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.
Dollars in thousands 1998 1997 1996
---- ---- ----
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
======== ======== ========
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.
Available for sale Held to maturity
------------------ --------------------
Book Yield to Amortized Yield to
Value maturity Cost maturity
------- -------- --------- --------
Dollars in thousands
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%
======= ======== ======== ========
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.
Dollars in thousands
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
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
======== ======== ======== ======== ========
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.
Dollars in thousands Through More Than
<1 Year 5 Years 5 Years Total
------- ------- -------- ------
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
======= ======= ======== ========
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:
Dollars in thousands
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
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%
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.
Dollars in thousands
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
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%
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.
Dollars in thousands
As of December 31, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Balance at
end of period
applicable to: Amount % Amount % Amount % Amount % Amount %
------ -- ------ -- ------ -- ------ -- ------ --
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%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
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.
Dollars in thousands
December 31, 1998
----
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
=======
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.
Dollars in thousands
Total borrowings:
At or For the year ended
December 31, 1998 1997 1996
---- ---- ----
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%
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.
Dollars in thousands Through More Than
<1 Year 5 Years 5 Years Total
Interest-earning assets: -------- -------- -------- -----
Interest-earning assets:
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%
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.