UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
Commission File No. 0-28190
CAMDEN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
MAINE 01-04132282
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
2 ELM STREET, CAMDEN, ME 04843
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 236-8821
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Outstanding at March 31, 1999: Common stock (no par value) 6,640,414
shares.
</PAGE>
<PAGE>
CAMDEN NATIONAL CORPORATION
Form 10-Q for the quarter ended March 31, 1999
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
PART I.
ITEM 1. FINANCIAL INFORMATION
PAGE
Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998 3
Consolidated Statements of Comprehensive Income
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Conditions
March 31, 1999 and 1998 and December 31, 1998 5
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements
Three Months Ended March 31, 1999 and 1998 7-8
Analysis of Change in Net Interest Margin
Three Months Ended March 31, 1999 and 1998 8
Average Daily Balance Sheets
Three Months Ended March 31, 1999 and 1998 9
Analysis of Volume and Rate Changes on Net Interest Income
& Expenses March 31, 1999 over March 31, 1998 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10-16
PART II.
ITEM 4. Submission Matters to a Vote of Security holders 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBITS 18
</PAGE>
<PAGE>
PART I.
ITEM I. FINANCIAL INFORMATION
<TABLE>
Camden National Corporation and Subsidiaries
Consolidated Statement of Income
(unaudited)
(In Thousands, except number of Three Months Ended March 31
shares and per share data) 1999 1998
<S> <C> <C>
Interest Income
Interest and fees on loans $ 9,887 $ 8,593
Interest on U.S. Government and agency obligations 2,233 2,576
Interest on state and political subdivisions 101 31
Interest on interest rate swap agreements 0 33
Interest on federal funds sold and other investments 889 241
------- -------
Total interest income 13,110 11,474
Interest Expense
Interest on deposits 4,478 3,679
Interest on other borrowings 1,179 1,539
Interest on interest rate swap agreements 0 32
------- -------
Total interest expense 5,657 5,250
------- -------
Net interest income 7,453 6,224
Provision for Loans Losses 435 324
------- -------
Net interest income after provision for loan losses 7,018 5,900
Other Income
Service charges on deposit accounts 536 360
Other service charges and fees 431 396
Other 493 340
------- -------
Total other income 1,460 1,096
Operating Expenses
Salaries and employee benefits 2,375 1,940
Premises and fixed assets 557 465
Other 1,735 1,271
------- -------
Total operating expenses 4,667 3,676
------- -------
Income before income taxes 3,811 3,320
Income Taxes 1,207 1,086
------- -------
Net Income $ 2,604 $ 2,234
======= =======
Per Share Data
Basic Earnings per share $0.39 $0.33
(Net income divided by weighted
average shares outstanding)
Diluted Earnings per share $0.39 $0.32
Cash dividends per share $0.15 $0.13
Weighted average number of shares outstanding 6,654,288 6,810,630
</TABLE>
</PAGE>
<PAGE>
<TABLE>
Camden National Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(unaudited)
(In Thousands) Three Months Ended March 31
1999 1998
<S> <C> <C>
Net income $ 2,604 $ 2,234
Other comprehensive income, net of tax:
Change in unrealized
gains on securities (31) 5
------- -------
Comprehensive income $ 2,573 $ 2,239
======= =======
</TABLE>
</PAGE>
<PAGE>
Camden National Corporation and Subsidiaries
Consolidated Statements of Condition
(unaudited)
<TABLE>
(In Thousands, except number March 31, December 31,
of shares and per share data) 1999 1999
<S> <C> <C>
Assets
Cash and due from banks $ 13,374 $ 14,938
Federal funds sold 1,525 0
Securities available for sale 95,641 84,159
Securities held to maturity 80,483 88,570
Other securities 14,085 14,084
Residential mortgages held for sale 27,336 24,637
Loans, less allowance for loan losses of
$6,791 and $6,512 at March 31, 1999
and December 31, 1998 420,431 407,798
Bank premises and equipment 9,324 9,530
Other real estate owned 859 905
Interest receivable 4,475 3,820
Other assets 20,669 19,510
-------- --------
Total assets $688,202 $667,951
======== ========
Liabilities
Deposits:
Demand $ 57,607 $ 64,303
NOW 26,211 27,955
Money market 84,270 87,532
Savings 84,594 80,908
Certificates of deposit 252,428 247,875
-------- --------
Total deposit 505,110 508,573
Borrowings from Federal Home Loan Bank 86,134 60,265
Other borrowed funds 24,379 29,893
Accrued interest and other liabilities 7,192 5,028
Minority interest in subsidiary 94 90
-------- --------
Total liabilities 622,909 603,849
-------- --------
Stockholders' Equity
Common stock, no par value; authorized
10,000,000, issued 7,128,240 shares 2,436 2,436
Surplus 1,142 1,142
Retained earnings 70,387 68,785
Net unrealized appreciation on securities
available for sale, net of income tax (155) (129)
-------- --------
73,810 72,234
Less cost of 487,826 and 471,930 shares
of treasury stock on March 31, 1999
and December 31, 1998 8,517 8,132
-------- --------
Total stockholders' equity 65,293 64,102
-------- --------
Total liabilities and stockholders' equity $688,202 $667,951
======== ========
</TABLE>
<PAGE>
Camden National Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
(In Thousands) Three Months Ended March 31,
1999 1998
<S> <C> <C>
Operating Activities
Net Income $ 2,604 $ 2,234
Adjustment to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 435 324
Depreciation and amortization 49 164
(Increase) Decrease in interest receivable (655) 268
Increase in other assets (1,067) (8,145)
Increase in other liabilities 2,177 2,738
Cash receipts from sale of residential loans 1,588 167
Origination of mortgage loans held for sale (4,287) (4,869)
Loss on disposal of assets 0 0
Other, net 0 1
------- -------
Net cash provided by operating activities 844 (7,118)
------- -------
Investing Activities
Proceeds from maturities of securities
held to maturity 8,206 21,514
Proceeds from maturities of securities
available for sale 12,561 2,000
Purchase of securities held to maturity 0 0
Purchase of securities available for sale (24,096) 0
Purchase of Federal Home Loan Bank Stock (1) 0
Increase in loans (13,068) (5,763)
Net decrease in other real estate 46 129
Purchase of premises and equipment (42) (613)
Proceeds from sale of premises and equipment 0 0
Decrease (increase)in minority position 4 1
Net purchase of federal funds (1,525) 1,100
------- -------
Net cash used by investing activities (17,915) 18,368
------- -------
Financing Activities
Net increase (decrease) in demand deposits,
NOW accounts, and savings accounts (8,016) 27,983
Net increase in certificates of deposit 4,553 35,237
Net (decrease)increase in short-term borrowings 20,355 (64,681)
Purchase of treasury stock (385) 0
Sale of treasury stock 0 0
Cash Dividends (1,000) (908)
------- -------
Net cash provided by financing activities 15,507 (2,369)
------- -------
Increase in cash and equivalents (1,564) 8,881
Cash and cash equivalents at beginning of year 14,938 13,451
------- -------
Cash and cash equivalents at end of period $13,374 $22,332
======= =======
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
disclosures required by generally accepted accounting principles for complete
presentation of financial statements. In the opinion of management, the
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the consolidated
statements of condition of Camden National Corporation, as of March 31, 1999,
and December 31, 1998, the consolidated statements of income for the three
months ended March 31, 1999 and March 31, 1998, the consolidated statements of
comprehensive income for the three months ended March 31, 1999 and March 31,
1998 and the consolidated statements of cash flows for the three months ended
March 31, 1999, and March 31, 1998. All significant intercompany transactions
and balances are eliminated in consolidation. The income reported for 1999
period is not necessarily indicative of the results that may be expected for
the full year.
NOTE 2 - Earnings Per Share
Earnings Per Share. Basic earnings per share date is computed based on
the weighted average number of common shares outstanding during each year.
Potential common stock is considered in the calculation of weighted
average shares outstanding for diluted earnings per share.
The following table sets forth the computation of basic and diluted earnings
per share:
Three Months Ended March 31,
1999 1998
Net income, as reported 2,604 2,234
Weighted average shares 6,654,288 6,810,630
Effect of dilutive securities:
Employee stock options 83,007 155,388
Dilutive potential common shares
Adjusted weighted average shares
and assumed conversion 6,737,464 6,966,018
Basic earnings per share $0.39 $0.33
Diluted earnings per share 0.39 0.32
NOTE 3 - Excess of Cost Over Fair Value of Assets Acquired
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 transaction:
Loans acquired 18,541
Fixed assets 546
Core deposit intangibles 7,466
Other assets 1,202
Deposits assumed 87,332
Other Liabilities 112
Net Cash received 59,689
<TABLE>
ANALYSIS OF CHANGE IN NET INTEREST MARGIN
Three Months Ending Three Months Ending
March 31, 1999 March 31, 1998
------------------- -------------------
Dollars in thousands Amount Average Amount Average
of Yield/ of Yield/
interest Rate interest Rate
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Interest-earning assets:
Securities - taxable $ 3,098 7.05% $ 2,810 6.78%
Securities - nontaxable 153 6.47% 47 6.95%
Federal funds sold 24 8.14% 11 5.57%
Loans 9,674* 8.68% 8,734* 9.59%
------- ------ ------- ------
Total earning assets 12,949 8.19% 11,602 8.70%
Interest-bearing liabilities:
NOW accounts 155 1.03% 129 1.21%
Savings accounts 573 2.79% 543 3.31%
Money Market accounts 465 3.50% 289 3.69%
Certificates of deposit 3,199 5.23% 2,718 5.52%
Short-term borrowings 1,181 4.79% 1,539 5.45%
Broker Certificates of deposit 85 5.66% 0 0.00%
------- ------ ------- ------
Total interest-bearing liabilities 5,658 4.16% 5,218 4.64%
Net interest income
(fully-taxable equivalent) 7,291 6,384
Less: fully-taxable
equivalent adjustment (154) (73)
------- -------
$ 7,137 $ 6,311
======= =======
Net Interest Rate Spread
(fully-taxable equivalent) 4.04% 4.06%
Net Interest Margin
(fully-taxable equivalent) 4.61% 4.79%
*Includes net swap income figures (in thousands) - March 1999 $0 and
March 1998 $1.
Notes: Nonaccrual loans are included in total loans. Tax exempt
interest was calculated using a rate of 34% for fully-taxable
equivalent.
</TABLE>
<PAGE>
<TABLE>
AVERAGE DAILY BALANCE SHEETS
Three Months Ended March 31,
Dollars in thousands 1999 1998
---- ----
<S> <C> <C>
Interest-earning assets:
Securities - taxable $175,742 $165,749
Securities - nontaxable 9,467 2,705
Federal funds sold 1,180 790
Loans 445,966 364,306
-------- --------
Total earning assets 632,355 533,550
Cash and due from banks 15,032 14,038
Other assets 35,427 25,644
Less allowance for loan losses (6,674) (5,640)
-------- --------
Total assets $676,140 $567,592
======== ========
Interest-bearing liabilities:
NOW accounts $ 59,987 $ 42,712
Savings accounts 82,148 65,627
Money market accounts 53,151 31,348
Certificates of deposits 244,792 196,888
Short-term borrowings 98,559 112,956
Broker certificates 6,004 131
-------- --------
Total interest-bearing liabilities 544,641 449,662
Demand deposits 61,820 48,738
Other liabilities 4,982 5,971
Shareholders' equity 64,697 63,221
-------- --------
Total liabilities and stockholders' equity $676,140 $567,592
======== ========
</TABLE>
<PAGE>
ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSES
<TABLE>
March 1999 Over March 1998
---------------------------------
Change Change
Due to Due to Total
In thousands Volume Rate Change
------- ------- -------
<S> <C> <C> <C>
Interest-earning assets:
Securities--taxable $ 169 $ 119 $ 288
Securities--nontaxable 117 (11) 106
Federal funds sold 5 8 13
Loans 1,958 (1,017) 941
------- ------- -------
Total interest income $ 2,249 $ (901) $ 1,348
Interest-bearing liabilities:
NOW accounts $ 52 $ (26) $ 26
Savings accounts 137 (107) 30
Money market accounts 201 (25) 176
Certificates of deposit 659 (178) 481
Short-term borrowings (196) (162) (358)
Broker certificates 85 0 85
------- ------- -------
Total interest expense $ 938 $ (498) $ 440
------- ------- -------
Net interest income $ 1,311 $ (403) $ 908
(fully taxable equivalent) ======= ======= =======
</TABLE>
ITEM II. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
FINANCIAL CONDITION
During the first three months of 1999, consolidated assets increased by $20.3
million to $688.2 million. This increase was the result of an increase in the
loan portfolio of $15.6 million or 3.6% and an increase in the investment
portfolio of $3.4 million or 1.8%. The increase in loans can be attributed to
strong loan demand during the first quarter. Although the investment portfolio
experienced a modest increase, the Company did not want to aggressively
purchase securities during a time of relatively low interest rates.
The liquidity needs of the Company's financial institution subsidiaries require
the availability of cash to meet the withdrawal demands of depositors and the
credit commitments to borrowers. Deposits still represent the Company's primary
source of funds. Since December 31, 1998, deposits have decreased by $3.5
million or 0.7%. The major reason for this decrease was the seasonal decline in
the Company's transaction accounts (demand deposits and NOW accounts). Both of
the Company's banking subsidiaries continue to experience extreme competition
by competitors for deposits. Therefore, other funding sources continue to be
pursued and utilized. Borrowings provide liquidity in the form of federal funds
purchased, securities sold under agreements to repurchase, treasury tax and
loan accounts, and borrowings from the Federal Home Loan Bank. Total borrowings
have increased by $20.4 million or 22.6% since December 31,1998. The majority
of the borrowings were from the Federal Home Loan Bank of Boston. FHLB advances
remain the largest nondeposit-related interest-bearing funding source for the
Company. These borrowings are secured by qualified residential real estate
loans, certain investment securities and certain other assets available to
be pledged. The Company views borrowed funds as a reasonably priced alternative
funding source that should be utilized. Borrowings have continued to be a
viable source of funding.
In determining the adequacy of the loan loss allowance, management relies
primarily on its review of the loan portfolio both to ascertain if there are
any probable losses to be written off, and to assess the loan portfolio in the
aggregate. Nonperforming loans are examined on an individual basis to determine
estimated probable loss. In addition, management considers current and
projected loan mix and loan volumes, historical net loan loss experience for
each loan category, and current and anticipated economic conditions affecting
each loan category. No assurance can be given, however, that adverse economic
conditions or other circumstances will not result in increased losses in the
portfolio. The Company continues to monitor and modify its allowance for
loan losses as conditions dictate. During the first three months of 1999,
$435,000 was added to the reserve for loan losses, resulting in an allowance
of $6.8 million, or 1.49%, of total loans outstanding. This addition to the
allowance was made as a result of loan growth and not a reduction in loan
quality. Management believes that this allowance is appropriate given the
current economic conditions in the Company's service area and the overall
condition of the loan portfolio.
Under Federal Reserve Board(FRB) guidelines, bank holding companies such as the
Company are required to maintain capital based on "risk-adjusted" assets. These
guidelines apply to the Company on a consolidated basis. Under the current
guidelines, banking organizations must maintain a risk-based capital ratio of
eight percent, of which at least four percent must be in the form of core
capital. The Company's risk based capital ratios for Tier 1 and Tier 2 ratios
at March 31, 1999, of 12.3% and 13.5% respectively, exceed regulatory
guidelines. The Company's ratios at December 31, 1998 were 12.8% and 14.0%.
The principal cash requirement of the Company is the payment of dividends on
common stock when declared. The Company is primarily dependent upon the payment
of cash dividends by Camden National Bank to service its commitments. During
the first three months of 1999 Camden National Bank paid dividends to the
Company in The amount of $1.4 million. The Company paid dividends to
shareholders in the amount of $1.0 million. The remaining amount of $.4
million was used for treasury stock transactions by the Company.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1999 was $2,604,000, an
increase of $370,000 or 1.7% above 1998's first three month's net income of
$2,234,000. The major contributing factor was the increase in loans, which
resulted in an increase in net interest income.
NET INTEREST INCOME
Net interest income, on a fully taxable equivalent basis, for the three months
ended March 31, 1999 was $7.3 million, a 14.2% or $0.9 million increase over
the net interest income for the first three months of 1998 of $6.4 million.
Interest income on loans increased by $0.9 million. This increase was due to
the increase in loan volume, despite a decrease in yields from 9.59% during
the first three months of 1998 to 8.68% during the first three months of
1999. The Company experienced a slight increase in interest income on
investments during the first three months of 1999 compared to the same period
in 1998 due to both increased volume and yield. The Company's net interest
expense on deposits and borrowings increased during the first three months of
1999 compared to the same period in 1998. This increase was the result of
borrowed funds being used to support loan growth.
The Analysis of Change in Net Interest Margin, the Average Daily Balance
Sheets, and the Analysis of Volume and Rate Changes on Net Interest Income and
Expenses are provided on pages 8-10 of this report to enable the reader to
understand the components of the Company's interest income and expenses.
The first table provides an analysis of changes in net interest margin on
earnings assets; interest income earned and interest expense paid and average
rates earned and paid; and the net interest margin on earning assets for the
three months ended March 31, 1999 and 1998. The second of these tables
presents average assets liabilities and stockholders' equity for the three
months ended March 31, 1999 and 1998. The third table presents an analysis of
volume and rate change on net interest income and expense from March 31, 1998
to March 31, 1999.
The Company utilizes off-balance sheet instruments such as interest rate swap
agreements that have an effect on net interest income. There was no effect on
net interest income in the first three months of 1999 compare to a slight
increase of $1,000 in the first three months of 1998.
NONINTEREST INCOME
There was a $364,000 or 33.2% increase in total noninterest income in the first
three months of 1999 compared to the first three months of 1998. Service
charges on deposit accounts increased $176,000 or 48.9% for the first
three months of 1999 compared to 1998. This increase was the result of
increased deposits balances. The increase in deposit balance was inflated due
to the acquisition of seven branches by the Company in 1998. Three branches
were acquired in March 1998 and three in October 1998. Other service charges
and fees increased by $35,000 or 8.8% in the first three months of 1999
compared to 1998. The largest contributing factor to this increase was the fee
income generated by merchant assessments. Other income increased by
$153,000 in the first three months of 1999 compared to 1998. The major reason
for this increase in other income was a $125,000 gain on the sale of
securities.
NONINTEREST EXPENSE
There was a $991,000 or 21.2% increase in total noninterest expenses in the
first three months of 1999 compared to the first three months of 1998. Salaries
and employee benefits cost increased by $435,000 or 22.4% in the first three
months of 1999 compared to 1998. This increase was the result of normal annual
increases, additions to staff (including the staff at the seven branches
acquired in 1998) and higher pension benefit costs. Other operating expenses
increased by $556,000 or 32.0%. The major contributing factor for this increase
the costs related to the seven new branch locations added in 1998. The Company
experienced increases in premises and fix assets, credit card expenses, data
processing, and amortization of deposit premium and various other general
operating expenses. The amortization of deposit premium of $193,000 was
recorded in 1999, which was the result of the new branches acquired in 1998.
YEAR 2000
The Year 2000 issue refers to the fact that many computers were originally
programmed using two digits rather than four digits when referring to the
applicable year. When the year 2000 occurs, these systems will read the year as
1900 rather than 2000. Unless software and hardware systems are corrected to be
Year 2000 compliant, computers could generate miscalculations and create
operational problems. Year 2000 compliant means having computer systems that
accurately process date and time data from, into, and between the twentieth and
twenty-first centuries. Furthermore, Year 2000 compliant information
technology, when used in combination with other information technology, will
accurately process date and time data if the other information technology
properly exchanges date and time data with it.
To assist in identifying any and all exposures that the Company may have and to
help make all the appropriate changes necessary to allow for a smooth
transition into the new millennium the Company engaged Vitex Inc. to assist in
development of a Year 2000 Plan. The Company's Executive Operations and
Technology Committee manages the Year 2000 project with the assistance of Vitex
Inc. The Committee developed a Year 2000 Plan to address the Company's
exposure to potential problems arising from the Year 2000. The plan is based
on the Federal Financial Institution Examination Council ("FFIEC") Guidelines.
The Company has been working since June 1997 to identify, test, and if
necessary, upgrade key systems such as checking, savings, general ledger, wire
transfer, consumer and commercial loans, and other core computer systems. These
are the Company's "mission critical" systems. Currently, 100% of the company's
"mission critical" systems are ready for the Year 2000. In addition, all other
systems were tested in our own environment. Independent validation of the
testing results of "mission critical" systems has been completed. The Company
also operates in a highly interconnected local and wide area network
environment. The Company's entire network has been renovated to Year 2000 ready
versions of both hardware and software. In addition, a thorough inventory of
the company's facilities, elevators and security systems for potential Year
2000 issues was completed in September 1998.
All software used by the company is provided by outside vendors, which are
selected based on the quality of their products and their proven ability to
deliver to the Company and its customers. The Company is actively monitoring
its approximate 50 software and hardware suppliers for Year 2000 compliance.
The progress of these vendors is tracked as they deliver Year 2000
compliant upgrades to their applications.
The Company strives to strengthen customer awareness of the Year 2000 issue in
various forms. An internal awareness training program is ongoing with
employees. This will enable our staff to effectively answer customers'
concerns. 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 et 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 is being
developed for non-mission critical systems. All contingency plans will be
completed by June 30, 1999. 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 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.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and related Notes thereto presented
elsewhere herein have been prepared in accordance with generally accepted
accounting principles which require the measurement of financial position and
operating results in terms of historical dollars without considering changes
in the relative purchasing power of money over time due to inflation.
Unlike many industrial companies, substantially all of the assets and virtually
all of the liabilities of the Company are monetary in nature. As a result,
interest rates have a more significant impact on the Company's performance than
the general level of inflation. Over short periods of time, interest rates may
not necessarily move in the same direction or in the same magnitude as
inflation.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the Company adopted SFAS No. 130, No. 131 and No. 132. The
adoption of SFAS No. 130 "Reporting Comprehensive Income," required that
certain items be reported under a new category of income, "Other Comprehensive
Income." Unrealized gains and losses on securities available for sale is the
only item included in other comprehensive income. SFAS No. 131 and No. 132
relate to disclosures about segments and employee benefits, respectively. The
financial statements, where applicable, include the required additional
disclosures for SFAS No. 130, No. 131 and No. 132. SFAS No. 133, "Accounting
For Derivative Instruments and Hedging activities," and SFAS No. 134,
"Accounting for Mortgage-Backed Securities Retained After the Securitization
of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise," are
effective for fiscal years beginning after June 15, 1999, and the first fiscal
quarter beginning July 1, 1999, respectively. Management has not determined
the impact of SFAS No. 133 and No. 134 on the financial statements.
OTHER MATTERS
SHARE REPURCHASE PLAN. Camden National Corporation (CNC) will seek to
repurchase up to $6,000,000 worth of its outstanding shares during the
succeeding twelve months following the adoption of this plan. The Board of
Directors approved funding of this plan on October 13, 1998. The repurchase
will be effected as follows:
1. All of CNC's bids and repurchases of its stock during a given day shall
be effected through a single broker or dealer, except that CNC may
repurchase shares from others provided that the same have not been
solicited by or on behalf of CNC. For this purpose, CNC shall utilize
the services of any registered broker or dealer.
2. All of CNC's repurchases of its stock shall be at a price which is not
higher than the lowest current independent offer quotation determined
on the basis of reasonable inquiry. Management shall exercise its best
judgement whether to purchase stock at the then lowest current
independent offer quotation;
3. Daily volume of CNC repurchases must be in an amount that
(a) when added to the amounts of all of CNC's other repurchases
through a broker or dealer on that day, except "block purchases,"
(i.e., 2,000 or more shares repurchased from a single seller) does
not exceed one "round lot" (i.e., 100 shares) or (b) when added to
the amounts of all of CNC's other repurchases through a broker or
dealer during that day and the preceding five business days, except
"block purchases" does not exceed one twentieth of one percent
(1/20 of 1%) of the outstanding shares of CNC stock, exclusive of
shares known to be owned beneficially by affiliates, (i.e.,
approximately 1,000 shares);
4. If at any time while this plan is in effect trading in CNC's shares of
stock are reported through a consolidated system, compliance for rule
10b-18 of the Exchange Act Rules shall be complied with;
5. A press release was issued describing this plan.
The Camden National Bank expressed, to the Comptroller of the Currency, in a
letter dated September 3, 1998, its desire to change its capital structure by
reducing its common stock or surplus in an amount not to exceed $6,000,000 to
accommodate the above described "Share Repurchase Plan." This will reduce the
Company's excess capital position and should improve shareholder return on
equity.
In a letter dated September 25, 1998 from the Comptroller of the Currency's
office approval was granted with the understanding that the reduction in
capital will be accomplished through a reduction in Camden National Bank's
surplus account and a corresponding distribution to Camden National
Corporation, the bank's sole shareholder.
Item 4. Submission Matters to a vote of Security holders.
Item 6. Exhibits and Reports on Form 8-K.
(a). Exhibits
(3.i.) The Articles of Incorporation of Camden National Corporation, are
incorporated herein by reference.
(3.ii.) The Bylaws of Camden National Corporation, as amended to date,
Exhibit 3.ii. to the Company's Registration Statement on Form S-4
filed with the Commission on September 25, 1995, file number
33-97340, are incorporated herein by reference.
(10.1) Lease Agreement for the facility occupied by the Thomaston Branch
of Camden National Bank, filed with Form 10-K, December 31, 1995,
and is incorporated herein by reference.
(10.2) Lease Agreement for the facility occupied by the Camden Square
Branch of Camden National Bank, filed with Form 10-K, December 31,
1995, and is incorporated herein by reference.
(10.3) Lease Agreement for the facility occupied by the Hampden Branch of
United Bank, filed with Form 10-K, December 31, 1995, and is
incorporated herein by reference.
(10.4) Camden National Corporation 1993 Stock Option Plan, filed with Form
10-K, December 31, 1995, and is incorporated herein by reference.
(10.5) UnitedCorp Stock Option Plan, filed with Form 10-K, December 31,
1995, and is incorporated herein by reference.
(10.6) Lease Agreement for the facility occupied by the Damariscotta
Branch of Camden National Bank, betweek Keybank National Associa-
tion (Lessor) and Camden National Bank (Lessee).
(10.7) Lease Agreement for the facility occupied by the Milo Branch of
United Bank, between Bangor Savings Bank (Lessor) and United Bank
(Lessee).
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
None filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Acto of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
CAMDEN NATIONAL CORPORATION
(Registrant)
Robert W. Daigle (signature) 05/14/99
- ------------------------------------- --------
Robert W. Daigle Date
President and Chief Executive Officer
Susan M. Westfall (signature) 05/14/99
- ------------------------------------- --------
Susan M. Westfall Date
Treasurer and Chief Financial Officer
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