Patten (signature) 3/30/99
- ---------------------------------------------------------
Keith C. Patten Date
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Keith C. Patten (signature) 3/30/99 Susan M. Westfall (signature) 3/30/99
- ------------------------------------- -------------------------------------
Keith C. Patten Date Susan M. Westfall Date
President and Director Treasurer and
Chief Executive Officer Chief Financial Officer
Rendle A. Jones (signature) 3/30/99 John S McCormick, Jr.(signature)3/30/99
- ------------------------------------- --------------------------------------
Rendle A. Jones, Director Date John S. McCormick, Jr., Director Date
Chairman and Director
Peter T. Allen (signature) 3/30/99 Richard N. Simoneau (signature) 3/30/99
- ------------------------------------- --------------------------------------
Peter T. Allen, Director Date Richard N. Simoneau, Director Date
Ann W. Bresnahan (signature) 3/30/99 Arthur E. Strout (signature) 3/30/99
- ------------------------------------- --------------------------------------
Ann W. Bresnahan, Director Date Arthur E. Strout, Director Date
Robert J. Gagnon (signature) 3/30/99 Robert W. Daigle (signature) 3/30/99
- ------------------------------------- --------------------------------------
Robert J. Gagnon, Director Date Robert W. Daigle, Director Date
John W. Holmes (signature) 3/30/99 Royce M. Cross (signature) 3/30/99
- ------------------------------------- --------------------------------------
John W. Holmes, Director Date Royce M. Cross, Director Date
Exhibit #21 Subsidiaries of the Company
Camden National Bank
United Bank
Trust Company of Maine, Inc.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 14,938
<INT-BEARING-DEPOSITS> 444,270
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 98,243
<INVESTMENTS-CARRYING> 88,570
<INVESTMENTS-MARKET> 91,579
<LOANS> 438,947
<ALLOWANCE> 6,512
<TOTAL-ASSETS> 667,951
<DEPOSITS> 508,573
<SHORT-TERM> 90,158
<LIABILITIES-OTHER> 5,118
<LONG-TERM> 0
0
0
<COMMON> 2,436
<OTHER-SE> 61,666
<TOTAL-LIABILITIES-AND-EQUITY> 667,951
<INTEREST-LOAN> 37,845
<INTEREST-INVEST> 10,937
<INTEREST-OTHER> 33
<INTEREST-TOTAL> 48,815
<INTEREST-DEPOSIT> 17,017
<INTEREST-EXPENSE> 20,750
<INTEREST-INCOME-NET> 28,065
<LOAN-LOSSES> 1,376
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 17,073
<INCOME-PRETAX> 14,114
<INCOME-PRE-EXTRAORDINARY> 14,114
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,645
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.41
<YIELD-ACTUAL> 8.88
<LOANS-NON> 1,710
<LOANS-PAST> 612
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,322
<ALLOWANCE-OPEN> 5,640
<CHARGE-OFFS> 770
<RECOVERIES> 266
<ALLOWANCE-CLOSE> 6,512
<ALLOWANCE-DOMESTIC> 6,512
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 585
</TABLE>
Annual Report / Cover
CNC Logo
(sailboat with CNC in base)
Camden National Corporation 1998 Annual Report
Round picture with family of 8
(6" wide x 4.5" tall)
Providing Financial Solutions
---------- For Generations ----------
[Inside front cover]
Camden National Corporation Logo
(sailboat with CNC in base)
Generational Banking: Family Finances
For the New Millennium
Camden National Corporation and its subsidiaries
have been serving the financial needs of customers
for generations. In 1998, the Company embraced the
theme of generational banking and introduced the
innovative Generations Gold Family Club Checking
Account. Generations Gold has become our banks'
signature account, offering families valuable
discounts in a number of significant areas. In 1999
and beyond, Camden National will continue to
develop products that address the specific needs
of each generation in the communities we serve.
Cover Photo
The McFarlands... Generations Gold Family
Generations Gold Logo
(sunburst with Generation Gold inside)
[Page 1]
Historical Financial Data
1978 - 1998
Return Return
on on
Year Total Net Earnings Average Average Dividends Stock
End Assets Income Per Share Assets Equity Per Share Splits
1998 $667,951 $ 9,645 $ 1.43 1.62% 15.23% $.55 12/98- 3:1 Split
1997 573,892 9,145 1.34 1.65 15.20 .45
1996 510,078 8,115 1.16 1.65 14.56 .32
1995 480,685 7,403 1.05 1.59 14.53 .20
1994 455,615 8,258 1.17 1.90 18.56 .15
1993 414,044 7,135 1.02 1.79 19.02 .10 07/93- 30:1 Split
1992 386,341 6,108 .88 1.69 19.16 .11
1991 336,749 4,724 .68 1.45 17.29 .05
1990 282,713 4,050 .62 1.51 19.67 .05
1989 244,913 3,984 .61 1.78 23.42 .04
1988 201,096 3,175 .49 1.71 23.26 .04
1987 175,125 2,150 .33 1.40 19.22 .03
1986 141,688 1,764 .27 1.45 18.40 .03
1985 110,389 1,470 .22 1.44 17.96 .03
1984 95,065 1,227 .18 1.43 17.49 .02
1983 80,310 952 .14 1.32 15.67 .02
1982 65,618 803 .12 1.26 15.08 .02
1981 58,965 656 .10 1.17 13.93 .02
1980 53,557 456 .07 0.90 10.80 .02
1979 46,557 477 .08 1.10 12.70 .01
1978 42,779 431 .07 1.10 13.40 .01
Per share amounts have been restated to reflect stock splits during the periods
presented. Data prior to 1991 excludes United Bank and Trust Company of Maine,
Inc.
[Page 2] Letter from CEO of the Corporation
Top of page has CNC Logo (Sailboat with CNC in base)
Dear Shareholders:
It is again a pleasure to report that Camden National Corporation (the
"Company") achieved record operating results for 1998. Total net earnings for
the year increased from $9,148,000 to $9,645,000. This increase of $497,000 was
achieved during a year of expansion with Camden National Bank's purchase of four
branches and United Bank's acquisition of three branches, along with their
establishment of a de novo branch. Considering the one-time expenses related to
the acquisitions and start-up, the development costs for internet banking, and
the investment to ensure the century date change (Y2K) will be a non-event for
our customers, it was a good year for the Company.
Both banks posted good deposit and loan growth even after accounting for
the acquisition totals of $87,330,000 and $18,540,000, respectively. Total
deposit growth of $135,164,000 provided the source of funds for current year and
future loan and investment growth, and loan growth of $75,795,000 produced
higher levels of interest income, all necessary components for improving
performance.
The focus of your Company has and will continue to be ever improving
performance to enhance shareholder value by concentrating on long-term growth
and profitability. Sometimes it is beneficial to forgo some level of current
income to position the Company or one of its affiliates to achieve higher levels
of performance. It is expected that this past year's branch expansions and the
internet banking product will provide the catalyst.
As the large banks put less and less emphasis on small town business and
leave rural Maine to the community banks, their customers have become more
disenchanted and appreciate the responsiveness and attention Camden
National Bank, United Bank and Trust Company of Maine provide. This is our
strength as we believe in the concept of Community Banking and providing
our customers with advanced technology, but never at the expense of
friendly, helpful service. As you can see by reviewing page 1 of this
report, Camden National Corporation is proud of the growth it has
experienced in assets, net profits and overall financial performance over
these many years, and we wanted to share these accomplishments with you. As
you will recall, Camden National Corporation was rated the sixth best
performing mid-sized banking company in the country in 1998 by U.S. Banker,
and these numbers explain some of the reasons why. On a more personal note,
it is with mixed emotions that I acknowledge this to be my last Letter to
the Shareholders, having set May 4 as my retirement date. I have truly
enjoyed working for this very fine organization for the past 22 years and
with its talented staff and Board of Directors. But now it is time to
concentrate my energies on fishing the rivers of the world. I thank the
Board of Directors, Management, staff and you, the Shareholders, for your
assistance and support. I promised your Directors that I would not retire
until I felt very comfortable with management succession. A plan was put in
place more than three years ago with the hiring of Robert Daigle, who will
be the new President of Camden National Corporation as well as retaining
this same position with Camden National Bank. Rendle Jones will succeed me
as Chairman of Camden National Bank in addition to his current role as
Chairman of Camden National Corporation. Robert Daigle, a seasoned banker
with strong people skills and a dedication to community banking, will ably
provide the vision to lead this Company into the next millennium. Rendle
Jones has worked diligently for the past eleven years as a Director to
truly understand the business of banking and is well qualified to work with
the other Directors in setting policy and providing direction for your
Company. With the strength and experience we have gained through the
success of our past, we are well positioned to meet the challenges of the
future. A strong management team and dedicated staff of very competent
people supported by a talented Board of Directors have the strength and
vision to continue the forward progress of your Company. They are all
dedicated to building shareholder value to earn your continuing support.
Sincerely,
Keith C. Patten (signature)
Keith C. Patten
President & CEO
[Page 3] This page contains letters to the shareholders from the three
subsidiary companies CEO's.
United Bank LOGO
Dear Shareholders:
As I reflect upon the many achievements of United Bank during the past year,
I am reminded yet again that community banking is truly a people business. We
have long focused upon attracting and retaining a core group of highly motivated
and results-oriented employees and providing them with the support necessary for
exceptional achievement. The success of that policy was manifested over the past
year as all staff levels exceeded expectations and provided the most productive
year in the bank's history. Particularly notable in a year of many firsts was
net earnings performance. United Bank exceeded its 1998 earnings projections,
reporting net earnings in excess of $1.2 million. This represents a 28% increase
over the prior year's record earnings performance. The 1998 asset growth of
nearly 68% was in part the result of the purchase of existing branch banks in
Dover-Foxcroft, Greenville and Milo, and the establishment of a new branch in
the Waldo County community of Winterport. In each community United Bank replaced
existing or previously closed branches operated by Fleet Bank of Maine. The
assimilation of these new banks into our branch system was accomplished with a
minimum of customer disruption. Expanded service hours, local management and a
full range of bank products and services has resulted in new customer growth in
each of these communities.
As we prepare to enter the 21st century, I am confident that United Bank will
continue to find opportunity in the many challenges facing our industry. To our
holding company and to each of its shareholders, our thanks for providing a
supportive environment in which extraordinary performance may become routine.
Sincerely,
Bruce D. Bartlett (signature)
Bruce D. Bartlett
President, Treasurer & CEO
Camden National Bank Logo
Dear Shareholders:
While 1998 proved to be a year of many challenges, it was filled equally with
a number of rewarding developments. From expanding our franchise to getting a
leg-up preparing for the new millennium, the entire Camden National family once
again rose to the occasion, contributing to another year of solid financial
results.
Net income of $8,404,972 was up 2.6% over 1997 with the positive effect of a
15% increase in average loan outstandings and 22% growth in average deposit
balances having been somewhat muted by onetime charges relating to franchise
expansion and Y2K compliance, coupled with lower investment income resulting
from a falling interest rate environment. The latter notwithstanding, overall
performance ratios, including return on assets of 1.68% and return on equity of
15.36%, continued to be well above the ban s national peer group.
The geographic expansion into two new counties--Lincoln County to the south
and Hancock County to the north--certainly had to be one of the highlights of
our year, providing the opportunity to capitalize on the natural growth of our
franchise. In addition, a number of new products were introduced in 1998 aimed
at providing value and convenience to our ever-increasing customer base. Leading
the way was the introduction of Generations Gold, a Family Club Checking
Account, combining the essentials of banking with a panoply of lifestyle
services which has at its core nearly 400 local businesses offering our
customers a variety of cost-savings discounts ... all part of our belief that if
you call yourself a community bank, you should engage in initiatives that
promote local economic vitality. Technology advances abounded as well, with the
introduction of a comprehensive cash management capability for our business
customers and the development of on-line banking for our retail customers who
can now visit us at www.camdennational.com. I am encouraged by the progress we
have made this year toward sustaining our long-term goal of continuing as a
high performing, independent community bank. Our investments in the development
of new markets, products and technology, together with a highly dedicated
group of employees, has us poised for success not only in 1999 but also in the
new millennium. As always, thank you for your ongoing encouragement and
support!
Sincerely,
Robert W. Daigle (signature)
Robert W. Daigle
President & CEO
Trust Company of Maine, Inc. Logo
Dear Shareholders:
The past year was an exciting and challenging one for Trust Company of Maine.
Our dedicated and hard working staff was a key factor in our continued growth
during the year, as was the continued support of Camden National Corporation,
its subsidiaries and their employees.
Trust Company of Maine reached a major milestone during 1998, as total
assets under management exceeded $200 million for the first time in our history.
At year end our assets had grown to $227 million, an increase of 18% over 1997.
During 1998, a Voice Response System was installed in our Employee Benefit Plan
Administration division, which allows the participants in 401(K) plans that we
administer to access their individual accounts 24 hours a day. Effective as of
December 31, 1998, Fiduciary Services, Inc., our employee benefit plan
subsidiary was merged into Trust Company of Maine. This will allow us to
streamline our organizational structure and should enhance the visibility of the
Trust Company of Maine. Looking forward to 1999, our past growth will make us
better able to meet the challenges presented to us and provide the opportunity
for continued growth and profitability.
Sincerely,
Andrew P. Averill (signature)
Andrew P. Averill
Chairman, President & CEO
[Page 4]
Children... hope for the future
Picture - 3 young boys playing near steps (picture size - 4.5" wide x 3.5" tall)
Passbook and Statement
Savings Accounts Both
banks offer statement
and passbook savings
options, so customers
can choose the type of
account thy prefer.
Penny's Piggy Bank Savings
Account This Camden
National Bank savings
account, designed to
make banking fun,
rewards children for
saving money.
Camden National Corporation is helping the customers of tomorrow become
financially savvy and responsible adults. Products like Penny's Piggy Bank
savings account are designed to teach young people about banking and
encourage them to save.
[Page 5]
Young families...just starting out
Picture of young couple
(picture size - 3.75" wide x 6.0" tall)
Overdraft Protection This service helps customers
avoid the inconvenience, expense and embarrassment of an
overdrawn checking account and provides access to funds in
case of an emergency.
Personal Loans The banks offer a variety of rates
and terms on auto, vacation, boat, college and other types of
personal loans.
Mortgage Loans The banks offer many mortgage
options including low down payment loans and first-time
homebuyer programs.
ATM/Debit Cards Anyone with a busy lifestyle will
enjoy the convenience offered by Camden National's ATM and
point-of-sale network.
Internet Banking Camden National Bank customers can
make transactions from the comfort of their
living room and enjoy convenient features like
on-line loan application and bill paying with
NetBANK, 24-hour on-line banking. The address
is www.camdennational.com. United Bank
customers can get product information,
locations, and more at www.unitedbank-me.com.
Life is a balancing act for young people just starting out. Both banks of Camden
National Corporation help families with car loans and mortgages, and offer
time-saving products and services like debit cards and on-line banking.
[Page 6]
Middle years...meeting changing needs
Picture of a couple weaving a basket
(picture size - 3.5" wide x 5.5" tall)
Individual Retirement Accounts The
banks offer a variety of IRA
vehicles, from CDs to mutual
funds, to help customers take
advantage of tax-deferred
interest and save for the
future.
Holiday Savings Clubs Holiday club
coupons make saving for the
holiday season a breeze-the
automatic payment option makes
saving even easier.
Mortgage Refinancing / 2nd Home
Loans The banks offer
competitive-rate mortgage
programs for refinancing your
current home, vacation
properties and rental
investments.
HomeEquity Loans Customers can use
the equity in their homes and
enjoy a revolving line of credit
for a variety of uses, from
remodeling to family vacations.
A mortgage for a new home. A home equity loan for college expenses. A trust to
Help aging parents. Camden National Bank, United Bank and Trust Company of Maine
offer financial solutions for the changing needs of growing families.
[Page 7]
Retirement...planning for the future
Picture of a retired woman in her kitchen
(picture size - 4.0" wide x 5.75" tall)
Money Market Accounts
Money market accounts let customers enjoy competitive interest rates with
the liquidity of a checking account-the best of both worlds.
Certificate of Deposit
Customers can invest their money for a specified period of time-from 90
days to seven years. Competitive rates and a variety of terms are
available.
Investment Management Services
The banks work with customers to establish a financial plan based on
their needs and objectives.
Trust Services
The Trust Company of Maine provides a full range of trust services from
revocable and irrevocable trusts to savings, rollovers, and SEP IRAs.
Camden National Corporation helps customers plan for a financially secure
retirement with services such as certificates of deposit, individual retirement
accounts and trust services through the Trust Company of Maine.
[Page 8]
Generations Gold...
Innovative solutions for the entire family
Picture One-Picture of a man (same man as young couple picture) and a boy ice
fishing (picture size - 2.5" wide x 3.0" tall)
Picture
Two-Picture of
the retired
woman and a
boy at a piano
(picture size
- 2.75" wide x
2.75" tall)
Picture Three-Picture of man and two boys (same man and boys as above)
playing chess (picture size - 2.5" wide x 1.75" tall)
Generations Gold emblem
In 1998 Camden National Bank and United Bank introduced the Generations Gold
Family Club Checking Account. Generations Gold has something for everyone,
offering savings on a variety of products and services, including local merchant
discounts. Providing incentives to shop locally has the added benefit of
boosting the economy in the communities we serve. From discounts on travel,
prescriptions and long distance phone service-to lower premiums on dental and
pet insurance, Generations Gold exemplifies innovative banking at its best.
[pages 9 - 16 contain the MD&A]
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management's discussion and analysis reviews the consolidated financial
condition of the Company at December 31, 1998 and 1997, the consolidated results
of operations for the past three years and, where appropriate, factors that may
affect future financial performance. This discussion should be read in
conjunction with the Consolidated Financial Statements, Notes to Consolidated
Financial Statements and Selected Consolidated Financial Data.
Forward Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information contained in this
discussion, or in any other written or oral statements made by the Company, are
or may be considered as forward-looking. Forward-looking statements relate to
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.
GENERAL
Overview of Company.
Camden National Corporation ("the Company") is a multi-bank, financial
services holding company headquartered in Camden, Maine. The Company's bank
subsidiaries, both of which are wholly owned, are Camden National Bank, a
national banking organization, based in Camden, Maine, and United Bank, a
banking organization chartered under the laws of the State of Maine, based in
Bangor, Maine. The Company also has a 51% ownership in a non-bank subsidiary,
Trust Company of Maine, Inc., which provides trust and retirement management
services throughout central and mid-coast Maine.
Business.
The Company's wholly-owned bank subsidiaries are independent commercial
banks with branches serving both mid-coast and central Maine. The banks are
full-service financial institutions that focus primarily on attracting deposits
from the general public through their branches and using such deposits to
originate residential mortgage loans, commercial business loans, commercial real
estate loans and a variety of loans to individuals, businesses and organizations
in its service area. In addition, the Company also invests in mortgage-backed
securities and securities issued by the United States Government and agencies
thereof.
The Company's majority-owned trust subsidiary, Trust Company of Maine, Inc.,
offers a broad range of trust and trust investment services, in addition to
retirement and pension plan management services.
The Company's goal is to balance profit with growth and quality with
productivity. Therefore, emphasis is placed on increasing loan and deposit
market share in the communities its bank subsidiaries serve by offering a wide
range of quality financial products and services coupled with local decision
making. In addition, the Company closely manages yields on interest-earning
assets and rates on interest-bearing liabilities and strives to increase
noninterest income while controlling the growth of noninterest expenses. It is
also part of the business strategy of the Company to supplement internal growth
with acquisitions of other banks and/or branches of other banks when such
purchases are determined to add long-term shareholder value.
REVIEW OF FINANCIAL STATEMENTS
The discussion and analysis which follows focuses on the factors affecting
the Company's financial condition at December 31, 1998 and 1997, and financial
results of operations during 1998, 1997 and 1996. The Consolidated Financial
Statements and related Notes beginning on page 19 of this report should be read
in conjunction with this review.
RESULTS OF OPERATIONS
Overview.
The Company reported net income of $9.6 million in 1998, $9.1 million in
1997 and $8.1 million in 1996. Basic earnings per share were $1.43 in 1998,
$1.34 in 1997 and $1.16 in 1996. Return on average assets was 1.62% in 1998
compared with 1.65% in 1997 and 1.65% in 1996. Return on average equity was
15.23% in 1998 compared to 15.20% and 14.56% in 1997 and 1996, respectively.
The Company's improved earnings in 1998 were attributable to an increase in
net interest income, which is the difference between interest and dividend
income on loans and securities, and interest expense on deposits and borrowings.
The Company's results of operations are also affected by the provision for loan
losses, resulting from the Company's assessment of the adequacy of the allowance
for loans losses, and other noninterest income and expenses. Each of these
principal components of the Company's operating results is discussed on the
following pages.
Net Interest Income.
Net interest income, when expressed as a percentage of average assets, is
referred to as net interest margin. The following tables, which present changes
in interest income and interest expense by major asset and liability category
for 1998, 1997 and 1996, illustrate the impact of average volume growth and rate
changes. Figures are adjusted to a taxable equivalent basis to recognize the
income from tax-exempt assets as if the interest was taxable, thereby allowing a
uniform comparison to be made between asset yields.
Analysis of Changes in Net Interest Margin on Earning Assets
(Dollars in thousands) December 31, 1998
Average Yield/
Balance Interest Rate
Assets
Interest-earning assets:
Securities--taxable............. $153,073 $10,641 6.95%
Securities--
nontaxable (1)................ 3,126 209 6.69%
Federal funds sold ............. 3,817 158 4.14%
Loans (1) (2) (3)............... 393,214 38,105 9.69%
-------- ------- -----
Total interest-earning assets . 553,230 49,113 8.88%
-------- ------- -----
Cash and due from banks ....... 16,949
Other assets .................. 31,548
Less allowance for loan losses 6,112
--------
Total assets .................. $595,615
========
Liabilities & Shareholders' Equity
Interest-bearing liabilities
NOW accounts ............... $ 42,384 $ 580 1.37%
Savings accounts ........... 70,754 2,229 3.15%
Money market accounts ...... 52,337 1,607 3.07%
Certificates of deposit .... 224,275 12,380 5.52%
Broker certificates of deposit 3,847 221 5.74%
Short-term borrowings ...... 72,300 3,701 5.13%
-------- ------- -----
Total interest-bearing liabilities 465,897 20,718 4.45%
-------- ------- -----
Demand deposits ............... 59,911
Other liabilities ............. 6,478
Shareholders' equity .......... 63,329
-------
Total liabilities &
shareholders' equity ....... $595,615
========
Net interest income .............. $ 28,395
(fully-taxable equivalent)
Less: fully-taxable equivalent adjustment (330)
--------
$ 28,065
========
Net interest rate spread ......... 4.43%
=====
(fully-taxable equivalent)
Net interest margin .............. 5.13%
=====
(fully-taxable equivalent)
(Dollars in thousands) December 31, 1997
Average Yield/
Balance Interest Rate
Assets
Interest-earning assets:
Securities--taxable............. $185,580 $12,549 6.76%
Securities--
nontaxable (1)................ 4,566 311 6.81%
Federal funds sold ............. 826 42 5.08%
Loans (1) (2) (3)............... 336,030 33,053 9.84%
-------- ------- -----
Total interest-earning assets . 527,002 45,955 8.72%
-------- ------- -----
Cash and due from banks ....... 13,869
Other assets .................. 22,850
Less allowance for loan losses 4,874
--------
Total assets .................. $558,847
========
Liabilities & Shareholders' Equity
Interest-bearing liabilities
NOW accounts ............... $ 41,152 $ 535 1.30%
Savings accounts ........... 64,269 2,158 3.36%
Money market accounts ...... 24,147 772 3.20%
Certificates of deposit .... 183,134 9,996 5.46%
Broker certificates of deposit 356 23 6.46%
Short-term borrowings ...... 132,298 7,324 5.54%
-------- ------- -----
Total interest-bearing liabilities 445,356 20,808 4.67%
-------- ------- -----
Demand deposits ............... 48,190
Other liabilities ............. 5,112
Shareholders' equity .......... 60,189
-------
Total liabilities &
shareholders' equity ....... $558,847
========
Net interest income .............. $ 25,147
(fully-taxable equivalent)
Less: fully-taxable equivalent adjustment (325)
--------
$ 24,822
========
Net interest rate spread ......... 4.05%
=====
(fully-taxable equivalent)
Net interest margin .............. 4.77%
=====
(fully-taxable equivalent)
(Dollars in thousands) December 31, 1996
Average Yield/
Balance Interest Rate
Assets
Interest-earning assets:
Securities--taxable............. $154,102 $ 9,793 6.35%
Securities--
nontaxable (1)................ 7,279 472 6.48%
Federal funds sold ............. 3,369 177 5.25%
Loans (1) (2) (3)............... 298,596 29,737 9.96%
-------- ------- -----
Total interest-earning assets . 463,346 40,179 8.67%
-------- ------- -----
Cash and due from banks ....... 13,250
Other assets .................. 20,076
Less allowance for loan losses 4,290
--------
Total assets .................. $492,382
========
Liabilities & Shareholders' Equity
Interest-bearing liabilities
NOW accounts ............... $ 39,745 $ 531 1.34%
Savings accounts ........... 63,536 2,130 3.35%
Money market accounts ...... 25,340 809 3.19%
Certificates of deposit .... 182,926 10,257 5.61%
Broker certificates of deposit 3,910 255 6.52%
Short-term borrowings ...... 73,069 3,983 5.45%
-------- ------- -----
Total interest-bearing liabilities 388,526 17,965 4.62%
-------- ------- -----
Demand deposits ............... 41,569
Other liabilities ............. 3,116
Shareholders' equity .......... 59,171
-------
Total liabilities &
shareholders' equity ....... $492,382
========
Net interest income .............. $ 22,214
(fully-taxable equivalent)
Less: fully-taxable equivalent adjustment (304)
--------
$ 21,910
========
Net interest rate spread ......... 4.05%
=====
(fully-taxable equivalent)
Net interest margin .............. 4.79%
=====
(fully-taxable equivalent)
(1) Reported on tax-equivalent basis calculated using a rate of 34% for
fully-taxable equivalent. (2) Non-accrual loans are included in total average
loans. (3) Includes net swap income figures 1998 $1, 1997 $(11), and 1996 $111.
Analysis of Volume and Rate Changes on Net Interest Income
Year Ended December 31, Year Ended December 31,
1998 vs 1997 1997 vs 1996
(Dollars in thousands)
Increase (Decrease) Increase (Decrease)
Due to Due to
Volume Rate Total Volume Rate Total
Interest-earning Assets:
Securities--taxable $(2,198) $ 290 $(1,908) $ 2,000 $ 756 $ 2,756
Securities--nontaxable (98) (4) (102) (176) 15 (161)
Federal funds 152 (36) 116 (134) (1) (135)
Loans (1) 5,625 (573) 5,052 3,728 (412) 3,316
------- ----- ------- ------- ------ -------
Total interest income $ 3,481 $(323) $ 3,158 $ 5,418 $ 358 $ 5,776
------- ----- ------- ------- ------ -------
Interest-bearing Liabilities:
NOW accounts $ 16 $ 29 45 $ 19 $ (15) 4
Savings accounts 218 (147) 71 25 3 28
Money Market accounts 901 (66) 835 (38) 1 (37)
Certificates of deposit 2,246 138 2,384 12 (273) (261)
Broker certificates 226 (28) 198 (232) 0 (232)
Short-term borrowings (3,321) (302) (3,623) 3,229 112 3,341
------- ----- ------- ------- ----- -------
Total interest expense $ 286 $(376) $ (90) $ 3,015 $(172) $ 2,843
------- ----- ------- ------- ----- -------
Net interest income
(fully-taxable
equivalent) $ 3,195 $ 53 $ 3,248 $ 2,403 $ 530 $ 2,933
======= ===== ======= ======= ===== =======
The Company's net interest income, on a fully-taxable equivalent basis was
$28.4 million, $25.1 million and $22.2 million in 1998, 1997 and 1996,
respectively. Changes in net interest income are the result of interest rate
movements, changes in the amounts and mix of interest-earning assets and
interest-bearing liabilities, and changes in the level of non-interest-earning
assets and non-interest-bearing liabilities.
Net interest income increased by $3.2 million or 12.9%, on a fully-taxable
equivalent basis in 1998 compared to 1997. This increase was primarily due to
the increase in loan volume, even though loans experienced a slight decrease in
yields. During 1997, net interest income increased by $2.9 million or 13.2%, on
a fully-taxable equivalent basis compared to 1996. This increase was due to the
increase in loan and investment volumes despite a slight decrease in loan
yields. Net interest income, expressed as a percentage of average
interest-earning assets, was 5.13% in 1998, 4.77% in 1997, and 4.79% in 1996.
The average amount of loans outstanding increased by $57.2 million or 17.0%
in 1998 over 1997 and by $37.4 million or 12.5% in 1997 over 1996 which
contributed to the increase in interest income. Interest income on loans
increased by $5.1 million in 1998 compared to 1997 and by $3.3 million in 1997
compared to 1996. The weighted average yield on loans decreased from 9.96% in
1996 to 9.84% in 1997 and 9.69% in 1998.
The average amount of non-accrual loans can also affect the average yield
earned on all outstanding loans. However, the average amount of non-accrual
loans for 1998, 1997 and 1996 were minimal and, therefore, had an insignificant
effect on average loan yield.
Interest and dividends on investment securities decreased by $1.9 million,
on a fully-taxable equivalent basis, in 1998 compared with 1997. This was the
result of a poor reinvestment market for maturing securities. In 1997, interest
and dividends on investment securities increased by $2.5 million, on a
fully-taxable equivalent basis, compared with 1996. The primary reason for the
increase was increased volume and yields. The average balance of investments
outstanding increased from $164.8 million in 1996 to $191.0 million in 1997 and
then declined to $160.0 million in 1998. The weighted average yield on
investment securities increased from 6.34% in 1996 to 6.76% in 1997 and 6.88% in
1998. During 1997 the Company recovered $107,312 of principal and interest on
several municipal investments that had previously defaulted and for which a
permanent writedown had been recognized. The Company also recovered $54,000 of
principal and interest on those same investments in 1996.
Interest expense on deposits and borrowings decreased by $90,000 in 1998
compared with 1997. This decrease was primarily attributable to the purchase of
$87.3 million in deposits which resulted in a reduction to the Company's cost of
funds. Interest expense on deposits and borrowings increased by $2.8 million or
15.8% in 1997 compared with 1996. The increase was due to increases in both
borrowings and certificates of deposit, and to the increased interest rates paid
on these borrowings and certificates of deposits. The weighted average rate on
interest-bearing liabilities increased from 4.62% in 1996 to 4.67% in 1997 and
then decreased to 4.45% in 1998.
The following discussion about the Company's risk-management activities
includes "forward-looking statements" that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements (see "Forward Looking Information" on page 9).
Additionally, the Company periodically uses interest rate swaps, floors and
caps, which are common derivative financial instruments, to hedge interest rate
risk associated with anticipated purchases and sales of investments and loans,
as well as deposit practices (see Note 17 "Financial Instruments" of Notes to
Consolidated Financial Statements on page 35, for further information on
derivative financial instruments).
The off-balance sheet instruments have an effect on net interest income. The
net result of the Company's interest rate swap agreements was an offset to gains
in net interest income of $1,000 in 1998, and $111,000 in 1996, and a loss in
net interest income of $11,000 in 1997. Entering into interest rate swap
agreements involves not only the risk of dealing with counterparties and their
ability to meet the terms of the contracts, but also the interest rate risk
associated with unmatched positions. Notional principal amounts are used to
express the volume of these transactions, but the amounts potentially subject to
credit risk are much smaller. During 1998, 1997 and 1996, the Company was a
party in several agreements to assume variable market-indexed interest payments
in exchange for fixed-rate interest payments (interest rate swaps). At December
31, 1998, the Company had no outstanding interest rate swaps. The notional
principal amount of interest rate swaps outstanding was $5 million at December
31, 1997 and $20 million at December 31, 1996. During 1997 two swap agreements
with notional principal amounts totaling $15 million matured resulting in only
one swap with a notional principal of $5 million remaining. The variable rate
being paid by the Company on the remaining swap was higher than the rate being
paid to the Company, therefore, resulting in a decrease of income. The variable
rates being paid by the Company on the swaps decreased during 1996 resulting in
an increase in the spread between what the Company was paying (variable rate)
and receiving (fixed rate) on these agreements.
During 1998, 1997 and 1996, the Company entered into several floor and cap
contracts. The Company amortized the cost over the term of each contract.
Noninterest Income.
Noninterest income was $4.5 million, $3.8 million and $3.4 million for the
years ended December 31, 1998, 1997 and 1996, respectively. There was an
increase of $748,000 or 19.9% in total noninterest income during 1998. Service
charges on deposit accounts increased $95,000 or 10.5% over 1997. Other service
charges and fees which include merchant assessments increased by $580,000 or
21.3% over the same period. The largest contributing factor to this increase was
the fee income generated by merchant assessments. Other income also increased
over 1997 by $73,000 or 59.8%. The major contributing factor for this increase
was trust fees.
Total noninterest income increased by $339,000 in 1997 compared to 1996.
Service charges on deposit accounts increased by $36,000 or 4.2% over 1996.
Other service charges and fees which include merchant assessments increased by
$222,000 or 15.9% over the same period. The largest contributing factor was the
fee income generated by merchant assessments. Other income decreased from 1996
to 1997 by $161,000 or 56.8%.
Noninterest Expenses.
Noninterest expense was $17.1 million, $13.3 million and $12.3 million for
the years ended December 31, 1998, 1997 and 1996, respectively. There was an
increase of $3.8 million or 28.4% in total noninterest expense during 1998. The
largest increase was in salaries and employee benefits which increased $1.6
million or 23.5% from $7.0 million in 1997. The major contributing factor to
this increase was the additional staff as a result of the branch acquisitions
during 1998. In 1997 salaries and employee benefits increased $689,000 or 10.9%
from $6.3 million in 1996. This increase was the result of normal annual
increases, additions to staff and higher pension benefit costs. In addition, a
new performance compensation program was introduced to all employees during 1997
which resulted in additional compensation paid over 1996.
Other operating expenses increased by $2.1 million or 33.8% in 1998 over
1997. The major contributing factors for this increase were credit card
expenses, data processing, marketing, supply costs, and amortization of the core
deposit intangibles. With the addition of eight new branches higher than normal
expenses were incurred in the areas of data processing, marketing and supplies.
In addition, the amortization of the core deposit intangibles of $471,000 was
recorded in 1998, which was the result of the new branches acquired in March and
October. In 1997 other operating expenses remained relatively level, with no
unusual increases or decreases in any category.
FINANCIAL CONDITION
Overview.
The year 1998 was highlighted by branch acquisitions by both of the
Company's bank subsidiaries. On March 13, 1998, the Company's subsidiary, Camden
National Bank, purchased four branches, and assumed $52.4 million in deposits,
and $7.3 million in loans from KeyBank. These branches are located in the
communities of Bucksport, Damariscotta, Vinalhaven and Waldoboro. On October
2,1998, the Company's subsidiary, United Bank, purchased three branches, and
assumed $34.9 million in deposits, and $11.2 million in loans from Fleet Bank.
These branches are located in the communities of Milo, Dover-Foxcroft and
Greenville. United Bank also established a de novo branch during 1998 in the
community of Winterport. The Company considers the acquisition of these branches
by its subsidiary banks a logical expansion of their current service areas.
At December 31, 1998, the Company had consolidated assets of $668.0 million,
an increase of $94.1 million or 16.4%, from December 31, 1997. The change in
assets consisted primarily of a $75.8 million increase in loans, an increase in
other assets of $11.2 million and an increase of $7.5 million in investment
securities. The asset growth was supported by a change in liabilities and
shareholders' equity consisting of a $135.2 million increase in deposits, a $1.5
million increase in total shareholders' equity, combined with a decrease of
$42.3 million in total borrowings.
Investment Securities.
With increased loan demand during 1998 and 1997, additions to the investment
portfolio have been minimal. In addition, the Company did not want to
aggressively purchase new securities during a time of relatively low interest
rates. Most new investment purchases replaced investments that matured during
1998.
Total investment securities increased by $7.5 million or 4.2% to $186.8
million at December 31, 1998. The Company has investment securities in both the
available-for-sale and held-to-maturity categories. During 1998 the Company
increased the available-for-sale portion of the investment portfolio. The change
in the investment portfolio reflects the Company's efforts to meet asset and
liability objectives and manage its liquidity and funding needs within the
parameters of current accounting polices. The available-for-sale category
increased during 1998 by $79.8 million. A portion of the Company's investment
portfolio is also classified as held to maturity, meaning that the Company has
both the intent and ability to hold the securities until maturity. The ability
to use these securities as collateral for Federal Home Loan Bank loans enhances
the Company's ability to hold the securities to maturity. In 1997, to better
position the balance sheet for a potential downward interest rate shift, the
Company purchased longer-term investments funded by shorter-term borrowings
primarily through the Federal Home Loan Bank of Boston ("FHLB"). Additional FHLB
stock was purchased to support the Company's increased borrowing activity.
Loans.
During 1998, the loan portfolio experienced growth in every category. Loans
and loans held for sale in the portfolio totalled $438.9 million at December 31,
1998, a 20.9% increase from total loans of $363.1 million at December 31, 1997.
This resulted from a continuation of the loan growth experienced by the Company
for the past several years and the $18.5 million acquired loans as part of the
branch acquisitions by the Company's bank subsidiaries in 1998.
Residential real estate mortgage loans increased by $2.1 million or 1.8% in
1998. Residential real estate loans consist of loans secured by one-to-four
family residences. The Company generally retains adjustable-rate mortgages in
its portfolio but will, from time to time, retain fixed-rate mortgages. The
Company also originates fixed-rate residential loans for sale to investors in
the secondary market. During 1998, $22.3 million of the fixed rate residential
loans originated and classified as sale pending were held by the Company. All of
the mortgage loans in the Company's loan portfolio are secured by properties
located in Maine.
Commercial loans increased by $36.1 million or 20.0% during 1998. Commercial
business loans consist of loans secured by various corporate assets, as well as
loans to provide working capital in the form of lines of credit, which may be
secured or unsecured. The commercial category also includes commercial real
estate loans secured by income producing commercial real estate. In addition,
the Company makes loans for the acquisition, development and construction of
commercial real estate. The Company focuses on lending to sound small- and
medium-sized business customers within its geographic marketplace.
Consumer loans increased by $14.1 million or 30.5% in 1998. Consumer loans
are provided for a wide variety of purposes to meet our customers' needs.
Consumer loans are originated directly by the Company and include credit card,
overdraft protection, automobile, boat, recreation vehicles, mobile homes, home
equity, and secured and unsecured personal loans.
Non-performing loans, defined as non-accrual loans plus accruing loans 90
days or more past due, totaled $2.3 million or .53% of total loans at December
31, 1998, compared to $2.2 million or .61% of total loans at December 31, 1997.
It is the Company's policy to discontinue the accrual of interest on loans when,
in the opinion of management, there is an indication that the borrower may be
unable to meet payments as they become due. Upon such discontinuance, all
accrued but unpaid interest is reversed.
Delinquent real estate loans are not reclassified as Other Real Estate Owned
("OREO") until the Company takes title to the property, either through
foreclosure or upon receipt of a deed in lieu of foreclosure. In such
situations, the secured loan is reclassified on the balance sheet as OREO at the
lesser of the fair value of the underlying collateral less estimated selling
costs, or the recorded amount of the loan. The balance of OREO was $.9 million
and $1.4 million, as of December 31, 1998 and 1997, respectively. As a
percentage of total loans OREO represented .21% and .38% as of December 31, 1998
and 1997, respectively. Losses arising from the acquisition of such properties
are charged against the Allowance for Loan Losses ("ALL"). Operating expenses
and any subsequent provisions to reduce the carrying value are charged to
operations. Gains and losses upon disposition are reflected in earnings as other
noninterest income when realized.
Allowance for Loan Losses / Provision for Loan Losses.
In determining the adequacy of the ALL, management relies primarily on its
review of the loan portfolio both to ascertain whether there are probable losses
to be charged off, and to assess the loan portfolio in the aggregate.
Non-performing loans are examined on an individual basis to determine an
estimated probable loss on these loans. 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 ALL as conditions dictate.
During 1998, the Company provided $1.4 million for possible loan losses,
compared to $1.7 million and $.8 million in 1997 and 1996, respectively. During
1998, the increase in the allowance was due to the increase in loan volume and
was not due to a deterioration of loan quality. Determining an appropriate level
of ALL involves a high degree of judgment. Management believes that the
allowance at December 31, 1998 of $6.5 million or 1.48% of total loans
outstanding was appropriate given the current economic conditions in the
Company's service area and the overall condition of the loan portfolio. The ALL
as a percentage of total loans outstanding was 1.55% and 1.44%, in 1997 and
1996, respectively.
LIQUIDITY
The primary objective of liquidity management is to maintain a balance
between sources and uses of funds to meet the cash flow needs of the Company in
the most economical and expedient manner. The liquidity needs of the Company's
bank subsidiaries require the availability of cash to meet the withdrawal
demands of depositors and the credit commitments to borrowers. Due to the
potential for unexpected fluctuations in both deposits and loans active
management of the Company's liquidity is critical. The Company seeks to maintain
various sources of funding and prudent levels of liquid assets in order to
satisfy its varied liquidity demands. In order to respond to the various
circumstances, the Company has both on- and off-balance sheet funding in place.
Each of the Company's banking subsidiaries monitors its
liquidity in accordance with guidelines established by the Company and
applicable regulatory requirements. As of December 31, 1998 and 1997, the
Company's level of liquidity exceeded its target level. Management believes that
the Company's banking subsidiaries currently have adequate liquidity available
to respond to both expected and unexpected liquidity demands. Sources of funds
utilized by the Company's banking subsidiaries consist of deposits, borrowings
from the FHLB of Boston and other sources, cash flows from operations,
prepayments and maturities of outstanding loans, investments and mortgage-backed
securities, and the sale of mortgage loans. Deposits still represent the
Company's primary source of funds. In 1998 total deposits increased by $135.2
million or 36.2% over 1997. Part of this increase was the result of the branch
acquisitions in 1998 where the subsidiary banks purchased $87.3 million in
deposits. However, in addition to the deposits acquired with the purchased
branches, the Company experienced growth in all deposit categories in 1998 of
$47.9 million or 12.8% over 1997. Transaction accounts (DDA and NOW) increased
by $8.8 million, money markets by $12.9 million, savings by $6.9 million and
certificates of deposit by $19.3 million. This increase in deposits was the
result of aggressive marketing of the Company's deposit products. In 1997 total
deposits increased by $20.2 million or 5.7% over 1996. Transaction accounts (DDA
and NOW) increased by $4.8 million or 5.3%, savings accounts increased by $3.1
million or 4.9%, and certificates of deposit increased by $12.9 million or 7.3%.
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 FHLB. Total borrowings were $90.2 million at December
31, 1998, compared to $132.5 million at December 31, 1997, a decrease of $42.3
million or 31.9%. The decrease was the result of more funds being generated in
the form of deposits during 1998. The majority of the borrowings were from the
Federal Home Loan Bank of Boston. FHLB advances remain the largest
nondeposit-related interest-bearing funding source for the Company in 1998.
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 an alternative funding source that should be
utilized.
CAPITAL RESOURCES
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
8.0%, of which at least 4.0% must be in the form of core capital. The Company's,
and its bank subsidiaries', ratios at December 31, 1998 and December 31, 1997
exceeded regulatory guidelines. For actual ratios see Note 18 to the
Consolidated Financial Statements. In addition to risk-based capital
requirements, the FRB requires bank holding companies to maintain a minimum
leverage capital ratio of core capital to total assets of 4.0%. Total assets for
this purpose do not include goodwill and any other intangible assets and
investments that the FRB determines should be deducted. The Company's leverage
ratios at December 31, 1998 and 1997 were 9.5% and 10.6%, respectively.
As part of the Company's goal to operate a safe, sound, and profitable
financial organization, the Company is committed to maintaining a strong capital
base. The Company's shareholders' equity totaled $64.1 million and $62.6 million
or 9.6% and 10.9% of total assets at December 31, 1998 and 1997, respectively.
The $1.5 million or 2.5% increase in shareholders' equity was primarily
attributable to net income of $9.6 million, less net share repurchases of $3.1
million, the exercise and repurchase of stock options of $1.1 million and $3.8
million in cash dividends.
The principal cash requirement of the Company is dividends on common stock
when declared. Dividends paid on the Company's common stock in 1998 represented
a 23.0% increase over 1997. The Company is primarily dependent upon the payment
of cash dividends by Camden National Bank to service its commitments. The
Company, as the sole shareholder of Camden National Bank and United Bank, is
entitled to dividends when and as declared by each Bank's Board of Directors,
out of funds legally available; therefore, the Company's ability to pay
dividends is subject to the powers of the State of Maine and Federal regulators.
Camden National Bank declared dividends in the aggregate amount of $12,534,000
and $4,356,000 in 1998 and 1997, respectively. In 1998 the dividends declared by
Camden National Bank included $3,750,000 payable to shareholders, $3,058,000 to
repurchase stock, $4,000,000 to invest in other bank subsidiary, and $1,726,000
to repurchase stock options. United Bank declared no dividends in 1998 and 1997.
As of December 31, 1998, and subject to the limitations and restrictions under
applicable law, Camden National Bank and United Bank had $12.2 million available
for dividends to the Company, although there is no assurance that dividends will
be paid at any time in any amount.
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.
Year 2000 Risk Assessment and Action Plan.
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. All other systems are
undergoing rigorous Year 2000 testing in our own environment, and completion is
scheduled for June 30, 1999. The Company also operates in a highly
interconnected local and wide area network environment. The Company's entire
network has been renovated to Year 2000 ready versions of both hardware and
software. In addition, a thorough inventory of the Company's facilities,
elevators and security systems for potential Year 2000 issues was completed in
September 1998.
All software used by the Company is provided by outside vendors, which are
selected based on the quality of their products and their proven ability to
deliver to the Company and its customers. The Company is actively monitoring its
approximate 50 software and hardware suppliers for Year 2000 compliance. The
progress of these vendors is tracked as they deliver Year 2000 compliant
upgrades to their applications.
The Company strives to strengthen customer awareness of the Year 2000 issue
in various forms. An internal awareness training program is ongoing with
employees. This will enable our staff to effectively answer customers' concerns.
Statement stuffers 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 is developing Year 2000 contingency
plans for all of its mission critical products and services. These plans are
designed to mitigate the risks associated with (1) the failure to successfully
complete renovation, validation, or implementation of our Year 2000 readiness
plan; or (2) the failure to any of our systems at critical dates. The Company
has dedicated staff for this critical aspect of preparation for the Year 2000.
The Company's Contingency Plan includes the development of a Crisis Management
Team to handle any unforeseen problems. Although the Company does not expect
there to be any problems, it will outline procedures to handle any if there is a
mission critical system failure. A general contingency plan will be developed
for non-mission critical systems. The 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 is conducting 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 is
analyzing strategies and identifying resources that will be required to restore
systems and or business operations. As part of the emergency plan for each
individual mission critical item, the Company will include a recovery program
that identifies participants, processes, and equipment that might be needed for
the Company to function at an adequate level. The program will ensure that all
participants are aware of their roles, adequately trained, and able to do
whatever is necessary to restore operations.
The Company will monitor cash levels during 1999 in order to determine usage
trends. The Company plans 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 will
confirm 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 approximately $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. During
1998, the Company recognized $200,000 in expenses related to Year 2000.
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 the banks 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 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 periodically over
the past year.
Estimated
Rate Change Changes in NII
High Low Average
+200bp 1.96% .83% .46%
-200bp (.52%) (3.82%) (1.95%)
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: the
nature and timing of interest rate levels, including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of asset and liability cashflows,
and others. The assumptions differed in each of the four periods included in the
sensitivity analysis on the preceding page. 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. Board of Directors' approved hedging policy statements govern the use
of these instruments by our bank subsidiaries. As of December 31, 1998, the
Company had a notional principal of $20 million in floor contracts outstanding.
The estimated effects of these derivative financial instruments on the Company's
earnings are included in the sensitivity analysis presented above.
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 highly effective.
Interest rate floors, caps and swaps are accounted for using the accrual
method with an income statement adjustment to interest income or interest
expense depending on whether the hedged items are assets or liabilities. The
unamortized premiums associated with purchased options contracts (i.e., caps and
floors) are presented on the balance sheet along with other prepaid assets.
Interest receivable under the cap and floor contracts and interest receivable
and payable amounts associated with swap contracts are reflected on the balance
sheet along with other interest receivable and payable amounts. Unrealized gains
or losses associated with these positions are not recognized in the financial
statements.
While it is not the Company's practice to unwind derivative hedges prior to
their maturity, any recognized gains/losses would be deferred on the balance
sheet 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 income statement in the period they occur.
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 for 1998 and prior periods, where applicable, include
the required additional disclosures for SFAS No. 130, No. 131 and No. 132. SFAS
No. 133, "Accounting For Derivative Instruments and Hedging Activities," and
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," are effective for fiscal years beginning after June 15, 1999, and
the first fiscal quarter beginning July 1, 1999, respectively. Management has
not determined the impact of SFAS No. 133 and No. 134 on the financial
statements.
Common Stock Information.
The Common Stock of Camden National Corporation (ticker symbol CAC) began
trading on the American Stock Exchange ("AMEX") October 7, 1997. Prior to that
date, the stock was not traded on any exchange as the Company had maintained an
informal market in its stock. The Company elected to repurchase stock for its
treasury during 1997 and 1998. During 1998 the Company's stock traded in the
range of $16.33 to $27.67. On December 4, 1998, the Company's stock split three
for one. The number of shares and per share amounts have been restated in the
Consolidated Financial Statements, Notes to Consolidated Financial Statements
and Selected Consolidated Financial Data to reflect this stock split. Shortly
after the listing of the Company's stock on AMEX in 1997 the price per share
increased to a high of $20.25 per share, then leveled to a range of $18.33 to
$20.00 per share. In 1996, the Company stock traded in the range of $11.67 to
$13.33 per share.
In November 1998, the shareholders approved an increase in the number of
authorized shares of common stock from 5,000,000 to 10,000,000 shares. After
this approval the Board of Directors approved a three-for-one split of the
Company's common stock to shareholders of record on November 19, 1998, with a
distribution date of December 4, 1998.
The Company has paid quarterly dividends since its inception in 1985. The
market price (as quoted by the American Stock Exchange since October 7, 1997)
and cash dividends paid, per share of the Company's common stock, by calendar
quarter for the past two years were as follows:
1998
Fourth Third Second First
Quarter Quarter Quarter Quarter
High $27.67 $20.00 $19.83 $20.00
Low 16.33 17.08 18.92 18.33
Close 20.50 17.46 19.75 19.33
Dividend Paid .14 .14 .14 .13
1997
Fourth Third Second First
Quarter Quarter Quarter Quarter
High $20.25 na na na
Low 14.83 na na na
Close 19.52 na na na
Dividend Paid .12 .11 .11 .11
Information concerning restrictions on the ability of the Company's
affiliates to transfer funds to the Company in the form of cash dividends is
described in the Capital Resources section on page 14.
As of December 31, 1998, there were 6,656,310 shares of Camden National
Corporation stock outstanding, held of record by approximately 802 shareholders.
[Page 17]
Camden National Corporation and Subsidiaries
Summary of Financial Performance
The page contains six bar graphs where the bar backgrounds are pictures of
coins. The data in the bar graphs is for the current year and the previous four
years.
Net Income Assets Deposits
(in millions) (in millions) (in millions)
'94 8.258 '94 455.6 '94 340.2
'95 7.403 '95 480.7 '95 369.9
'96 8.115 '96 510.1 '96 353.2
'97 9.148 '97 573.9 '97 373.4
'98 9.645 '98 668.0 '98 508.6
Loans Earnings per share(1) Book Value per share(1)
(in millions) (in dollars) (in dollars)
'94 265.5 '94 1.17 '94 6.86
'95 285.1 '95 1.05 '95 7.63
'96 311.2 '96 1.16 '96 8.39
'97 363.1 '97 1.34 '97 9.19
'98 438.9 '98 1.43 '98 9.63
(1) The number of shares and per share amounts have been restated to reflect a
three-for-one stock split distributed in December 1998.
Selected Five-Year Financial Data
(In thousands, except per share data)
December 31,
Financial Condition Data 1998 1997 1996 1995 1994
Assets .................. $667,951 $573,892 $510,078 $480,685 $455,615
Loans ................... 438,947 363,149 311,246 285,102 265,476
Allowance for Loan Losses 6,512 5,640 4,472 4,080 3,751
Investments ............. 186,813 179,290 163,379 161,332 158,434
Deposits ................ 508,573 373,409 353,240 369,880 340,244
Borrowings .............. 90,158 132,478 93,760 51,980 62,444
Shareholders' Equity .... 64,102 62,556 57,822 53,680 48,258
Year Ended December 31,
Operations Data ............... 1998 1997 1996 1995 1994
Interest Income ............... $48,815 $46,051 $41,015 $38,661 $33,958
Interest Expense .............. 20,750 21,229 19,105 18,853 13,766
------- ------- ------- ------- -------
Net Interest Income ........... 28,065 24,822 21,910 19,808 20,192
Provision for Loan Losses ..... 1,376 1,677 838 899 216
------- ------- ------- ------- -------
Net Interest Income after
Provision for Loan Losses .. 26,689 23,145 21,072 18,909 19,976
Non-interest Income ........... 4,498 3,750 3,411 3,544 3,057
Non-interest Expense .......... 17,073 13,294 12,338 11,707 10,581
------- ------- ------- ------- -------
Income before Provision
for Income Tax ............ 14,114 13,601 12,145 10,746 12,452
Income Tax Expense ............ 4,469 4,453 4,030 3,343 3,964
Accounting Change
for Postretirement Benefits -- -- -- -- 230
------- ------- ------- ------- -------
Net Income .................... $ 9,645 $ 9,148 $ 8,115 $ 7,403 $ 8,258
======= ======= ======= ======= =======
At or For the Year Ended December 31,
Other Data 1998 1997 1996 1995 1994
Return on Average Assets 1.62% 1.65% 1.65% 1.59% 1.90%
Return on Average Equity 15.23% 15.20% 14.56% 14.53% 18.56%
Net Income Per Share (1) $ 1.43 $ 1.34 $ 1.16 $ 1.05 $ 1.17
Dividends Per Share (1) . $ .55 $ .45 $ .32 $ .20 $ .15
Book Value Per Share (1) $ 9.63 $ 9.19 $ 8.39 $ 7.63 $ 6.86
Allowance for Loan Losses
to Total Loans ....... 1.48% 1.55% 1.44% 1.43% 1.42%
Non-performing Loans
to Total Loans ....... .53% .61% .73% 1.05% 1.08%
(1) The number of shares and per share amounts have been restated to reflect a
three-for-one stock split distributed in December 1998.
Consolidated Statements of Condition
December 31,
(In thousands, except number
of shares and per share data) 1998 1997
Assets
Cash and due from banks ........................ $ 14,938 $ 13,451
Federal funds sold ............................. -- 1,100
Securities available for sale, at market ....... 98,243 18,396
Securities held to maturity (market
value $91,759 and $164,286 at December
31, 1998 and 1997, respectively) ............ 88,570 160,894
Residential mortgages held for sale ............ 24,637 7,094
Loans, less allowance for loan losses
of $6,512 and $5,640 at December 31,
1998 and 1997, respectively ................. 407,798 350,415
Bank premises and equipment .................... 9,530 8,786
Other real estate owned ........................ 905 1,373
Interest receivable ............................ 3,820 3,924
Core deposit intangibles ....................... 7,219 225
Other assets ................................... 12,291 8,234
--------- ---------
Total assets ............................. $ 667,951 $ 573,892
========= =========
Liabilities
Deposits:
Demand ...................................... $ 64,303 $ 51,422
NOW ......................................... 62,094 42,796
Money market ................................ 53,393 23,452
Savings ..................................... 80,908 66,723
Certificates of deposit ..................... 247,875 189,016
--------- ---------
Total deposits ........................... 508,573 373,409
Borrowings from Federal Home Loan Bank ......... 60,265 98,514
Other borrowed funds ........................... 29,893 33,964
Accrued interest and other liabilities ......... 5,028 5,364
Minority interest in subsidiary ................ 90 85
--------- ---------
Total liabilities ........................ 603,849 511,336
--------- ---------
Commitments (Note 11, 13, 17 and 18)
Shareholders' Equity
Common stock, no par value;
authorized 10,000,000 shares,
issued 7,128,240 shares ..................... 2,436 2,436
Surplus ........................................ 1,142 1,410
Retained earnings .............................. 68,785 62,925
Net unrealized gains and (losses)
on securities available for sale,
net of income tax ........................... (129) 5
--------- ---------
72,234 66,776
Less cost of 471,930 and 317,610
shares of treasury stock
on December 31, 1998 and 1997 ............... 8,132 4,220
--------- ---------
Total shareholders' equity ............... 64,102 62,556
--------- ---------
Total liabilities and shareholders' equity $ 667,951 $ 573,892
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statements of Income
Year Ended December 31,
(In thousands, except number
of shares and per share data) 1998 1997 1996
Interest Income
Interest and fees on loans ................. $37,845 $32,845 $29,483
Interest on U.S. Government and
agency obligations ...................... 9,737 11,710 9,321
Interest on state and political subdivisions 138 245 338
Interest on interest rate swap agreements .. 33 410 1,251
Interest on federal funds sold and
other investments ....................... 1,062 841 622
------- ------- -------
Total interest income ................... 48,815 46,051 41,015
------- ------- -------
Interest Expense
Interest on deposits ....................... 17,017 13,484 13,982
Interest on other borrowings ............... 3,701 7,324 3,983
Interest on interest rate swap
agreements .............................. 32 421 1,140
------- ------- -------
Total interest expense .................. 20,750 21,229 19,105
------- ------- -------
Net interest income ..................... 28,065 24,822 21,910
Provision for Loan Losses .................. 1,376 1,677 838
------- ------- -------
Net interest income after provision
for loan losses ...................... 26,689 23,145 21,072
------- ------- -------
Other Income
Service charges on deposit accounts ........ 996 901 865
Other service charges and fees ............. 2,004 1,614 1,392
Merchant assessments ....................... 1,303 1,113 871
Other income ............................... 195 122 283
------- ------- -------
Total other income ...................... 4,498 3,750 3,411
------- ------- -------
31,187 26,895 24,483
------- ------- -------
Operating Expenses
Salaries and employee benefits ............. 8,638 6,992 6,303
Net occupancy .............................. 1,011 856 736
Furniture, equipment and data processing ... 1,384 1,294 1,254
Other ...................................... 6,040 4,152 4,045
------- ------- -------
Total operating expenses ................ 17,073 13,294 12,338
------- ------- -------
Income before income taxes .............. 14,114 13,601 12,145
Income Taxes ............................... 4,469 4,453 4,030
------- ------- -------
Net Income ................................. $ 9,645 $ 9,148 $ 8,115
======= ======= =======
Per Share Data
Basic earnings per share $ 1.43 $ 1.34 $ 1.16
Diluted earnings per share 1.41 1.31 1.14
Weighted average number
of shares outstanding 6,763,086 6,820,752 6,989,967
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Changes in
Shareholders' Equity Years Ended December
31, 1998, 1997 and 1996
(In thousands, except number of shares and per share data)
Net Unrealized
Gains (Losses)
on Total
Securities Share
Common Retained Available Treasury -holders
Stock Surplus Earnings For Sale Stock Equity
Balance at January 1, 1996 $2,436 $1,226 $50,951 $ 104 $ (1,037) $53,680
------ ------ ------- ------ -------- -------
Net income for 1996 ....... -- -- 8,115 -- -- 8,115
Change in unrealized
gains (losses) on
securities available for
sale net of tax benefit
of $37 .................. -- -- -- (72) -- (72)
------ ------ ------- ------ -------- -------
Total comprehensive
income ........... -- -- 8,115 (72) -- 8,043
Purchase of treasury stock
(141,783 shares) ...... -- -- -- -- (1,712) (1,712)
Sale of treasury stock
(4,002 shares) ........ -- -- -- -- 50 50
Cash dividends
($.32 per share) ...... -- -- (2,239) -- -- (2,239)
------ ------ ------- ------ -------- -------
Balance at December 31, 1996 $2,436 $1,226 $56,827 $ 32 $ (2,699) $57,822
------ ------ ------- ------ -------- -------
Net income for 1997 ....... -- -- 9,148 -- -- 9,148
Change in unrealized
gains (losses) on
securities available for
sale, net of tax benefit
of $14 ................. -- -- -- (27) -- (27)
------ ------ ------- ------ -------- -------
Total comprehensive
income .......... -- -- 9,148 (27) -- 9,121
Purchase of treasury stock
(100,422 shares) ..... -- -- -- -- (1,337) (1,337)
Sale of treasury stock
(15,156 shares) ...... -- 184 -- -- (184) --
Cash dividends
($.45 per share) ..... -- -- (3,050) -- -- (3,050)
------ ------ ------- ------ -------- -------
Balance at December 31, 1997 $2,436 $1,410 $62,925 $ 5 $ (4,220) $62,556
------ ------ ------- ------ -------- -------
Net income for 1998 ...... -- -- 9,645 -- -- 9,645
Change in unrealized
gains (losses)on
securities available for
sale, net of tax benefit
of $69 ................ -- -- -- (134) -- (134)
------ ------ ------- ------ -------- -------
Total comprehensive
income .......... -- -- 9,645 (134) -- 9,511
------ ------ ------- ------ -------- -------
Purchase of treasury stock
(154,320 shares) ..... -- -- -- -- (3,058) (3,058)
Exercise and repurchase
of stock options(93,000 shares)
net of tax benefit of $604 -- (268) -- -- (854) (1,122)
Filing fees related to
stock split ............. -- -- (35) -- -- (35)
Cash dividends
($.55 per share) ...... -- -- (3,750) -- -- (3,750)
------ ------ ------- ------ -------- -------
Balance at December 31, 1998 $2,436 $1,142 $68,785 $ (129) $ (8,132) $64,102
====== ====== ======= ====== ======== =======
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statements of Cash Flows
Year Ended December 31,
(In thousands) 1998 1997 1996
Operating Activities
Net Income ............................. $ 9,645 $ 9,148 $ 8,115
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses ........ 1,376 1,677 838
Depreciation and amortization .... 853 708 1,016
Decrease (increase) in
interest receivable ............ 104 (4) 332
Increase in other assets ......... (2,516) (1,844) (55)
(Decrease) increase in
other liabilities .............. (379) 167 193
Sale of residential mortgage
loans held for sale ............ 2,370 2,531 1,505
Origination of mortgage loans
held for sale .................. (19,913) (7,081) (1,966)
Loss on disposal of assets ....... -- -- 82
Other, net ....................... -- -- 5
-------- -------- --------
Net cash (used) provided by
operating activities ........... (8,460) 5,302 10,065
-------- -------- --------
Investing Activities
Proceeds from maturities of
securities held to maturity ......... 72,622 46,062 32,252
Proceeds from maturities of
securities available for sale ....... 3,581 8,300 9,400
Purchase of securities
to be held to maturity .............. -- (63,620) (40,332)
Purchase of securities
available for sale .................. (83,689) -- (2,301)
Purchase of Federal Home
Loan Bank Stock ..................... -- (6,568) (1,157)
Increase in loans ...................... (40,218) (47,862) (26,129)
Net decrease (increase) in other
real estate owned ................... 468 (109) (178)
Purchase of premises and equipment ..... (1,158) (802) (1,572)
Proceeds from sale of premises
and equipment ....................... -- -- 9
Increase (decrease) in minority position 5 40 (44)
Net sale (purchase) of federal funds ... 1,100 975 (375)
Net cash provided by acquisitions
of branches ......................... 59,689 -- --
-------- -------- --------
Net cash provided (used) by
investing activities ........... 12,400 (63,584) (30,427)
-------- -------- --------
Financing Activities
Net increase (decrease) in
demand deposits, NOW accounts,
money markets and savings accounts .. 28,562 7,256 (1,658)
Net increase (decrease) in certificates
of deposit .......................... 19,270 12,913 (14,982)
Net (decrease) increase in
short-term borrowings ............... (42,320) 38,718 41,780
Purchase of treasury stock ............. (3,058) (1,337) (1,712)
Sale of treasury stock ................. -- -- 50
Exercise and repurchase of
stock options ....................... (1,122) -- --
Filing fees related to stock split ..... (35) -- --
Cash dividends ......................... (3,750) (3,050) (2,239)
-------- -------- --------
Net cash (used) provided by
financing activities ........... (2,453) 54,500 21,239
-------- -------- --------
Increase (decrease) in cash
and cash equivalents ........... 1,487 (3,782) 877
Cash and cash equivalents at
beginning of year ................... 13,451 17,233 16,356
-------- -------- --------
Cash and cash equivalents
at end of year ................. $ 14,938 $ 13,451 $ 17,233
======== ======== ========
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 20,390 $ 20,919 $ 19,270
Income tax 5,203 4,907 3,599
Non-cash transactions:
Transfer from loans to real estate owned 733 1,035 1,333
Sale of treasury stock from exercised
stock options - 184 -
See Note 2 of the Notes to Consolidated Financial Statements for branch
acquisition disclosure. The accompanying notes are an integral part of these
consolidated financial statements.
[Pages 23 - 40 contain the notes to the financial statements]
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(Amounts in tables expressed in thousands except number of shares and
per share data)
NATURE OF OPERATIONS.
Camden National Corporation (the "Company") is a multi-bank and financial
services holding company. The Company's bank subsidiaries, both of which
are wholly owned, are Camden National Bank, a national banking
organization, based in Camden, Maine, and United Bank, a banking
organization chartered under the laws of the State of Maine, based in
Bangor, Maine. The Company also has a 51% ownership in a non-bank
subsidiary, Trust Company of Maine, Inc., which provides trust and
retirement management services throughout the central and mid-coast Maine
area.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies conform to generally accepted accounting
principles and to general practice within the banking industry. The following is
a summary of the significant accounting and reporting policies.
Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of Camden National Corporation, its wholly-owned
subsidiaries, Camden National Bank and United Bank, and its majority-owned
subsidiary, Trust Company of Maine, Inc. All intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements. The
preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowance for loan losses and the
carrying value of real estate owned, management obtains independent appraisals
for significant properties.
Cash. The Company is required to comply with various laws and regulations
of the Federal Reserve which requires that the Company maintain certain amounts
of cash on deposit and is restricted from investing those amounts. The Company
maintains those balances at the Federal Reserve Bank of Boston. In the normal
course of business, the Company has funds on deposit at other financial
institutions in amounts in excess of the $100,000 insured by the FDIC. For the
statement of cash flows, cash equivalents consist of cash and due from banks.
Investment Securities. The Company has classified its investment securities
into investments available for sale and investments to be held to maturity.
Securities Available for Sale. Debt and other securities that are to be
held for indefinite periods of time, are stated at market value. Changes in
net unrealized gains or losses are recorded as an adjustment to
shareholders' equity until realized. Market values of securities are
determined by prices obtained from independent market sources. Realized
gains and losses on securities sold are computed on the identified cost
basis on the trade date. Federal Home Loan Bank of Boston stock and Federal
Reserve stock are stated at cost. The investment in the FHLB of Boston is
required for membership and is used as collateral for borrowings.
Securities to be Held to Maturity. Bonds, notes and debentures for which
the Company has the positive intent and ability to hold to maturity are reported
at cost, adjusted for amortization of premiums and accretion of discounts which
are recognized in interest income using the interest method over the period to
maturity.
Residential Mortgages Held for Sale. Residential mortgages held for sale
are primarily one-to-four family real estate loans which are valued at the lower
of cost or market on an individual basis, as determined by outstanding
commitments from investors or current investor yield requirements. Gains and
losses from sales of residential mortgages held for sale are recognized upon
settlement with investors and recorded in noninterest income. These activities,
together with underwriting residential mortgage loans and servicing loans
previously sold, comprise the Company's mortgage banking business.
Loan Servicing. SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," was adopted on January 1,
1997. The cost of mortgage servicing rights is amortized in proportion to, and
over the period of, estimated net servicing revenues. Impairment of mortgage
servicing rights is assessed based on the fair value of those rights. Fair
values are estimated using discounted cash flows based on a current market
interest rate. For purposes of measuring impairment, the rights are stratified
based on the following predominant risk characteristics of the underlying loans:
interest rate, fixed versus variable rate, and period of origination. The amount
of impairment recognized is the amount by which the capitalized mortgage
servicing rights for a stratum exceed their fair value. No impairment has been
recognized during 1998 and 1997.
Loans. Interest on loans is accrued and credited to income based on the
principal amount outstanding. The accrual of interest on loans is
discontinued when, in the opinion of management, there is an indication
that the borrower may be unable to meet payments as they become due. Upon
such discontinuance, all unpaid accrued interest is reversed. Fees received
and direct costs incurred for the origination of loans are deferred and
recognized as an adjustment of loan yield. The allowance for loan losses is
maintained at a level adequate to absorb
future charge-offs of loans deemed uncollectible. Management determines the
adequacy of the allowance based upon reviews of individual credits, recent loss
experience, current economic conditions, known and inherent risk characteristics
of the various categories of loans, adverse situations that may affect the
borrowers' ability to repay, estimated value of underlying collateral, and other
pertinent factors. The allowance is increased by provisions charged to operating
expense and by recoveries on loans previously charged off. Credits deemed
uncollectible are charged against the allowance.
Loans considered to be impaired are reduced to the present value of
expected future cash flows or to the fair value of collateral, by allocating a
portion of the allowance for loan losses to such loans. If these allocations
cause the allowance for loan losses to require an increase, such increase is
reported as provision for loan losses.
The carrying values of impaired loans are periodically adjusted to reflect
cash payments, revised estimates of future cash flows, and increases in the
present value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such. Other cash payments are
reported as reductions in carrying value, while increases or decreases due to
changes in estimates of future payments and due to the passage of time are
reported as provision for loan losses.
Other Real Estate Owned. Other real estate owned represents real estate
acquired through foreclosure and is recorded at the lower of cost or fair market
value, determined by an independent appraisal, with any difference at the time
of acquisition treated as a loan loss. Subsequent reductions in fair market
value below cost are charged directly to other operating expenses.
Premises and Equipment. Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed on the straight-line method over the estimated useful lives of the
related assets.
Intangible Assets. The core deposit intangibles are being amortized over
periods ranging from ten to fifteen years using the straight-line method. Other
intangible assets including goodwill and recapitalization costs are being
amortized over twenty to twenty-five years using the straight-line method.
Amortization of software is recognized using the straight-line method over the
estimated useful life of the various software.
Other Borrowed Funds and Securities Sold Under Repurchase Agreements. Other
borrowed funds consist of commercial and consumer repurchase agreements and
treasury tax and loan deposits. Securities sold under agreements to repurchase
generally mature within thirty days. Treasury tax and loan deposits generally do
not have fixed maturity dates.
Employee Pension and Postretirement Benefits. The Company has a defined
benefit noncontributory pension plan covering substantially all employees.
Actuarially determined pension costs are charged to current operations. The
funding policy is to pay at least the minimum amounts required by the Employee
Retirement Income Security Act of 1974. In addition, the Company has a
supplemental pension plan covering several executive officers. This plan was
designed to keep the percentage level of pension benefits consistent for all
employees.
The Company also provides a voluntary savings plan for the benefit of its
employees which qualifies under 401(k) of the Internal Revenue Code. Employees
can contribute up to the maximum amount allowed by law. The Company matches a
percentage of employee contributions. The Company's postretirement plans also
provide medical and life insurance to certain eligible retired employees.
Advertising. Advertising costs are expensed as incurred.
Income Taxes. Deferred tax assets and liabilities are determined based on
the differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Principal timing differences include
pension and other postretirement benefits, depreciation, and provision for loan
losses.
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. On December 4, 1998, the Company's
stock split three for one. The number of shares and per share amounts have been
restated in the Consolidated Financial Statements, Notes to Consolidated
Financial Statements and Selected Consolidated Financial Data to reflect this
stock split.
Financial Instruments with Off-Balance Sheet Risk. The Company uses
off-balance sheet financial instruments as part of its asset/liability
management activities. The Company does not intend to sell any of these
instruments. Interest Rate Exchange Agreements (swaps) are accounted for
using the accrual method. Net interest income (expense) resulting from the
differential between exchanging floating and fixed-rate interest payments
is recorded on a current basis. Interest Rate Floors are contracts in which
a floor is established at a specified rate and for a specified period of
time. The premium paid for the contract is amortized over its life. Any
cash payments received are recorded as an adjustment to net interest
income.
In the ordinary course of business the Company has entered into off-balance
sheet financial instruments consisting of commitments to extend credit,
commitments under credit card arrangements, commercial letters of credit, and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded.
Fair Value Disclosures. The following methods and assumptions were used by
the Company in estimating its fair value disclosures for financial instruments:
Cash and due from banks and federal funds sold: The carrying amounts of
cash and due from banks and federal funds sold approximates their fair value.
Investment securities and securities available for sale: Fair values for
investment securities are based on quoted market prices, where available. If
quoted market prices are not available, fair values are based on quoted market
prices of comparable instruments. The carrying amounts of other securities
approximates their fair value.
Residential mortgages held for sale: Fair values are based on quoted
market prices from the Federal Home Loan Mortgage Corporation (Freddie Mac).
Loans receivable: For variable rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on carrying values.
The fair value of other loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Interest receivable: The carrying amount of interest receivable
approximates fair value.
Off-balance sheet instruments: Fair values for interest rate swaps and
floor and cap contracts are based on quoted market prices. Fair value of
commitments to extend credit has not been presented as the future revenue
derived from such commitments is not significant.
Deposits: The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand. The fair value of
fixed-maturity certificates of deposit is estimated using the rates currently
offered in the Company's market for deposits of similar remaining maturities.
Short-term borrowings: The carrying amounts of borrowings from the Federal
Home Loan Bank, securities under repurchase agreements and other short-term
borrowings, approximate fair value.
Interest payable: The carrying amount of interest payable approximates fair
value.
Effect of New Financial Accounting Standards. During 1998, the Company
adopted SFAS No. 130, No. 131 and No. 132. The adoption of SFAS No. 130,
"Reporting Comprehensive Income," requires 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 for 1998
and prior periods where applicable, include the required additional disclosures
for SFAS No. 130, No. 131 and No. 132. In addition, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting For Derivative Instruments and
Hedging Activities," and SFAS No. 134, "Accounting for Mortgage Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise," which are effective for fiscal years beginning
after June 15, 1999, and the first fiscal quarter beginning July 1, 1999,
respectively. Management has not determined the impact of SFAS No. 133 or SFAS
No. 134 on the financial statements.
Reclassification. Certain items from the prior year were restated to
conform with current year presentation.
2. BRANCH ACQUISITIONS
During 1998 the Company's two bank subsidiaries acquired seven branch locations.
The excess of cost over fair value of net assets 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 transactions:
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
Amortization expense of core deposit intangibles was $471,000 in 1998.
3. INVESTMENT SECURITIES
The following tables summarize the amortized costs and market values of
securities available for sale and held to maturity:
December 31, 1998
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies .... $ 7,047 $ 48 $ -- $ 7,095
Obligations of states and
political subdivisions ....... 8,214 1 (72) 8,143
Mortgage-backed securities ...... 61,121 43 (312) 60,852
Other debt securities ........... 2,000 30 (5) 2,025
------- ------- ------ -------
Total debt securities ........ 78,382 122 (389) 78,115
------- ------- ------ -------
Federal Home Loan Bank
of Boston stock .............. 14,045 -- -- 14,045
Federal Reserve Bank stock ...... 39 -- -- 39
Other equity securities ......... 5,972 72 -- 6,044
------- ------- ------ -------
Total equity securities ...... 20,056 72 -- 20,128
------- ------- ------ -------
Total securities
available for sale ..... $98,438 $ 194 $ (389) $98,243
======= ======= ====== =======
Held to maturity
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies .... $ 6,093 $ 81 $ (30) $ 6,144
Obligations of states and
political subdivisions ....... 1,338 42 -- 1,380
Mortgage-backed securities ...... 81,139 3,113 (17) 84,235
------- ------- ------ -------
Total securities
held to maturity ....... $88,570 $ 3,236 $ (47) $91,759
======= ======= ====== =======
December 31, 1997
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 4,304 $ 15 $ (7) $ 4,312
------- ------- ------ -------
Total debt securities 4,304 15 (7) 4,312
------- ------- ------ -------
Federal Home Loan Bank
of Boston stock 14,045 -- -- 14,045
Federal Reserve Bank stock 39 -- -- 39
------- ------- ------ -------
Total equity securities 14,084 -- -- 14,084
------- ------- ------ -------
Total securities
available for sale $18,388 $ 15 $ (7) $18,396
======= ======= ====== =======
Held to maturity
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $48,566 $ 131 $ (346) $48,351
Obligations of states and
political subdivisions 2,955 30 (1) 2,984
Mortgage-backed securities 109,373 3,624 (46) 112,951
------- ------- ------ -------
Total securities
held to maturity $160,894 $ 3,785 $ (393) $164,286
======= ======= ====== ========
The amortized cost and fair values of debt securities by contractual maturity at
December 31, 1998, areshown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Amortized Fair
Cost Value
Available for sale
Due in one year or less $ 700 $ 704
Due after one year through five years 1,301 1,326
Due after five through ten years 18,303 18,134
Due after ten years 58,078 57,951
-------- --------
$78,382 $78,115
======== ========
Amortized Fair
Cost Value
Held to maturity
Due in one year or less $ 5,969 $ 6,052
Due after one year through five years 4,925 4,943
Due after five years through ten years 8,556 8,889
Due after ten years 69,120 71,875
-------- --------
$88,570 $91,759
======== ========
For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated to the due after ten years
category.
There were no sales in available-for-sale or held-to-maturity portfolios during
1998, 1997 and 1996. At December 31, 1998, securities with a book value of $30.4
million and a fair value of $31.6 million were pledged to secure public deposits
and securities sold under agreements to repurchase and other purposes required
or permitted by law.
4. LOANS
The composition of the Company's loan portfolio was as follows:
December 31,
1998 1997
Commercial Loans ................... $216,470 $180,327
Residential real estate loans ...... 120,724 118,603
Consumer loans ..................... 60,245 46,178
Municipal loans .................... 17,199 10,324
Other loans ........................ 236 1,226
-------- --------
Total loans ..................... 414,874 356,658
Less deferred loan fees, net of cost 564 603
Less allowance for loan losses ..... 6,512 5,640
-------- --------
$407,798 $350,415
======== ========
The Company's lending activities are conducted in mid-coast and central Maine.
The Company grants single family and multi-family residential loans, commercial
real estate loans, business and a variety of consumer loans. In addition, the
Company grants loans for the construction of residential homes, multi-family
properties and commercial real estate properties. The ability and willingness of
borrowers to honor their repayment commitments is generally dependent on the
level of overall economic activity within the geographic area and the general
economy.
As of December 31, 1998 and 1997, nonaccrual loans were $1,710,000 and
$1,215,000 respectively. Interest foregone was approximately $130,000, $147,000
and $178,000 for 1998, 1997 and 1996, respectively.
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
December 31,
1998 1997 1996
Beginning Balance ....... $ 5,640 $ 4,472 $ 4,080
Provision for loan losses 1,376 1,677 838
Recoveries .............. 266 583 210
Loans charged off ....... (770) (1,092) (656)
------- ------- -------
Net charge offs ......... (504) (509) (446)
------- ------- -------
Ending Balance .......... $ 6,512 $ 5,640 $ 4,472
======= ======= =======
Information regarding impaired loans is as follows:
December 31,
1998 1997 1996
Average investment in impaired loans .. $1,352 $1,520 $1,864
Interest income recognized on impaired
loans, all on cash basis ............ 87 64 220
Balance of impaired loans ............. 1,710 1,215 1,674
Portion of impaired loan balance for
which an allowance for credit losses
is allocated ........................ 1,710 1,215 1,674
Portion of allowance for loan losses
allocated to the impaired loan balance 296 223 340
6. MORTGAGE SERVICING
Residential real estate mortgages are originated by the Company for both
portfolio and for sale into the secondary market. The sale of loans are to
institutional investors such as the Federal Home Loan Mortgage Corporation
("Freddie Mac"). Under loan sale and servicing agreements with the investor, the
Company generally continues to service the residential real estate mortgages.
The Company pays the investor an agreed-upon rate on the loan, which, including
a guarantee fee paid to Freddie Mac, is less than the interest rate the Company
receives from the borrower. The difference is retained by the Company as a fee
for servicing the residential real estate mortgages. As required by SFAS No.
125, the Company capitalizes mortgage servicing rights at their fair value upon
sale of the related loans. Capitalized servicing rights totaled $69,000 during
1998.
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of condition. The unpaid principal balances of mortgage
loans serviced for others was $36,101,669, $41,617,228 and $45,913,503 at
December 31, 1998, 1997 and 1996, respectively.
Custodial escrow balances maintained in connection with the foregoing loan
servicing, and included in demand deposits, were $22,711 and $25,000 at December
31, 1998 and 1997, respectively.
7. BANK PREMISES AND EQUIPMENT
Details of premises and equipment, at cost, at December 31 were as follows:
1998 1997
Land and buildings ............................ $ 9,169 $ 8,193
Furniture, fixtures and equipment ............. 7,807 7,112
Leasehold improvements ........................ 426 401
Construction in process ....................... 38 30
------- -------
17,440 15,736
Less: Accumulated depreciation and amortization 7,910 6,950
------- -------
$ 9,530 $ 8,786
======= =======
Depreciation expense was $1.1 million, $1.1 million and $1.0 million for 1998,
1997 and 1996, respectively.
8. OTHER REAL ESTATE OWNED
The transactions in other real estate owned for the years ended December 31 were
as follows:
Beginning balance $1,373 $1,264
Additions ....... 733 1,035
Properties sold . 1,124 850
Writedowns ...... 77 76
------ ------
Ending balance .. $ 905 $1,373
====== ======
9. DEPOSITS
The aggregate amount of certificates of deposit, each with a minimum
denomination of $100,000, was approximately $50,022,926 and $32,094,000 in 1998
and 1997, respectively. Certificates of deposit included brokered deposits in
the amount of $6,003,000 and $131,000 at December 31, 1998 and 1997,
respectively.
At December 31, 1998, the scheduled maturities of certificates of deposit are as
follows:
1999 $188,083
2000 45,382
2001 7,933
2002 4,527
2003 1,483
Thereafter 467
--------
$247,875
========
10. BORROWED FUNDS
A summary of the borrowings from the Federal Home Loan Bank ("FHLB") of Boston
is as follows:
December 31, 1998
Principal Amounts Interest Rates Maturity Date
$40,265 4.95% - 6.58% 1999
20,000 4.99% - 5.09% 2008
-------
$60,265
=======
December 31, 1997
Principal Amounts Interest Rates Maturity Date
$98,236 5.59% - 7.05% 1998
278 6.58% 1999
-------
$98,514
=======
Short- and long-term borrowings from the FHLB consist of both fixed and
adjustable rate borrowings and are collateralized by all stock in the FHLB and a
blanket lien on qualified collateral consisting primarily of loans with first
mortgages secured by one- to four- family properties, certain unencumbered
investment securities and other qualified assets. The FHLB at its discretion can
call $20 million of the Company's long-term borrowings. The Company, through its
banking subsidiaries, has an available line of credit with FHLB of $11.2 million
and $10.2 million at December 31, 1998 and 1997, respectively. The Company had
$8.4 million outstanding at December 31, 1997, and no outstanding balance at
December 31, 1998.
The Company utilizes other borrowings in the form of federal funds purchased;
treasury, tax and loan deposits; and repurchase agreements secured by U.S.
Government or agency securities as shown in the table below:
1998 1997
Securities sold under repurchase agreements $29,849 $32,456
Treasury, tax and loan deposits 44 1,508
------- -------
Total other borrowed funds $29,893 $33,964
======= =======
Weighted-average rate at end of period 4.05% 4.98%
11. EMPLOYEE RETIREMENT PLANS
The Company has a trusteed defined benefit noncontributory pension plan covering
substantially all eligible employees over 21 years of age with one year of
employment. The benefits are based on years of service and salary earned during
an employee's last five years of employment. The assets of the plan are
primarily invested in listed stocks.
The Company also provides a supplemental pension plan for certain executive
employees to restore pension benefits which have been reduced by income tax
regulations. This plan is unfunded and nonqualified.
The Company's postretirement plans provide medical and life insurance to certain
eligible retired employees. It is the Company's policy to fund the cost of
postretirement health care and life insurance plans as premiums are paid;
therefore, there are no plan assets.
Postretirement
Pension Benefits Benefits
1998 1997 1998 1997
Change in benefit obligation
Benefit obligation at beginning of year ... $ 4,897 $ 4,008 $ 356 $ 315
Service cost .............................. 440 404 21 19
Interest cost ............................. 338 317 26 23
Actuarial (gain) loss ..................... (87) 240 15 12
Benefits paid ............................. (69) (72) (19) (13)
------- ------- ------- -------
Benefit obligation at end of year ......... 5,519 4,897 399 356
------- ------- ------- -------
Change in plan assets
Fair value of plan assets at beginning of year 2,947 2,469 -- --
Actual return on plan assets ............... 169 197 -- --
Employer contribution ...................... 357 340 -- --
Benefits paid .............................. (54) (59) -- --
------- ------- ------- -------
Fair value of plan assets at end of year ... 3,419 2,947 -- --
------- ------- ------- -------
Funded status .............................. (2,100) (1,950) (399) (356)
Unrecognized net actuarial loss ............ 326 256 2,712
Unrecognized net prior service cost ........ 114 314 (126) (142)
Transition asset ........................... (73) (80) -- --
------- ------- ------- -------
Accrued benefit cost ...................... $(1,733) $(1,460) $ (498) $ (486)
======= ======= ======= =======
Weighted-average assumptions as of December 31
Discount rate 7.5% 7.5% 7.5% 7.5%
Expected return on plan assets 7.5% 7.5% -- --
Rate of compensation increase 6.0% 6.0% 6.0% 6.0%
For measurement purposes, a 7.1% annual rate of increase in the per capita cost
to cover health care benefits was assumed for 1999. The rate was assumed to
decrease gradually to a 6.0% annual growth rate after eight years, and remain at
6.0% annual growth rate thereafter. A 1% increase in the assumed health care
cost trends rate would not have a material impact on the accumulated
postretirement benefit obligation due to a built-in cap on annual benefits. A 1%
decrease in the assumed health care cost trends is not readily available.
The expected return on plan assets and rate of compensation increase for 1996 is
7.5% and 6.0%, respectively.
Pension Benefits Postretirement Benefits
1998 1997 1996 1998 1997 1996
Components of net
periodic benefit cost
Service cost ............ $ 440 $ 404 $ 352 $ 21 $ 19 $ 20
Interest cost ........... 338 317 258 26 23 22
Expected return on
plan assets .......... (235) (188) (153) -- -- --
Amortization of prior
service cost .......... (14) (14) (9) (16) (16) (16)
Recognized net
actuarial loss ........ 45 52 39 -- -- --
----- ----- ----- ----- ----- -----
Net periodic benefit cost $ 574 $ 571 $ 487 $ 31 $ 26 $ 26
===== ===== ===== ===== ===== =====
12. SEGMENT REPORTING
Camden National Corporation through its subsidiaries (Camden National Bank,
United Bank and Trust Company of Maine, Inc.) provides a broad range of
financial services to individuals and companies in mid-coast and central Maine.
These services include lending, demand, savings and time deposits, cash
management and trust services. While the Company's senior management team
monitors the operations of each subsidiary, these subsidiaries are primarily
organized to operate in the banking industry. Substantially all revenues and
services are derived from banking products and services in Maine. Accordingly,
the Company's subsidiaries are considered by management to be aggregated in one
reportable operating segment.
13. SHAREHOLDERS' EQUITY
Dividends paid by subsidiaries are the primary source of funds available to the
Company for payment of dividends to its shareholders. The Company's subsidiary
banks are subject to certain requirements imposed by state and federal banking
laws and regulations. These requirements, among other things, establish minimum
levels of capital and restrict the amount of dividends that may be distributed
by the subsidiary banks to the Company.
The Company has a fixed stock option plan accounted for under APB Opinion 25 and
related interpretations. The plan allows the Company to grant options to
employees for up to 420,000 shares of common stock. The options are immediately
vested when granted, and expire ten years from the date the option is granted.
The exercise price of each option equals the market price of the Company's stock
on the date of grant. Accordingly, no compensation cost has been recognized for
the plan. Had compensation cost for the plan been determined based on the fair
value of the options at the grant dates consistent with the method of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's 1998 and 1996 net income and earnings per share
would have been reduced to the pro forma amounts indicated below. In 1997, no
options were granted, thus pro forma amounts are the same as reported.
Earnings per Share
Net Income Basic Diluted
1998
As reported $9,645 $1.43 $1.41
Pro forma 9,524 1.41 1.39
1997
As reported $9,148 $1.34 $1.31
Pro forma 9,148 1.34 1.31
1996
As reported $8,115 $1.16 $1.14
Pro forma 7,949 1.14 1.12
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted-average
assumptions used for all grants in 1996: dividend yield of 2.6%, expected
volatility of 5%, risk-free interest rate of 6.5%, and expected lives of 10
years; in 1998 dividend yield of 3.0%, expected volatility of 1.35%, risk-free
interest rate of 4.75%, and expected lives of 10 years.
A summary of the status of the Company's fixed stock option plan as of December
31, 1998, 1997 and 1996, and changes during the years ending on those dates is
presented below.
1998
Number of Weighted-average
Shares Exercise Price
Outstanding at beginning of year ......... 259,500 $ 7.82
Granted during the year .................. 13,500 18.75
Exercised during the year ................ 93,000 6.04
-------- ---------
Outstanding and exercisable at end of year 180,000 $ 9.56
======== =========
Weighted-average fair value of options
granted during the year $13.54
1997
Number of Weighted-average
Shares Exercise Price
Outstanding at beginning of year ......... 287,274 $ 7.65
Granted during the year .................. -- --
Exercised during the year ................ 27,774 6.07
------- --------
Outstanding and exercisable at end of year 259,500 $ 7.82
======= ========
Weighted-average fair value of options
granted during the year $ -
1996
Number of Weighted-average
Shares Exercise Price
Outstanding at beginning of year ......... 205,524 $ 5.79
Granted during the year .................. 81,750 12.33
Exercised during the year ................ -- --
------- ---------
Outstanding and exercisable at end of year 287,274 $ 7.65
======= =========
Weighted-average fair value of options
granted during the year $ 3.08
The following table summarizes information about stock options outstanding at
December 31, 1998:
Weighted-average
Number Remaining Weighted-average
Outstanding at Contractual Life Exercise Price
90,000 5.0 $ 5.83
76,500 8.0 12.33
13,500 10.0 18.75
------- ----- -------
180,000 6.7 $ 9.56
======= ===== =======
14. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
1998 1997 1996
Net income, as reported ........ $ 9,645 $ 9,148 $ 8,115
Weighted-average shares ........ 6,763,086 6,820,752 6,989,967
Effect of dilutive employee
stock options ............... 91,527 154,926 113,700
Adjusted weighted-average shares
and assumed conversion ...... 6,854,613 6,975,678 7,103,667
Basic earnings per share ....... $ 1.43 $ 1.34 $ 1.16
Diluted earnings per share ..... $ 1.41 $ 1.31 $ 1.14
15. INCOME TAXES
The current and deferred components of income tax expense were as follows:
1998 1997 1996
Current:
Federal $4,822 $4,948 $4,024
State . 151 181 121
------ ------ ------
4,973 5,129 4,145
Deferred:
Federal (504) (676) (115)
------ ------ ------
$4,469 $4,453 $4,030
====== ====== ======
The actual expense differs from the expected tax expense computed by applying
the applicable U.S. Federal corporate income tax rate to earnings before income
taxes, as follows:
1998 1997 1996
Computed tax expense ................. $ 4,940 $ 4,625 $ 4,151
Increase (reduction) in income taxes
resulting from:
Tax exempt income ................. (165) (222) (209)
State taxes, net of federal benefit 98 120 79
Income from life insurance ........ (80) (41) (30)
Low income housing credits ........ (221) (47) --
Other ............................. (103) 18 39
------- ------- -------
$ 4,469 $ 4,453 $ 4,030
======= ======= =======
Items which give rise to deferred income tax assets and liabilities and the tax
effect of each are as follows:
1998 1997
Asset Liability Asset Liability
Allowance for possible losses
on loans ........................ $2,053 $ -- $1,682 $ --
Allowance for investment losses .... 90 -- 90 --
Capitalized costs .................. -- 69 -- 72
Pension and other benefits ......... 777 -- 671 --
Depreciation ....................... -- 222 -- 141
Deferred loan origination fees ..... -- 86 6 --
Deferred compensation and benefits . 89 -- 83 --
Unrealized gains (losses) of
investments available for sale .. -- 51 -- 3
Unrealized appreciation in loans
held for sale ................... 84 -- 22 --
Valuation of other real estate owned 29 -- 41 --
Interest receivable ................ 94 -- 37 --
Core deposit intangibles ........... 60 -- 27 --
Mortgage servicing rights .......... 24 -- -- --
Other .............................. 136 -- 109 --
------ ------ ------ ------
$3,436 $ 428 $2,768 $ 216
====== ====== ====== ======
The related income taxes have been calculated using a rate of 35%. No valuation
allowance is deemed necessary for the deferred tax asset, which is included in
other assets.
16. RELATED PARTIES
In the ordinary course of business, the Company has granted loans to certain
officers and directors and the companies with which they are associated. All
such loans were made under terms that are consistent with the Company's normal
lending policies. Changes in the composition of the Board of Directors or the
group comprising executive officers result in additions to or deductions from
loans outstanding to directors, executive officers, or principal shareholders.
Loans to related parties which in aggregate exceed $60,000 were as follows:
1998 1997
Balance, January 1, ............. $14,254 $ 7,710
Loans made/advanced and additions 5,986 9,505
Repayments and reductions ....... 4,637 2,961
------- -------
Balance, December 31, ........... $15,603 $14,254
======= =======
In addition to the loans noted above, the Company had deposits outstanding at
December 31, 1998 and December 31, 1997 to the same individuals of $5.3 and $6.3
million, respectively.
17. FINANCIAL INSTRUMENTS
In the normal course of business, the Company is a party to financial
instruments with off-balance sheet risk, which are not reflected in the
accompanying consolidated statements of condition. The Company's significant
off-balance sheet risks are lending commitments, letters of credit, interest
rate floors and interest rate swap agreements. Those instruments involve varying
degrees of credit and interest rate risk in excess of the amount recognized in
the statement of condition.
The Company follows the same credit policies in making commitments to extend
credit and conditional obligations as it does for on-balance sheet instruments,
including requiring similar collateral or other security to support financial
instruments with credit risk. The Company's exposure to credit loss in the event
of nonperformance by the customer is represented by the contractual amount of
those instruments. Since many of the commitments are expected to expire without
being drawn upon, the total amount does not necessarily represent future cash
requirements.
The Company uses off-balance sheet derivative instruments as hedges against
significant fluctuations in interest rates. The Company uses interest rate swap
and floor instruments to hedge against potentially lower yields on the variable
prime rate loan category in a declining rate environment. If rates were to
decline, resulting in reduced income on the adjustable rate loans, there would
be an increased income flow from the interest rate swap and floor instruments.
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. The Company regularly reviews the
credit quality of the counterparties from which the instruments have been
purchased. As of December 31, 1998, the Company had $20 million (notional
principal amount) in floor contracts. The two floor contracts ($10 million each)
have a strike rate of 5%, and both mature in 1999.
1998 1997
Commitments to extend credit $101,724 $80,043
Letters of credit 1,735 1,911
Swaps - 5,000
Floors 20,000 20,000
The estimated fair values of the Company's financial instruments were as
follows:
December 31, 1998 December 31, 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash ................................. $ 14,938 $ 14,938 $ 14,551 $ 14,551
Securities available for sale ........ 98,243 98,243 18,396 18,396
Securities held to maturity .......... 88,570 91,759 160,894 164,286
Loans held for sale .................. 24,637 24,877 7,094 7,094
Loans receivable ..................... 407,798 402,612 350,415 347,681
Interest receivable .................. 3,820 3,820 3,924 3,924
Financial liabilities:
Deposits ............................. 508,573 509,800 373,409 373,898
Borrowings from Federal Home Loan Bank 60,265 59,163 98,514 98,502
Other borrowed funds ................. 29,893 29,893 33,964 33,964
Interest payable ..................... 3,137 3,137 3,459 3,459
The estimated fair values of the Company's off-balance sheet instruments were as
follows:
December 31, 1998
Fair Value
Notional Contract Maturity Including
Principal Date Date Accruals
Interest Rate Floors $10,000 03-Jun-94 03-Jun-99 $ 8
10,000 13-Sep-94 13-Sep-99 11
------- ----
$20,000 $19
======= ====
December 31, 1997
Fair Value
Notional Contract Maturity Including
Principal Date Date Accruals
Interest Rate Swaps $ 5,000 09-Feb-94 09-Feb-98 $(57)
======== ====
Interest Rate Floors $10,000 03-Jun-94 03-Jun-99 $ 8
10,000 13-Sep-94 13-Sep-99 10
------- -----
$20,000 $ 18
======= =====
18. REGULATORY MATTERS
The Company, and its bank subsidiaries, are subject to various regulatory
capital requirements administered by the Comptroller of the Currency, the
Federal Reserve Board, and the Federal Deposit Insurance Corporation. Failure to
meet minimum capital requirements can initiate certain mandatory and possible
additional discretionary actions by regulations that, if undertaken, could have
direct material affect on the Company's financial statements.
These capital requirements represent quantitative measures of the Company's
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting principles. The Company's capital classification is also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital to average assets (as
defined). Management believes that, as of December 31, 1998, the Company meets
all capital requirements to which it is subject.
As of December 31, 1998, both bank subsidiaries were categorized by their
regulatory agencies as well capitalized. To be categorized as well capitalized
the banks must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the following table. There are no conditions or
events that management believes have changed the banks' category.
The Company's actual capital amounts and ratios are also presented in the table.
To Be Well
Capitalized
For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount>= Ratio>= Amount>= Ratio>=
As of December 31, 1998
Total Capital
(To Risk Weighted Assets):
Consolidated .......... $62,445 14.0% $35,602 8.0% N/A
Camden National Bank .. 50,111 14.2% 28,292 8.0% $35,365 10.0%
United Bank ........... 9,773 10.7% 7,310 8.0% 9,138 10.0%
Tier I Capital
(To Risk Weighted Assets):
Consolidated .......... $56,882 12.8% $17,801 4.0% N/A
Camden National Bank .. 45,690 12.9% 14,146 4.0% $21,219 6.0%
United Bank ........... 8,631 9.5% 3,655 4.0% 5,483 6.0%
Tier I Capital
(To Average Assets):
Consolidated .......... $56,882 9.5% $23,836 4.0% N/A
Camden National Bank .. 45,690 9.1% 19,982 4.0% $24,978 5.0%
United Bank ........... 8,631 9.0% 3,842 4.0% 4,803 5.0%
To Be Well
Capitalized
For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount>= Ratio>= Amount>= Ratio>=
As of December 31, 1997
Total Capital (To Risk Weighted Assets):
Consolidated $66,606 19.5% $27,354 8.0% N/A
Camden National Bank 57,799 20.2% 22,841 8.0% $28,551 10.0%
United Bank 6,820 12.1% 4,517 8.0% 5,646 10.0%
Tier I Capital (To Risk Weighted Assets):
Consolidated $62,332 18.2% $13,677 4.0% N/A
Camden National Bank 54,230 19.0% 11,420 4.0% $17,130 6.0%
United Bank 6,114 10.8% 2,258 4.0% 3,388 6.0%
Tier I Capital (To Average Assets):
Consolidated $62,332 10.6% $23,483 4.0% N/A
Camden National Bank 54,230 11.2% 19,401 4.0% $24,251 5.0%
United Bank 6,114 8.3% 2,953 4.0% 3,691 5.0%
19. BANK HOLDING COMPANY
Following are the condensed statements of condition, income statements, and
statements of cash flow for Camden National Corporation, a multi-bank and
financial services holding company.
Statements of Condition
December 31,
1998 1997
Assets
Cash ........................................ $ 2,638 $ 170
Fixed assets ................................ 1,486 1,675
Investment in subsidiaries:
Banking subsidiaries ..................... 61,540 60,569
Other subsidiaries ....................... 94 89
Amounts receivable from subsidiaries ........ 1,940 46
Goodwill .................................... 51 55
Other assets ................................ 273 170
------- -------
Total assets ............................. $68,022 $62,774
======= =======
Liabilities & Shareholders' Equity
Amounts due to subsidiaries ................. $ 3,657 $ 40
Accrued expenses ............................ 263 178
Shareholders' equity ........................ 64,102 62,556
------- -------
Total liabilities and shareholders' equity $68,022 $62,774
======= =======
Statements of Income
For Years Ended December 31,
1998 1997 1996
Operating Income
Dividend income
from subsidiaries ................. $ 8,569 $ 4,387 $ 3,951
Fees from subsidiaries .............. 3,696 2,956 77
------- ------ -------
Total operating income ........... 12,265 7,343 4,028
------- ------- -------
Operating Expenses
Salaries and employee benefits ...... 2,030 1,625 --
Net occupancy ....................... 170 156 --
Furniture, equipment and
data processing ................... 653 612 --
Other operating expenses ............ 867 607 77
------- ------- -------
Total operating expenses ......... 3,720 3,000 77
------- ------- -------
Income before equity in undistributed
earnings of subsidiaries .......... 8,545 4,343 3,951
Equity in undistributed earnings
of subsidiaries .................. 1,076 4,761 4,164
------- ------- -------
Net income before tax ............ 9,621 9,104 8,115
Income tax benefit .................. 24 44 --
------- ------- -------
Net Income ............................. $ 9,645 $ 9,148 $ 8,115
======= ======= =======
Statements of Cash Flows
For Years Ended December 31,
1998 1997 1996
Operating Activities
Net income ............................ $ 9,645 $ 9,148 $ 8,115
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Undistributed net income
from subsidiaries ............. (1,076) (4,761) (4,164)
Depreciation and amortization ... 361 197 --
Amortization of goodwill ........ 4 3 4
(Increase) decrease in amount
receivable from subsidiaries .. (1,894) 84 (77)
Increase in other assets ........ (103) (169) --
Increase (decrease) in payables . 3,702 232 (25)
Other, net ...................... (34) 11 --
-------- -------- --------
Net cash provided by
operating activities ........... 10,605 4,745 3,853
-------- -------- --------
Investing Activities
Investment in Trust Company
of Maine, Inc. ................... -- (51) --
Purchase of premises and equipment . (172) (149) --
-------- -------- --------
Net cash used in
investing activities .............. (172) (200) --
-------- -------- --------
Financing Activities
Proceeds from sale of treasury stock -- -- 50
Exercised stock options ............ (1,122) -- --
Purchase of treasury stock ......... (3,058) (1,337) (1,712)
Dividends paid ..................... (3,750) (3,050) (2,239)
Filing fees related to stock split . (35) -- --
-------- -------- --------
Net cash used in
financing activities ............. (7,965) (4,387) (3,901)
-------- -------- --------
Net increase (decrease) in cash ....... 2,468 158 (48)
Cash at beginning of year ............. 170 12 60
-------- -------- --------
Cash at end of year ................... $ 2,638 $ 170 $ 12
======== ======== ========
20. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1998 and 1997:
Three Months Ended
Mar 31 June 30 Sept 30 Dec 31
1998
Interest income .......... $11,561 $11,802 $11,989 $13,463
Interest expense ......... 5,250 5,145 5,097 5,258
Net interest income ...... 6,311 6,657 6,892 8,205
Provision for loan losses 324 324 344 384
Income before income taxes 3,320 3,291 3,679 3,824
Applicable income taxes .. 1,086 1,050 1,165 1,168
Net income ............... 2,234 2,241 2,514 2,656
Per common share:
Basic ................. .33 .33 .37 .40
Diluted ............... .32 .32 .37 .40
Three Months Ended
Mar 31 June 30 Sept 30 Dec 31
1997
Interest income .......... $10,612 $11,439 $11,566 $12,434
Interest expense ......... 4,934 5,473 5,467 5,355
Net interest income ...... 5,678 5,966 6,099 7,079
Provision for loan losses 287 285 385 720
Income before income taxes 3,145 3,525 3,481 3,450
Applicable income taxes .. 1,056 1,195 1,166 1,036
Net income ............... 2,089 2,330 2,315 2,414
Per common share:
Basic ................. .31 .34 .34 .35
Diluted .............. .30 .34 .33 .34
[Page 41]
This page contains a scanned in copy of Berry, Dunn, McNeil & Parker's Report
of Independent Certified Public Accountants.
Camden National Corporation and Subsidiaries
Auditors' Letter
Berry, Dunn, McNeil & Parker letterhead
Berry, Dunn, McNeil & Parker
Certified Public Accountants
Management Consultants
100 Middle Street / P.O. Box 1100
Portland, ME 04104-1100
(207) 775-2387 Fax (207) 774-2375
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
Camden National Corporation
We have audited the accompanying consolidated statements of financial condition
of Camden National Corporation and Subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Camden National
Corporation and Subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
Berry, Dunn, McNeil & Parker (signature)
Portland, Maine
January 22, 1999
[Pages 42 - 43 list the Boards of Directors and Bank Administrations]
Boards of Directors and Bank Administrations
In appreciation for their dedication and outstanding
contributions To the Board of Directors of Camden
National Corporation,
We acknowledge the retirement of
David H. Montgomery
Director, 1966-1998
Chairman, Camden National Corporation, 1976-1998
And
Kenneth C. Dickey
Director, 1970-1997
Vice Chairman, Camden National Corporation, 1976-1997
Directors of
Camden National Corporation
Rendle A. Jones
Chairman, Camden National Corporation
Attorney & Partner - Harmon, Jones & Sanford
Keith C. Patten
President & CEO, Camden National Corporation
Chairman, Camden National Bank
Peter T. Allen
Private Investor
Ann W. Bresnahan
Civic Leader
Royce M. Cross
President, Woodrow W. Cross Agency
Robert W. Daigle
President & CEO, Camden National Bank
Robert J. Gagnon
Store Manager, Rockland Shop 'n Save
John W. Holmes
President, Consumers Fuel Co.
John S. McCormick, Jr.
Engineer & Developer
Consolidated Real Estate and Engineering
Richard N. Simoneau, C.P.A.
Tax Partner, Simoneau & Norton, P.A.
Arthur E. Strout
Attorney & Partner - Strout & Payson, P.A.
Directors of Camden National Bank
Keith C. Patten
President & CEO, Camden National Corporation
Chairman, Camden National Bank
Robert W. Daigle
President & CEO
Peter T. Allen
Private Investor
Ann W. Bresnahan
Civic Leader
David C. Flanagan
President, Viking, Inc.
Robert J. Gagnon
Store Manager, Rockland Shop 'n Save
John W. Holmes
President, Consumers Fuel Co.
Rendle A. Jones
Attorney & Partner - Harmon, Jones & Sanford
John S. McCormick, Jr.
Engineer & Developer
Consolidated Real Estate and Engineering
Richard N. Simoneau, C.P.A.
Tax Partner, Simoneau & Norton, P.A.
Arthur E. Strout
Attorney & Partner - Strout & Payson, P.A.
Rosemary B. Weymouth
President, Megunticook Management Co.
Associate Directors of
Camden National Bank
C.R. deRochemont
Realtor, C.R. deRochemont Realtor
Kenneth C. Dickey
Retired Vice Chairman,
Camden National Corporation
Haskell & Corthell Real Estate
Frederick G. "Ted" Hanley
Retired Executive Vice President,
Camden National Bank
Lawrence N. Hopkins
Retired President, Camden National Bank
David H. Montgomery
Retired Chairman, Camden National Corporation
Past Chairman, Allen Agency
Administration of
Camden National Corporation
Keith C. Patten
President & CEO
Susan M. Westfall
Vice President, Clerk, Treasurer
& Chief Financial Officer
Jeffrey D. Smith
Vice President & Chief Operations Officer
Steven D. Dailey
Vice President & Information Systems Officer
June B. Parent
Assistant Vice President & Personnel Manager
Kathryn M. Ryder
Financial Officer
Manager, Accounting Department
Brenda B. Munroe
Manager, Electronic Banking Department
Robert E. Cleveland, Jr.
Senior Network Administrator
Timothy J. Pratt
Manager, Items Processing Department
Jennifer F. Mazurek
Manager, Deposit Services Department
Administration of
Camden National Bank
Keith C. Patten
Chairman
Robert W. Daigle
President & CEO
John P. "Jack" Williams
Senior Vice President, Commercial Loan & Business Development Officer
Michael A. McAvoy
Vice President & Senior Loan Officer
Susan M. Westfall
Vice President, Cashier &
Investment and Trust Officer
Charles A. Wootton
Vice President, Branch Administration Officer &
Commercial Loan Officer
Joanne T. Campbell
Vice President &
Residential Real Estate Administration Officer
Stephen C. Staples
Vice President, Regional Manager &
Commercial Loan Officer
James C. Ebbert
Assistant to the President
Barbara B. Hanson
Assistant Vice President & Commercial Loan Officer
Richard E. Littlefield
Assistant Vice President & Commercial Loan Officer
Craig S. Dahlberg
Assistant Vice President & Commercial Loan Officer
Kimberly J. Nason
Mortgage Loan Underwriter
Christopher A. Frohock
Commercial Loan Officer
Lee Ann Szelog
Marketing Manager
Marie M. Charest
Training Officer
Vera E. Rand
Commercial Credit Administrator
Jane G. Pierce
Branch Administration Service Manager
Ellen L. Ellis
Loan Servicing Department Manager
Ann E. Filley
Call Center and NetBANK Manager
Branch Administration of
Camden National Bank
Paul C. Doody
Vice President, Regional Manager &
Manager, Belfast Office
Robert P. Wheeler
Assistant Vice President, Regional Manager & Manager, Vinalhaven Office
Brenda J. Condon
Assistant Vice President &
Manager, Bucksport Office
Rodney L. MacDougal
Assistant Vice President &
Manager, Waldoboro Office
Sangeeta B. Norton
Manager, Rockland Office
Judith L. Brogden
Manager, Camden Square Office
Susan L. O'Brien
Manager, Union Office
R. Todd Starbird
Manager, Thomaston Office
Walter C. Reynolds
Manager, Damariscotta Office
Jane G. Pierce
Interim Manager, Main Office
Directors of United Bank
Royce M. Cross, Chairman
President, Woodrow W. Cross Agency
Bruce D. Bartlett
President, Treasurer & CEO
Kermit P. Allen
Treasurer, G.M. Allen & Son, Inc.
Edward R. Dysart
President, Dysart Transportation Services, Inc.
William T. Gardner
President, William T. Gardner & Sons, Inc.
Rendle A. Jones, Esq.
Attorney & Partner - Harmon, Jones & Sanford
C. Charles Lumbert
President, Moose River Lumber Co., Inc.
Keith C. Patten
President & CEO, Camden National Corporation
Chairman, Camden National Bank
Carroll R. Pickard
President, Pleasant Hill Diversities
LaJune S. Means
Private Investor, Director Emeritus
Bank Administration of United Bank
Bruce D. Bartlett
President, Treasurer & CEO
James M. Kimball
Vice President & Senior Loan Officer
Paul R. Flynn
Vice President & Branch Administrator
Lori L. Martin
Vice President & Operations Officer
Daniel A. Kelley
Assistant Vice President & Loan Officer
Ronald W. Taplin
Loan Officer
Robert N. Cross
Business Development Officer
Branch Administration of United Bank
Brent A. Folster
Vice President & Manager, Bangor Office
Joseph E. Hackett
Vice President & Manager, Greenville Office
Linda J. Colbath
Manager, Corinth Office
William J. Crawford, III
Manager, Dover-Foxcroft Office
Michael A. Durgin
Manager, Hampden & Winterport Offices
Darcel S. Bryant
Manager, Hermon Office
Marilyn J. Chalker
Manager, Jackman Office
Linda K. Russell
Manager, Milo Office
Directors of
Trust Company of Maine, Inc.
Andrew P. Averill
Chairman, President & CEO
R. Paul Pasquine
Executive Vice President, COO &
Senior Trust Officer
Bruce D. Bartlett
President, Treasurer & CEO, United Bank
Randall A. Bishop
Chief Financial Officer
William T. Gardner & Sons, Inc.
Robert W. Daigle
President & CEO, Camden National Bank
Shirley B. Kile
Executive Vice President & Treasurer
Richard N. Simoneau, C.P.A.
Tax Partner, Simoneau & Norton, P.A.
Officers Trust Company of Maine, Inc.
Andrew P. Averill
Chairman, President & CEO
R. Paul Pasquine
Executive Vice President, COO &
Senior Trust Officer
Shirley B. Kile
Executive Vice President & Treasurer
Lynn M. Bowden
Vice President & Trust Officer
Susan L. Kenney
Assistant Vice President & Trust Officer
Robert M. Parker, Jr.
Assistant Vice President &Trust Officer
[Page 44]
Generations Gold Emblem Generations Gold Family...
Picture of family of eight on frozen pond with a sled and ice fishing equipment
(picture size - 4.0" wide x 3.5" tall)
Thank You to the McFarlands
The McFarland family has been banking with Camden National for over 50 years.
Murial McFarland, a retired nursery school teacher, recalls, "Camden National
helped us finance our first house, our first car, and everything since." Sheila
McFarland was employed at Camden National Bank for 20 years. She retired from
her position as customer service officer in 1997. Sheila's husband, Paul Jr., is
general manager of O'Hara Corporation in Rockland. Paul III is the ice plant
manager at O'Hara and his wife Deborah is a registered nurse at Penobscot Bay
Medical Center in Rockport. The youngest generation of McFarlands, Owen, Tyler
and Caleb, like to play sports and are learning the joys of saving with the help
of three Penny's Piggy Bank accounts.
The following information is in a box and the annual meeting information is
bolded:
Annual Meeting, Camden National Corporation - Tuesday, May 4, 1999, 3:30p.m.
The Company will provide, without charge, upon written request, a copy of Camden
National Corporation's Annual Report to the Securities and Exchange Commission,
Form 10K for the 1998 fiscal year.
Please contact:
Susan M. Westfall - Camden National Corporation - P.O. Box 310 - Camden, Maine
04843 - 207-236-8821
Camden National Corporation logo Camden National Corporation
Under the outlined box are the following credits:
Credits
Benjamin Magro, Photography - Peggy Mason Graphics, Design & typesetting
Back cover
At the bottom of the page is the following:
Camden National Corporation logo
Camden National Corporation
Picture of Camden National Bank's Main Office (Camden, ME)
(picture size - 2.25" wide x
1.75" tall)
2 Elm Street - P.O. Box 310 - Camden, Maine 04843-0310 - 207-236-8821
[DAMARISCOTTA LEASE]
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT made on the 16 day of March, 1998, by and between
KEYBANK NATIONAL ASSOCIATION, successor in interest to CASCO NORTHERN BANK, N.A.
("Lessor"), and CAMDEN NATIONAL BANK ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Jordan Bay Investment Corporation, a Maine
corporation ("Master Lessor") have entered into that certain Indenture of lease
dated September 20, 1989 with respect to the Leased Premises (defined below)
(the "Master Lease"); and
WHEREAS, pursuant to the terms of that certain Branch Purchase and
Assumption Agreement dated as of October 14, 1997, Lessor has agreed to sublease
the Leased Premises to Lessee.
NOW, THEREFORE, in consideration, of the Leased Premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the partiess hereto agree as follows:
1. Leased Premises. The Lessor hereby leases unto the Lessee, and the
Lessee hereby hires and takes from the Lessor, the following described premises
located in the Coastal Plaza in Damariscotta, Maine: a building containing a
floor area of approximately twenty-six hundred (2600) square feet situated in
the southwesterly corner of Coastal Plaza all as more particularly shown as the
shaded area on the plan attached to the Master Lease and marked "Exhibit A"
(hereafter "Leased Premises").
2. The Shopping Center. The words "the Coastal Plaza" or "Shopping
Center" and all references thereto shall be deemed to mean the area situated on
the northerly side of Route US 1 (Business) in Damariscotta, Maine, as shown
outlined by a dark black line on the plan attached to the Master Lease and
marked "Exhibit A" which includes the Leased Premises.
3. Term. TO HAVE AND TO HOLD the Leased Premises unto the Lessee and
its successors and assigns for a term commencing on March 16, 1998 (the
"Commencement Date") and ending May 3, 2010 (the "Lease Term"), subject to the
terms and conditions hereinafter in this Lease contained.
The Lessor and the Lessee agree that promptly after the commencement of
the term hereof, they will enter into a Memorandum of Lease in accordance with
title 33, M.R.S.A. Section 201, which shall be acknowledged and in form for
recording, setting forth the facts required by that Statute.
4. Rent. YIELDING AND PAYING rent therefor at such place or places as
the Lessor may by notice in writing to the Lessee from time to time direct, as
follows:
(a) Commencing on the Commencement Date and ending May 4, 2000
(the "Initial Term"), annual rent of Forty-one thousand and 00/100
Dollars ($41,000.00) ("Initial Term Rent") payable monthly in advance,
in equal installments beginning on April 1, 1998 and on the first day
of each calendar month thereafter; provided, however, that Lessee shall
pay prorated rent on a per diem basis for any fractional part of a
month at the commencement or termination of this lease or in any month
in which an Adjustment Period (defined below) begins or ends.
(b) Upon each of May 5, 2000 and May 5, 2005 and any renewal
term of this Lease (each being and "Adjustment Period") the Lessor
shall be entitled to have the annual rental payments for the ensuing
years of each adjustment period reflect any increase in the cost of
living which occurred during the period (whether initial or adjustment)
then ending. The Lessor shall compute any such increase by using as a
basis for the computation the "Consumer Price Index-All Cities (1967
equal to 100)", hereinafter referred to as the "Index", published by
the Bureau of Labor Statistics of the United States Department of
Labor. More specifically, the computation shall be made as follows:
(i) The Index Number in the column for Boston,
entitled "All Items" for the month in which the
first payment of rent for the Initial Term of this
Lease shall be the Base Index Number (BIN) and the
corresponding Index Number for the month prior to
the last month of the period (whether initial or
adjustment) then ending shall be the Current Index
Number (CIN).
(ii) The increase in the cost of living, if any, shall be
determined by dividing the Current Index Number by
the Base Index Number, as determined by Subparagraph
(i) above, and subtracting the integer one from the
quotient, in accordance with the following formula:
Increase in cost of living = CIN over BIN minus one.
The adjustment to the annual rental payments shall be
determined by multiplying the percentage increase in
the cost of living as determined above by the Initial
Term Rent. The adjustment figure for the first
Adjustment Period shall be added to Initial Term
Rent. The adjustment figure for the first Adjustment
Period shall be added to Initial Term Rent yielding
the new annual rent. The new annual rent so computed
shall be payable to Lessee to Lessor in monthly
installments in advance on the first day of each
month of the first adjustment period of this Lease.
(iii) The adjustment for the second Adjustment Period of
this Lease shall be computed as indicated in
Subparagraphs (i) and (ii) above except that the CIN
shall be changed to the last month of the first
Adjustment Period. The adjustment to the rental
payments shall be determined by multiplying the
percentage increase, if any, in the cost of living as
so determined by an amount equal to the Initial Term
Rent, and the rental as so added to and adjusted
shall be payable in the manner as provided in
Subparagraph (ii) above.
(iv) If the publication of the Consumer Price Index is
discontinued, the parties hereto shall accept
comparable statistics on the cost of living for the
City of Boston as computed and published by an agency
of the United States, if any, or otherwise by a
responsible financial periodical of recognized
authority to be selected by the parties.
(c) On the last rent day, Lessee shall pay rent at the last
computed monthly rent for the portion of the last calendar month included in the
term hereof.
5. AS-IS/WHERE-IS. Tenant acknowledges that Tenant hereby accepts the
Leased Premises in its present condition, AS-IS, without any warranties or
representations. Tenant acknowledges and agrees that neither Landlord, nor any
officer, employee, or agent of Landlord has made any representation, verbal or
otherwise, concerning the condition of the Leased Premises on which Tenant has
relied in the decision to execute the Lease.
6. Parking Areas and Other Common Facilities. The Lessee shall have the
right, as an appurtenance to the Leased Premises, to use the parking areas,
roadways, walkways and other common facilities within the Shopping Center in
common with others entitled to the use thereof and otherwise in accordance with
and subject to the provisions of this Lease and such reasonable regulations with
respect to their use as the Master Lessor shall from time to time establish. The
Master Lessor may also from time to time make reasonable changes in any common
facility in the Shopping Center. Automobiles and other vehicles used by the
Lessee and its employees shall be parked only in areas located in the Leased
Premises and not in the remainder of the Shopping Center. The Lessee also agrees
not to cause any obstruction or other interference with any roadway, walkway or
other common facility appurtenant to the Leased Premises which any person or
persons other than the Lessee or those claiming under it may be entitled to use.
The Lessee also agrees to use its best efforts to prohibit truck and delivery
vehicles in the parking areas within the Shopping Center; all loading and
unloading of merchandise, supplies, fixtures, equipment and furniture shall be
done at and through the proper service entrance or entrances.
7. Construction and Maintenance of Parking Areas and Additional Rent .
The Lessor further agrees to use reasonable efforts to cause Master Lessor,
during the term hereof, to pay the real estate taxes and other assessments,
provide comprehensive public liability and fire and extended coverage insurance
and operate, manage and maintain all parking areas, roadways, walkways and other
common facilities within the Shopping Center, and to maintain the landscaping,
drainage and lighting facilities therefor, all in such manner and at such cost
as the Master Lessor in its reasonable judgement shall determine, it being
expressly understood and agreed that neither Master Lessor nor Lessor shall be
liable for any inconvenience, discomfort, deprivations, interruption of business
or other consequence resulting from or due to the making of repairs,
replacements, improvements, alterations, or additions or the doing of any other
work by or at the direction of the Master Lessor, to or upon any of such common
facilities, strikes or other labor difficulties, difficulty in obtaining
electricity or any other service or supplies from the Master Lessor's usual
source of supply, inability to obtain labor or materials, or any cause beyond
the Master Lessor's or Lessor's reasonable control. The Lessee agrees to pay the
Lessor upon being billed therefor, but no more often than once each calendar
month, as ADDITIONAL RENT (which additional rent may be estimated by the Master
Lessor, subject to adjustment in future billings to the Lessor), the Lessee's
share of such cost described in the immediately preceding sentence during each
year of the term of this Lease, including without limiting the foregoing
generality, the cost of such insurance, taxes and assessments, the cost of snow
removal, policing, lighting, cleaning, and line painting and of repairing,
renovating, replacing and improving any of such common facilities, landscaping,
drainage or lighting facilities, and also the Lessee's share of the cost of
lighting and maintaining such signs and advertising devices as the Master Lessor
may erect calling attention to the Shopping Center, excepting such signs that
are not within the Shopping center or adjacent thereto. Notwithstanding the
foregoing, with respect to real estate taxes and assessments by any agency
authorized to make assessments relating to the building located on the Leased
Premises, the Lessee shall bear the entire cost of same as a portion of the
Additional Rent and the next succeeding sentence shall not apply to same. The
Lessee's share of costs, excluding such real estate taxes and such assessments,
shall be one and one-half times the proportion that the total floor area of the
building to be constructed on the Leased Premises bears to the total floor area
in all leased or occupied buildings or portions of buildings within the Shopping
Center, including the building to be constructed as of the date of the billing.
If the Master Lessor may, in its sole judgement, charge for all or a portion of
such special costs on such reasonable basis as the Mater Lessor shall determine.
Lessee shall pay Lessor for any such special costs not paid directly to Master
Lessor by Lessee.
In the event that at any time subsequent to the date when the Master
Lessor named herein shall cease to be the Master Lessor, the Master Lessor
should fail to seek an abatement of the real estate taxes affecting the Leased
Premises for thirty (30) days after request by the Lessee at any time, the
Lessee may do so in the name of the Master Lessor but at the sole cost and
expense of the Lessee, and all reasonable legal fees and expenses incurred by
the Lessee therein shall be recouped out of the first proceeds of any such
abatement procured, and such real estate taxes shall be adjusted as a result of
such abatement procured. In no event shall Lessor be obligated to expend any sum
of money or incur any obligations in connection with such abatement. In the
event of such contest, the Lessee shall, however, furnish reasonable security,
if required by the Master Lessor, to insure the payment of such taxes and
prevent any sale, foreclosure or forfeiture of all or any part of the Shopping
Center by reason of such contest. The Lessee further agrees that such contest
shall be prosecuted to a final conclusion diligently, that it will pay and
exonerate and indemnify the Lessor against any and all claims, suits,
obligations, liabilities and damages in connection therewith, and that it will,
promptly after the final determination of such contest, fully pay and discharge
to the Master Lessor its share, as determined by this Sublease of all amounts
determined to be payable therein, together with all penalties, defines,
interest, costs and expenses resulting from such contest. The right of the
Lessee so to seek an abatement pursuant to the provisions of this Paragraph
shall not apply during any period when an institutional mortgagee, either in
possession of the Leased Premises or Shopping Center or both, shall have become
the Lessor hereunder or the Master Lessor under the Master Lease pursuant to
foreclosure or acceptance of a deed in lieu of foreclosure.
8. Real Estate Taxes, Etc. The Lessee agrees to reimburse Lessor or
Master Lessor for all real estate taxes and assessments of every kind and
description which may be levied or assessed against the building and other
improvements construction on the Leased Premises.
9. Utilities. The Lessee shall pay for all electricity, gas, water,
heat, sewer and other utility services used on the Leased Premises, and at its
own expense shall heat the water to meet its hot water requirements. If the
Master Lessor shall elect at any time to supply any one or more of said services
to the Leased Premises, then the Lessee, upon not less than forty-five (45)
days' written notice from the Lessor, shall accept and use such of said services
as are tendered by the Master Lessor and pay therefor at the rates which would
be charged if the same were purchased by the Lessee from the municipality or
other service corporation which would otherwise supply such service or services.
The charges for such of said services are to be furnished by the Master Lessor
shall be ADDITIONAL RENT due on the first day of the calendar month following
the billing thereof to the Lessee, and the Lessor shall have the same remedies
for non-payment of said ADDITIONAL RENT as the Lessor shall have for the
non-payment of other rent; and in addition to said remedies, the Lessor, upon
not less than three (3) days' notice to the Lessee, may discontinue furnishing
such of said services as are not paid for, and no such discontinuance shall be
deemed an eviction or render the Lessor or Master Lessor liable for damages or
relieve the Lessee from its obligations under this Lease. If the Master Lessor
should elect as aforesaid to furnish all or any of said services, then the
Lessor shall not be liable to the Lessee in damages or otherwise should the
furnishing of any one or more thereof be interrupted or terminated because of
accident, the making of repairs, replacements, improvements, alterations or
additions, strikes or other labor difficulties, difficulty in obtaining fuel,
electricity or any other supplies or service from the Master Lessor's usual
source of supply, or any cause beyond the Master Lessor's or Lessor's reasonable
control. Upon not less than forty-five (45) days' written notice to the Lessee
from the Master Lessor or Lessor, the Master Lessor may cease to furnish all or
any of said services without any responsibility to the Lessee except to connect
the service facilities with such other nearby source of supply as may be
available for the service or services so discontinued.
10. Lessee's Liability Insurance. The Lessee shall procure and maintain
during the Lease Term, at its own expense, comprehensive public liability
insurance, which may be under a blanket policy, in responsible insurance
compoies qualified to do business in Maine and in good standing therein,
insuring the Lessor as well as the Lessee against all claims for injuries to
person or for death occurring in or about the Leased Premises, in the amount of
at least Three Million and 00/100 ($3,000,000.00) Dollars in the event of injury
to or death and against all claims for damages to or loss of property occurring
in or about the Leased Premises in the amount of at lease Five Hundred Thousand
and 00/100 ($500,000.00) Dollars. This insurance shall be in addition to any
similar insurance the Master Lessor or Lessor may provide. The Lessee shall
promptly furnish to the Lessor, upon obtaining such insurance, the policy of
insurance or a certificate thereof, and at least twenty (20) days, before the
expiration of any such policy or certificate shall furnish to the Lessor a new
policy or certificate in lieu thereof, including an endorsement to the effect
that such insurance shall not be cancelled except after ten (10) days' notice in
writing to the Lessor. The Lessee shall also maintain and keep in force plate
glass insurance on all plate glass on the Leased Premises. The Lessee shall also
maintain in full force during the Lease Term, on all of its fixtures and
equipment, a policy or policies of fire insurnace with standard extended
coverage in an amount not less than eighty (80%) percent of their sound
insurable value, the proceeds of which will, as long as this Lease is in effect,
be used for the repair or replacement of the fixtures and equipment so insured.
11. Increase in Insurance Rates. The Lessee shall not carry on any
activity in or about the Leased Premises which will in any way tend to increase
the insurance rates on the Leased Premises or impair or invalidate any insurance
thereon. If, because of anything, done on the Lease Premises, whether it be the
conduct of the business permitted by this Lease or otherwise, the premiums for
insurance on the Leased Premises required by this Lease are increase over those
which would prevail if the Leased Premises were used for a supermarket carrying
the lowest insurance rates according to the local fire insurance rating
organization or other body exercising similar functions, then the Lessee agrees
upon demand to pay the Lessor an amount equal to such increase as additional
rent.
12. Use of Premises. The Lessee agrees to use the Leased Premises for
the conduct of a bank, subject to restrictions under other provisions of this
Lease, and not to use them for any other purpose.
13. Signs, Etc. on Outside of Premises. The Lessee shall not
install any sign, placard, lettering or advertising media, or any shade,
awning, aerial, flagpole or the like, that is visible from the outside of the
Leased Premises, or any exterior lighting or plumbing fixtures, or any
exterior decorations or painting, or build any fences outside of the Leased
Premises, or make any changes in the front of the Leased Premises, without
first obtaining in each case the written consent of the Master Lessor. The
Lessee also agrees not to use any advertising media in the Shopping Center that
may be objectionable to the Master Lessor, such as loud speakers,
phonographs or radio broadcasts that may be heard outside of the Leased
Premises. The Lessee shall keep the Leased Premises and the
sidewalks, if any, adjacent thereto clean and free from rubbish and dirt at all
times, and shall store all trash and garbage within the Leased Premises and
arrange for the regular pick-up of such trash and garbage at Lessee's expense.
14. Property Attached to Floors, Etc. Subject to the next following
sentence, all alterations, additions, improvements and fixtures, other than
trade fixtures, which may be made or installed by either the Master Lessor,
Lessor or the Lessee in or upon the Leased Premises and which in any manner are
attached to the floors, walls or ceilings shall be the property of the
Master Lessor and at the expiration or earlier termination of this Lease shall
remain upon and be surrendered with the Leased Premises as part thereof,
without disturbance, molestation or injury; provided, that, if prior to such
expiration or termination or within thirty (30) days thereafter the Lessor
and Master Lessor so directs by written notice to the Lessee, then the Lessee
shall promptly remove any of said additions, improvements and fixtures which
were installed by the Lessee and are designated in said notice and repair any
damage occasioned by such removal. All trade fixtures and equipment installed
by the Lessee may be removed by the Lessee any time during or prior to the
expiration of the Lease Term provided that the Lessee leaves the Leased
Premises in the condition called for by Paragraph 15(d) and repairs any
damages caused by such removal. Any floor covering of similar character
which may be cemented or otherwise adhesively affixed to any floor in the
Leased Premises shall be and become the Master Lessor's property absolutely.
With respect to any vault and vault door that may be installed in the building
to be constructed on the Leased Premises, Lessee shall have the option of
removing same in their entirety not later than the date upon which the term of
his Lease, or any renewal term thereof, ends, repairing the building and all
effects of such removal in order that the space formerly occupied by the vault
shall be in good, rentable condition or, in the alternative, Lessee may leave
said vault and door at the end of its said occupancy.
15. Covenants by Lessee. The Lessee also covenants and
agrees with the Lessor (in each case at the Lessee's own expense, except
as otherwise expressly stated):
(a) To pay when due all rent, however designated,
including additional rent, as herein provided.
(b) To keep the building and other improvements on
the Leased Premises, including, without limitation, all structural parts
of the building on the Leased Premises - i.e., the bearing walls, beams,
roof, and the like - wall surfaces, ceilings, and floor, window and plate
glass, all exterior doors, the heating, ventilating, air conditioning,
electric, lighting, plumbing, sewer, drainage and sprinkler systems therein,
and all fixtures and equipment therein and all signs and other property of
the Lessee installed on the outside of the Leased Premises,
in good repair, order and condition, all repairs to be of the same quality,
design and class as the original work.
(c) To keep exterior doors and all glass in the
Leased Premises, including that in windows, doors and skylights, whole and
in good condition and to replace any glass which may be damaged or broken with
glass of the same quality.
(d) At the expiration or termination of this Lease to
remove the Lessee's goods and effects and peaceably to yield up the building
and other improvements on the Leased Premises in good order,
repair and condition, and to repair any injury done to the Leased
Premises by the installation or removal of the Lessee's furniture
or fixtures excepting only reasonable wear and tear and fire or casualty
covered by the Lessor's or Master Lessor's insurance.
(e) Not to injure, overload or deface the Lease Premises
nor permit any waste, damage or injury to be done thereto, nor use the
plumbing or any other facilities in the Leased Premises for any other
purpose than that for which they were constructed.
(f) To comply with all laws, ordinances and bylaws,
and with all rules, orders and requirements and recommendations of all
governmental authorities, and with all rules, directions, requirement and
recommendations of the local board of fire underwriters and the fire insurance
rating organization having jurisdiction over the area in which the Lease
Premises are situated, or other bodies or agencies now or hereafter
exercising similar functions in said area, in any way pertaining to
the Leased Premises or the use, condition, cleanliness or occupancy
thereof, and whether directed to the Master Lessor, Lessor, the Lessee,
or anyone claiming under the Lessee; provided, however, that, the Lessee
may defer such compliance during such time as it shall contest in good faith by
appropriated legal proceedings the validity or applicability of any such laws,
ordinances or bylaws, or any such rules, orders, or requirements of governmental
authorities, if such deferment shall not constitute a crime or misdemeanor on
the part of the Lessor or subject it to any fine or penalty.
(g) Not to make any structural alterations or
additions in or to the building on the Leased Premises, nor permit
or suffer any such structural alterations or additions to be made,
without on each occasion first obtaining the consent in writing of the
Lessor, which consent shall not be unreasonably withheld, and the consent in
writing of the Master Lessor.
(h) To pay promptly when due the entire cost of any
work done on the Leased Premises or any portion thereof by or at the
direction of the Lessee, to the end that the Leased Premises shall at all
times be free of liens for labor and materials; to procure all necessary
permits and licenses before such work is done; to do all such work or
cause it to be done in a good and a workmanlike manner, employing
materials of good quality and complying with all laws, ordinances and bylaws and
all rules, orders and requirements of all governmental authorities applicable
thereto, as, well as all rules, directions, requirements and recommendations of
said local board of fire underwriters and fire insurance rating organization or
bodies of similar function; and to save the Lessor harmless and indemnified from
all loss or expense occasioned by or growing out of such work, whether arising
form claims for injury to any person (including death), loss of or damage to
property or otherwise; not to permit, create, incur or impose, or cause or
suffer others to permit, create, incur or impose any lien or obligation against
the Leased Premises or Lessor by reason of any alteration, improvement or
decoration, and the Lessee agrees to hold the Lessor harmless and indemnified
against any and all claims and demands by any contractor, sub-contractor,
materialman, laborers or any other third person against the Leased Premises or
the Lessor relating to or arising out of any such alteration, improvement or
decoration.
(i) That if excavations or other work for building or other
purposes upon land adjacent to the Leased Premises shall be contemplated or
done, to afford the Master Lessor, Lessor and/or their designees license to
enter the Leased Premises for the purpose of doing the work necessary to protect
or preserve from injury the walls and structures of the Leased Premises and to
support the same by proper foundations, pinning or underpinning, provided that
the foregoing shall not be unreasonably interfere with the conduct of the
Lessee's business.
(j) To save the Lessor harmless and indemnified from all claims
for injury to any person (including death) or for loss of or damage to any
property, while on the Leased Premises or, if occasioned by any neglect, default
or misconduct of the Lessee, at any place.
(k) That all merchandise, furniture, fixtures and property
of every kind from time to time in, on or about the Leased Premises,
or any approaches, streets, sidewalks, or ways (public or private)
adjacent thereto, shall be at the sole risk of the Lessee, and that neither the
Lessee nor anyone claiming under the Lessee will make any claim against the
Master Lessor or Lessor (except for claims arising out of the Master Lessor's or
Lessor's willful default or negligence; provided, however, that, any claims
against the Master Lessor or Lessor for negligence may be made only after the
Master Lessor or Lessor shall have been given written notice of a condition
which the Lessee claims is one of which the Master Lessor or Lessor is
responsible, and the Master Lessor or Lessor shall have failed to correct the
same after a reasonable time has elapsed following the giving of such notice;
and provided further, however, that if any insurance carried by the Lessee shall
cover such loss in whole or in part, then to the extent of such insurance
coverage, then neither Master Lessor nor Lessor shall have any responsibility,
notwithstanding any such negligence) for any injury to any person (including
death at any time resulting therefrom), or loss of or damage to property,
occurring in, on or about the Leased Premises, or the approaches, streets,
sidewalks or ways (public or private) adjacent thereto, including without hereby
limiting the foregoing generality, (i) any injury, loss or damage due to steam,
gas, electricity, water, rain, snow or ice which may escape, leak or flow from,
into or within any part of the Leased Premises, or from the pipes, wires,
appliances or plumbing thereof, or from any other building or place, or (ii) any
injury, loss or damage due to the neglect, default or misconduct of any tenant
or occupant of the Shopping Center or due to any latent defect in the Leased
Premises or any building or structure in the Shopping Center or due to the
neglect, default or misconduct of the owner or occupant of adjoining or
contiguous property, or (iii) any inconvenience, discomfort, deprivation,
interruption of business or other consequence resulting from or due to any
injury, loss or damage as aforesaid or the making of repairs, replacements,
improvements, alterations or additions, or the doing of any work by or at the
direction of the Master Lessor, as permitted under this Lease, to or upon the
Leased Premises or any part thereof or any of the Master Lessor's fixtures
therein or any of the appurtenances thereto.
(l) That the Master Lessor shall have the right to
run pipes, ducts, wires and other conduits through, or to or from, the
Leased Premises, provided they do not unreasonably interfere with the
conduct of the Lessee's business; and the Master Lessor shall at its own expense
restore the property substantially to its original condition.
(m) To permit the Master Lessor or Lessor and its
agents at reasonable times to show the Leased Premises to prospective
purchasers (or Lessees in the case of Lessor) and during the last two(2) years
of the Lease Term to show them to prospective lessees.
(n) To conform to all reasonable rules which the
Master Lessor may make from time to time in the management and use of the
Shopping Center.
16. Damage or Destruction. If (i) the Leased Premises shall be damaged
or destroyed by fire or any other peril against which insurance
is then customarily carried with respect to premises similar
in construction, general location, use and occupancy to the
Leased Premises, and (ii) unless this Lease be terminated as
hereinafter provided, then (x) the Lessee shall immediately
give notice of such damage or destruction to the Lessor and
Master Lessor and (y) the Lessor shall use reasonable efforts
to cause Master Lessor, at the Master Lessor's expense, to
repair or rebuild the same so as to restore the Leased
Premises as nearly as may be reasonable to their condition
immediately prior to such damage or destruction; provided,
always, that the Master Lessor's obligation so to repair or
rebuild shall in no event exceed the scope of the work
required to be done by the Master Lessor in the original
construction of the Leased Premises nor require it to expend
more than the net amount recovered by the Master Lessor under
the insurance policies in force at the time of such damage or
destruction provided that the Leased Premises were then
insured against loss or damage by fire and such other perils
as were then customarily covered with respect to premises
similar in construction, general location, use and occupancy
to the Leased Premises, to the extent of at least eighty (80%)
percent of the insurable value of the Leased Premises if
reasonably obtainable from responsible insurance companies
licensed to do business in Maine. If the Leased Premises shall
be damaged or destroyed by any cause to the extent of fifty
(50%) percent or more of its then insurable value, then the
Master Lessor may elect by written notice given to the Lessee
from either Master Lessor or Lessor either to terminate this
Lease or to repair or rebuild as above provided, in which
latter event the Master Lessor's obligation shall in no event
exceed the scope of the work required to be done by the Master
Lessor in the original construction of the Leased Premises. In
the event that the Leased Premises shall be damaged or
destroyed by any peril against which insurance of the type
described in Paragraph 33 is not carried on the Leased
Premises by the Master Lessor and the estimated cost of
repairing or rebuilding the Leased Premises by an independent
engineer retained by the Master Lessor shall be in excess of
Two Hundred Fifty Thousand and 00/100 ($250,000.00) Dollars,
then the Master Lessor may elect by written notice given to
the Lessee either to terminate this Lease or to repair or
rebuild as above provided. No such termination shall be
effective if the Lessee shall elect in writing, within ten
(10) days after such event, to so repair or rebuild the Leased
Premises and to waive any abatement of rent provided herein.
In no event shall the Master Lessor be required to so repair
or rebuild any such damage or destruction which arises after
the expiration of the nineteenth (19th) year of the term of
the Master Lease from a peril which is insured against under
policies of insurance of the type required to be carried by
the Lessor hereunder. During any period that the Lessee cannot
fully occupy the Leased Premises for its business purposes, a
just proportion of the rent shall be abated.
17. Eminent Domain. Except for any award payable with respect to the
Lessee's fixtures and equipment and loss of business or
relocation allowance, the Lessee acknowledges that the Master
Lessor reserves and excepts under the Master Lease all rights
to damages to the Leased Premises and the leasehold hereby
created now accrued or hereafter accruing by reason of any
exercise of the right of eminent domain or condemnation or by
reason of anything lawfully done in pursuance of any public or
other authority; and by way of confirmation the Lessee grants
to the Master Lessor all the Lessee's rights to such damages
and covenants to execute and deliver such further instruments
of assignment thereof as the Master Lessor or Lessor, on
behalf of the Master Lessor, may from time to time request.
If, as a result of any taking by eminent domain or
condemnation the total floor area (non-selling mezzanines
excepted, however) in the Leased Premises shall be reduced to
less than eighty (80%) percent of the total floor area (except
as aforesaid) in the Leased Premises at the commencement of
the term hereof, then, at the election of the Lessee,
exercisable by written notice given to the Lessor and Master
Lessor within fourteen (14) days after such event this Lease
may be terminated as of the date when the Lessee is required
to vacate the Leased Premises or portion thereof so taken
(notwithstanding that the entire interest of the Master Lessor
and the Lessor, if any may have been divested by such taking).
If, as a result of any such taking or condemnation, the total
floor area (except as aforesaid) of the Leased Premises shall
be reduced to less than sixty (60%) percent of the total floor
area (except as aforesaid) in the Leased Premises as at the
commencement of the term hereof, then, at the election of the
Master Lessor or Lessor, on behalf of the Master Lessor,
exercisable by written notice given to the Lessee within
forty-five (45) days after such event, this Lease may be
terminated as of the date when the Lessee is required to
vacate the Leased Premises or portion thereof so taken
(notwithstanding that the entire interest of the Master Lessor
and Lessor, if any, may have been divested by such taking).
If, as a result of any such taking or condemnation, the total
parking areas and other common facilities shall be reduced to
less than sixty (60%) percent of the total parking areas and
other common facilities in the Shopping Center at the
commencement of the term hereof, or if, as a result of any
such taking or condemnation, the portion of the parking area
outlined in red on Exhibit A of the Master Lease shall be
reduced to less than sixty (60%) percent of such portion at
the commencement of the term hereof, then, in either such
event, at the election of the Lessee, exercisable by written
notice given to the Lessor and Master Lessor within fourteen
(14) days after such event, this Lease may be terminated as of
the date when the Lessee is required to cease to use such
parking areas and other common facilities or portion thereof
so taken (notwithstanding that the entire interest of the
Master Lessor and Lessor, if any, may have been divested by
such taking). And if, as a result of any taking by eminent
domain, neither party may terminate this Lease as above
provided or this Lease is not so terminated, the Lessor shall
use reasonable efforts to cause Master Lessor, at the Master
Lessor's expense and proceeding with all reasonable dispatch,
to do such work (within the scope of the work required to be
done by the Master Lessor in the original construction of the
Leased Premises) as may be required to put what may remain of
the Leased Premises in proper condition for the conduct of the
Lessee's business, and the Lessee, at the Lessee's expense and
proceeding with all reasonable dispatch, shall make such
alterations, repairs and replacements of the trade fixtures,
equipment, signs or other property installed by or belonging
to the Lessee as may be necessary to put said remainder in
proper condition for the Lessee's business, and from and after
the date on which the Lessee is required to vacate the portion
of the Leased Premises so taken, the rent shall be abated in
the proportion that the floor area (except as aforesaid) of
the portion so taken bears to the floor area (except as
aforesaid) of the Leased Premises.
18. Default Provisions. This Lease is also made upon the condition
that if the Lessee shall neglect or fail to perform or observe any of
the covenants herein contained on the Lessee's part to be
performed or observed, or if the estate hereby created shall
be taken on execution, attachment or by other process of law,
or if the Lessee shall make or offer to make, in or out of
bankruptcy, a composition of the Lessee's debts with the
Lessee's creditors or if Lessee shall fail to observe any
obligation of Lessor (other than the payment of rent under the
Master Lease) that Lessor holds to Master Lessor under the
terms and provisions of the Master Lease or if the Lessee
shall execute a trust mortgage or if the Lessee shall make an
assignment for the benefit of its creditors, or if the Lessee
shall commit any act which when done is an act of bankruptcy
laws (Federal, State or otherwise), then, and in any of the
said cases (notwithstanding any license of any former breach
of covenant or waiver of the benefit hereof or consent in a
former instance), the Lessor and the agents and servants of
the Lessor lawfully may, in addition to and not in derogation
of any remedies for preceding breach of covenant, immediately
or at any time thereafter and without demand or notice and
with or without process of law (forcibly if necessary) enter
into and upon the Leased Premises or any part thereof in the
name of the whole and repossess the same as of the Lessor's
former estate and expel the Lessee and those claiming through
or under the Lessee and remove the effects of both or either
(forcibly, if necessary) without being deemed guilty of any
manner of trespass and without prejudice to any remedies which
might otherwise be used for arrears of rent or preceding
breach of covenant, and upon entry as aforesaid, the Lessee's
estate shall end, the Lessee hereby waiving all statutory
rights; and the Lessee covenants with the Lessor that in case
of such termination, or of termination under statute by reason
of default on the part of the Lessee, the Lessee will pay to
the Lessor, in equal monthly installments in advance, sums
equal to the rent herein provided for, or if the Leased
Premises have been relet, sums equal to the excess of the rent
herein provided over the sums actually received by the Lessor,
such sums being payable all as liquidated damages for the
unexpired term hereof. And it is also agreed as a further
condition of this Lease that if any proceedings are instituted
in a court of competent jurisdiction for relief or composition
of the Lessee's debts under any bankruptcy law (including,
without limitation of the foregoing generality, adjudication
of the Lessee as a bankrupt), or for the dissolution or
liquidation of the Lessee, or for the appointment of a
receiver, trustee or other similar officer to take charge of a
substantial part of the Lessee's property or to wind up the
Lessee's affairs, then, unless said proceedings are dismissed,
and any receiver, trustee or other similar officer appointed
there discharged, within sixty (60) days after the institution
of such proceedings, the same shall be deemed to constitute a
breach of this Lease and thereupon, ipso facto and without
entry or other action by the Lessor, the Lessee's estate shall
cease and be terminated and the Lessor shall immediately
become entitled to recover of the Lessee, and the Lessee
agrees in such event to pay the Lessor as liquidated damages
for such breach, an amount equal to the amount of the rent
herein provided for the residue of the term hereof less the
fair rental value of the Leased Premises for the residue of
said term. For the purpose of the foregoing provisions of this
Paragraph, the expression "rent herein provided for" shall be
deemed to include all items of additional rent or other
charges or payments for which the Lessee is responsible under
any provision of this Lease.
19. Grace Period: Lessor's Right to Cure Defaults. Notwithstanding the
provisions of the foregoing Paragraph 18, the Lessor agrees
that it will not take any action to terminate this Lease for
default by the Lessee in the performance of any covenants
(other than a covenant to pay a sum of money) unless and until
the Lessor gives the Lessee written notice specifying the
alleged default, and the Lessee fails to cure such default
within (20) days thereafter. And it is agreed that if the
Lessee shall fail to perform or observe any of the Lessee's
covenants or agreements herein within the time above allowed,
or in the event of any such failure which (a) is or may be
injurious to the health and safety of persons in or about the
Leased Premises or (b) may create a further material
deterioration of any portion of the Leased Premises, then the
Lessor may, if it so elects, without prejudice to its other
remedies, immediately or at any time thereafter, and without
notice, enter upon the Leased Premises without termination of
this Lease and/or do any and all such acts as may be
necessary, proper or convenient to cure or correct such
default, and the Lessee agrees upon demand to pay to the
Lessor the damage and/or cost and expense, including
reasonable counsel fees, incurred by the Lessor in so doing,
together with interest thereon at the rate of ten (10%)
percent per annum to the date of payment.
20. Assignment, Subletting, Etc.. The Lessee agrees that neither it nor
anyone claiming under it will assign, mortgage or pledge this
Lease, license or grant concessions or underlet the whole of
any portion of the Leased Premises, or permit the occupation
thereof by any other person, without on each occasion first
obtaining the Lessor's and Master Lessor's consent in writing.
No permitted assignment or sublease by the Lessee, nor any
consent thereto, nor any indulgence or favor at any time
granted by the Lessor to anyone claiming under the Lessee, nor
any relief of any party claiming by, through or under the
Lessee by operation of law, nor the acceptance of rent from or
other dealing with anyone claiming under the Lessee, shall
relieve the Lessee of its obligations under this Lease, it
being agreed that the Lessee and all assignees hereof shall be
deemed to have waived all suretyship defenses.
21. Subordination of Lease. The Lessee agrees, from time to time as
requested in writing by the Lessor, to subordinate this Lease
to any mortgage of property including the Leased Premises
given to a bank, insurance company or other lending
institution, and to any renewal, modification, replacement or
extension of any such mortgage, provided that in the
instrument of subordination the mortgagee agrees for itself
and its successors and assigns that so long as the Lessee, and
its successors and assigns, shall perform and observe, within
any applicable period of grace, the terms, agreements,
covenants and conditions in this Lease contained on the part
of the Lessee to be performed and observed, neither the
mortgagee nor its successors or assigns will disturb the
peaceful and quiet possession of the Lessee and its successors
and assigns, but will permit the Lessee to exercise and enjoy
all the Lessee's rights, privileges and benefits under this
Lease and, at the election of the Lessee or its successors or
assigns, to attorn, and the Lessee, for itself and its
successors and assigns, hereby irrevocably appoints the
Lessor, and its successors and assigns, its and their attorney
or attorneys-in-fact to execute and deliver any such
instrument of subordination for and on behalf of the Lessee or
its successors or assigns. The Lessee also agrees for itself
and its successors and assigns that if this Lease is so
subordinated, no entry under any such mortgage or sale for the
purpose of foreclosing the same shall be regarded as an
eviction of the Lessee or its successors or assigns
constructive or otherwise, or give the Lessee or its
successors or assigns any right to terminate this Lease or
treat it as terminated, whether it or they attorn or become
tenant to the mortgagee or new owner, or not.
22. No Consent or Waiver. No consent or waiver expressed or implied
by the Lessor to or of any breach in the performance or
observance by the Lessee shall be construed as a consent or
waiver to or of any other breach in the performance or
observance by the Lessee of the same or any other covenant,
agreement, condition or duty. And no receipt or acceptance by
the Lessor of any rent payment with knowledge of any such
breach shall be deemed a waiver thereof (except when the
payment is in compliance with a demand of the Lessor), nor
shall any acceptance of rent in a lesser amount than is herein
provided for, regardless of any endorsement on any check or
any statement in any letter accompanying the payment of rent,
operate or be construed as an accord and satisfaction or in
any manner other than as payment on account of the earliest
rent then unpaid by the Lessee. Acceptance by the Lessor of a
check or checks drawn by others than the Lessee shall not
affect the Lessee's liability hereunder in any manner, nor
shall it be deemed an approval of any assignment of this Lease
by the Lessee.
23. Representation. The Lessor and its agents have made no
representations or promises except as in this Lease expressly set forth,
and the Lessee agrees that in entering into and taking this Lease, it relies
solely upon the representation and agreements contained herein and that there
are no other inducements to the making hereof. This Lease embodies the
entire contract of the parties hereto and shall not be altered, changed or
modified in any respect except in writing.
24. Notices. Any notice or other communication pursuant to this
lease which one party desires to give to the other shall be deemed to be
sufficiently and duly given if in writing and sent by
registered or certified mail, return receipt requested,
postage prepaid, or delivered by hand, and received. And until
further notice the Lessor designates KeyBank National
Association, 127 Public Square, Cleveland, Ohio 44114 as its
address for such purpose, and the Lessee designates Camden
National Bank, 2 Elm Street, Camden, Maine 04843, Attention:
Michael McAvoy, as its address for such purpose; but the
foregoing shall not be deemed to preclude the giving of
written notice hereunder in any other manner, in which case
the notice shall be deemed to have been given when actually
received by the party for whom it is intended.
26. Quiet Enjoyment. The Lessor, for itself and its successors and
assigns, agrees to warrant and defend unto the Lessee the
peaceful enjoyment and possession of the Leased Premises and
the appurtenances thereto during the term hereof, free from
molestation, eviction or disturbance by the Lessor or by any
person or persons claiming by, through or under the lessor,
conditioned upon the Lessee's performance and observing all
and singular the terms, covenants, agreements and conditions
herein contained on the part of the Lessee to be performed and
observed and upon Lessee's performance of all obligations of
Lessor under the terms of the Master Lease (other than the
payment of rent under the Master Lease).
27. Invalidity. If any term or provision of this Lease, or the
application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provisions to persons or circumstances other than those as
to which it is invalid or unenforceable, shall not be affected thereby,
and each term and provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
28. Recording of Lease.
The Lessee agrees that it will not record this Lease but only a
Memorandum of Lease prepared in accordance with the laws of the State
of Maine, and the Lessor agrees to execute, acknowledge and deliver
such Memorandum.
29. Table of Contents Captions. The table of contents
preceding this Lease and the captions of this Lease are for convenience
and reference only and shall not be deemed to define, limit or describe
the scope or intent of any of the provisions of this Lease, nor have
any other bearing thereon.
30. Applicable Law. This Lease shall be
construed and enforced in accordance with the laws of the State of
Maine.
31. And the following paragraphs, Miscellaneous.
32. The Lessor
agrees, providing this Lease is in full force and effect and that
Lessee has complied with all its provisions, that the Lessee shall have
and is hereby granted an option to extend the term of this Leas for two
(2) additional successive terms of five (5) years each upon the same
terms and conditions contained herein, except as to rentals. If the
Lessee shall elect to exercise the option, it shall do so by giving the
Lessor notice in writing not later than fourteen (14) months
prior to the expiration of the then current term. It is
agreed that if these options are exercised, there is no further option
provision. At the inception of both the first and second option terms,
the Lessor shall be entitled to have the annual rental payments for the
ensuing years of each term reflect any increase in the cost of living which
occurred during the term (whether original or renewal) then ending. The
Lessor shall compute any such increase by using the formula set forth
in Paragraph 4 and adjusting the data accordingly.
33. The Lessee will at its expense promptly comply with all applicable
laws, rules, regulations and requirements of all public authorities the fire
insurance rating association having jurisdiction and similar organizations,
the insurers issuing any of the insurance required by any provision of this
Lease, except insofar as the Lessor is expressly responsible for compliance
therewith.
34. To the extent available under standard policies of insurance without
extra cost, or if extra cost shall be charged therefor, so long as the othe
party pays such extra cost, each party hereby waives all liability of and all
rights of recovery and subrogation against, and agrees that neither it nor its
insurers will sue the other party for any loss of or damage to property
arising out of fire or casualty, and each party agrees that all such insurance
policies will contain waivers by the insurer of such liability, recovery,
subrogation and suit. If extra cost is chargeable therefor, each party shall
advise the other party thereof and of the amount of the extra cost, and the
other party, at its election, may pay the same, but shall not be obligated to
do so.
35. The Lessee will exonerate and indemnify the Lessor against all
claims, suits, obligations, liabilities and damages, including attorney's
fees, arising out of any failure by the Lessee to perform, fulfill or
observe any obligation or liability of the Lessee set forth in this Lease,
or any negligent act or omission by the Lessee, or any condition of any kind,
class or description, however and whenever caused or occurring, in any portion
of the Leased Premises the Lessee is obligated to maintain or repair.
36. Upon receipt of a written request by the Lessor or any holder of a
mortgage on all or any part of the Leased Premises, the Lessee will thereafter
send any such holder copies of all notices of default or termination or both
given by the Lessee to the Lessor in accordance with any provision of this
Lease. In the event of any failure by the Lessor to perform, fulfill or
observe any agreement by the Lessor herein or any breach by the Lessor of
any representation or warranty of the Lessor herein, any such holder may at
its election cure such failure or breach for and on behalf of the Lessor.
37. The Lessee will from time to time, upon not less than ten (10) days
prior written request by the Lessor, deliver to the Lessor or any actual or
prospective purchaser or holder of a mortgage on all or any part of the Leased
Premises or Shopping Center a written statement certifying whether or not this
Lease is in full force and effect and stating (a) the last date to which the
rent and other payment have been made, (b) whether or not this Lease has been
amended, (c) whether or not, to knowledge of the Lessee, the Lessor is in
default in the performance, fulfillment or observance of any representation,
warranty or agreement by the Lessor set forth herein, or has any indebtedness
to the Lessee for the payment of money, and (d) if so, each default or
indebtedness of which the Lessee has knowledge.
38. As used herein, the terms "Master Lessor" and "Lessor" shall mean
the owner for the time of the Master Lessor's and Lessor's estate and property
in the Leased Premises, respectively, and if such estate and property be sold
or transferred, the seller or assignor shall thereupon be relieved of all
obligations and liabilities hereunder thereafter arising or occurring, and
the purchaser or assignee shall thereupon be deemed to have assumed and agreed
to perform and observe all obligation and liabilities hereunder thereafter
arising or occurring, or based on occurrences or situations thereafter arising
or occurring unless and until a transfer of such estate and property is made by
such purchaser or assignee.
39. With reference to any assignment by the Master Lessor or
Lessor of the Master Lessor's or Lessor's interest in this Lease,
respectively, or the rents payable hereunder, conditional in nature or
otherwise, which assignment is made to the holder of a mortgage on property
which includes the Leased Premises, the Lessee agrees:
(a) That the execution thereof by the Lessor, and the acceptance thereof by
the holder of such mortgage, shall never be treated as an assumption by
such holder of any of the obligations of the Lessor hereunder, unless
such holder shall, by notice sent to the Lessee, specially otherwise
elect.
(b) That, except as aforesaid, such holder shall be treated as having
assumed the Master Lessor's or Lessor's obligations hereunder only upon
foreclosure of such holder's mortgage and the taking of possession of
the Leased Premises.
40. Indemnification: Notice. (a) Lessee hereby indemnifies and agrees to
hold harmless and defend Lessor for any claim, damage, loss or
expense (including reasonable attorney's fees) arising out of
(i) Sublessee's operation of the Leased Premises, (ii) the
failure of Lessee to comply with all of the terms of this
Lease, (iii) the breach of any term of the Master Lease by
Lessor arising as a result of Lessee's failure to strictly
comply with the terms of this Lease or as a result of any
other act or failure to act by Lessee. Lessor hereby
indemnifies and agrees to hold harmless and defend Lessee for
any claim, damage, loss or expense (including reasonable
attorney's fees) arising out of (i) the failure of Lessor to
comply with the terms of the Master Lease and (ii) the breach
of any term of this Lease by Lessee arising out of the
Lessor's failure to comply with the terms of the Master Lease
or as a result of any other act or failure to act by Lessor.
(b) Lessee and Lessor hereby agree that upon either party's receipt of a
notice from the Master Lessor regarding the terms and conditions of this Lease,
the party receiving such notice shall promptly provide a copy of said notice to
the other party.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals on the day and year first above written.
WITNESSES KEYBANK NATIONAL ASSOCIATION
Kathryn L. Hale (signature) By: Daniel R. Stolzer (signature)
Print Name: Kathryn L. Hale Name: Daniel R. Stolzer
Title: Authorized Official
CAMDEN NATIONAL BANK
Holly L. Marshall (signature) By: Robert W. Daigle (signature)
Print Name: Holly L. Marshall Robert W. Daigle, President
& Chief Executive Officer
STATE OF OHIO
COUNTY OF CUYAHOGA SS:
BEFORE ME, a Notary Public in and for said County and State personally appeared
Daniel R. Stolzer, the authorized official of KeyBank National Association, a
national banking association, who acknowledged that he did execute the foregoing
Sublease Agreement on behalf of said KeyBank National Association and that the
same is his free act and deed on behalf of said corporation.
Melissa McNamara Brant (signature)
Notary Public
STAMP
MELISSA MCNAMARA BRANT
NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION EXPIRES JUNE 20, 2000
STATE OF MAINE
COUNTY OF KNOX SS:
BEFORE ME, a Notary Public in and for said County and State personally appeared
Robert W. Daigle, President and Chief Executive Officer of Camden National Bank,
who acknowledged that he did execute the foregoing Sublease Agreement on behalf
of said Camden National Bank and that the same is his free act and deed on
behalf of said corporation.
Holly L. Marshall (signature)
Notary Public
STAMP
My Commission Expires
August 8, 1998
MEMORANDUM OF LEASE
LANDLORD: KEYBANK NATIONAL ASSOCIATION,
a national banking association headquartered in Cleveland,
Ohio and having a place of business at One Canal Plaza,
Portland, Maine
TENANT: CAMDEN NATIONAL BANK,
a national banking association having a principal place
of business in Camden, Maine.
DATE OF EXECUTION: March 16, 1998
LEASED PREMISES: A building containing approximately 2,600 square feet
of floor area, together with rights to parking and
appurtenant common areas, located in a shopping center known
as Coastal Plaza on the northerly side of U.S. Route One
(business) in Damariscotta, Maine.
TERM OF LEASE: Approximately Twelve (12) Years, commencing on March 16,
1998 and continuing until May 3, 2010.
OPTION TO PURCHASE: None
RIGHT OF FIRST REFUSAL: None
RIGHT TO RENEW OR EXTEND: Tenant has a right to extend the term of the
Lease for two (2) additional successive terms of
five (5) years each. Tenant must send written
notice of exercise of said option to renew to
Landlord in writing not later than fourteen (14)
months prior to the expiration of the initial term.
The first such renewal term shall commence on
May 4, 2010 and continue until May 3, 2015; the
second such renewal term shall commence on
May 4, 2015, and continue until May 3, 2020.
The parties hereto further expressly acknowledge that this Memorandum of
Lease is being executed. pursuant to the provisions of the Lease and is not
intended to vary the terms or conditions of the Lease.
Executed as a Sealed Instrument as of 1st day of April, 1998.
LANDLORD:
KEYBANK NATIONAL ASSOCIATION
Kathryn L. Hale (signature) By: Daniel R. Stolzer (signature)
Witness Its: Authorized Official
TENANT:
CAMDEN NATIONAL BANK
Holly L. Marshall (signature) By: Robert W. Daigle (signature)
Witness Its: President & CEO
STATE OF OHIO
Cuyahoga, ss. April 1, 1998
Personally appeared the above named Daniel R. Stolzer in his/her capacity as
Authorized Official of KeyBank National Association and acknowledged the
foregoing instrument to be his/her free act and deed in his/her said capacity
and the free act and deed of KeyBank National Association.
Before me,
Jill A. Smith (signature)
Notary Public/Attorney at Law
Jill A. Smith
ATTORNEY AT LAW
NOTARY PUBLIC - STATE OF OHIO
MY COMMISION HAS NO EXPIRATION DATE
SECTION 1470 (stamp)
STATE OF MAINE
Knox, ss. April 15, 1998
Personally appeared the above named Robert W. Daigle in his/her capacity as
President & CEO of Camden National Bank and acknowledged the foregoing
instrument to be his/her free act and deed in his/her said capacity and the free
act and deed of Camden National Bank.
Before me,
Holly L. Marshall (signature)
Notary Public
My commission expires
August 8, 1998 (stamp)
[DOVER LEASE]
LEASE AGREEMENT
This Lease Agreement is made this 2nd day of October, 1998, by and
between UNITED BANK, a Maine banking corporation having a place of business at
145 Exchange Street, Bangor, Maine ("Tenant"), and BANGOR SAVINGS BANK, a Maine
banking corporation having a place of business at 66 Franklin Street, Bangor,
Maine ("Landlord").
ARTICLE I
Leasehold
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon and subject to the terms and provisions of this Lease Agreement,
certain real estate and the structure thereon located at Dover-Foxcroft,
Piscataquis County, Maine, being further described in Exhibit A annexed hereto
and made a part hereof, together with any fixtures and improvements thereon (the
"Leased Premises").
ARTICLE II
Term
The term of this Lease Agreement shall commence October 2, 1998 and
terminate December 31, 1999, unless earlier terminated pursuant to the terms
hereof.
ARTICLE III
Rental Obligation
Tenant covenants and agrees to pay to Landlord at Landlord's address or
place of business, above identified, or at such other place as Landlord shall
from time to time designate in writing, rent in the amount of three thousand and
00/100 dollars ($3,000) each month, payable in advance on or before the first
day of each month during the term of this Lease Agreement.
ARTICLE IV
Possession
Immediately following the execution of this Lease Agreement, Landlord
shall deliver full possession of the Leased Premises to Tenant, free and clear
of all liens and encumbrances which would interfere with the use and enjoyment
of the Leased Premises for the purpose of operating a banking facility.
ARTICLE V
Covenant of Quiet Enjoyment
Tenant shall, subject to the terms and provisions of this Lease
Agreement, on payment of the rent and faithfully observing, keeping and
performing all of the terms and provisions of this Lease Agreement on its part
to be observed, kept and performed, lawfully, peacefully and quietly have, hold,
occupy, and enjoy the Leased Premises during the term hereof without hindrance
or rejection by any persons lawfully claiming under Landlord.
ARTICLE VI
Utilities
Tenant shall adequately heat and air condition the Leased Premises and
shall pay for all of its requirements for all utilities, including, but not
limited to, gas, water, sewer, electricity, and telephone service. Tenant will
pay when due all such utility bills, and will make its own arrangements for
delivery of all necessary fuels to the Leased Premises for providing heat for
the Leased Premises, and will pay when due all charges for such fuel.
ARTICLE VII
Taxes
Tenant shall pay, within thirty (30) days of Landlord's request, all
real estate taxes which may be lawfully charged, assessed, or imposed upon the
Leased Premises, or any part thereof. Tenant further covenants and further
agrees to pay all assessments, and any and all other governmental levies or
charges of any kind that are levied upon or assessed against or with respect to
the Leased Premises or any part thereof during the term of the Lease Agreement
and any extension or renewal thereof.
Tenant shall pay all such taxes which may be lawfully charged,
assessed, or imposed upon all fixtures and equipment or other property of every
type located in or upon the Leased Premises. Tenant shall pay license fees which
may be lawfully imposed on the business of Tenant conducted upon the Leased
Premises.
ARTICLE VIII
Installation of Personal Property
Tenant may install equipment, machinery, and fixtures necessary to
carry on its business on the Leased Premises. All such equipment, machinery, and
fixtures shall remain their personal property of the Tenant, and may be removed
by Tenant at any time at or before the end of the term of the Lease Agreement,
subject to the conditions of removal set forth in Article X herein.
ARTICLE IX
Repairs, Maintenance and Alterations
Tenant agrees to maintain and repair the interior of the leased
premises, and including, without limitation, the heating and air conditioning
system, in a good and tenantable condition at all times during the term of this
Lease Agreement consistent with Tenant's use of the premises. Tenant shall be
further responsible for replacement of exterior glass at the Leased Premises.
Tenant shall yield up the premises to Landlord at the expiration or earlier
termination of this Lease in good order and repair, in the same condition in
which they are presently constructed or subsequently remodeled, as provided in
this Lease, reasonable wear and tear only excepted.
During the term of this Lease Agreement, Tenant may erect necessary
improvements on the Leased Premises for use by the Tenant only with the prior
written consent of Landlord. Tenant" construction shall be performed in a good
and workerlike manner in accordance with all applicable building codes, laws,
ordinances, regulations and other requirements of governmental authorities, and
at Tenant's own cost and expense. Tenant shall at all times keep the Leased
Premises free of all liens or mechanics liens. Tenant agrees to indemnify and
hold Landlord harmless from and against any claim or lien on account of such
improvements and shall indemnify Landlord from all costs incurred by Landlord in
defending the same. At the expiration or earlier termination of this Lease
Agreement, all improvements upon the Leased Premises made by the Tenant shall,
absent any agreement between landlord and Tenant to the contrary at the time of
installation, become the property of the Tenant and Tenant shall remove any or
all of the improvements made by Tenant at the conclusion of the lease term.
Tenant shall promptly repair any damage caused by such removal and restore the
Leased Premises to the same condition as existed upon the commencement of the
lease term. Improvements, fixtures and personal property of Tenant shall be
removed within sixty (60) days from the date of any termination of this Lease
Agreement. Any such improvements, fixtures and personal property of Tenant
remaining on the Leased Premises after the expiration of said sixty (60) days
shall become the property of Landlord.
Except for exterior and structural alterations made by Tenant and
except as otherwise provided herein, Landlord agrees to repair and maintain all
other the exterior and the structural components of the building, including the
roof, foundation, electrical and plumbing systems, but not including any
maintenance or repair resulting from the negligence or misconduct of Tenant, its
agents, contractors, or employees. Notwithstanding the foregoing obligations of
Landlord, to the extent any of the foregoing structural repairs and maintenance
do not involve structural repairs or corrections of construction defects, and to
the extent that, in each case, the Tenant first approves such maintenance and
repairs, Tenant agrees to reimburse Landlord for one-half (1/2) the total cost
of such maintenance and repair, within thirty (30) days of the Landlord's
request. Further, Landlord shall be responsible for exterior lighting, grass
maintenance, plowing and/or clearing the driveway, parking area, and walkways
serving the premises. Within thirty (30) days of Landlord's request, Tenant
shall pay one-half (1/2) of the total cost of such exterior lighting, grass
maintenance, plowing and clearing the driveway, parking area, and walkways.
ARTICLE X
Signage
Tenant may, without cost or expense to Landlord, place one sign on the
Leased Premises, provided that said sign is placed at a location and is of a
size approved by Landlord. Placement of said sign shall be in full compliance
with the Town of Dover Zoning Ordinance and in a manner which does not impair
the structural integrity of the building at the Leased Premises. Tenant shall
bear the cost of maintaining said sign.
ARTICLE XI
Parking
Parking by Tenant, its customers, agents and employees, shall be
limited to five (5) undesignated parking spaces located behind the Leased
Premises, and used in common with Landlord, its customers, agents and employees.
Landlord, its customers, agents and employees shall at all times have access to
the remaining ten (10) parking spaces located behind the Leased Premises.
ARTICLE XII
Indemnification and Insurance
Tenant agrees to indemnify and save Landlord harmless from and against
all claims of whatever nature arising from any act, omission or negligence of
Tenant, or Tenant's contractors, licensees, agents or employees, or arising from
any accident, injury or damage whatsoever caused to any person or to the
property of any person occurring during the term hereof in and about the Leased
Premises, except for those arising from the negligence of Landlord, or
Landlord's contractors, licensees, agents or employees. This indemnity and hold
harmless agreement shall include indemnity against all costs, expenses, and
liabilities of any kind whatsoever incurred in or in connection with any such
claim or proceeding brought thereon, and the defense thereof.
Tenant agrees to maintain in full force during the term thereof a
policy of commercial general insurance under which Landlord and Tenant are named
as insured. Each such policy shall be noncancellable with respect to Landlord
without thirty (30) days' written notice to Landlord, by certified mail, and a
duplicate original or certificate of said policies shall be immediately
delivered to Landlord on demand. The minimum limits of liability of such
insurance shall be three million and 00/100 dollars ($3,000,000.00). At or prior
to the commencement of the term of this Lease Agreement, original copies or
certificates of the policy as required hereunder setting forth in full
provisions thereof, shall be delivered by Tenant to Landlord. All such insurance
shall be placed with a responsible insurance company satisfactory to Landlord
and authorized to transact business in the State of Maine.
Landlord shall maintain throughout the term of this Lease Agreement a
policy of fire and hazard insurance indemnifying the Landlord and the Tenant, as
their interests may appear, against loss, cost or damage to the structure during
the term of this Lease. Within thirty days (30) days of request by Landlord,
Tenant shall reimburse Landlord for fifty percent (50%) of the total premium for
such policy during the term of this Lease Agreement. Tenant shall maintain the
Tenant's own insurance policy or policies insuring against loss or damage to
personal property of the Tenant.
ARTICLE XIII
Use
It is understood and Tenant so agrees that the Leased Premises during
the term hereof shall be used and occupied by Tenant solely for the operation
of a banking facility. Tenant's use shall at all times comply with all
applicable federal, state and local laws, ordinances and regulations.
ARTICLE XIV
Access by Landlord
Landlord or Landlords agents, employees and contractors, may enter the
Leased Premises during emergencies to make or facilitate repairs. After giving
Tenant notice at lease 24 hours in advance Landlord may enter the Leased
Premises at other reasonable times to make repairs to inspect the Leased
premises, or show the Leased Premises to prospective tenants or purchasers.
ARTICLE XV
Eminent Domain
If, after the execution of this Lease Agreement and before the
expiration of the term hereof, the entire Leased Premises shall be taken by
right of eminent domain for any street or other public use, then this Lease
Agreement and the term hereof shall terminate as of the time that possession is
required by taking authority. In the event of such termination, the rent and
other charges shall be apportioned and adjusted as of the date of termination,
and any rent or other charges paid in advance shall be refunded by Landlord to
Tenant.
In case only a part of the Leased Premises shall be so taken by right
of eminent domain, then, if the part so taken renders the remaining premises
unfit or unsuitable for the use and occupation by Tenant as of the date of such
taking, Tenant may, at Tenant's election, terminate this Lease Agreement ant the
term hereof by notice to Landlord in writing within thirty (30) days after
receiving notice from Landlord of such taking, effective as of the time that
possession is required for public use. If Tenant so elects to terminate, the
rent and other charges paid in advance shall be refunded by Landlord to Tenant.
If Tenant does not elect to terminate, then this Lease Agreement shall continue
in full force and effect, and Landlord shall, to the extent reasonably possible,
promptly after possession is taken, restore the Leased Premises or what may
remain thereof to substantially the same condition as the same were in prior to
the taking of possession and to suitable condition for use and occupation by
Tenant, but Landlord shall have no obligation to restore Tenant" furniture,
fixtures, and equipment. There shall be a fair and equitable permanent abatement
of the rent payable hereunder, due regard being given to the nature and extent
of the portion of the Leased Premises so taken. Should the Leased Premises or
any part thereof be taken by eminent domain and this Lease Agreement canceled,
the sums received in payment for the property so taken shall be paid in entirety
to Landlord, free of any claim by Tenant, except as herein provided. Tenant
shall be entitled to receive and retain the amount which may be specifically
awarded to it in a condemnation proceeding because of the taking of its
equipment, furniture or fixtures, and its leasehold improvements.
ARTICLE XVI
Default
Tenant shall be in default upon the occurrence of any one or more of
the following events:
Tenant fails to pay the rent or any other charges payable
hereunder and such failure continues for a period of fifteen (15) days after
written notice thereof has been given by Landlord;
Tenant fails to perform or comply with any of the other
covenants, terms, provisions, or conditions of this Lease Agreement and such
failure continues for a period of thirty (30) days after written notice thereof
has been given by Landlord;
The estate hereby created is taken upon execution or by other
process of law;
Any assignment is made of the property of Tenant for the
benefit of creditors, or a receiver, guardian, conservator, trustee in
involuntary bankruptcy, or other similar officer appointed to take charge of all
or any substantial part of Tenant's property by a court of competent
jurisdiction, and such appointment is not promptly dismissed; or
Tenant institutes, or there are instituted against Tenant,
bankruptcy or insolvency proceedings of any nature, and such proceedings are not
dismissed within ninety (90) days after they are commenced.
If Tenant is in default, notwithstanding any license of any former
default or consent thereto or any waiver of these rights in a former
instance, Landlord may, immediately or at any time thereafter, without
demand or notice, terminate this Lease Agreement, institute proceedings
to evict Tenant and/or pursue any other remedies available to Landlord
at law or in equity. Further, Tenant covenants and agrees,
notwithstanding any termination or entry by Landlord, to pay and be
liable for, on the days originally filed herein for the payment
thereof, amounts equal to the several installments of rent and other
charges reserved as they would , under the terms of this Lease
Agreement, become due if this Lease Agreement had not been terminated,
whether the Leased Premises be relet or remain vacant in whole or in
part or for a period less than the reminder of the term or for the
whole thereof, but, in the event the Leased Premises, including, but
not limited to, remodeling costs, brokerage fees, and attorneys' fees,
and in collecting the rent in connection therewith. As an alternative,
at the election of Landlord, Tenant will upon such termination pay to
Landlord, as damages, such a sum as at the time of such termination
represents the amount of the excess, if any, of the then value of the
total rent and other benefits which would have accrued to Landlord
under this Lease Agreement for the remainder of the lease term if the
provisions of this Lease Agreement had been fully complied with by
Tenant over and above the then cash rental value, in advance, of the
Leased Premises for the balance of the term.
ARTICLE XVII
Americans with Disabilities Act (ADA)
Within ten (10) days after receipt, Landlord and Tenant shall
advise the other party in writing and provide the other with copies (as
applicable), as amended, of any notices alleging violation of the
Americans with Disabilities Act of 1990 (ADA) relating to any portion
of the Leased Premises and claims made or threatened in writing
regarding noncompliance with the ADA and relating to any portion of the
Leased Premises, or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with
the ADA and relating to any portion of the Leased Premises.
ARTICLE XVII
Notices
Whenever by terms of this Lease Agreement notice shall or may
be given either to Landlord or Tenant, such notice shall be in writing and shall
be sent by registered or certified mail, postage prepaid, to the addresses
stated above, or such other address or addresses as my from time to time
hereafter by designated by Landlord or Tenant, addressed to the attention of the
undersigned officer of Tenant and Landlord.
ARTICLE XIX
Miscellaneous
Assignment. This Lease Agreement shall not be assigned or the Leased
Premises sublet by the Tenant.
Memorandum of Lease. Concurrently with the execution hereof, both parties
may execute a Memorandum of Lease, so called, in recordable form, said
instrument to contain such provisions as shall be reasonably acceptable to
counsel for both Landlord and Tenant.
Bind and Inure. All of the terms and provisions of this Lease Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective parties hereto.
Invalidity of Particular Provisions. If any term or provision of this Lease
Agreement or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, then the remainder of this Lease
Agreement, or the application of such term or provisions to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease Agreement shall be valid and be enforced to the fullest extent
permitted by law.
Governing Law. This Lease Agreement shall be governed exclusively by
the provisions hereof and by the laws of the State of Maine.
Paragraph Headings. The paragraph headings throughout this
instrument are for convenience and reference only, and the words contained
therein shall in no way be held to explain, modify, amplify, or aid in the
interpretation, construction, or meaning of the provisions of this Lease
Agreement.
The person executing this Lease Agreement on behalf of Tenant
and Landlord hereby covenants and warrants that the corporation on behalf of
which s/he is signing, is a duly authorized and existing corporation, that said
corporation is qualified to do business in Maine, that the corporation has full
right and authority to enter into this Lease Agreement, and that the person
signing on behalf of the corporation is authorized to do so.
IN WITNESS WHEREOF, Landlord and Tenant have caused this
instrument to be signed and sealed, by there respective officers, duly
authorized, in any number of counterpart copies, each of which counterpart
copies shall be deemed an original for all purposes, as of the day and year
first above written.
WITNESS: Bangor Savings Bank
By
Its Treasurer
WITNESS: United Bank
By Bruce D. Bartlett (Signature)
Brandy L. Page (Signature) Its President
EXHIBIT A
Certain property located in Dover-Foxcroft, Piscataquis County, Maine,
described as follows:
The west one-half of the building located at the intersection of the
east line of East Maine Street and the south line of Court Street in said
Dover-Foxcroft, together with the right for the Tenant and its customers, agents
and employees to use five (5) parking spaces in the parking area located at the
rear of said building in common with Landlord and its customers, agents and
employees.
[MILO LEASE]
ASSIGNMENT OF LEASE
KNOW THAT FLEET BANK OF MAINE having its principal office as One City
Center, Portland, Maine, 04101 ("Assignor") in consideration of One Dollar
($1.00) and other good and valuable consideration paid by United Bank having its
principal office at 145 Exchange Street, Bangor, Maine 04402 ("Assignee"),
hereby assigns unto the Assignee without recourse all of Assignor's right, title
and interest as tenant under a certain lease of property on Maine and Elm
Street, Milo, Maine ("Lease") more particularly described in a Memorandum of
Lease (" Memorandum") recorded in the Piscataquis County Registry of Deeds in
Book 1128, Page 192.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns
from and after the close of business as of the date hereof (the "Effective
Time"), subject to the terms, covenants, conditions and provisions set forth in
the Lease.
IN WITNESS WHEREOF, Assignor and Assignee have executed this agreement
as of the 29th day of September, 1998.
FLEET BANK OF MAINE
By (signature) Terence J. Farrell
Terence J. Farrell
Vice President
UNITED BANK
By: (signature) Bruce D. Bartlett
Name: Bruce D. Bartlett
Title: President
COMMONWEALTH OF MASSACHUSETTS
Suffolk County, ss. September 29, 1988
PERSONALLY APPEARED the above named Terence J. Farrell, Vice President of Fleet
Bank of Maine as aforesaid and acknowledged the foregoing instrument to be his
free act and deed in his said capacity and the free act and deed of said
corporation.
Before me,
(signature) Jean K. Donnelly
Notary Public: Jean K. Donnelly
My commission expires: January 31, 2003
STATE OF MAINE
Penobscot County, ss. October 1, 1998
PERSONALY APPEARED the above named Bruce D. Bartlett, President of United Bank
as aforesaid and acknowledged the foregoing instrument to be his free act and
deed in his said capacity and the free act and deed of said corporation.
Before me,
(signature) Catherine L. Moore
Notary Public: Catherine L. Moore
My commission expires: Sept 26, 2002
Stamp - Catherine L. Moore
Notary Public - State of Maine
My commission expires September 26, 2002
LEASE AGREEMENT
THIS LEASE AGREEMENT (herein called the "Lease") is made this 18th day of March,
1998 by and between CABREL COMPANY, a Maine corporation with a place of business
in Bangor, Penobscot County, State of Maine, ("Landlord"), and mailing address
of 6 State Street, P.O. Box 2400, Bangor, Maine 04402-2400, and FLEET BANK OF
MAINE, a Maine banking corporation with a place of business in Bangor, Penobscot
County, State of Main ("Tenant") and mailing address of Fleet Bank Corporate
Properties, One Federal Street, P.O. Box 2197, MA OF 0803, Boston, MA
02106-2197.
Landlord and Tenant agree as follows:
SECTION 1. LEASED PREMISES. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, subject to the terms and conditions of this
Lease, the premises located at Main Street, Milo, Maine, more particularly
described in Schedule "A" annexed hereto and made apart hereof, subject to all
easements, reservations, and restrictions of record (hereinafter referred to as
"the Premises").
SECTION 2. TERM. This Lease shall be for a term of three (3) years
commencing on May 19, 1998 and terminating on May 18, 2001.
2.1 Option to Renew. Tenant shall have the option to renew this Lease
for two (2) additional terms of three (3) years each, each option to be
exercised separately by Tenant giving Landlord written notice at least six (6)
months prior to expiration of the previous term, and provided that Tenant is not
in default under this Lease at the time of exercise of the option. All renewal
terms shall be on the same terms and conditions as the original term, except for
rent as hereinafter provided.
SECTION 3. RENT. Tenant agrees to pay to Landlord at Landlord's mailing
address identified above, or at such other place as Landlord shall from time to
time designate in writing, minimum annual rent of $25,000.00, in equal monthly
installments of $2,083.34, and proportionately at such rate for any partial
month, which minimum rent shall be paid monthly in advance on the first day of
each and every calendar month during the term hereof
3.1 Additional Rent. In addition to the aforesaid minimum annual rent,
Tenant agrees to pay as additional rent all such sums as are due and payable by
Tenant to or on behalf of Landlord pursuant to any of the subsequent provisions
of this Lease, and the failure of Tenant to pay any sums required hereunder
shall be deemed as failure to pay rent. Landlord appoints Tenant the
attorney-in-fact of landlord for the purpose of making all payments to be made
by Tenant pursuant to any of the provisions of this Lease to persons other than
Landlord.
3.2 Net Net Net Lease. This Lease is intended as an absolutely net
lease, and the minimum rent, additional rent, and all other sums payable
hereunder to or on behalf of Landlord shall be paid by Tenant without notice or
demand, and without set-off, abatement, suspension, deduction, or defense,
except as specifically and expressly set forth in this Lease. Under no
circumstances or conditions whether now existing or hereinafter arising, or
whether within or beyond the present contemplation of the parties shall Landlord
or Landlord's successors or assigns be expected or required to make any payment
of any kind whatsoever, or be under any other obligation or liability hereunder,
except as specifically and expressly provided in the Lease. This Lease shall
always be construed in order to effectuate the foregoing declared intent of the
parties.
3.3 Rent During Renewal Terms. If Tenant exercises the options to renew
under Section 2.1 above, the minimum annual rent during the first renewal term
shall be $27,500.00 payable in equal monthly installments of $2,291.67, and the
minimum annual rent during the second renewal term (if the option is exercised)
shall be $30,250.00 payable in equal monthly installments of $2,520.83.
SECTION 4. USE. Tenant shall use the Premises solely for the purposes
of a branch bank and financial services center, and for purposes ancillary
thereto, and for no other purpose. Tenant shall obtain, at Tenant's expense, all
permits, licenses, and approvals required by any federal, state, or local
authority. Tenant shall not permit any nuisance on the Premises, nor use or
permit any use of the Premises which is contrary to any law or ordinance, nor
permit any use which will invalidate any policy of insurance or materially or
adversely affect the value of the Premises.
SECTION 5. COVENANT OF QUIET ENJOYMENT. So long as Tenant is not in
default hereunder, Tenant shall have the peaceful and quiet use and possession
of the Premises during the term hereof, subject to the terms and provisions of
this Lease; but it is understood and agreed that this covenant and any and all
other covenants of Landlord contained in this Lease shall be binding upon
Landlord and Landlord's successors only with respect to breaches occurring
during Landlord's and Landlord's successors' respective ownership of the
Landlord's interest in the Premises.
SECTION 6. UTILITIES. Tenant shall adequately heat the Premises so as
to prevent damage by weather and shall pay all charges for all utilities
furnished to the Premises, including but not limited to gas, steam, water,
electricity and sewer and telephone service. Tenant will make its own
arrangements for delivery of all necessary heating fuel to the Premises and will
pay when due all charges for such fuel. Landlord shall in no event be liable for
any interruption or failure of utilities or other services on the Premises.
SECTION 7. TAXES
7.1 Tenant shall pay, or cause to be paid, before the same become
delinquent, all real estate taxes, including assessments for local improvements
and any and all other governmental levies or charges of any kind that are levied
upon or assessed against or with respect to the Premises, or any part thereof,
during the term of this Lease, pro-rated with respect to any portion of a fiscal
year in which the term of this Lease begins or ends.
7.2 Without postponing payment or otherwise adversely affecting
Landlord, Tenant may prosecute appropriate proceedings in the name of Landlord
or Tenant or both, but at the sole cost and expense of Tenant, to contest the
validity or amount of any such taxes or assessments, or to recover payments
therefor, and shall indemnify and save Landlord harmless from all costs and
expenses in connection therewith. Landlord shall cooperate with Tenant with
respect to such proceedings so far as reasonably necessary, provided that
Landlord shall not be obligated to incur any expense in connection with such
cooperation. Such contest by appropriate proceedings by the Tenant of any such
tax assessments shall be undertaken only with the prior express written consent
of Landlord, which consent shall not be unreasonably delayed, conditioned or
withheld.
7.3 Tenant shall also pay all personal property taxes assessed or
imposed upon all fixtures and equipment or other personal property of every type
situated in or upon the premises, and Tenant shall pay all license fees or other
governmental charges which may be imposed upon the Premises or the activities of
Tenant.
7.4 The foregoing provisions are predicated upon the present system of
taxation in the State of Maine. If taxes upon rentals shall be substituted, in
whole or in part, for the present ad valorem real estate taxes, then Tenant
agrees to pay such additional taxes on rentals whether the same shall be in
addition to or substitute for present ad valorem real estate taxes. Further, if
there is any other change in the system of taxation which is in substitution or
in addition to the present system, Tenant agrees to pay all such taxes.
Notwithstanding the foregoing, there is excluded from the Tenant's obligation to
pay real estate taxes the following taxes: income, intangible, franchise,
capital stock, estate or inheritance taxes or taxes substituted for or in lieu
of the foregoing exclusions.
SECTION 8. PERSONAL PROPERTY.
8.1 Tenant may install equipment, machinery, and trade fixtures
necessary to carry on Tenant's business on the Premises. All such equipment,
machinery, and trade fixtures (including, without limitation, the vault doors,
the drive-up window unit, the night depository unit, the counters, the
under-counter fill, the kitchen equipment, and all alarm equipment, except
wiring and conduit and specifically excepting the hearting system) shal remain
the personal property of Tenant, and may be removed by Tenant at any time before
the end of the term of this Lease, provided that any damage to the Premises by
such removal is promptly repaired by Tenant at Tenant's own expense.
8.2 All merchandise, trade fixtures, and personal property of any kind
in the Premises shall be at Tenant's sole risk, and Landlord shall not be liable
for any loss or damage to property of Tenant or others arising from theft, fire,
explosion, breakage of water pipes, steam pipes or other pipes, or by leaking
roofs, or by any other cause whatsoever unless resulting from the willful act of
Lndlord.
SECTION 9. REPAIRS OR MAINTENANCE. Tenant acknowledges that Tenant is
fully aware of the condition of the Premises and (except as otherwise expressly
provided in this Lease) agrees to take the same on a strictly "as is" basis
without warranty, obligation, or representation on the part of Landlord of any
kind whatsoever.
9.1 Landlord agrees to keep in good order, condition and repair the
roof, foundation and structural portions of the Premises, (but not including
glass and glass windows or the so-called store front), except for any damage
thereto caused by any act or negligence of Tenant, its employees, agents,
licensees or contractors; it being the intent hereof that the Landlord's
obligation to maintain the foregoing is to be limited to repairs required by
normal and reasonable wear and tear. Landlord shall not be responsible to make
any other improvements or repairs of any kind upon the Premises.
9.2 Except as provided in 9.1 above, Tenant shall, at Tenant's sole
cost and expense, maintain the Premises in at least as good condition and repair
(reasonable wear and tear excepted) as they are in at the commencement of the
term of this Lease or as they may be put in thereafter. Tenant shall not permit
the Premises to be overloaded, damaged, stripped or defaced, or suffer any
waste. Tenant's duty to maintain and repair the Premises includes, without
limitation, all mechanical, hearing, plumbing and electrical components and all
nonstructural, interior and exterior portions of the Premises and whether
constructed or installed by Landlord or by Tenant. Tenant shall maintain all
exterior areas and landscaping in and about the Premises, keep any lawn areas
mowed, and keep all driveways, walks, and parking and loading areas within the
Premises in good repair and reasonably free of snow and ice.
9.3 All alternations or repairs required by public authorities with
respect to Tenant's specific use of the Premises shall be made by Tenant at
Tenant's expense.
SECTION 10. ALTERATIONS. Tenant will not make any structural
alterations or any nonstructural changes costing more than $25,000, to the
Premises or any part thereof, without first obtaining Landlord's written
approval, which approval will not be unreasonably delayed, conditioned or
withheld. All work done on the Premises shall meet the following requirements:
10.1 The work will not adversely affect the structural strength or
integrity of the Premises;
10.2 All remodeling shall be done in full conformity with plans and
specifications approved in writing by Landlord;
10.3 All improvements and alterations made by Tenant shall immediately
become the property of Landlord and shall remain on the Premises in the absence
of a written agreement to the contrary;
10.4 All work shall be done in a good and first-class workmanlike
manner;
10.5 All work done by Tenant shall be in compliance with all applicable
laws, ordinances, regulations, and insurance requirements including, without
limitation, all applicable requirements for access by disabled persons under the
Maine Human Rights Laws and the Americans with Disabilities Act, and Tenant
shall indemnify and hold Landlord harmless from any loss, cost, or expense
arising from failure to comply with such requirements;
10.6 Tenant shall not permit any mechanics liens, or similar liens, to
remain upon the Premises in connection with any work performed or claimed to
have been performed at the direction of Tenant and shall cause any such lien to
be released of record forthwith (through the filing of a bond or otherwise)
without cost to Landlord.
SECTION 11. INDEMNIFICATION; INSURANCE.
11.1 Indemnity. Tenant shall indemnify and save Landlord harmless from
and against all claims of whatever nature arising from any act, omission or
negligence of Tenant, or Tenant's contractors, licensees, agents, servants or
employees, or arising from any accident, injury, or damage whatsoever caused to
any person or to the property of any person occurring during the term hereof in
or about the Premises except to the extent caused by negligence or willful
misconduct of Landlord or its agents. This indemnity and hold harmless agreement
shall include indemnity against all costs, expenses, and liabilities of any kind
whatsoever incurred in or in connection with any such claim or proceeding
brought thereon, and the defense thereof.
11.2 Liability Insurance. Tenant shall maintain in full force during
the term hereof a policy of commercial general liability insurance under which
Landlord and Tenant are named as insureds, against all claims, expense and
liability for injury to or death of persons or damage to property which may be
claimed to have occurred in or about the Premises. The minimum limits of
liability of such insurance shall be $1,000,000.00 for injury or death to
persons, and $500,000.00 with respect to damage to property.
11.3 Casualty Insurance. Tenant shall, at Tenant's own expense,
maintain fire and casualty insurance providing for insurance to the replacement
value of the Premises, or such lesser amount as is reasonably acceptable to
Landlord, with extended coverage on all buildings located on the Premises and
with carriers and in amounts reasonably approved by landlord and any mortgagee
under a mortgage on the Premises (the "Lender"), such insurance to be payable to
Landlord, Lender, and Tenant, as their interest may appear.
11.4 Release and Waiver of Subrogation. Insofar as and to the extent
that the following provisions may be effective without invalidating or making it
impossible to secure insurance coverage obtainable from responsible insurance
companies doing business in the State of Maine (even though extra premium may
result therefrom), Landlord and Tenant mutually agree that with respect to any
loss which is covered by insurance then being carried by them respectively, the
one carrying such insurance and suffering such loss, releases the other of and
from any and all claims with respect to such loss, to the extent of the
insurance proceeds paid under such policies, and Landlord and Tenant mutually
agree that their respective insurance companies shall have no right of
subrogation against the other on account thereof. Nothing contained in this
section shall be deemed to modify or otherwise affect releases elsewhere herein
contained of either party from liability for claims.
11.5 Polices. At or prior to the commencement of the term of this
Lease, and thereafter not less than then (10) days prior to the expiration
date of each expiring policy, original policies or certificates of all insurance
policies required hereunder setting forth in full the provisions thereof,
together with satisfactory evidence of the payment of all premiums then due
therefore, shall be delivered by Tenant to Landlord and shall, upon request of
Landlord, also be delivered by Tenant to the holder of any mortgage affecting
the Premises. All such insurance policies shall provide that such policy shall
not be amended or canceled without at least then (10) days prior written notice
to Landlord. All such insurance shall be placed with a responsible insurance
company reasonably satisfactory to Landlord and authorized to transact business
in the State of Maine. The insurance required herein may be written in
connection with a so-called "blanket policy."
SECTION 12. COMPLIANCE WITH APPLICABLE LAWS. Tenant shall, throughout
the term of this Lease and at Tenant" sole expense, promptly observe, comply
with and execute all laws and regulations of all federal, state and municipal
governments and appropriate departments, commissions, boards and officers
thereof and the orders and regulations of the National Board of Fire
Underwriters or any other body now or hereafter exercising similar functions
which may be applicable. Tenant shall make all repairs, alterations, additions
or replacements to the Premises required by any law or ordinance or any order or
regulation of any public authority because of Tenant's specific use of the
Premises; shall keep the Premises equipped with all safety appliances so
required because of such use; and shall procure any licenses and permits
required for any such use. Tenant shall comply with all governmental laws and
regulations from time to time applicable to the Premises arising from Tenant's
specific use of the Premises, including but not limited to the requirements of
the Americans with Disabilities Act and the Maine Human Rights Act and any other
laws and regulations relating to providing access and accommodation to persons
with disabilities, and Tenant shall indemnify and hold Landlord harmless from
any loss, cost or liability incurred by Landlord as a result of Tenant's failure
to comply with such requirements.
SECTION 13. HAZARDOUS MATERIALS.
13.1 Tenant shall not cause or permit any Hazardous Material to be
stored, generated, brought upon, kept, or used in or about the Premises by
Tenant, its agents, employees, contractors or invitees, without first obtaining
Landlord's written consent.
13.2 Any Hazardous Material permitted on the Premises, and all
containers therefor, shall be used, kept, stored and disposed of in a manner
that complies with all federal, state and local laws or regulations applicable
to any such Hazardous Material.
13.3 Tenant will in no event permit or cause any disposal of Hazardous
Materials in or about the Premises.
13.4 Tenant shall give immediate notice to Landlord of any violation or
potential violation of the provisions of this Section and will at all reasonable
times permit Landlord or its agents to enter the Premises to inspect the same
for compliance with this sections.
13.5 Tenant shall defend, indemnify and hold harmless Landlord
from and against any loss, claims, penalties, fines, liabilities,
settlements, damages, costs, or expenses (including, without
limitation, attorney and consultant fees, court costs and
litigation expenses) arising during or after the Lease term as
a result of any violation by Tenant of the terms of this
Section, or any contamination of the Premises or any other
land of Landlord by Hazardous Materials as a result of action
by Tenant or Tenant's agents, employees, contractors, or
invitees.
13.6 As used herein, the term "Hazardous Material" means any and all
materials or substances which are defined as "hazardous waste" or "hazardous
substance" under any state, federal, or local laws, and includes asbestos, waste
oil, and petroleum products.
13.7 Landlord shall comply, at Landlord's sole cost, with all
applicable laws and regulations or governmental orders associated with any
required cleanup or other actions arising from the existence or alleged
existence of Hazardous Materials on, in, or under the Premises prior to Tenant's
occupation of the Premises, and shall indemnify and hold Tenant harmless from
any costs associated therewith.
13.8 The provisions of this section 13 shall be in addition to any
other obligations and liabilities the parties may have to each other at law or
equity and shall survive the transactions contemplated herin and shall survive
the termination of the Lease.
SECTION 14. SIGNS. Tenant shall be permitted to construct, install, and
maintain a freestanding or attached sign or signs of suitable size for
visibility from adjacent public ways and indicating Tenant's occupancy of the
Premises, at Tenant's sole expense, provided that Tenant must obtain written
approval from Landlord as to the design and location of all exterior signs,
which approval shall not be unreasonably delayed, conditioned or withheld. All
signs must comply with all applicable laws and ordinances, and Tenant shall be
responsible for obtaining all necessary permits from applicable governmental
authorities, at Tenant" sole expense. Landlord's prior consent shall not be
required as to signs required by law or regulation or in the event of a change
in the name, logo or color of any signage consistent with Tenant's corporate
standard. All Tenant's signs shall comply with all requirements of appropriate
governmental authorities, and all necessary permits or licenses shall be
obtained by Tenant. Landlord shall cooperate with Tenant in obtaining all such
required permits and licenses. By execution of this Lease, Landlord shall be
deemed to have approved all signs located at the Premises on the date of the
Lease.
SECTION 15. EMINENT DOMAIN. In the case of any taking by eminent domain
of either the whole or such lesser portion of the Premises as to preclude the
use of the Premises by Tenant for the purpose for which leased, then this Lease
shall terminate on the date of such taking. If only a portion of the Premises is
taken, and such taking does not unreasonably impair the use of the Premises for
the purpose for which leased, the minimum rent shall be equitably abated for the
remainder of the term.
15.1 Condemnation Award. Should the Premises or any part thereof be
taken by eminent domain, the sums received in payment for the property so taken
shall be paid in their entirety to Landlord, free of any claim by Tenant, except
that Tenant shall be entitled to receive and retain any amount which may be
specifically awarded to Tenant in a condemnation proceeding because of the
taking of any machinery, equipment, trade fixtures, or other property owned by
Tenant on the Premises.
SECTION 16. DAMAGE OR DESTRUCTION. In the event of damage to or
destruction of the Premises or any part thereof from fire or other
casualty, at any time during the term of this Lease, Tenant, with all
reasonable diligence shall reconstruct, repair, replace or restore the
Premises to their condition immediately preceding such casualty and
this obligation shall not be limited in any way by the amount of
available insurance proceeds. No damage to or destruction of the
Premises or any part thereof from any cause shall operate to terminate
this Lease or relieve, reduce, or discharge Tenant's continuing
obligation during the term of this Lease for the payment of rents and
other sums due under this Lease. Notwithstanding the foregoing, if
during the last year of the term of this Lease the Premises are totally
destroyed or so substantially damaged that the restoration could not
reasonably be completed with on hundred twenty (120) days from the date
of the casualty, either Landlord or Tenant shall have the right to
terminate this Lease by giving written notice to the other no later
than thirty (30) days following the date of such damage or destruction.
In the event of such termination, Landlord shall be entitled to receive
and retain the entire amount of insurance proceeds.
SECTION 17. ASSIGNMENT OR SUBLETTING. Notwithstanding any other
provisions of this Lease, Tenant shall have no right to assign this
Lease or sublet (which term, without limitation, shall include the
granting of concessions, licenses and the like) the whole or any part
of the Premises without in each instance having first received the
prior express written consent of Landlord, which consent shall not be
unreasonably delayed, conditioned or withheld. In any case where
Landlord shall so consent to such assignment or subletting, Tenant
shall remain fully liable to Landlord for all of the obligations
imposed upon Tenant under this Lease, including without limitation, the
obligation to pay the rent and other charges. Notwithstanding the
foregoing, Tenant shall have the right to sublease all or a portion of
the Premises, to permit occupancy of all or a portion of the Premises,
and to assign its interest in this Lease to any Affiliated Entity, as
hereinafter defined, without Landlord's consent, provided that Tenant
shall give Landlord written notice of any such sublease or assignment.
"Affiliated Entity" for purposes of this provision is defined as (a)
any entity which controls, is controlled by, or is under common control
with Tenant, (b) any entity that succeeds to Tenant's business by
merger, reorganization or other form of corporate reorganization, and
(c) any purchaser who acquires all or substantially all of the Tenant's
assets and/or stocks.
SECTION 18. ACCESS BY LANDLORD. Landlord or any person designated by
Landlord shall have the right to enter the Premises after reasonable
notification to Tenant for the purpose of inspecting the Premises or to make
repairs. For a period commencing one hundred eighty (180) days prior to the end
of the term of this Lease, Landlord shall have the right to enter the Premises
at any reasonable times, for the purpose of exhibiting the same to prospective
tenants or purchasers. Landlord shall at all times show due regard for Tenant's
reasonable security concerns.
SECTION 19. SUBORDINATION. This Lease is and shall be subject and
subordinate to any mortgages that may now exist or hereafter be placed
upon the Premises by Landlord, and to any and all advances to be made
thereunder, and all renewals, replacements, and extensions thereof.
This provision shall be self-operative, but Tenant shall, upon request,
execute and deliver any documents to confirm this subordination, as may
be desired by holders of such mortgages, and if requested by the
mortgagee, to agree not to prepay rent more than thirty (30) days in
advance, provided that the holder of such mortgage enters into a
non-disturbance agreement with Tenant by the terms of which such holder
agrees to recognize this Lease and not to disturb Tenant's possession
of the Premises hereunder so long as Tenant continues to perform all
obligations under this lease, and, in the event of acquisition of title
by such holder through foreclosure proceedings or otherwise, to accept
Tenant as tenant of the Premises under the terms and conditions of this
Lease and to perform Landlord's obligations under this Lease (but only
while owner of the Premises), and Tenant agrees to attorn to and
recognize such holder or any other person acquiring title to the
Premises as Landlord.
SECTION 20. ESTOPPEL CERTIFICATES. Tenant agrees, upon at least thirty
(30) days prior written request by Landlord from time to time, to execute,
acknowledge, and deliver to Landlord a written statement certifying that this
Lease is unmodified and in full force and effect (or that the same is in full
force and effect as modified, listing the modifications), the date to which rent
and other charges have been paid, and whether or not to the best of Tenant's
knowledge Landlord is in default hereunder (and if so, specifying the nature of
the default), it being intended that any such statement delivered pursuant to
this section may be relied upon by a prospective purchaser or mortgagee or
Landlord's interest in the Premises.
SECTION 21. DEFAULT. Tenant shall be in default under this Lease if:
(i) Tenant shall fail to pay any installment of rent or any other payment to
Landlord or other parties required herein, when due, and such failure shall
continue for a period of seven (7) days after Tenant's receipt of written notice
from Landlord; (ii) Tenant shall become insolvent or make a transfer in fraud of
creditors; (iii) a petition shall be filed against Tenant under any state or
federal bankruptcy or insolvency laws or under any similar law or statute of the
United States or any state, and not discharged within sixty (60) days after such
filing, or Tenant shall file such petition, or Tenant shall be adjudged bankrupt
or insolvent in any proceeding; (iv) any assignment shall be made of the
property of Tenant for the benefit of creditors, or a receiver, guardian,
conservator, trustee in involuntary bankruptcy or other similar officer shall be
appointed to take charge of all or any substantial part of Tenant's property, or
the estate hereby created shall be taken on execution or by other process of
law; (v) Tenant shall fail to comply with any covenant, term, or provision of
this Lease (other than the payment of rent and other charges) and shall not cure
such failure within thirty (30) days after written notice thereof to Tenant, or
such additional time as is reasonably required to correct such failure.
In case of any such default, and regardless of any waiver or consent to
any earlier event of default, Landlord, at its option, may exercise any and all
remedies available to Landlord at law or equity, all of such rights and remedies
to be cumulative and not exclusive, including without limitation the following:
Landlord may terminate this Lease, and Tenant shall quit and surrender
the Premises and remain liable as set forth below;
Landlord may immediately, or at any subsequent time, without demand or
further notice, reenter the Premises with or without process of law, and
repossess the Premises and expel Tenant and those claiming under Tenant, and
Landlord may remove any property from the Premises and store the same in any
warehouse, all at the expense and risk of Tenant, or may dispose of the same in
accordance with applicable law, and Tenant shall remain liable as set forth
below;
In the event of termination or re-entry after default, Tenant shall
pay Landlord as damages all rent, and other charges, payable under
this Lease up to the time of re-entry or termination, and all rent
that Tenant would have been required to pay until the expiration
of the then current term of this lease, whether or not the
Premises shall be relet, as and when due in accordance with the
provisions of this Lease, plus all expenses of re-entering,
repossession, and all expenses in connection with any reletting,
including without limitation expenses for altering and repairing
the Premises for any new tenant, attorneys' fees and brokers
commissions, less the net proceeds to Landlord of any reletting of
the Premises, and subject to Landlord's obligation to mititgate
damages under applicable law. Any suit brought by Landlord to
recover the damages due under this section shall not prejudice
Landlord' right to recover in any subsequent action brought for
any amount not previously reduced to judgment.
At any time after termination, whether or not Landlord shall have
collected any damages under (C) above, Landlord shall be entitled, at Landlord's
option, to obtain from Tenant, on demand, as liquidated final damages, an amount
equal to the present value to Landlord of the rent and other changes that would
have been payable by Tenant if this Lease had remained in effect until the
expiration of the current term, minus the fair rental value of the Premises for
the same period.
SECTION 22. ATTORNEYS' FEES. In the event of an action by either of the
parties hereto against the other to enforce any obligation under this Lease, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
expense from the other. If Landlord or any of Landlord's agents or employees
shall become a party to or participate in any judicial or administrative
proceeding which arises as a result of Landlord being a party to this Lease,
Tenant shall pay and indemnify
Landlord against all costs and charges, including reasonable attorneys'
fees, which Landlord or Landlord's agents or employees shall incur.
SECTION 23. RECORDING. This Lease shall not be recorded in any registry
of deeds or other public office, but each party agrees to execute, acknowledge,
and deliver, at the request of the other party, a memorandum of this Lease in
appropriate form for recording, in accordance with Maine statute. Such
memorandum will not set forth the rental or other charges payable by Tenant
under this Lease, and shall expressly state that it is not intended to vary the
terms or conditions of this Lease.
SECTION 24. NOTICES. Whenever by the terms of this Lease notice shall
or may be given to either party, such notice shall be in writing and shall be
sent by registered or certified mail, postage prepaid, to the addresses set
forth on the first page of this Lease, or such other address or addresses as
either party may from time to time hereafter designate by written notice to the
other. A copy of each notice to Tenant shall be sent to Fleet Legal Department,
Attn: Real Estate Counsel, MA BO F31B, P.O. Box 2197, Boston, MA 02106-2197.
SECTION 25. SEVERABILITY. If any term or provision of this Lease,
or the application thereof to any person or circumstance shall to any extent
be invalid or unenforceable for any reason, then the remainder of this Lease,
or the application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term or provision of this Lease shall be valid and
enforced to the fullest extent permitted by law.
SECTION 26. SUCCESSORS AND ASSIGNS. The conditions, covenants and
agreements in this Lease contained to be kept and performed by the parties
hereto shall be binding upon and inure to the benefit of said respective
parties, their legal representatives, successors and assigns. The term
"Landlord" as used in this Lease means only the owner for the time being
of the land and the buildings of which the Premises ar a part, so that in
the event of any sale or transfer of such land and buildings or of
this Lease, Landlord shall be and hereby is entirely released of all
covenants and obligations of Landlord hereunder, excepting such claims or causes
of action which accrued prior to the time of such sale or transfer.
SECTION 27. AUTHORIZATION. Landlord and Tenant each warrant and
represent to the other that they are authorized to enter into this Lease, that
the person or persons signing it are duly authorized to execute this Lease, and
that no other signature or approvals are necessary.
SECTION 28. GOVERNING LAW: This Lease shall be governed by and
construed in accordance with the laws of the State of Maine.
SECTION 29. BROKERS: Each party hereto represents that it has not
dealt with any real estate broker or agent in connection with the negotiation
of this Lease or the leasing of the Premises. Each party shall hold the other
harmless from all damages resulting from any claims that may be asserted
against the other party by any broker, finder, or other person or entity with
whom the other party has dealt.
SECTION 30. FORCE MAJEURE; In the event either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
under this Lease by reason of adverse weather condition, strikes, lockouts,
labor troubles, inability to procure materials, failure of power, restrictive
governmental law or regulations, riots, insurrection, war or other reason of a
like nature not that fault of the party delayed in performing work or doing acts
required under the terms of this Lease, then the performance of such act shall
be excused for the period of the delay, and the period for the performance of
any such act shall be extended for a period equivalent to the period of the such
delay. The provisions of this Section 30 shall not (i) operate to excuse Tenant
from prompt payment of Tent, or any other payment required by the terms of this
Lease; (ii) be applicable to delays resulting from the inability of a party to
obtain financing or to proceed with its obligations under this Lease because of
a lack of funds; or (iii) delay or postpone any of the rights specifically
granted to Tenant hereunder based upon a time certain.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals, in any number of counterparts, the day year first above written.
WITNESS: CABREL COMPANY
By (signature)
CAROL A. EPSTEIN
Its President
Hereunto duly authorized
LANDLORD
FLEET BANK OF MAINE
By (signature)
Terence J. Ferrell
Its Vice President
Hereunto duly authorized
TENANT
The land, with all buildings thereon, located in Milo, County of Piscataquis,
State of Maine, bounded and described as follows:
Beginning at any iron pipe set in the ground at the intersection of the
generally southeasterly sideline of Main Street and generally northeasterly
sideline of Elm Street, thence South 66 degrees 51' East along the generally
northeasterly sideline of Elm Street one hundred then (110) feet, more or less,
to an iron pipe set in the ground; thence North 23 degrees 10' East ninety-seven
(97) feet to an iron pipe set in the ground; thence continuing on the same
course of North 23 degrees 10' East three (3) feet to an iron pipe set in the
ground; thence South 66 degrees 40' East a distance of one hundred twenty-seven
and seven tenths (127.7) feet to an iron pipe, said point being a witness
corner; thence same course a distance of two (2) feet to the center of a
thirty-six (36) inch Elm tree; thence North 28 degrees o5' East a distance of
ninety-eight (98) feet to an iron pipe thence North 67 degrees 45' West a
distance of one hundred three and five tenths (103.5) feet to an iron pip;
thence South 29 degrees 59' West a distance of forty-five (45) feet to an iron
pipe; thence North 65 degrees 28' West a distance of one hundred five and four
tenths (105.4) feet to an iron pipe; thence North 67 degrees 30' West a distance
of thirty (30) feet to the generally southeasterly sideline of said Main Street
one hundred fifty-one and five tenths (151.5) feet to the point of beginning.
The above description was prepared from a survey made of the above described
premises by Paul A. West, dated June 15, 1968, and all bearings are related to
true north.
