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