Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
Commission File No. 0-28190
CAMDEN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
MAINE 01-0413282
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
2 ELM STREET, CAMDEN, ME 04843
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 236-8821
Securities registered pursuant to Section 12(g) of the Act
Common Stock, without par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 27, 1998 is: Common stock - $102,216,816
The number of shares outstanding of each of the registrant's classes of
common stock, as of December 31, 1997 is: Common stock - 2,270,210
Listed hereunder are documents incorporated by reference and the Part of
the form 10-K into which the document is incorporated:
(1) Portions of the Annual Report to Stockholders for the year ended
December 31, 1997 are incorporated by reference into Part II,
Items 5, 6, 7 and 8.
(2) The definitive Proxy Statement for the 1998 Annual Meeting of
Shareholders to be filed with the commission prior to April 30, 1998
pursuant to Regulation 14A of the General Rules and Regulations of The
Commission is incorporated into Part III of the Form 10-K.
Index
Item # Description Page
- ------ ----------- ----
1 Business 1-6
2 Properties 6-7
3 Pending Legal Proceeding 7
4 Submission of Matters to a Vote of Security Holders 7
5 Market for Registrant's Common Equity and Related
Stockholders Matters 7
6 Selected Financial Data 7
7 Management's Discussion and Analysis of Financial
Condition and Results of Operation 7-18
7A Quantitative and Qualitative Disclosures about
Market Risks 19
8 Financial Statements and Supplementary Data 19
9 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 19
10 Directors and Executive Officers of the Registrant 19
11 Executive Compensation 19
12 Security Ownership of Certain Beneficial Owners
and Management 20
13 Certain Relationships and Related Transactions 20
14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 20-21
PART I
Item 1. Business
Camden National Corporation, ("the Company") is a multi-bank and financial
services holding company headquartered in Camden, Maine. The Company was
founded on January 2, 1985 as a result of a corporate reorganization, in which
the shareholders of Camden National Bank, which was founded in 1875, exchanged
their stock for shares of the Company, and Camden National Bank became a wholly-
owned subsidiary of the Company. As of December 29, 1995 the Company acquired
100% of the outstanding stock of United Bank and 51% of the outstanding stock of
Trust Company of Maine, Inc. by merging with their then parent company,
UNITEDCORP, Bangor, Maine. As of December 31, 1997, the Company's securities
consisted of one class of common stock, no par value, of which there were
2,270,210 shares outstanding held of record by approximately 825 shareholders.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries,Camden National Bank and United
Bank, and its majority-owned subsidiary, Trust Company of Maine, Inc. Trust
Company of Maine, Inc's amounts include its wholly-owned subsidiary -- Fiduciary
Services, Inc. All intercompany accounts and transactions have been eliminated
in consolidation.
The Company's wholly-owned bank subsidiaries are independent commercial
banks with branches serving both mid-coast and central Maine. The banks are
full-service financial institutions that focus primarily on attracting deposits
from the general public through their branches and using such deposits to
originate residential mortgage loans, commercial business loans, commercial real
estate loans, and a variety of consumer loans. Camden National Bank is a
national banking organization based in Camden, Maine, and offers services in the
communities of Camden, Union, Rockland, Thomaston and Belfast. Camden National
Bank is the largest independent commercial bank in Maine. United Bank is a
banking organization chartered under the laws of the State of Maine based in
Bangor, Maine, and offers services in the communities of Bangor, Corinth,
Hampden, Hermon and Jackman, Maine.
The Company's majority-owned trust company subsidiary, Trust Company of
Maine, Inc., offers a broad range of trust and trust investment services, in
addition to retirement and pension plan management services. The financial
services provided by the Trust Company of Maine, Inc., complement the services
provided by the Company's bank subsidiaries by offering customers investment
management services.
The Company competes principally in mid-coast Maine through its largest
subsidiary, Camden National Bank. Camden National Bank considers its primary
market areas to be in the two counties in which it has banking facilities, Knox
and Waldo counties. These two counties have a combined population of
approximately 76,000 people. The economy of the these counties is based
primarily on tourism, and is also supported by a substantial population of
retirees. Major competitors in these markets include local branches of large
regional bank affiliates, as well as local independent banks, thrift
institutions and credit unions. Other competitors for deposits and loans with-
in Camden National Bank's market include insurance companies, money market
funds, consumer finance companies and financing affiliates of consumer durable
goods manufacturers.
The Company, through United Bank, also competes in the central Maine area.
United Bank has approximately a 5% share of the market in its service area and
competes principally on the basis of service. The greater Bangor area has a
population of approximately 100,000 people. Major competitors in these markets
include local branches of large regional bank affiliates, as well as local
independent banks, thrift institutions and credit unions. Other competitors for
deposits and loans within United Bank's market include insurance companies,
money market funds, consumer finance companies and financing affiliates of
consumer durable goods manufacturers.
The Company is committed to the philosophy of serving the financial needs
of customers in local communities. The Company, through Camden National Bank
and United Bank has branches that are located in small towns within the
Company's geographic market areas. The Company believes that the local needs,
and its comprehensive retail and small business products, together with rapid
decision-making at the branch level, enable its banks to compete effectively.
No single person or group of persons provides a material portion of the
Company's deposits, the loss of any one or more of which would have a materially
adverse effect on the business of the Company, nor is a material portion of the
Company's loans concentrated within a single industry or group of related
industries.
The Company had consolidated asset growth of 12.5% or $63.8 million during
1997. The primary contributing factor to this growth was the increase in
lending activity at both bank subsidiaries. As the business continued to grow
during this past year, each subsidiary focused on customer service. Supporting
this concept, the Company implemented a new performance-based compensation
program. This program is designed to create an environment where employees take
a more personal interest in the performance of the company and are rewarded for
balancing profit with growth and quality with productivity. In addition, the
Company's subsidiary, Camden National Bank, entered into an agreement during
October 1997 to purchase four branches in four new markets - Bucksport,
Damariscotta, Vinalhaven and Waldoboro. The closing date was March 16, 1998.
This acquisition creates a growth opportunity for Camden National Bank, in
addition, to allowing the bank to better service its many customers already in
these markets.
The Company employs approximately 171 people on a full-time equivalent
basis. Management believes that employee relations are good, and there are no
known disputes between management and employees. Employees who are at least 21
years of age and who have worked for the Company for at least one year are
eligible for participation in the Company's Retirement Savings 401(k) Plan and
Defined Benefit Retirement Plan. Certain eligible employees of the Company also
receive group insurance benefits. Certain Executive Officers of the Company may
also participate in the 1993 Stock Option Plan and the Supplemental Executive
Retirement Plan.
As a registered bank holding company under the Bank Holding Company Act of
1956 (the "BHC Act"), the Company is subject to the regulations and supervision
of the Federal Reserve Bank (FRB). The BHC Act requires the Company to file
reports with the FRB and provide additional information requested by the FRB.
The Company must receive the approval of the FRB before it may acquire all or
substantially all of the assets of any bank, or ownership or control of the
voting shares of any bank if, after giving effect to such acquisition of shares,
the Company would own or control more than 5 percent of the voting shares of
such bank.
The Company and its subsidiaries, including any it may acquire or organize
in the future, will be deemed to be affiliates of Camden National Bank and
United Bank under the Federal Reserve Act. That Act establishes certain
restrictions which limit bank transactions with affiliates. The Company will
also be subject to restrictions on the underwriting and the public sale and
distribution of securities. It is prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, sale or lease of
property, or furnishing of services.
The Company will be prohibited from engaging in, or acquiring direct or
indirect ownership or control of more than 5 percent of the voting shares of any
company engaged in non-banking activities, unless the FRB by order or regulation
has found such activities to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
Federal Reserve Regulation "Y" (12 C.F.R. Part 225) sets forth those
activities which are regarded as closely related to banking or managing or
controlling banks and, thus, are permissible activities that may be engaged in
by bank holding companies, subject to approval in individual cases by the FRB.
Litigation has challenged the validity of certain activities authorized by the
FRB for the bank holding companies, and the FRB has various regulations and
applications in this regard still under consideration.
Under Maine law, dividends and other distributions by the Company with
respect to its stock are subject to declaration by the Board of Directors at its
discretion out of net assets. Dividends cannot be declared and paid when such
payment would make the Company insolvent or unable to pay its debts as they come
due.
FRB policy prohibits a bank holding company from declaring or paying a cash
dividend which would impose undue pressure on the capital of subsidiary banks or
would be funded only through borrowings or other arrangements that might
adversely affect the holding company's financial position. The policy further
declares that a bank holding company should not continue its existing rate of
cash dividends on its common stock unless its net income is sufficient to fully
fund each dividend and its prospective rate of earnings retention appears
consistent with its capital needs, asset quality and overall financial
condition. Other FRB policies forbid the payment by bank subsidiaries to their
parent companies of management fees which are unreasonable in amount or exceed a
fair market value of the services rendered (or, if no market exists, actual
costs plus a reasonable profit).
In addition, the FRB has authority to prohibit banks that it regulates from
engaging in practices which in the opinion of the FRB are unsafe or unsound.
Such practices may include the payment of dividends under some circumstances.
Moreover, the payment of dividends may be inconsistent with capital adequacy
guidelines. The Company may be subject, under State and/or Federal law, to
assessment to restore the capital of the Bank should it become impaired.
The Company is subject to the minimum capital requirements of the FRB. As
a result of these requirements, the growth in assets of the Company is limited
by the amount of its capital accounts as defined by the FRB. Capital
requirements may have an effect on profitability and the payment of
distributions by the Company. If the Company is unable to increase its assets
without violating the minimum capital requirements, or is forced to reduce
assets, its ability to generate earnings would be reduced.
The FRB has adopted guidelines utilizing a risk-based capital structure.
These guidelines apply to the Company on a consolidated basis.
The risk-based guidelines require the Company to maintain a level of
capital based primarily on the risk of its assets and off-balance sheet items.
Assets and off-balance sheet items are placed in one of four risk categories.
Assets in the first category, such as cash, have no risk and, therefore, carry a
zero percent risk-weight and require no capital support. Capital support is
required for assets in the remaining three risk categories--those categories
having a risk-weight of 20 percent, 50 percent and 100 percent, respectively.
A banking organization's risk-based capital ratio is calculated by dividing
its qualifying total capital base by its risk-weighted assets. Qualifying
capital is divided into two tiers. Core capital (Tier 1) consists of common
shareholders' equity capital, noncumulative perpetual preferred stock and
minority interests in equity capital accounts of consolidated subsidiaries, less
goodwill and other intangible assets. Supplementary capital (Tier 2) consists
of, among other items, allowance for possible loan and lease losses, cumulative
and limited-life preferred stock, mandatory convertible securities and
subordinated debt. Tier 2 capital will qualify as a part of the Bank's total
capital up to a maximum of 100 percent of the Bank's Tier 1 capital. Amounts in
excess of these limits may be issued but are not included in the calculation of
the risk-based capital ratio.
Under current guidelines, banking organizations must maintain a risk-based
capital ratio of 8 percent, of which at least 4 percent must be in the form of
core capital. The Company is and expects to remain in compliance with these
guidelines.
The purposes of the new risk-based capital guidelines are twofold--to make
capital requirements more sensitive to differences in risk profiled among
banking organizations, and to aid in making the definition of bank capital
uniform internationally. To achieve these purposes, the guidelines recognize
the riskiness of assets by lowering capital requirements for some assets that
clearly have less risk that others, and they recognize that there are risks
inherent in off-balance sheet activities. The guidelines require that banking
organizations hold capital to support such activities. In addition, the
guidelines establish a definition of capital and minimum risk-based capital
standards which are consistent on an international basis and that place a
greater emphasis on equity capital.
The FRB has also adopted a minimum leverage ratio which is intended to
supplement the risk-based capital requirements and to insure that all financial
institutions continue to maintain a minimum level of capital. As with the
risk-based capital guidelines, the leverage capital guidelines apply to the
Company on a consolidated basis.
The leverage-based capital requirement stipulates that banking
organizations maintain a minimum level of Tier 1 capital to total assets. The
most highly rated banks in terms of safe and sound operation that are not
experiencing or anticipating significant growth are required to have Tier 1
capital equal to at least 3 percent of total assets. All other banks are
expected to maintain a minimum leverage capital ratio (i.e., Tier 1 capital
divided by total assets) in excess of the 3 percent minimum level. The FDIC
regulations require a financial institution to maintain a minimum ratio of 4
percent to 5 percent, depending on the condition of the institution.
The Company's leverage ratio is and its management expects it to remain in
excess of regulatory requirements.
Camden National Bank is a national bank organized under the laws of the
United States. Camden National Bank is a member of the Federal Reserve System
and its deposits are insured by the FDIC. Camden National Bank is subject to
regulation, supervision and regular examination by the Office of the Comptroller
of the Currency (the "OCC"). The ability of Camden National Bank to pay
dividends is subject to the banking laws of the United States and to the powers
of the OCC and the FDIC. Under federal banking law, dividends can only be paid
out of the retained earnings of Camden National Bank's current and two preceding
fiscal years, or with the prior approval of the OCC. Under federal banking
regulation, a bank is prohibited from declaring a dividend or from making any
other capital distribution if the payment or distribution would cause the bank
to fail to meet minimum capital requirements.
United Bank is a banking organization chartered under the laws of the State
of Maine. United Bank is subject to regulation, supervision and regular
examination by the Federal Deposit Insurance Corporation (the "FDIC") and the
Maine State Bureau of Banking. Under Maine law, dividends are subject to
declaration by the Board of Directors at its discretion. Dividends cannot be
declared and paid when such payment would make the bank insolvent or unable to
pay its debts as they come due.
The principal sources of funds essential to the business of banks and bank
holding companies are deposits, stockholders' equity, and borrowed funds. The
availability of these various sources of funds and other potential sources, such
as preferred stock or commercial paper, and the extent to which they are
utilized, depends on many factors, the most important of which are the FRB's
monetary policies and the relative costs of different types of funds. An
important function of the FRB is to regulate the national supply of bank credit
in order to combat recession and curb inflationary pressure. Among the
instruments of monetary policy used by the FRB to implement these objectives are
open market operations in United States Government securities, changes in the
discount rate on bank borrowings, and changes in reserve requirement against
bank deposits. The monetary policies of the FRB have had a significant effect
on the operating results of commercial banks in the past and are expected to
continue to do so in the future. In view of the recent changes in regulations
affecting commercial banks and other actions and proposed actions by the federal
government and its monetary and fiscal authorities, including proposed changes
in the structure of banking in the United States, no predication can be made as
to future changes in interest rates, credit availability, deposit levels, the
overall performance of banks generally or of the Company.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was
enacted by Congress in September of 1994. Under the Act, beginning on September
29, 1995, bank holding companies may acquire banks in any state, notwithstanding
contrary state law, and all banks commonly owned by a bank holding company may
act as agents for one another. An agent bank may receive deposits, renew time
deposits, accept payments, and close and service loans for its principal bank,
but will not be considered a branch of that principal bank.
A bank may also merge with a bank in another state and operate either
office as a branch, notwithstanding pre-existing contrary state law. This
interstate merger provision becomes automatically effective in all states on
June 1, 1997, unless 1) the law becomes effective in a given state at any
earlier date selected by legislation in that state; or 2) the law does not
become effective at all in a given state because by legislation enacted before
June 1, 1997 that state opts out of coverage by the interstate merger provision.
Upon consummation of an interstate merger, the resulting bank may acquire or
establish branches on the same basis that any participant in the Merger could
have if the Merger had not taken place.
Banks may also merge with branches of banks in other states without merging
with the banks themselves, or may establish de novo branches in other states, if
the laws of the other states expressly permit such mergers or such interstate de
novo branching.
Item 2. Properties
The Company operates in thirteen facilities. The Main Office of the
Company and Camden National Bank is at Two Elm Street, Camden, Maine, and is
owned by Camden National Bank. The building has 15,500 square feet of space on
three levels. Camden National Bank also owns three of its branches and the
facility in which the operations departments of the Company are located. None
of the owned facilities is subject to a mortgage. Camden National Bank also
leases two branches under long-term leases,which expire in January of 2020
and December of 2077.
The Main Office of United Bank is at 145 Exchange Street, Bangor, Maine,
and is owned by United Bank. The building has 25,600 square feet of space on
two levels. United Bank occupies 16,975 square feet of space on both floors.
The Trust Company of Maine, Inc., a non-depository trust company and a
subsidiary of the Company leases 2,100 square feet of office space on the second
floor of the facility and its wholly owned subsidiary, Fiduciary Services, Inc.,
leases 2,042 square feet on the first floor of the facility. Other occupants of
the facility include the Law Firm of Russell, Lingley & Silver, P.A., 2,533
square feet on the second floor and L&H Investors, a property management firm
and Cullen Williams, CPA, who have a joint lease on 1,920 square feet on the
second floor. United Bank also owns three of its other facilities, none of
which is subject to a mortgage. United Bank also leases one branch under a
five-year lease, which expires in September of 2002.
Item 3. Pending Legal Proceedings
The Company is not involved in any material pending legal proceedings,
other than ordinary, routine litigation incidental to the business of the
Company and its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
There were no items submitted to a vote of security holders of the company
during the fourth quarter of 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders
Matters
The information required is contained on page 13 of the Company's Annual
Report to Shareholders for the year ended December 31, 1997 and is incorporated
herein by reference.
Item 6. Selected Financial Data
Selected year-end financial information for the past five years is
contained on page 15 of the Company's Annual Report to Shareholders for the year
ended December 31, 1997 and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information contained in the section captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 8
through 13 of the Company's Annual Report to Shareholders for the year ended
December 31, 1997 should be read in conjunction with the following text and
tables, and is incorporated herein by reference.
The Analysis of Change in Net Interest Margin on Earnings Assets, Average
Daily Balance Sheets, and the Analysis of Volume and Rate Changes on Net
Interest Income and Expenses are provided to enable the reader to understand the
components and past trends of the Company's interest income and expenses. The
first of these tables provides an analysis of changes in net interest margin;
reflecting interest income earned and interest expense paid and average rates
earned and paid. Nonaccrual loans are included in total average loans.
Interest income on loans includes fee on loans of $975 in 1997, $968 in 1996,
and $823 in 1995. In addition, net interest income of $(11) in 1997, $111 in
1996 and $(2) in 1995, from interest rate swaps was also included in loan
interest income.
Years ended
December 31 1997 1996 1995
----------------- ----------------- ----------------
Dollars in thousands Amount Average Amount Average Amount Average
of Yield/ of Yield/ of Yield/
interest Rate interest Rate interest Rate
-------- ------- -------- ------- -------- -------
Interest-earning assets:
Securities - taxable $12,549 6.76% $ 9,793 6.35% $ 9,297 6.40%
Securities - nontaxable 311 6.80% 472 6.48% 647 6.27%
Federal funds sold 42 5.08% 177 5.25% 121 5.56%
Loans 33,053 9.84% 29,737 9.96% 27,718 9.88%
------- ----- ------- ----- ------- -----
Total earning assets 45,955 8.72% 40,179 8.67% 37,783 8.62%
Interest-bearing liabilities:
NOW accounts 535 1.30% 531 1.34% 675 1.70%
Savings accounts 2,158 3.36% 2,130 3.35% 2,183 3.46%
Money Market accounts 772 3.20% 809 3.19% 1,025 3.27%
Certificates of deposit 9,977 5.45% 10,260 5.61% 9,459 5.61%
Short-term borrowings 7,343 5.54% 3,980 5.45% 3,728 6.01%
Broker certificates 23 6.50% 255 6.52% 401 6.62%
------- ----- ------- ----- ------- -----
Total interest-bearing
liabilities 20,808 4.67% 17,965 4.62% 17,471 4.71%
Net interest income $25,147 $22,214 $20,312
======= ======= =======
Net interest rate spread 4.05% 4.05% 3.91%
===== ===== =====
Net interest margin 4.77% 4.79% 4.63%
===== ===== =====
The following table shows the Company's daily average balance sheets for years
ended December 31, 1997, 1996 and 1995.
Dollars in thousands
Years ended December 31, 1997 1996 1995
---- ---- ----
Interest-earning assets:
Securities - taxable $185,580 $154,102 $145,303
Securities - nontaxable 4,566 7,279 10,326
Federal funds sold 826 3,369 2,175
Loans 336,030 298,596 280,566
-------- -------- --------
Total earning assets 527,002 463,346 438,370
Cash and due from banks 13,869 13,250 12,790
Other assets 22,850 20,076 19,651
Less allowance for loan losses (4,874) (4,290) (3,978)
-------- -------- --------
Total assets $558,847 $492,382 $466,833
======== ======== ========
Interest-bearing liabilities:
NOW accounts $ 41,152 $ 39,745 $ 39,771
Savings accounts 64,269 63,536 63,071
Money market accounts 24,147 25,340 31,368
Certificates of deposits 183,134 182,926 168,564
Short-term borrowings 132,298 73,069 62,044
Broker certificates 356 3,910 6,058
-------- -------- --------
Total interest-bearing liabilities 445,356 388,526 370,876
Demand deposits 48,190 41,569 40,335
Other liabilities 5,112 3,116 5,114
Shareholders' equity 60,189 59,171 50,508
-------- -------- --------
Total liabilities and
stockholders' equity $558,847 $492,382 $466,833
======== ======== ========
The following tables present the changes in interest income and the changes
in interest expense attributable to the change in interest rates and the change
in volume for the periods indicated. Tax-exempt income has been calculated on a
tax-equivalent basis, 34% being the tax rate used.
1997 Over 1996
--------------
Change Change
Due to Due to Total
In thousands Volume Rate Change
------- ------- -------
Interest-earning assets:
Securities--taxable 2,000 756 2,756
Securities--nontaxable (176) 15 (161)
Federal funds sold (134) (1) (135)
Loans 3,728 (412) 3,316
------- ------- -------
Total interest income 5,418 358 5,776
Interest-bearing liabilities:
NOW accounts 19 (15) 4
Savings accounts 25 3 28
Money market accounts (38) 1 (37)
Certificates of deposit 12 (295) (283)
Short-term borrowings 3,226 121 3,347
Broker deposits (232) 16 (216)
------- ------- -------
Total interest expense 3,012 (169) 2,843
Net interest income 2,406 527 2,933
======= ======= =======
1996 Over 1995
--------------
Change Change
Due to Due to Total
In thousands Volume Rate Change
------- ------- -------
Interest-earning assets:
Securities--taxable 563 (67) 496
Securities--nontaxable (191) 16 (175)
Federal funds sold 66 (10) 56
Loans 1,781 238 2,019
------- ------- -------
Total interest income 2,219 177 2,396
Interest-bearing liabilities:
NOW accounts 0 (144) (144)
Savings accounts 16 (69) (53)
Money market accounts (197) (19) (216)
Certificates of deposit 806 (5) 801
Short-term borrowings 662 (410) 252
Broker deposits (142) (4) (146)
------- ------- -------
Total interest expense 1,145 (651) 494
------- ------- -------
Net interest income 1,074 828 1,902
======= ======= =======
The following table set forth the Company's investment securities at book
carrying amount as of December 31, 1997, 1996, and 1995.
Dollars in thousands 1997 1996 1995
---- ---- ----
Securities available for sale:
U.S. Treasury and agency $ 4,312 $ 12,616 $ 19,836
Mortgage-backed securities -0- -0- -0-
State and political subdivisions -0- 31 1
-------- -------- --------
4,312 12,647 19,837
-------- -------- --------
Securities held to maturity:
U.S. Treasury and agency 48,566 58,433 67,512
Mortgage-backed securities 109,373 79,259 59,722
State and political subdivisions 2,955 5,524 7,897
Other securities -0- -0- -0-
-------- -------- --------
160,894 143,216 135,136
-------- -------- --------
$165,206 $155,863 $154,973
======== ======== ========
To enhance the Company's ability to manage liquidity, the investment
portfolio is divided into two parts: Investments available for sale and
investments held to maturity. The ability to use securities as collateral for
Federal Home Loan Bank loans enables the Company to hold the largest portion of
the portfolio to maturity. The following table summarizes the investment
portfolio maturities and yields at December 31, 1997.
Available for sale Held to maturity
------------------ ----------------
Book Yield to Amortized Yield to
Value maturity Cost maturity
------- -------- --------- --------
Dollars in thousands
U.S. Treasury and Agency:
Due in 1 year or less $ 304 6.57% $ 12,382 5.18%
Due in 1 to 5 years 2,008 5.93% 19,783 6.77%
Due in 5 to 10 years -0- 0.00% -0- 0.00%
Due after 10 years -0- 0.00% -0- 0.00%
------- -------- -------- --------
2,312 6.01% 32,165 6.16%
------- -------- -------- --------
Structured notes:
Due in 1 year or less 2,000 5.61% 16,101 3.45%
Due in 1 to 5 years -0- 0.00% -0- 0.00%
Due in 5 to 10 years -0- 0.00% 300 4.42%
Due after 10 years -0- 0.00% -0- 0.00%
------- -------- -------- --------
2,000 5.61% 16,401 3.47%
------- -------- -------- --------
Mortgage-backed securities:
Due in 1 year or less -0- 0.00% 2,567 5.22%
Due in 1 to 5 years -0- 0.00% 6,102 6.75%
Due in 5 to 10 years -0- 0.00% 7,802 7.68%
Due after 10 years -0- 0.00% 92,902 7.68%
------- -------- -------- --------
-0- 0.00% 109,373 7.57%
------- -------- -------- --------
State and political subdivisions:
Due in 1 year or less -0- 0.00% 1,606 6.50%
Due in 1 to 5 years -0- 0.00% 977 6.42%
Due in 5 to 10 years -0- 0.00% 272 6.78%
Due after 10 years -0- 0.00% 100 9.10%
------- -------- -------- --------
-0- 0.00% 2,955 6.59%
------- -------- -------- --------
$ 4,312 5.83% $160,894 6.85%
======= ======== ======== ========
Total loans increased by $51.9 million, or 16.7%, in 1997. The following
table provides a summary of the loan portfolio for the past five years.
Management does not foresee any significant changes occurring in the loan mix
during the coming year.
Dollars in thousands
As of December 31, 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Commercial, other $121,093 $ 99,694 $ 82,622 $ 77,126 $ 69,692
Commercial, real estate 69,558 55,104 56,397 53,766 42,264
Real estate construction 3,731 2,706 2,123 3,445 3,911
Residential real estate 121,363 116,520 107,412 96,456 80,534
Consumer 47,404 37,222 36,548 34,683 32,508
-------- -------- -------- -------- --------
$363,149 $311,246 $285,102 $265,476 $228,909
======== ======== ======== ======== ========
Loan demand also affects the Company's liquidity position. However, of the
loans maturing over one year, approximately 65% are variable rate loans. The
following table presents the maturities of loans at December 31, 1997.
Dollars in thousands Through More Than
<1 Year 5 Years 5 Years Total
------- ------- --------- -----
Maturity Distribution:
Fixed Rate:
Commercial, other $ 7,204 $13,455 $11,237 $31,896
Commercial, real estate 1,758 12,057 4,240 18,055
Real estate construction 3,731 0 0 3,731
Residential real estate 3,841 418 34,980 39,239
Consumer 6,356 15,742 4,527 26,625
Variable Rate:
Commercial, other 30,996 19,088 28,789 78,873
Commercial, real estate 2,452 8,078 40,974 51,504
Real estate construction 0 0 0 0
Residential real estate 9 484 81,846 82,339
Consumer 0 20,562 0 20,562
State and municipal 6,919 1,573 1,833 10,325
------- ------- -------- --------
$63,266 $91,457 $208,426 $363,149
======= ======= ======== ========
Management considers both the adequacy of the collateral and the other
resources of the borrower in determining the steps to be taken to collect non-
accrual and charged-off loans. Alternatives that are considered are
foreclosure, collecting on guarantees, restructuring the loan, or collection
lawsuits.
The following table sets forth the amount of the Company's non-performing
assets as of the dates indicated:
Dollars in thousands
As of December 31, 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Nonperforming loans:
Non-accrual loans $1,215 $1,674 $2,631 $1,660 $1,553
Accruing loans past due
90 days or more 1,004 599 353 1,217 428
Restructured loans (in
compliance with
modified terms) -0- -0- -0- -0- -0-
------ ------ ------ ------ ------
Total nonperforming loans 2,219 2,273 2,984 2,877 1,981
Other real estate owned 1,373 1,264 1,086 1,606 1,667
------ ------ ------ ------ ------
Total Nonperforming assets $3,592 $3,537 $4,070 $4,483 $3,648
====== ====== ====== ====== ======
Ratios:
Nonperforming loans to
total loans 0.61% 0.73% 1.05% 1.08% 0.87%
Allowance for loan losses
to nonperforming loans 254.17% 196.74% 136.73% 130.38% 204.44%
Nonperforming assets to
total assets 0.63% 0.69% 0.85% 0.98% 0.88%
Allowance for loan losses
to nonperforming assets 157.02% 126.43% 100.25% 83.67% 111.02%
It is the Company's policy to discontinue 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.
Interest foregone on non-accrual loans was approximately $147,000,
$178,000, $207,000, $98,000 and $117,000 for 1997, 1996, 1995, 1994 and 1993,
respectively. Interest income recognized on non-accrual loans during 1997 was
$64,000.
Management believes that the level of the allowance for loan losses at
December 31, 1997 of $5.6 million, or 1.55% of total loans outstanding was
appropriate given the current economic conditions in the Company's service area
and the overall condition of the loan portfolio. When determining the amount of
provision for loan losses annually management relies on its review of the loan
portfolio both to ascertain whether there are probable losses to be written off,
projected loan mix and loan volumes, historical net loan loss experience, and to
assess the loan portfolio in the aggregate.
The following table summarizes the activity in the allowance for loan
losses for the years ended December 31, 1997, 1996, 1995, 1994 and 1993.
Dollars in thousands
As of December 31, 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Balance beginning
of period $4,472 $4,080 $3,751 $4,050 $3,749
Provisions for loan losses 1,677 838 899 216 683
Charge-offs:
Commercial 628 222 413 392 235
Residential real estate 135 191 248 188 155
Consumer 328 243 198 106 274
------ ------ ------ ------ ------
Total Charge-offs 1,091 656 859 686 664
Recoveries:
Commercial 424 55 174 62 143
Residential real estate 36 27 4 3 32
Consumer 122 128 111 106 107
------ ------ ------ ------ ------
Total Recoveries 582 210 289 171 282
Net Charge-offs 509 446 570 515 382
------ ------ ------ ------ ------
Balance end of period $5,640 $4,472 $4,080 $3,751 $4,050
====== ====== ====== ====== ======
Average loans
outstanding $336,029 $298,596 $282,094 $253,439 $219,840
Net charge-offs as a
percentage of average
loans 0.15% 0.15% 0.20% 0.20% 0.17%
Provision for loan losses
to average loans 0.50% 0.28% 0.32% 0.09% 0.31%
Ending allowance for loan
losses to:
Total loans at end
of period 1.55% 1.44% 1.43% 1.41% 1.77%
Net charge-offs during
period 1108.06% 1002.69% 715.79% 728.35% 1060.21%
Nonperforming loans at
end of period 254.17% 196.74% 136.73% 130.38% 204.44%
The following table summarizes the allocation of the allowance for loan
losses among the Company's loan categories for the years ended December 31,
1997, 1996, 1995, 1994 and 1993.
Dollars in thousands
As of December 31, 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Balance at
end of period
applicable to: Amount % Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ - ------ -
Commercial, other $2,323 33% $1,711 32% $1,510 29% $1,500 29% $1,388 30%
Commercial,
real estate 1,261 19% 1,100 18% 753 20% 658 20% 526 18%
Residential
real estate 601 34% 551 38% 347 37% 451 37% 406 37%
Consumer 582 13% 492 11% 447 13% 443 13% 423 14%
Guaranteed loans 95 1% 69 1% 26 1% 16 1% 12 1%
Unfunded commitments 366 NA 252 NA 211 NA 221 NA 234 NA
Unallocated 412 NA 297 NA 786 NA 462 NA 1,061 NA
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Total $5,640 100% $4,472 100% $4,080 100% $3,751 100% $4,050 100%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
The maturity of certificates of deposit in denominations of $100,000 or
more is set forth in the following table. These deposits are generally
considered to be more rate sensitive than other deposits and, therefore, more
likely to be withdrawn to obtain higher yields elsewhere if available.
Dollars in thousands
December 31, 1997
----
Time remaining until maturity:
Less than 3 months $ 9,295
3 months through 12 months 18,143
Over 12 months 4,656
-------
$32,094
=======
The dividend payout ratio was 33.34%, 27.59%, 18.67%, 12.78%, and 9.51% for
1997, 1996, 1995, 1994 and 1993 respectively. The average equity to average
assets ratio was 10.86%, 11.32%, 10.92%, 10.24%, and 9.39% for 1997, 1996, 1995,
1994 and 1993 respectively.
The borrowings utilized by the Company primarily have been advances from
the FHLB of Boston. In addition, the Company utilizes fed funds, treasury, tax
and loan deposits, and repurchase agreements, secured by the United States
Government or Agency securities. The major portion of all borrowings matures or
reprices within the next six months. The following table sets forth certain
information regarding borrowed funds for the years ended December 31, 1997,
1996, and 1995.
Dollars in thousands
Total borrowings:
At or For the year ended
December 31, 1997 1996 1995
---- ---- ----
Average balance outstanding $132,297 $73,069 $47,248
Maximum amount outstanding at
any month-end during the year 163,884 93,760 43,125
Balance outstanding at end of year 132,478 93,760 43,125
Weighted average interest rate
during the year 5.53% 5.45% 6.18%
Weighted average interest rate
at end of year 5.49% 5.35% 5.79%
Interest rate sensitivity or "Gap" management involves the maintenance of
an appropriate balance between interest sensitive assets and interest sensitive
liabilities to reduce interest rate risk exposure while also providing liquidity
to satisfy the cash flow requirements of operations and to meet customers'
fluctuating demands for funds, either in terms of loan requests or deposit
withdrawals. Major fluctuations in net interest income and net earnings could
occur due to imbalances between the amounts of interest-earning assets and
interest-bearing liabilities, as well as different repricing characteristics.
Gap management seeks to protect earnings by maintaining an appropriate balance
between interest-earning assets and interest-bearing liabilities in order to
minimize fluctuations in the net interest margin and net earnings in periods of
volatile interest rates.
The following table set forth the amount of interest-earning assets and
interest-bearing liabilities outstanding, at December 31, 1997 which are
anticipated by the Company, based upon certain assumptions, to reprice or mature
in each of the future time periods shown.
Dollars in thousands Through More Than
<1 Year 5 Years 5 Years Total
------- ------- --------- -----
Interest-earning assets:
Loans
Fixed $ 29,809 $43,245 $ 56,817 $129,871
Variable 233,278 -0- -0- 233,278
Investment securities
Available for sale 2,301 2,002 -0- 4,303
Held to maturity 32,626 26,862 101,376 160,894
-------- ------- -------- --------
Total interest-earning assets 298,014 72,109 158,193 528,346
-------- ------- -------- --------
Interest-bearing liabilities:
Savings accounts 15,000 -0- 51,723 66,723
NOW accounts -0- -0- 42,796 42,796
Money market accounts 23,452 -0- -0- 23,452
Certificate accounts 148,324 40,368 324 189,016
Borrowings 132,197 278 -0- 132,475
-------- ------- -------- --------
Total interest-bearing
liabilities 318,973 40,646 94,843 454,462
-------- ------- -------- --------
Effect of interest rate swap 5,000
--------
Interest sensitivity gap
per period $(25,959) $31,463 $ 63,350
======== ======= ========
Cumulative interest
sensitivity gap $(25,959) $ 5,504 $ 68,854
======== ======= ========
Cumulative interest
sensitivity gap as a
percentage of total assets (5%) 1% 12%
Cumulative interest-earning
assets as a percentage of
interest-sensitive liabilities 93% 103% 116%
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
Included in the Company's 1997 Annual Report to Shareholders on pages 12-13
and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following financial statements and report of independent accountant,
included in the Company's 1997 Annual Report to Shareholders, are incorporated
herein by reference. Page references are to pages of the Company's 1997
Annual Report to Shareholders.
PAGE
Report of Independent Public Accountant 39
Consolidated Statements of Financial Condition
December 31, 1997 and 1996 16
Consolidated Statements of Earnings for the years ended
December 31, 1997, 1996 and 1995 17
Consolidated Statements of Changes in the Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995 18
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 19
Notes to Consolidated Financial Statements 20-37
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
During the past two years the Company has not made changes in and has not
had disagreements with its independent accountant.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Company responds to this item by incorporating herein by reference the
material responsive to such item in the Company's definitive Proxy Statement for
the 1998 Annual Meeting of Shareholders to be filed with the Commission prior to
April 30, 1998.
Item 11. Executive Compensation
The Company responds to this item by incorporating herein by reference to
the material responsive to such item in the Company's definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders to be filed with the Commission
prior to April 30, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Company responds to this item by incorporating herein by reference to
the material responsive to such item in the Company's definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders to be filed with the Commission
prior to April 30, 1998.
Item 13. Certain Relationships and Related Transactions
The Company responds to this item by incorporating herein by reference to
the material responsive to such item in the Company's definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders to be filed with the Commission
prior to April 30, 1998.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Index to Financial Statements:
A list of the consolidated financial statements of the Company and
report of independent public accountant incorporated herein is included in Item
8 of this Report.
2. Financial Statement Schedules:
Schedules have been omitted because they are not applicable or are
not required under the instructions contained in Regulation S-X or because the
information required to be set forth therein is included in the consolidated
financial statements or notes thereto.
3. Exhibits filed herewith:
(3.i) The Articles of Incorporation of Camden National Corporation, as
amended to date, Exhibit 3.i to the Company's Registration statement
Form S-4 filed with the Commission on September 25, 1995, file number
33-97340, are incorporated herein by reference.
(3.i) The Bylaws of Camden National Corporation, as amended to date,
Exhibit 3.ii to the Company's Registration Statement on Form S-4
filed with the Commission on September 25, 1995, file number 33-
97340, are incorporated herein by reference.
(10.1) Lease Agreement for the facility occupied by the Thomaston Branch of
Camden National Bank, between Knox Hotel Associates(Lessor) and
Camden National Bank (Lessee)filed with Form 10-K, December 31, 1995,
and is incorporated herein by reference.
(10.2) Lease Agreement for the facility occupied by the Camden Square Branch
of Camden National Bank, between Milliken, Tomlinson Company (Lessor)
and Camden National Bank (Lessee) filed with Form 10-K, December 31,
1995, and is incorporated herein by reference.
(10.3) Lease Agreement for the facility occupied by the Hampden Branch of
United Bank, Parway Realty Development Corporation (Lessor) and
United Bank (Lessee) filed with Form 10-K, December 31, 1995, and
is incorporated herein by reference.
(10.4) Camden National Corporation 1993 Stock Option Plan, filed with Form
10-K, December 31, 1995, and is incorporated herein by reference.
(10.5) UNITEDCORP Stock Option Plan, filed with Form 10-K, December 31,
1995, and is incorporated herein by reference.
(13) Camden National Corporation's 1997 Annual Report to Shareholders.*
(21) Subsidiaries of the Company
(27) Financial Data Schedule
*Deemed filed only with respect to those portions thereof incorporated herein by
reference
(b) Reports on Form 8-K. None filed.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CAMDEN NATIONAL CORPORATION (Registrant)
- ---------------------------------------------------------
Keith C. Patten Date
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Keith C. Patten (signature) 3/30/98 Susan M. Westfall (signature) 3/30/98
- --------------------------------------- -------------------------------------
Keith C. Patten Date Susan M. Westfall Date
President and Director Treasurer and
Chief Executive Officer Chief Financial Officer
David H. Montgomery (signature) 3/30/98 Rendle A. Jones (signature) 3/30/98
- --------------------------------------- -------------------------------------
David H. Montgomery Date Rendle A. Jones Date
Chairman and Director
John S McCormick, Jr.(signature)3/30/98 Royce M. Cross (signature) 3/30/98
- --------------------------------------- -------------------------------------
John S. McCormick, Jr., Director Date Royce M. Cross, Director Date
Peter T. Allen (signature) 3/30/98 Richard N. Simoneau(signature)3/30/98
- --------------------------------------- -------------------------------------
Peter T. Allen, Director Date Richard N. Simoneau, Director Date
Ann W. Bresnahan (signature) 3/30/98 Arthur E. Strout (signature) 3/30/98
- --------------------------------------- --------------------------------------
Ann W. Bresnahan, Director Date Arthur E. Strout, Director Date
Robert J. Gagnon (signature) 3/30/98 Robert W. Daigle (signature) 3/30/98
- --------------------------------------- --------------------------------------
Robert J. Gagnon, Director Date Robert W. Daigle, Director Date
John W. Holmes (signature) 3/30/98
- ---------------------------------------
John W. Holmes, Director Date
Exhibit #21 Subsidiaries of the Company
Camden National Bank
United Bank
Trust Company of Maine, Inc.
[COVER OF THE ANNUAL REPORT]
A History of Community Banking Since 1875
Photograph of Downtown Camden in the Fall. Camden National Bank in
the center of the photograph.
Corporate Logo Camden National Corporation
1997 Annual Report
[First Page of the Annual Report]
When Camden National first opened its doors in 1875, Maine was a
very different place.
Photograph. Photograph taken around 1923 of the interior of the
Main Office and an employee.
Caption under photo - Camden National is rich in history and
tradition, as seen in this interior view of
the Maine Office, circa 1923.
[Page 1 - Annual Report]
Although the world has experienced considerable change over the
past 122 years, Camden National has stayed true to its original
mission and remains a vital community resource.
Photograph. Photograph taken in 1997 of the interior of the
Main Office in Camden.
Caption under photo - Camden National's rich history of community
service continues today, enhanced by the
complete array of financial services offered
at all locations including its corporate
headquarters in Camden (shown here in 1997).
[Page 2 & 3 - President's Letter]
Dear Shareholders,
Camden National Corporation's (the "Company") 1997 financial
performance reflects many new records. Net income rose by 12.7% to
$9.1 million, earnings per share increased by $.54 to $4.02, assets
grew by 12.5% to $573.9 million and loans increased by 16.7% or
$51.9 million. Deposits, which had experienced a modest decline in
1996, increased by $20.1 million to $373.4 million this past year,
which was a new high. Both banks were major contributors to the
profit improvement and asset growth.
The Trust Company of Maine, Inc. (TCOM), a majority-owned
subsidiary which was established April 1994, continued its growth,
adding $53.8 million in assets under management and is approaching
the $200 million mark. This subsidiary operated at a near break-
even level while still adding value to your Company, as its
services make it possible for our bank subsidiaries to offer a more
complete financial package to their customers.
I am pleased with our first year's results under our
"Stakeholders" program, which is a performance-based employee
incentive compensation program designed to maximize shareholder
value and help ensure the long-term viability of the Company. Both
bank presidents are committed to this program which balances profit
with growth and quality with productivity. The "Stakeholders"
program is creating an environment where all of the employees take
a more personal interest in the performance of their respective
banks and are thinking and working as owners.
By the time you receive this report, Camden National
Corporation's subsidiary, Camden National Bank, is expected to have
completed its acquisition of the four KeyBank branches-Bucksport,
Damariscotta, Vinalhaven and Waldoboro. The purchase of these
branches is expected to add over $50 million in deposits and
approximately $7 million in loans. This acquisition not only
creates an excellent growth opportunity for Camden National, but
also allows the bank to better serve its many customers already in
these prospective markets.
Your Company and its subsidiaries continue to search-out
growth opportunities, but only where the directors and management
feel confident that the growth will add strength and value to your
stock. Growth just for the sake of growth is never a
consideration.
Your Company continues to undergo transition with changes in
directors, management structure and markets served. Kenneth C.
Dickey, Vice Chairman of both the Camden National Bank and Camden
National Corporation Boards of Directors reached the mandatory
retirement age at the end of 1997. Ken served the bank and the
Company very well since 1970. His knowledge of the Company and
its history was a real asset in planning for our future.
It is with considerable sadness that we note E. Maynard
"Sandy" Graffam's passing on May 29, 1997. Sandy was an active
member of the Camden National Bank and Camden National Corporation
Boards. This Annual Report is being dedicated to his memory.
Both Ken and Sandy were able, contributing members on the
boards they served, and they will be difficult to replace. We will
find the best qualified individuals to fill these vacancies, with
consideration given to candidates from the areas served by our
newly acquired branches. This approach is in line with our
philosophy that promotes board representation from within markets
served by the Company.
With the retirement of Robert E. Worthing, Vice President,
Cashier and Investment Officer of the Camden National Bank and Vice
President and Clerk of the holding company, your directors promoted
Susan M. Westfall to assume those duties. In addition, Susan, as
CFO, will retain responsibility for the accounting function,
providing oversight and supervision.
The Camden National Corporation was listed on the American
Stock Exchange (AMEX-CAC) at $42.00 per share on October 7, 1997.
The stock has appreciated significantly since its initial listing.
It is our hope and expectation that you are pleased with the
listing, as your stock now reflects a true market price. The AMEX
listing has also improved the liquidity of your stock and has made
it much easier for you to follow the value of your investment. As
with any investment, past performance regarding Camden National
Corporation's stock price is not an indication of future results.
Prior to our listing on the AMEX, your Company had repurchased
76,440 shares of stock under its stock buy-back program with an
initial goal of 117,400 shares. With the free market expediting
sales and with the increase in the market price of the stock, this
activity has ceased. Your directors continue to believe that a
repurchase program benefits shareholders; therefore, other methods
of stock repurchase are being explored and you will be advised
accordingly.
In closing, I am pleased to say that despite the many
challenges inherent in our industry, your Company continues to
operate as a high performing multi-bank holding company, exceeding
the results achieved by its peer group. This success could not
have happened without the cooperative spirit and guidance of the
directors, management and staff of the Company and its
subsidiaries. We all thank you, our shareholders, for your support
and for the opportunity to provide for you an attractive return on
your investment.
Sincerely,
Keith C. Patten (signature)
Keith C. Patten
President & Chief Executive Officer
Camden National Corporation
Photograph on page 2. Photograph of Keith C. Patten, President
& CEO of CNC shaking hands with Robert W.
Daigle, President of CNB at the American
Stock Exchange.
Caption to right of photo - Keith Patten and Bob Daigle are all
smiles as Camden National Corporation
made its debut on the American Stock
Exchange, October 7, 1997, under the
listing CAC.
Photograph on page 3. Photograph of Keith C. Patten, President
& CEO of CNC smiling and working at a desk.
[Page 4 - Camden National Bank President's Letter]
Photograph. Headshot of Robert W. Daigle, President of Camden
National Bank with the CNB Main Office in the back-
ground.
Comment to right of photo - Throughout the years, Camden National
Bank has helped individuals and
families realize their dreams.
Dear Shareholders,
As I reflect on the events and developments of this past year,
I see considerable familiarity interspersed with a good deal of
originality-combined, they give us much to be pleased with and
optimistic about.
Earnings of $8,192,495 were up 8.9% compared to the previous
year, with a return on assets of 1.69% and return on equity of
15.40%, both well above our Bank's national peer group average.
Contributing significantly to this success were quality loan growth
and a healthy increase in core deposits, each the result of a
heightened business development effort.
Training and professional development took on added emphasis
in 1997 as we endeavored to build on the quality of our staff and
their effectiveness in serving the customer. In addition to
technical skills development, specialized training such as "needs-
based selling" was incorporated into our curriculum.
For convenience and benefit to our customers, a number of
technology and product innovations materialized in 1997,
highlighted by the installation of the E-Z Teller System at our
branch offices and the debut of several new deposit initiatives,
including Penny"s Piggy Bank Savings Club, designed to foster
frugality among our next generation of customers.
One of the more exciting events this past year was the
announcement of our successful bid to acquire KeyBank branches in
four new markets-Bucksport, Damariscotta, Vinalhaven and Waldoboro.
Scheduled to close in March 1998, the acquisition represents a
natural geographic expansion opportunity that will allow for the
managed growth of our banking franchise.
Finally, it is important to note that the success of our
Company in 1997 would not have been possible without the support
and commitment of our employees. Their endorsement of our new
performance-based incentive program has sharpened each
"stakeholder's" awareness of what epitomizes a high performing
organization and fosters a spirit of teamwork that bodes well for
our respective futures.
On behalf of the Directors, management and staff of Camden
National Bank, thank you for your ongoing support and
encouragement.
Sincerely,
Robert W. Daigle (signature)
Robert W. Daigle
President & Chief Executive Officer
Camden National Bank
Photograph to the right of President's letter. Photo of
Petrea Allen, Mortgage Loan Consultant and Dr. Christine
Garrison looking at a home.
Caption under photo - Petrea Allen (right), Mortgage Loan
Consultant helped Dr. Christine Garrison make her dream
home in Rockport become a reality in 1997.
[Page 5 - United Bank President's Letter]
Comment on top of page. United Bank carries on the tradition of
of providing local expertise and decision making to area
businesses.
Photograph at top right corner. Headshot of Bruce D. Bartlett
President & CEO of United Bank with United Bank in the
background
Dear Shareholders:
With much pride in the performance of United Bank's staff
during the past year, I am pleased to report continuing progress
toward our objective of becoming a high performance subsidiary of
Camden National Corporation. The 1997 return on average assets of
1.31% and return on average equity of 16.49% each reflect
significant improvement over prior years. With a net interest
margin at the high end of our peer group, continuing reduction in
operating costs has enabled significant improvement in the
efficiency and competitive posture of United Bank, providing a
solid foundation for an even greater contribution to the operating
results of Camden National Corporation in the year ahead.
The addition of Paul R. Flynn to our management team in April
1997 has provided needed management depth and has brought us new
expertise in the branch administration and marketing areas. Paul
has already made great strides through enhancement of marketing
efficiency of our branch system. Also, Nathan R. Williams, an
accomplished commercial lender, joined United Bank in May 1997 as
Assistant Vice President and Commercial Loan Officer. Nate began
immediately to develop new account relationships and has taken on
the responsibility for the restructuring of our credit function as
well.
Early in 1997 we initiated the "Stakeholders" incentive
compensation program. Under this new effort, all staff members are
recognized as "Stakeholders" in the success of our Company. This
formalizes what had always been the case, that employees have a
vested interest in the success of their organization and should
participate in the opportunities and rewards offered by the growth
and earnings of the Company. This program has enhanced the
effectiveness of communication among our staff regarding goal
setting, meeting and even exceeding our growth and earnings
objectives. The "Stakeholders" program has been tremendously
successful during 1997, as evidenced by the progress of the
Company, and it forms the basis for renewed confidence in our
ability to achieve our objectives in 1998 and beyond.
Sincerely,
Bruce D. Bartlett (signature)
Bruce D. Bartlett
President & Chief Executive Officer
United Bank
Photograph to left of President's letter. Photograph of Jim
Kimball, Vice President & Senior Loan Officer and Charlie
Wolverton, business owner.
Caption under photo - Jim Kimball (right), Vice President &
Senior Loan Officer of United Bank, confers with Charlie
Wolverton, owner of Quality Tire & Service Center, Inc.
Brewer.
[Page 6 - Trust Company of Maine, Inc. Chairman's Letter]
Photograph top left of page. Photo of Andrew P. Averill, Chairman
& CEO, Trust Company of Maine sitting at desk smiling.
Comment at top of page - Trust Company of Maine augments our array
of financial services with trust and investment opportunities
Dear Shareholders,
The efforts of our staff to integrate the Trust Company into
the overall operation of Camden National Corporation, combined
with the support of the management and staff of its banking
subsidiaries, produced positive results in 1997 and, more
importantly, positions us to achieve quality future growth.
The highlights of our year included: completion of the
transfer of the Camden National Trust relationships to the Trust
Company, the Trust Company's growth in assets under management to
nearly $200 million, and our hosting, with Camden National Bank,
a successful seminar featuring Jay A. Schlott, founder of our
investment advisor Weston Asset Management, as the guest speaker.
The seminar was very well received and plans are being made to
make this an annual event.
In addition Fiduciary Services, our employee benefit plan
administration subsidiary, continued its investment in technology
which resulted in more timely reporting to our clients. Employee
benefit customer services will be further enhanced in 1998 with
the installation of a Voice Response Unit that will provide
401(k) plan participants access to their individual accounts at
any time.
Lastly, I would like to point out that our accomplishments
in 1997 would not have been possible without our staff, whose
dedication, knowledge and experience made the year a success.
Sincerely,
Andrew P. Averill (signature)
Andrew P. Averill
Chairman & Chief Executive Officer
Trust Company of Maine, Inc.
Photograph at right of Chairman's letter. Lynn Bowden, Vice
President & Trust Officer, advises new client Betty Kaynor.
Caption under photo - Trust Company of Maine's Lynn Bowden, Vice
President & Trust Officer, advises her new client, Elizabeth
"Betty" Kaynor about her investment portfolio.
Photograph in bottom right corner. Jana Hanscom with Fiduciary
Services, Inc. consults with Duncan Brown the President of
Cedar Works, Inc.
Caption under photo - To understand every aspect of her client's
business, Jana Hanscom, Retirement Plan Administrator for
Fiduciary Services, Inc. consults with Duncan Brown, President
of Cedar Works, Inc.
[Page 7 - Photographs]
Today, Camden National's commitment to the community extends beyond
the business day. Our employees are involved with local
organizations...donating time and financial resources to make their
communities a better place to live and work.
Photograph 1. Photograph of 3 employees wrapping and sorting
Christmas presents for the Community Spirit of
Christmas project.
Caption under photo - Heidi Vanorse, Tim Pratt, and Jane Pierce
(left to right) sort gifts that they and their follow
employees contributed to Camden National Bank's annual
Community Spirit of Christmas project, which benefitted
65 local families.
Photograph 2. Photograph of Brent Folster, Vice President &
Branch Manager of United Bank's Bangor Office with
Directors and children from the Ronald McDonald
House in Bangor.
Caption under photo - Serving as Vice President of the Board of
the Ronald McDonald House in Bangor, Brent Folster (right),
Vice President & Branch Manager of United Bank's Bangor
Office, joins Pat Beckwith (left), Executive Director of the
House, and residents Chuck and Vicki Matthews, with children
Brent and Shannon from Machias.
Photograph 3. Photograph of 4 Trust Company of Maine employees
volunteering at a shelter after a food drive.
Caption under photo - After conducting a successful food drive,
Trust Company of Maine employees, (left to right) Jennifer
Neale, Kathy Pelletier, Paul Pasquine, and Leander Macvane,
volunteer at the Bangor Area Shelter.
[Pages 8 - 13 Management's Discussion]
Management's Discussion and Analysis of Financial Condition
and Results of Operations
In addition to the historical information contained herein,
this Annual Report contains certain forward-looking statements. The
reader of this Annual Report should understand that all such
forward-looking statements are subject to various uncertainties and
risks that could affect their outcome. The Company s actual results
could differ materially from those suggested by such forward-looking
statements. 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 securities
investments, rates paid on deposits, competition effects, fee and
other noninterest income earned, as well as other factors. This
entire Annual Report should be read to put such forward-looking
statements in context and to gain a more complete understanding of
the uncertainties and risks involved in the Company s business.
GENERAL
Overview of Company.
Camden National Corporation (the Company ) is a multi-bank and
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 one non-bank subsidiary, Trust Company of Maine,
Inc., which provides trust and retirement management services
throughout central and mid-coast Maine.
1995 Merger of UnitedCorp.
On December 31, 1995, UnitedCorp, a one-bank holding company
with two principal subsidiaries, United Bank and Trust Company of
Maine, Inc., was merged into Camden National Corporation. The
merger was accounted for under the pooling-of-interests method and,
accordingly, the 1995 consolidated financial statements of the
Company have been restated to reflect the acquisition as though it
occurred at the beginning of the year.
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 consumer loans. Camden National Corporation
takes pride in supporting the communities it serves by having local
community banks that not only offer their customers a wide variety
of deposit accounts and services as well as competitive rates, but
also make lending decisions locally. 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 company subsidiary, Trust
Company of Maine, Inc., offers a broad range of trust and trust
investment services, in addition to retirement and pension plan
management services. The financial services provided by Trust
Company of Maine, Inc. complement the services provided by the
Company s bank subsidiaries by offering customers investment
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 quality financial products and services. In
addition, the Company closely manages yields on earning assets and
rates on interest-bearing liabilities and looks for ways to increase
noninterest income and control growth of noninterest expenses. It is
also part of the business strategy of the Company to supplement
internal growth with acquisitions of other banks or banking offices
in communities similar to the communities its bank subsidiaries
currently serve. During 1997 the Company s subsidiary, Camden
National Bank, entered into a definitive agreement with KeyBank to
purchase four branches in mid-coast Maine. These branches are
located in the communities of Bucksport, Damariscotta, Vinalhaven
and Waldoboro. The Company considers the acquisition of these
branches a logical move in expanding its current service area. The
acquisition is expected to be completed during the first quarter of
1998.
REVIEW OF FINANCIAL STATEMENTS
The discussion and analysis which follows focuses on the
factors affecting the Company s financial condition at December 31,
1997 and 1996, and financial results of operations during 1997,
1996, and 1995. The Consolidated Financial Statements and related
Notes beginning on page 16 of this report should be read in
conjunction with this review.
FINANCIAL CONDITION
Overview.
At December 31, 1997, the Company had consolidated assets of
$573.9 million, an increase of $63.8 million or 12.5%, from December
31, 1996. The change in assets consisted primarily of a $51.9
million increase in loans, an increase of $15.9 million in
investment securities and a decrease in cash and due from banks of
$3.8 million. The asset growth was supported by a change in
liabilities and shareholders equity consisting of a $20.1 million
increase in deposits, a $38.7 million increase in total borrowings
and a $4.7 million increase in total shareholders equity.
Investment Securities.
With increased loan demand during 1996 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 investments purchases
replaced investments that matured during 1997.
Total investment securities increased by $15.9 million or 9.7%
to $179 million at December 31, 1997. The major portion of the
Company s investment portfolio is 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. The Company does,
however, classify a small portion of the investment portfolio as
available for sale. The largest increase during 1997 was in the
held to maturity category, which increased by $17.7 million or
12.3%. In the first quarter of 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. This increase is reflected in the
other securities category, which increased by $4.6 million. The
available for sale portion of the securities decreased by $8.3
million due to maturities. During 1996 the majority of purchases in
the investment portfolio were classified as held to maturity. This
resulted in an increase in the securities held to maturity of $8.0
million or 6.0% during 1996. The available for sale portion of the
portfolio decreased by $7.2 million or 36.2% in the same year due to
maturities. Other securities increased by $1.1 million in 1996 due
to the purchase of FHLB stock.
Loans.
During 1997, the loan portfolio experienced growth in every
category. Loans and loans held for sale in the portfolio totalled
$363.1 million at December 31, 1997, a 16.7% increase from total
loans of $311.2 million at December 31, 1996. This growth results in
a continuation of the loan growth experienced by the Company for the
past several years.
Residential real estate mortgage loans increased by $1.9
million or 2.0% in 1997. 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. All of the mortgage loans in the Company s
loan portfolio are secured by properties located in Maine.
Commercial loans increased by $30.5 million or 20.3% during
1997. 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.
Thecommercial category also includes commercial real estate loans
secured by income producing commercial real estate, service
industry real estate, and retail trade 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 $9.1 million or 24.5% in 1997.
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 $3.6 million or
.63% of total loans at December 31, 1997, compared to $2.2 million
or .73% of total loans at December 31, 1996. It is the Company s
policy to discontinue 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 $1.4 million and $1.3
million, as of December 31, 1997 and 1996, respectively. As a
percentage of total loans OREO represented .39% and .42% as of
December 31, 1997 and 1996, respectively. Losses arising from the
acquisition of such properties are charged against the Allowance for
Loan Losses (ALLL). 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 ALLL, 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 estimated probable
loss. In addition, management considers current and projected loan
mix and loan volumes, historical net loan loss experience for each
loan category, and current and anticipated economic conditions
affecting each loan category. No assurance can be given, however,
that adverse economic conditions or other circumstances will not
result in increased losses in the portfolio. The Company continues
to monitor and modify its ALLL as conditions dictate.
SFAS No. 114, Accounting by Creditors for Impairment of a
Loan, was adopted January 1, 1995. This statement applies to all
troubled debt restructurings involving a modification of terms. The
adoption of this standard had an immaterial impact on the Company s
net income and retained earnings during 1997 and 1996.
During 1997 the Company provided $1.7 million for possible loan
losses, compared to $838,000 and $899,000 in 1996 and 1995,
respectively. During 1997, the increase in the provision was due to
the increase in loan volume and was not due to a deterioration of
loan quality. Determining an appropriate level of ALLL involves a
high degree of judgment. Management believes that the allowance at
December 31, 1997 of $5.6 million or 1.55% 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 ALLL as a percentage of total loans outstanding was
1.44% and 1.43%, in 1996 and 1995, 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 these areas 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, 1997 and
1996, 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 1997 total deposits increased by $20.1 million or 5.7%
over 1996. This increase in deposits was the result of aggressive
marketing of the Company s deposit products. For the same period,
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%. In 1996
total deposits decreased by $16.6 million or 4.5% from 1995. This
decrease was primarily in the certificates of deposit accounts,
which included broker certificates that decreased by $7.8 million or
85.9%. During 1995, management decided to add approximately $10
million in broker certificates to the deposit base, due to a slowing
of deposit growth. Broker certificates totaled $9.1 million at
December 31, 1995. However, during 1996 the Company replaced
maturing broker certificates with other sources of funding that were
more reasonably priced. Other certificates of deposit categories
also decreased by $7.1 million or 3.9% during 1996. The Company s
remaining deposit categories remained relatively level during 1996.
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 $132.4 million at December 31, 1997, compared to
$93.8 million at December 31, 1996, an increase of $38.6 million or
41.1%. The increase was necessary to meet funding needs not met by
deposits because loans increased by more than deposits did during
1997. The majority of the increase was in borrowings from the
Federal Home Loan Bank of Boston. FHLB advances remain the largest
nondeposit-related interest-bearing funding source for the Company
in 1997. 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, 1997
and December 31, 1996 exceeded regulatory guidelines. For actual
ratios see Note 19 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, 1997 and 1996 were
10.9% and 11.3%, respectively.
As part of the Company s goal to operate a safe, sound, and
profitable financial organization, the Company strives to maintain a
strong capital base. The Company s shareholders equity totaled
$62.6 million and $57.8 million or 10.9% and 11.3% of total assets
at December 31, 1997 and 1996, respectively. The $4.7 million or
8.2% increase in shareholders equity was primarily attributable
to net income of $9.1 million, less net share repurchases of $1.3
million and $3.1 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 1997 represented a 36.2% increase over 1996. 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
the dividend 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 $4,356,000 and $3,951,000 in 1997 and 1996,
respectively. United Bank declared no dividends in 1996 and 1997. As
of December 31, 1997, and subject to the limitations and
restrictions under applicable law, Camden National Bank and United
Bank had funds available for dividends to the Company sufficient to
meet its cash requirements, although there is no assurance that
dividends will be paid at any time in any amount.
RESULTS OF OPERATIONS
Overview.
The Company reported net income of $9.1 million in 1997, $8.1
million in 1996 and $7.4 million in 1995. Basic earnings per share
were $4.02 in 1997, $3.48 in 1996 and $3.16 in 1995. Return on
average assets was 1.65% in 1997 compared with 1.65% in 1996, and
1.59% in 1995. Return on average equity was 15.20% in 1997 compared
to 14.56% and 14.53% in 1996 and 1995, respectively. The Company
experienced an increase in earnings for 1997 of $1.0 million or
12.7%. The improved results were attributable to increases in net
interest income.
The operating results of the Company depend greatly on its 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 also
are 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
below.
Net Interest Income.
The Company s primary source of operating income is net
interest income. Net interest income, on a fully-taxable equivalent
basis was $25.1 million, $22.2 million, and $20.3 million in 1997,
1996 and 1995, respectively. Changes in net interest income are the
results of interest rate movements, changes in the amounts and the
mix of earning assets and interest-bearing liabilities, and changes
in the level of non-earning assets and non-interest-bearing
liabilities.
Net interest income increased by $2.9 million or 13.2%, on a
fully-taxable equivalent basis in 1997 compared to 1996. This
increase was due to the increase in loan and investment volumes
combined with a slight decrease in loan yields. During 1996 net
interest income increased by $1.9 million or 9.4% on a fully-taxable
equivalent basis compared to 1995. This increase was primarily due
to the increase in loan volume. During 1995 net interest income
decreased by $343,000 or 1.7%, on a fully-taxable equivalent basis
compared to 1994. This decrease in net interest income was
attributable to the fact that the Company s cost of funds (interest
on deposits and borrowings), increased faster than the yield on
earning assets (loans and securities), because of the Company s
decision to pay higher interest rates on deposits during 1995 to
meet funding needs. Net interest income, expressed as a percentage
of average earning assets, was 4.77% in 1997, 4.79% in 1996, and
4.63% in 1995.
The average amount of loans outstanding increased by $37.4
million or 12.5% in 1997 over 1996 and by $18.0 million or 6.4% in
1996 over 1995 which has contributed to the increase in interest
income. Interest income on loans increased by $3.4 million in 1997
compared to 1996 and by $2.0 million in 1996 compared to 1995. The
weighted average yield on loans increased from 9.88% in 1995 to
9.96% in 1996 and then decreased to 9.84% in 1997.
The average amount of non-accrual loans can also affect the
average yield earned on all outstanding loans. The average amount of
non-accrual loans for 1997, 1996 and 1995 were minimal, and
therefore, had an insignificant effect on average loan yield.
Interest and dividends on investment securities increased by
$2.5 million, on a fully-taxable equivalent basis, in 1997 compared
with 1996. This was the result of increases in both volume of
securities and rates earned. In 1996, interest and dividends on
investment securities increased by $377,000, on a fully-taxable
equivalent basis, compared with 1995. The primary reason for
the increase was the increased volume. The average balance of
investments outstanding increased from $157.8 million in 1995 to
$164.7 million in 1996 and then to $191.0 million in 1997. The
weighted average yield on investment securities, however, decreased
from 6.38% in 1995 to 6.34% in 1996 and then increased to 6.67% in
1997. During 1997 the Company recovered $107,312 of principal and
interest on several municipal investments that had previously
defaulted and for which a permanent decline had been recognized. The
Company also recovered $54,000 and $417,000 of principal and
interest on those same investments for 1996 and 1995, respectively.
Interest expense on deposits and borrowings increased by $2.8
million or 15.8% in 1997 compared with 1996. This increase was
primarily attributable to the increased volume of borrowed funds.
Interest expense on deposits and borrowings increased by $494,000 or
2.8% in 1996 compared with 1995. 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 deposit.
During 1995 interest rates in general experienced increases that
contributed to the increase of $4.7 million or 37.2% in interest
expense over 1994. Again, deposit growth was in higher yielding
certificates of deposit. This type of growth results in a narrowing
of the net interest margin that must be offset by increased yields
on earning assets or by a reduction of overhead expenses. The
weighted average rate on interest bearing deposits and borrowings
decreased from 4.71% in 1995 to 4.62% in 1996 and then increased to
4.67% in 1997.
The Company utilizes off-balance sheet instruments such as
interest rate swap agreements that have an effect on net interest
income. The net result was an offset to gains in net interest income
of $11,000 in 1997, an increase of $111,000 in 1996, and an offset
to gains in net interest income of $2,000 in 1995. 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 1997, 1996 and 1995, 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). The notional principal amount of
interest-rate swaps outstanding was $5 million at December 31, 1997
and $20 million at December 31, 1996 and 1995. 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 1995 an increase in the variable rates being paid
by the Company on the swaps resulted in a narrowing of spread
between what the Company was paying and receiving.
Noninterest Income.
Noninterest income was $3.7 million, $3.4 million and $3.5
million for the years ended December 31, 1997, 1996 and 1995,
respectively. There was an increase of $339,000 or 9.9% in total
noninterest income during 1997. Service charges on deposit accounts
increased $36,000 or 4.2% over 1996. Other service charges and fees
increased by $222,000 or 15.9% over the same period. The largest
contributing factor to this increase was the fee income generated by
merchant bankcard assessments. Other income also increased over 1996
by $81,000 or 7.0%. The major contributing factor for this increase
was trust fees.
Total noninterest income decreased by $133,000 in 1996 compared
to 1995. Service charges on deposit accounts declined by $43,000 or
4.7% in 1996 compared to 1995. However, other service charges and
fees increased $104,000 or 8.1% in 1996 compared to 1995. The
largest contributing factor was credit card assessment fees that
increased by $76,000 over 1995. Other income decreased by $194,000.
The major contributing factor to this decline was an unusually large
investment recovery of $417,000 in 1995 compared to only $54,000 in
1996. However, within the other income category during 1996, trust
fees increased $146,000.
Noninterest Expenses.
Noninterest expense was $13.3 million, $12.3 million and $11.7
million for the years ended December 31, 1997, 1996 and 1995,
respectively. There was an increase of $956,000 or 7.7% in total
noninterest expense during 1997. The largest increase was in
salaries and employee benefits which 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. Salary and employee benefits expense
increased by $796,000 or 14.4% in 1996 over 1995. This reflects
added staff and normal increases in salary and benefit costs.
During 1996 a number of positions were added due to the merger with
UnitedCorp. In addition, United Bank employees were added to the
defined benefit pension plan.
In 1997 and 1996 other operating expenses remained relatively
level, with no unusual increases or decreases in any category.
During 1995 other operating expenses increased $755,000 or 16.3%.
These increased costs were related in part to higher consulting
fees, depreciation of equipment, and expenses on or writedowns of
OREO properties.
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
It is anticipated that many computer applications will not
operate as intended past the year 1999 without modifications. This
potential problem results from the practice of storing data in
two-digit format (97) instead of four-digit format (1997). On
January 1, 2000, it is possible that some systems with time
sensitive software programs will recognize the year as 00 and may
incorrectly interpret the year as 1900 .
The Company has adopted a plan of action to minimize the risk
of the year 2000 event. The plan includes the formation of a
Technology Steering Committee to assess, monitor and review vendor
compliance and certification and to clearly identify all systems and
equipment utilized in the day-to-day operations of the Company.
Management believes that the Company is adequately addressing the
year 2000 issue and that preparation, coordination and testing is
being conducted throughout the organization, thereby minimizing any
associated risks to its customers. Management currently believes
that the costs related to addressing all year 2000 issues will not
have a material impact on future results of operation.
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 1.16% .37% .43%
-200bp 2.97% (.12%) .51%
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 above. 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 ALCO 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 use of these instruments by our bank
subsidiaries.
As of December 31, 1997 the Company had a notional principal of $5
million in swaps and $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.
SFAS No. 125 and No. 127 relate to the accounting for transfers
and servicing of financial assets and extinguishment of certain
liabilities and are effective for years beginning January 1, 1997.
The adoption of these standards did not have a material effect on
the financial statements.
The Financial Accounting Standards Board issued the following
statements of accounting standards (SFAS) during 1997:
SFAS No. 128 Earnings Per Share
SFAS No. 129 Disclosure of Information about Capital
Structure
SFAS No. 130 Reporting Comprehensive Income
SFAS No. 131 Disclosures about Segments of an
Enterprise and Related Information
These four statements do not change the measurement or
recognition methods used in the financial statements but rather deal
with disclosure and presentation requirements.
The financial statements for 1997 and all prior periods include
the additional disclosure requirements relating to diluted earnings
per share which are required under SFAS 128. Financial statement
disclosures also comply with SFAS 129, which summarized but does not
change the Company s requirements to disclose information about
capital structure.
SFAS No. 130 and No. 131 are effective for periods beginning
after December 15, 1997. Management has not determined the impact of
these two pronouncements 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 1996 and
again 1997 until the October listing on AMEX. Shortly after the
listing of the Company s stock on AMEX the price of per share
increased to a high of $60.75 per share. Since that date stock has
traded in the range of $55.00 to $60.00 per share. In 1995 and 1996,
the Company stock traded in the range of $35.00 to $40.00 per share.
The Company has paid quarterly dividends since its inception in
1985. The following table summarizes dividends declared for 1996 and
1997:
1996 1997 Increase
First Quarter $ 422,025 $ 734,602 $312,577
Second Quarter 585,235 750,462 165,227
Third Quarter 608,640 771,835 163,195
Fourth Quarter 623,000 793,436 170,436
--------- ---------- --------
Total $2,238,900 $3,050,335 $811,435
========== ========== ========
As of December 31, 1997, there were 2,270,210 shares of Camden
National Corporation Stock outstanding, held of record by
approximately 825 shareholders.
Camden National Corporation and Subsidiaries
Summary of Financial Performance
[This page contains six bar graphs showing 5 years of the information
detailed below:]
Net income Assets
(in millions) (in millions)
'97 XXXXXXXXXXXXXXXXXXXXX 9.148 '97 XXXXXXXXXXXXXXXXXXX 573.9
'96 XXXXXXXXXXXXXXXXX 8.115 '96 XXXXXXXXXXXXXXXXX 510.1
'95 XXXXXXXXXXXXXXX 7.403 '95 XXXXXXXXXXXXXXX 480.6
'94 XXXXXXXXXXXXXXXXXX 8.258 '94 XXXXXXXXXXXX 455.6
'93 XXXXXXXXXXXXXX 7.135 '93 XXXXXXXXXX 414.0
Deposits Loans
(in millions) (in millions)
'97 XXXXXXXXXXXXXXXXXX 373.4 '97 XXXXXXXXXXXXXXXXXXX 363.1
'96 XXXXXXXXXXXXXXXX 353.2 '96 XXXXXXXXXXXXXXXX 311.2
'95 XXXXXXXXXXXXXXXXX 370.0 '95 XXXXXXXXXXXXXX 283.0
'94 XXXXXXXXXXXXX 340.2 '94 XXXXXXXXXXXX 263.6
'93 XXXXXXXXXXXXXX 343.6 '93 XXXXXXXXX 228.9
Earnings per share Book Value per share
(in dollars) (in dollars)
'97 XXXXXXXXXXXXXXXXXXXX 4.02 '97 XXXXXXXXXXXXXXXXXXXXX 27.56
'96 XXXXXXXXXXXXXXXXX 3.48 '96 XXXXXXXXXXXXXXXXXXX 25.16
'95 XXXXXXXXXXXXXXX 3.16 '95 XXXXXXXXXXXXXXXXX 22.88
'94 XXXXXXXXXXXXXXXXXX 3.52 '94 XXXXXXXXXXXXXX 20.57
'93 XXXXXXXXXXXXX 3.05 '93 XXXXXXXXXXX 17.41
Camden National Corporation and Subsidiaries
Selected Five-Year Financial Data
(In Thousands, except per share data) December 31,
- --------------------------------------------------------------------------
Financial Condition Data 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------
Assets $573,892 $510,078 $480,685 $455,615 $414,044
Loans 363,149 311,246 285,102 265,476 228,909
Allowance for Loan Losses 5,640 4,472 4,080 3,751 4,050
Investments 179,290 163,379 161,332 158,434 160,253
Deposits 373,409 353,240 369,880 340,244 343,643
Borrowings 132,478 93,760 51,980 62,444 26,396
Shareholders' Equity 62,556 57,822 53,680 48,258 40,724
December 31,
- --------------------------------------------------------------------------
Operations Data 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------
Interest Income $ 46,051 $ 41,015 $ 38,661 $ 33,958 $ 31,529
Interest Expense 21,229 19,105 18,853 13,766 13,185
-------- -------- -------- -------- --------
Net Interest Income 24,822 21,910 19,808 20,192 18,344
Provision for Loan Losses 1,677 838 899 216 683
Net Interest Income after -------- -------- -------- -------- --------
Provision for Loan Losses 23,145 21,072 18,909 19,976 17,661
Non-interest Income 3,750 3,411 3,544 3,057 2,499
Non-interest Expense 13,294 12,338 11,707 10,581 9,596
Income before Provision -------- -------- -------- -------- --------
for Income Tax 13,601 12,145 10,746 12,452 10,564
Income Tax Expense 4,453 4,030 3,343 3,964 3,429
Accounting Change for
Postretirement Benefits - - - 230 -
-------- -------- -------- -------- --------
Net Income $ 9,148 $ 8,115 $ 7,403 $ 8,258 $ 7,135
======== ======== ======== ======== ========
At or For the Year Ended December 31,
- ---------------------------------------------------------------------------
Other Data 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------
Return on Average Assets 1.65% 1.65% 1.59% 1.90% 1.79%
Return on Average Equity 15.20% 14.56% 14.53% 18.56% 19.02%
Net Income Per Share $ 4.02 $ 3.48 $ 3.16 $ 3.52 $ 3.05
Dividends Per Share $ 1.34 $ .96 $ .59 $ .45 $ .29
Book Value Per Share $27.56 $25.16 $22.88 $20.57 $17.41
Allowance for Loan Losses
to Total Loans 1.55% 1.44% 1.43% 1.42% 1.77%
Non-Performing Loans to
Total Loans .63% .73% 1.05% 1.08% 0.87%
Camden National Corporation and Subsidiaries
Consolidated Statements of Condition
- ---------------------------------------------------------------------------
(In Thousands, except number of December 31,
shares and per share data) 1997 1996
- ---------------------------------------------------------------------------
Assets
Cash and due from banks $ 13,451 $ 17,233
Federal funds sold 1,100 2,075
Securities available for sale, at market 4,312 12,647
Securities held to maturity (market value $164,286 and
$143,220 at December 31,1997, and 1996, respectively 160,894 143,216
Other securities 14,084 7,516
Residential mortgages held for sale 7,094 2,544
Loans, less allowance for loan losses of $5,640 and
$4,472 at December 31, 1997, and 1996, respectively 350,415 304,230
Bank premises and equipment 8,786 8,944
Other real estate owned 1,373 1,264
Interest receivable 3,924 3,920
Other assets 8,459 6,489
-------- --------
Total assets $573,892 $510,078
Liabilities ======== ========
Deposits:
Demand $ 51,422 $ 47,749
NOW 42,796 41,715
Money market 23,452 24,076
Savings 66,723 63,597
Certificates of deposit 189,016 176,103
-------- --------
Total deposits 373,409 353,240
Borrowings from Federal Home Loan Bank 98,514 67,051
Other borrowed funds 33,964 26,709
Accrued interest and other liabilities 5,364 5,211
Minority interest in subsidiary 85 45
-------- --------
Total liabilities 511,336 452,256
Commitments (Note 13 & 17) -------- --------
Stockholders' Equity
Common stock, no par value; authorized
5,000,000 shares, issued 2,376,080 shares 2,436 2,436
Surplus 1,410 1,226
Retained earnings 62,925 56,827
Net unrealized appreciation on securities
available for sale, net of income tax 5 32
-------- --------
66,776 60,521
Less cost of 105,870 and 77,448 shares of
treasury stock on December 31, 1997 and 1996 4,220 2,699
-------- --------
Total stockholders' equity 62,556 57,822
-------- --------
Total liabilities and stockholders' equity $573,892 $510,078
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
Camden National Corporation and Subsidiaries
Consolidated Statements of Income
- -----------------------------------------------------------------------------
(In Thousands, except number Year Ended December 31,
of shares and per share data) 1997 1996 1995
- -----------------------------------------------------------------------------
Interest Income
Interest and fees on loans $32,845 $29,483 $27,439
Interest on US Government and agency obligations 11,710 9,321 8,810
Interest on state and political subdivisions 245 338 478
Interest on interest rate swap agreements 410 1,251 1,380
Interest on federal funds sold and other investments 841 622 554
------- ------- -------
Total interest income 46,051 41,015 38,661
------- ------- -------
Interest Expense
Interest on deposits 13,484 13,982 13,743
Interest on other borrowings 7,324 3,983 3,728
Interest on interest rate swap agreements 421 1,140 1,382
------- ------- -------
Total interest expense 21,229 19,105 18,853
------- ------- -------
Net interest income 24,822 21,910 19,808
Provision for Loan Losses 1,677 838 899
Net interest income after provision ------- ------- -------
for loan losses 23,145 21,072 18,909
------- ------- -------
Other Income
Service charges on deposit accounts 901 865 908
Other service charges and fees 1,614 1,392 1,288
Merchant assessments 1,113 871 795
Other income 122 283 553
------- ------- -------
Total other income 3,750 3,411 3,544
------- ------- -------
26,895 24,483 22,453
Operating Expenses ------- ------- -------
Salaries and employee benefits 6,992 6,303 5,507
Net occupancy 856 736 815
Furniture, equipment and data processing 1,294 1,254 1,215
Other 4,152 4,045 4,170
------- ------ -------
Total operating expenses 13,294 12,338 11,707
Income before income taxes and cumulative ------- ------- -------
effect of accounting change 13,601 12,145 10,746
Income Taxes 4,453 4,030 3,343
------- ------- -------
Net Income $9,148 $ 8,115 $ 7,403
======= ======= =======
Per Share Data
Basic earnings per share $ 4.02 $ 3.48 $ 3.16
Diluted earnings per share 3.93 3.43 3.10
Weighted average number of shares outstanding 2,273,584 2,329,989 2,345,774
The accompanying notes are an integral part of these consolidated financial
statements.
Camden National Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1997, 1996 and 1995
- -----------------------------------------------------------------------------
(In Thousands, except number of shares and per share data)
- -----------------------------------------------------------------------------
Net Unrealized
Appreciation on Total
Securities Stock-
Common Retained Available Treasury holders'
Stock Surplus Earnings For Sale Stock Equity
Balance at
January 1, 1995 $2,436 $1,208 $44,922 $137 $ (445) $48,258
Net income for 1995 - - 7,403 - - 7,403
Change in unrealized gains (losses)
on securities available for sale,
net of tax benefit of $16 - - - (33) - (33)
Purchase of treasury
stock (25,200 shares) - - - - (937) (937)
Sale of treasury
stock (20,629 shares) - 25 - - 338 363
Retirement of treasury
stock (322 shares) - (7) - - 7 -
Cash dividends ($.59/share) - - (1,374) - - (1,374)
------ ------ ------- ----- ------ -------
Balance at
December 31, 1995 $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 $37 - - - (72) - (72)
Purchase of treasury
stock (47,261 shares) - - - - (1,712) (1,712)
Sale of treasury
stock (1,334 shares) - - - - 50 50
Cash dividends ($.96/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)
Purchase of treasury
stock (33,474 shares) - - - - (1,337) (1,337)
Sale of treasury
stock (5,052 shares) - 184 - - (184) -
Cash dividends ($1.34/share) - - (3,050) - - (3,050)
------ ------ ------- ----- ------ -------
Balance at
December 31, 1997 $2,436 $1,410 $62,925 $ 5 $(4,220) $62,556
====== ====== ======= ===== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
Camden National Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended December 31,
- ------------------------------------------------------------------------------
(In Thousands) 1997 1996 1995
- ------------------------------------------------------------------------------
Operating Activities
Net Income $ 9,148 $ 8,115 $ 7,403
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 1,677 838 899
Depreciation and amortization 708 1,016 801
Decrease (increase) in interest receivable (4) 332 101
Increase in other assets (1,844) (55) (1,596)
Increase in other liabilities 167 193 508
Sale of residential mortgage loans held for sale 2,531 1,505 6,784
Origination of mortgage loans held for sale (7,081) (1,966) (6,976)
Loss on disposal of assets - 82 -
Other, net - 5 (29)
-------- -------- --------
Net cash provided by operating activities 5,302 10,065 7,895
Investing Activities -------- -------- --------
Proceeds from sale and maturities of
securities held to maturity 46,062 32,252 29,639
Proceeds from sale and maturities of
securities available for sale 8,300 9,400 473
Purchase of securities to be held to maturity (63,620) (40,332) (28,104)
Purchase of securities available for sale - (2,301) (2,308)
Purchased of Federal Home Loan Bank Stock (6,568) (1,157) (2,181)
Increase in loans (47,862) (26,129) (20,246)
Net (increase) decrease in other real estate (109) (178) 520
Purchase of premises and equipment (802) (1,572) (1,988)
Proceeds from sale of premises and equipment - 9 -
Decrease (increase) in minority position 40 (44) (28)
Net sale (purchase) of federal funds 975 (375) (1,700)
-------- -------- --------
Net cash used by investing activities (63,584) (30,427) (25,923)
Financing Activities -------- -------- --------
Net increase (decrease) in demand deposits, NOW
accounts, money markets and savings account 7,256 (1,658) (9,851)
Net (decrease)increase in certificates of deposit 12,913 (14,982) 39,487
Net increase (decrease) in short-term borrowings 38,718 41,780 (10,454)
Reduction in long-term debt - - (9)
Purchase of treasury stock (1,337) (1,712) (937)
Sale of treasury stock - 50 363
Cash dividends (3,050) (2,239) (1,374)
-------- -------- --------
Net cash provided by financing activities 54,500 21,239 17,225
------- ------- -------
(Decrease) increase in cash and equivalents (3,782) 877 (803)
Cash and cash equivalents at beginning of year 17,233 16,356 17,159
-------- -------- --------
Cash and cash equivalents at end of year $ 13,451 $ 17,233 $ 16,356
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest paid $ 20,919 $ 19,270 $ 17,615
Income tax paid 4,907 3,599 3,369
Non-Cash transactions:
Transfer from loans to real estate owned 1,035 1,333 974
Transfer of securities from held to maturity
to available for sale - - 11,175
Sale of Treasury stock from exercised
stock options 184 - -
The accompanying notes are an integral part of these consolidated financial
statements.
[Pages 20 - 37 Notes to Financial Statements]
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
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 one 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. Trust Company of Maine, Inc. s financial statements
include its wholly-owned subsidiary,Fiduciary Services, 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 include
interest bearing deposits in 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 stockholders 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.
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,
comprise the Company s mortgage banking business.
Loan Servicing. SFAS 125, "Accounting for transfers and
servicing of financial assets and extinguishments of liabilities,"
was adopted at January 1, 1997. The impact of adopting SFAS 125 was
immaterial to the financial statements. 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. The amortized cost approximates fair value at December
31, 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 borrower s 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.
SFAS No. 114 Accounting by Creditors for Impairment of a
Loan, as amended by SFAS No. 118, was adopted January 1, 1995.
This statement applies to all troubled debt restructurings
involving a modification of terms. The adoption of this standard
had no impact on net income and retained earnings.
Under this standard, 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 value of core deposits premium is being
amortized over a period of 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 softwares.
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 that
generally do not have fixed maturity dates. Securities sold under
agreements to repurchase generally mature within thirty days.
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.
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.
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 Caps and Floors are contracts in which a ceiling
or 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 cash equivalents, including cash and due from banks
and federal funds sold: The carrying amounts of cash and
equivalents 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.
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, under repurchase agreements and other
short-term borrowings, approximates fair value.
Effect of New Financial Accounting Standards. During 1997, the
Company adopted SFAS No. 125 and No. 127, which relate to the
accounting for transfer and servicing of financial assets and
extinguishment of certain liabilities. The adoption of these
standards did not have a material effect of the financial
statements.
The Financial Accounting Standards Board issued the following
statements of accounting standards (SFAS) during 1997:
SFAS No. 128 Earnings per Share
SFAS No. 129 Disclosure of Information about Capital
Structure
SFAS No. 130 Reporting Comprehensive Income
SFAS No. 131 Disclosures about Segments of an
Enterprise and Related Information
These four statements do not change the measurement or
recognition methods used in the financial statements but
rather deal with disclosure and presentation requirements.
The financial statements for 1997 and all prior periods
include the additional disclosure requirements relating to diluted
earnings per share which are required under SFAS No. 128. Financial
statement disclosures also comply with SFAS No. 129, which
summarized but does not change the Company s requirements to
disclose information about capital structure.
SFAS No. 130 and No. 131 are effective for periods beginning
after December 15, 1997. Management has not determined the impact
of these two pronouncements on the financial statements.
Reclassification. Certain items from the prior year were
restated to conform with current year presentation.
2. MERGER
On December 31, 1995, UnitedCorp was merged into the Company.
The merger was accounted for under the pooling-of-interests method.
At December 31, 1995, UnitedCorp had total assets of $61,440,000
and total shareholders equity of $4,918,900. The Company exchanged
approximately 162,000 shares of its common stock for approximately
190,000 shares of UnitedCorp. Under the pooling-of-interest method,
the recorded amounts of assets and liabilities of the Company and
UnitedCorp have been carried forward at their previously recorded
amounts. All prior period financial statements presented have been
restated as if the merger took place at the beginning of such
periods.
The following table sets forth the results of operations for
the year ended December 31, 1995.
Net Income
UnitedCorp $ 540
Camden National Corporation 6,863
------
Combined $7,403
======
Earnings per share
UnitedCorp $2.83
Camden National Corporation 3.14
Combined 3.16
Dividends per share
UnitedCorp $ .18
Camden National Corporation .61
Combined .59
3. INVESTMENT SECURITIES
The following tables summarize the amortized costs and market
values of securities available for sale and held to maturity:
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
======== ====== ======== =======
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 held to maturity $160,894 $3,785 $(393) $164,286
======== ====== ====== ========
December 31, 1996
- -------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- -------------------------------------------------------------------
Available for sale
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 12,597 $ 56 $ (37) $ 12,616
Obligations of states and
political subdivisions _ 31 _ 31
-------- ------- -------- ---------
Total available for sale $ 12,597 $ 87 $ (37) $ 12,647
========= ======= ======== =========
Held to maturity
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 58,433 $ 181 $ (862) $ 57,752
Obligations of states and
political subdivisions 5,524 44 (12) 5,556
Mortgage-backed securities 79,259 1,301 (648) 79,912
--------- ------- --------- --------
Total held to maturity $143,216 $1,526 $(1,522) $143,220
========= ====== ======== ========
The amortized cost and fair values of debt securities by
contractual maturity at December 31, 1997, are shown 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 $ 2,302 $ 2,304
Due after one year through five years 2,002 2,008
---------- ---------
$ 4,304 $ 4,312
========== ==========
Amortized Fair
Cost Value
- -------------------------------------------------------------------
Held to maturity
Due in one year or less $ 32,657 $ 32,343
Due after one year through five years 26,862 27,004
Due after five years through ten years 8,374 8,543
Due after ten years 93,001 96,396
--------- ---------
$160,894 $164,286
========= =========
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 1997 and 1996. At December 31, 1997, securities
with a book value of $36.5 million and a fair value of $37.2
million were pledged to secure public deposits and securities sold
under agreements to repurchase and other purposes required or
permitted by law. Other securities include Federal Home Loan Bank
and Federal Reserve Bank stock owned by the Company as part of
their relationship with these institutions.
4. LOANS
The composition of the Company s loan portfolio at December 31 was
as follows:
1997 1996
- ------------------------------------------------------------------
Commercial loans $180,327 $149,838
Residential real estate loans 118,603 116,682
Consumer loans 46,178 37,091
Municipal loans 10,324 5,578
Other loans 1,226 130
-------- --------
Total loans 356,658 309,319
Less deferred loan fees net of cost 603 617
Less allowance for loan losses 5,640 4,472
-------- --------
$350,415 $304,230
======== ========
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, 1997 and 1996, nonaccrual loans were
$1,215,000 and $1,674,000, respectively. Interest foregone
was approximately $147,000, $178,000 and $207,000 for 1997, 1996
and 1995, respectively.
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
December 31,
- -------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------
Beginning Balance $ 4,472 $ 4,080 $ 3,751
Provision for loan losses 1,677 838 899
Recoveries 583 210 289
Loans charged off (1,092) (656) (859)
------- ------- -------
Net charge offs (509) (446) (570)
------- ------- -------
Ending Balance $ 5,640 $ 4,472 $ 4,080
======= ======= =======
Information regarding impaired loans is as follows:
December 31,
- -------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------
Average investment in impaired loans $1,520 $1,864 $1,505
Interest income recognized on impaired
loans, all on cash basis 64 220 36
Balance of impaired loans 1,215 1,674 1,785
Less portion for which no allowance
for loan losses is allocated _ _ _
Portion of impaired loan balance for
which an allowance for credit losses
is allocated 1,215 1,674 1,785
Portion of allowance for loan losses
allocated to the impaired loan
balance 223 340 267
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. The Company s activity in the
secondary market was minimal during 1997. Therefore, capitalized
servicing rights were not material.
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
$41,617,228, $45,913,503 and $52,006,411 at December 31, 1997, 1996
and 1995, respectively.
Custodial escrow balances maintained in connection with the
foregoing loan servicing, and included in demand deposits, were
$86,680 and $98,541 at December 31, 1997 and 1996, respectively.
7. BANK PREMISES AND EQUIPMENT
Details of premises and equipment, at cost, at December 31 were as
follows:
1997 1996
- -------------------------------------------------------------------
Land and buildings $ 8,193 $ 7,485
Furniture, fixtures and equipment 7,112 6,524
Leasehold improvements 401 401
Construction in process 30 531
------- ------
15,736 14,941
Less: Accumulated depreciation and amortization 6,950 5,997
------- ------
$ 8,786 $ 8,944
======= =======
Depreciation expense was $1.1 million, $1.0 million and $.9
million for 1997, 1996 and 1995, respectively.
8. OTHER REAL ESTATE OWNED
The transactions in other real estate owned for the years
ended December 31 were as follows:
1997 1996
- ------------------------------------------------------------------
Beginning balance $1,264 $1,086
Additions 1,035 1,333
Properties sold 850 912
Writedowns 76 243
------ ------
Ending balance $1,373 $1,264
====== ======
9. DEPOSITS
The aggregate amount of certificates of deposit, each with a
minimum denomination of $100,000, was approximately $32,094,000
and $24,514,000 in 1997 and 1996, respectively. Certificates of
deposit included brokered deposits in the amount of $131,000 and
$1,282,000 at December 31, 1997 and 1996, respectively.
At December 31, 1997, the scheduled maturities of certificates
of deposit are as follows:
1998 $148,324
1999 27,868
2000 7,174
2001 2,739
2002 2,587
Thereafter 324
--------
$189,016
========
10. BORROWINGS FROM FEDERAL HOME LOAN BANK
A summary of the borrowings from the Federal Home Loan Bank
(FHLB) of Boston is as follows:
December 31, 1997
- -------------------------------------------------------------------
Principal Amounts Interest Rates Maturity Date
- -------------------------------------------------------------------
$98,236 5.59% - 7.05% 1998
278 6.58% 1999
--------
$98,514
========
December 31, 1996
- -------------------------------------------------------------------
Principal Amounts Interest Rates Maturity Date
- -------------------------------------------------------------------
$66,620 5.38% - 7.32% 1997
431 6.58% 1999
-------
$67,051
========
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 qualifying first mortgage loans up to the
amount of the advance outstanding. The Company, through its banking
subsidiaries, has an available line of credit with FHLB of $10.2
million and $9.2 million at December 31, 1997 and 1996,
respectively. The Company had $8.4 million and $.9 million
outstanding at December 31, 1997 and 1996, respectively.
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 plans 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. These plans are unfunded
and nonqualified.
Net periodic pension cost for these plans includes the
following components:
1997 1996 1995
- -------------------------------------------------------------------
Service Cost
Qualified plan $ 318 $ 280 $ 136
Supplemental plan 86 72 37
Interest cost
Qualified plan 224 194 169
Supplemental plan 93 64 56
Return on plan assets (188) (153) (152)
Net amortization and deferral
Qualified plan (14) (9) (13)
Supplemental plan 52 39 31
------ ------ ------
Net periodic pension cost $ 571 $ 487 $ 264
====== ====== ======
The funded status of the plan and amounts recognized in the
balance sheets at December 31 are as follows:
QUALIFIED PLAN 1997 1996
- -------------------------------------------------------------------
Actuarial present value of projected benefit obligation:
Vested $ 2,100 $ 1,759
Nonvested 100 93
-------- --------
Accumulated benefits obligation 2,200 1,852
Effect of future compensation 1,300 1,164
-------- --------
Projected benefit obligation 3,500 3,016
Plan assets at fair value (2,750) (2,272)
-------- --------
Unfunded excess of projected obligation
over plan assets 750 744
Unrecognized transition asset 115 123
Unrecognized net loss (232) (322)
Unrecognized net transition obligation 80 88
-------- --------
Pension liability included in accrued
other liabilities $ 713 $ 633
======== ========
The following assumptions were used:
Discount rate 7.5% 7.5%
Increase in compensation 6.0% 6.0%
The expected long-term rate of return on assets was 7.5% for 1997,
1996 and 1995.
SUPPLEMENTAL PLAN 1997 1996
- -------------------------------------------------------------------
Actuarial present value of projected benefit obligation:
Vested $ 919 $ 502
Nonvested 40 52
-------- --------
Accumulated benefits obligation 959 654
Effect of future compensation 468 38
-------- --------
Projected benefit obligation 1,427 992
Plan assets at fair value - -
-------- --------
Unfunded excess of projected obligation
over plan assets 1,427 992
Unrecognized transition obligation (251) (182)
Unrecognized net loss (429) (281)
-------- --------
Pension liability included in accrued
other liabilities $ 747 $ 529
======== ========
The following assumptions were used:
Discount rate 7.5% 7.5%
Increase in compensation 6.0% 6.0%
12. POSTRETIREMENT BENEFITS
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.
Net periodic postretirement benefit cost includes the
following components:
1997 1996
- ------------------------------------------------------------------
Service cost of benefits earned $ 19 $ 20
Interest cost on accumulated postretirement
benefit obligation 23 22
Amortization of prior service cost (16) (16)
----- -----
Net periodic postretirement benefit cost $ 26 $ 26
===== =====
The amounts recognized in the Company s balance sheets at
December 31, are:
1997 1996
- ------------------------------------------------------------------
Accumulated Postretirement Benefit Obligation
Retirees $ 97 $ 74
Fully eligible active plan participants 48 88
Other active plan participants 211 153
---- ----
356 315
Unrecognized transition asset 142 158
Unrecognized loss (12) -
---- ----
Accrued post-retirement benefit cost
included in other liabilities $486 $473
==== ====
Benefit costs were generally estimated assuming retiree health
care cost would initially increase at a 7.5% annual rate, decrease
gradually to a 6% annual growth rate after 8 years, and remain at a
6% annual growth rate thereafter. The discount rate used at
December 31, 1997 and 1996, to estimate the accumulated
postretirement benefit obligation was 7.5%. A 1% increase in the
assumed health care cost trend rate would not have a material
impact on the accumulated postretirement benefit obligation due
to a built-in cap on annual benefits.
13. BRANCH ACQUISITIONS
Camden National Corporation s subsidiary, Camden National
Bank, has entered into a definitive agreement to purchase four
branches in mid-coast Maine. The expected deposit premium to be
paid will approximate $5 million.
14. STOCKHOLDERS 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 140,000 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 1996 net income and earnings per share
would have been reduced to the pro forma amounts indicated on the
next page. In 1997, no options were granted, thus pro forma amounts
are the same as reported.
Earnings per Share
Net Income Basic Diluted
- -------------------------------------------------------------------
1997
As reported $9,148 $4.02 $3.93
Pro forma 9,148 4.02 3.93
1996
As reported $8,115 $3.48 $3.43
Pro forma 7,949 3.41 3.36
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.
A summary of the status of the company s fixed stock option
plan as of December 31, 1997 and 1996, and changes during the years
ending on those dates is presented below.
1997 1996
- --------------------------------------------------------------------------
Number Weighted Average Number Weighted Average
Of Shares Exercise Price Of Shares Exercise Price
- --------------------------------------------------------------------------
Outstanding at beginning
of year 95,758 $22.96 68,508 $17.38
Granted during
the year - - 27,250 37.00
Exercised during
the year 9,258 18.21 0 -
------ ----- ------- ------
Outstanding and exercisable
at end of year 86,500 23.47 95,758 22.96
====== ===== ======= =====
Weighted-average fair value of
options granted during
the year N/A $9.25
The following information applies to options outstanding at
December 31, 1997.
Number outstanding 86,500
Range of exercise prices $17.50 - $37.00
Weighted-average exercise price $23.47
Weighted-average remaining contractual life 6.92 years
15. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share:
1997 1996 1995
- ----------------------------------------------------------------------
Net income, as reported $9,148 $8,115 $7,403
Weighted-average shares 2,273,584 2,329,989 2,345,774
Effect of dilutive securities:
Employee stock options 51,642 37,900 38,531
Dilutive potential common shares
Adjusted weighted-average shares
and assumed conversion 2,325,226 2,329,989 2,384,305
Basic earnings per share $ 4.02 $ 3.48 $ 3.16
Diluted earnings per share $ 3.93 $ 3.43 $ 3.10
16. INCOME TAXES
The current and deferred components of income tax expense were
as follows:
1997 1996 1995
- ----------------------------------------------------------------------
Current:
Federal $4,948 $4,024 $3,336
State 181 121 112
------ ------ -----
5,129 4,145 3,448
Deferred:
Federal (676) (115) (105)
------- ------ ------
$4,453 $4,030 $3,343
====== ====== ======
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:
1997 1996 1995
- ----------------------------------------------------------------------
Computed tax expense $4,625 $4,151 $3,654
Increase (reduction) in income
taxes resulting from:
Tax exempt Income (222) (209) (234)
State taxes, net of
federal benefit 120 79 74
Compensation expense from stock
options exercised (20) - (134)
Other (50) 9 (17)
------ ------ ------
$4,453 $4,030 $3,343
====== ====== ======
Items which give rise to deferred income tax assets and
liabilities and the tax effect of each are as follows:
1997 1996
- ----------------------------------------------------------------------------
Asset Liability Asset Liability
- ----------------------------------------------------------------------------
Allowance for possible
losses on loans $1,682 $ - $1,206 $ -
Allowance for investment losses 90 - 110 -
Capitalized costs - 72 - 14
Pension and other benefits 671 - 463 -
Depreciation - 141 - 143
Deferred loan origination fees 6 - 9 -
Deferred compensation and benefits 83 - 140 -
Unrealized appreciation of
investments available for sale - 3 - 17
Unrealized appreciation in loans
held for sale 22 - - 5
Valuation of other real estate owned 41 - 48 -
Interest receivable 37 - 40 -
Other 136 - 61 -
------ ------ ------ -----
$2,768 $ 216 $2,077 $ 179
====== ====== ====== =====
The related income taxes have been calculated using a rate of
34%. No valuation allowance is deemed necessary for the deferred
tax asset, which is included in other assets.
17. 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:
1997 1996
- ---------------------------------------------------------------
Balance, January 1, $ 7,710 $ 9,058
Loans made/advanced and additions 9,505 7,188
Repayments and reductions 2,961 8,536
-------- -------
Balance, December 31 $ 14,254 $ 7,710
======== =======
In addition to the loans noted above, the Company had deposits
at December 31, 1997 to the same individuals of $6.3 million
outstanding.
18. 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 balance sheets. The
Company s significant off-balance sheet risks are lending
commitments, letters of credit, interest rate floors, caps, 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 large fluctuations in interest rates. The Company
uses interest rate swaps 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. The Company also uses cap instruments to hedge
against increases in short-term borrowing rates. If rates were to
rise, resulting in an increased interest cost, there would be an
increased income flow from the cap 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, 1997, the Company had $5 million (notional
principal amount) in interest-rate swaps, and $20 million in floor
contracts. The Company s interest-rate swap matures in 1998. The
two floor contracts ($10 million each) have a strike rate of 5%,
and both mature in 1999.
1997 1996
- -------------------------------------------------------------------
Commitments to extend credit $80,043 $63,138
Letters of credit 1,911 924
Swaps 5,000 20,000
Floors 20,000 20,000
Caps 0 15,000
The estimated fair values of the Company s financial
instruments were as follows:
December 31, 1997 December 31, 1996
- -------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- -------------------------------------------------------------------
Financial assets:
Cash and cash equivalents, including
cash and due from banks and
federal funds sold $ 14,551 $ 14,551 $ 19,308 $ 19,308
Securities available for sale 4,312 4,312 12,647 12,647
Securities held to maturity 160,894 164,286 143,216 143,220
Other investments 14,084 14,084 7,516 7,516
Loans held for sale 7,094 7,094 2,544 2,544
Loans receivable 350,415 347,681 304,230 302,000
Interest receivable 3,924 3,924 3,920 3,920
Financial liabilities:
Deposits 373,409 373,898 353,240 353,826
Borrowings from Federal Home
Loan Bank 98,514 98,502 67,051 67,074
Other borrowed funds 33,964 33,964 26,709 26,709
The estimated fair values of the Bank's off-balance sheet
instruments were as follows:
December 31, 1997
- ----------------------------------------------------------------------
Market Value
Notional Contract Maturity Including
Principal Date Date Accruals
- ----------------------------------------------------------------------
Interest Rate Swaps $ 5,000 09-Feb-94 09-Feb-98 $ (57)
-------- -----
$ 5,000 $ (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
======= ======
December 31, 1996
- ----------------------------------------------------------------------
Market Value
Notional Contract Maturity Including
Principal Date Date Accruals
- ----------------------------------------------------------------------
Interest Rate Swaps $10,000 24-Jan-92 24-Jan-97 $ (49)
5,000 09-Feb-94 09-Feb-98 (34)
5,000 04-May-94 04-May-97 (18)
-------- -----
$20,000 $(101)
======== =====
Interest Rate Floors $10,000 03-Jun-94 03-Jun-99 $ 28
10,000 13-Sep-94 13-Sep-99 23
------- -----
$20,000 $ 51
======= =====
Interest Rate Caps $10,000 30-May-95 30-May-97 $ 0
5,000 06-Jun-95 06-Jun-97 0
------- -----
$15,000 $ 0
======= =====
19. 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 Bank 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, 1997, the Company
meets all capital requirements to which it is subject.
As of December 31, 1997, 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 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 Corrective
Actual Adequacy Purposes Action 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%
As of December 31, 1996
Total Capital (To Risk Weighted Assets):
Consolidated $61,320 20.4% $23,996 8.0% N/A
Camden National
Bank 55,277 22.0% 20,126 8.0% $25,157 10.0%
United Bank 5,723 11.8% 3,874 8.0% 4,843 10.0%
Tier I Capital (To Risk Weighted Assets):
Consolidated $57,571 19.2% $11,998 4.0% N/A
Camden National
Bank 52,156 20.7% 10,063 4.0% $15,094 6.0%
United Bank 5,123 10.6% 1,937 4.0% 2,906 6.0%
Tier I Capital (To Average Assets):
Consolidated $57,571 11.7% $19,707 4.0% N/A
Camden National
Bank 52,156 12.1% 17,184 4.0% $21,480 5.0%
United Bank 5,123 8.2% 2,511 4.0% 3,139 5.0%
20. 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
1997 1996
- ------------------------------------------------------------------
Assets
Cash $ 170 $ 12
Fixed assets 1,675 0
Investment in subsidiaries:
Banking subsidiaries 60,569 57,519
Other subsidiaries 89 102
Amounts receivable from subsidiaries 46 130
Goodwill 56 59
Other assets 169 0
------- -------
Total assets $62,774 $57,822
======= =======
Liabilities & Stockholders Equity
Amounts due to subsidiaries $ 40 $ 0
Accrued expenses 178 0
Stockholders equity 62,556 57,822
------- -------
Total liabilities and stockholders equity $62,774 $57,822
======== =======
Statements of Income
For Years Ended December 31
1997 1996 1995
Operating Income
Dividend income from subsidiaries $4,387 $3,951 $1,928
Fees from subsidiaries 2,956 77 -
------ ------ ------
Total operating income 7,343 4,028 1,928
------ ------ ------
Operating Expenses
Salaries and employee benefits 1,625 - -
Net occupancy156++
Furniture, equipment,and data
processing 612 - -
Other operating expenses 607 77 195
------ ----- -----
Total operating expenses 3,000 77 195
------ ----- -----
Income before equity in undistributed
earnings of subsidiaries 4,343 3,951 1,733
Equity in undistributed earnings
of subsidiaries 4,761 4,164 5,483
------ ----- -----
Net income before tax 9,104 8,115 7,216
Income tax benefit 44 - 187
------ ----- -----
Net Income $9,148 $8,115 $7,403
====== ====== ======
Statements of Cash Flows
For Years Ended December 31
1997 1996 1995
- -----------------------------------------------------------------
Operating Activities
Net income $ 9,148 $ 8,115 $ 7,403
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Undistributed net income from
subsidiaries (4,761) (4,164) (5,483)
Depreciation and amortization 197 0 0
Amortization of goodwill 3 4 5
Decrease in amount receivable from
subsidiaries 84 (77) 26
Increase in other assets (169) 0 0
(Decrease) increase in payables 232 (25) 22
Other 11 0 0
------ ------ -----
Net cash provided by operating
activities 4,745 3,853 1,973
------ ----- -----
Investing Activities
Investment in Trust Company
of Maine, Inc. (51) 0 0
Purchase of premises and equipment (149) 0 0
----- ----- -----
Net cash used in investing activities (200) 0 0
Financing Activities
Proceeds from sale of treasury stock 0 50 363
Purchase of treasury stock (1,337) (1,712) (937)
Dividends paid (3,050) (2,239) (1,396)
------ ------ ------
Net cash used in financing activities (4,387) (3,901) (1,970)
------ ------ ------
Net (decrease) increase in cash
and cash equivalents 158 (48) 3
Cash and cash equivalents at
beginning of year 12 60 57
---- ----- -----
Cash and cash equivalents at
end of year $ 170 $ 12 $ 60
====== ======= =====
21. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The following is a summary of the quarterly results of
operations for the years ended December 31, 1997 and 1996:
THREE MONTHS ENDED
- -------------------------------------------------------------------
Mar 31 June 30 Sept 30 Dec 31
- -------------------------------------------------------------------
1997
Interest income $10,722 $11,329 $11,566 $12,434
Interest expense 4,934 5,473 5,467 5,355
Net interest income 5,788 5,856 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:
Primary .91 1.03 1.02 1.06
Fully diluted .90 1.01 1.00 1.02
THREE MONTHS ENDED
- -------------------------------------------------------------------
Mar 31 June 30 Sept 30 Dec 31
- -------------------------------------------------------------------
1996
Interest income $9,721 $9,909 $10,391 $10,994
Interest expense 4,709 4,758 4,948 4,690
Net interest income 5,012 5,151 5,443 6,304
Provision for loan losses 217 107 251 263
Income before income taxes 2,627 3,133 3,209 3,176
Applicable income taxes 869 1,036 1,069 1,056
Net income 1,758 2,097 2,140 2,120
Per common share:
Primary .75 .90 .91 .92
Fully diluted .75 .89 .88 .91
[Bottom of page 37 - Independent Auditor's Report]
Auditor's Logo on letterhead Auditor's name & address
- -------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders 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, 1997 and 1996, and the related consolidated
statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31,
1997. 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, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Berry, Dunn, McNeil & Parker (signature)
Portland, Maine
January 29, 1998
[Pages 38 - 39 List of Board of Directors & Bank Administration]
Board of Directors and Bank Administrations
Photograph of E. Maynard "Sandy" Graffam
Director who passed away during 1997
This annual report is dedicated to the memory of E.Maynard
"Sandy" Graffam. Director 1979-1997 Camden National Corporation
and Camden National Bank.
- -------------------------------------------------------------------
Directors of Camden National Corporation and Camden National Bank
David H. Montgomery
Chairman, Camden National Corporation
Past Chairman, Allen Agency
Kenneth C. Dickey
Vice Chairman, Camden National Corporation
Haskell & Corthell Real Estate
Keith C. Patten
President & CEO
Camden National Corporation
Chairman, Camden National Bank
Peter T. Allen
President, Cutting-Allen, Inc.
Bruce D. Bartlett
President & CEO, United Bank
Director of Camden National Corporation
Ann W. Bresnahan
Civic Leader
Robert W. Daigle
President & CEO, Camden National Bank
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.
- -------------------------------------------------------------------
Associate Directors of Camden National Bank
C.R. deRochemont
Realtor, C.R. deRochemont Realtor
Frederick G. "Ted" Hanley
Retired Executive Vice President
Camden National Bank
Gilbert Harmon
Retired Attorney & Partner
Harmon, Jones & Sanford
Lawrence N. Hopkins
Retired President, Camden National Bank
- -------------------------------------------------------------------
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, Data Processing Officer
June B. Parent
Assistant Vice President, Personnel Manager
Anna J. Jones
Auditor
Kathryn M. Ryder
Financial Officer
Manager, Accounting Department
Brenda B. Munroe
Manager, Electronic Banking Department
Karen Shanahan
Manager, Loan Servicing Department
David B. Mitchell
Information Systems Officer
Timothy J. Pratt
Manager, Items Processing 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 &
Commercial Loan Officer
Barbara B. Hanson
Assistant Vice President &
Commercial Loan Officer
Richard E. Littlefield
Assistant Vice President &
Commercial Loan Officer
Craig Dahlberg
Commercial Loan Officer
Kimberly J. Nason
Mortgage Loan Underwriter
Christopher A. Frohock
Commercial Loan Officer
Lee Ann Szelog
Marketing Manager
John E. Davis
Manager, Collections Department
Anne W. Gibbons
Compliance/CRA Officer
Marie M. Charest
Training Officer
Diane D. Townsend
Credit Officer
- -------------------------------------------------------------------
Branch Administration of Camden National Bank
Peggy C. Chapman
Manager, Rockland Office
Dolores C. Hyssong
Manager, Camden Square Office
Susan L. O'Brien
Manager, Union Office
Vera E. Rand
Manager, Belfast Office
Todd L. Savage
Manager, Main Office, Camden
R. Todd Starbird
Branch Management, Thomaston Office
- -------------------------------------------------------------------
Directors of United Bank
Royce M. Cross
Chairman, United Bank
President, Woodrow W. Cross Agency
Bruce D. Bartlett
President & CEO, United Bank
Kermit P. Allen
Treasurer, G.M. Allen & Son, Inc.
Edward R. Dysart
President, Dysart Transportation, Inc.
William T. Gardner
President, William T. Gardner & Sons, Inc.
Rendle A. Jones, Esq.
Attorney and Partner - Harmon, Jones & Sanford
C. Charles Lumbert
President, Moose River Lumber Co., Inc.
LaJune S. Means
Private Investor, Director Emeritus
William T. Meucci
President, Meucci Enterprises, Inc.
David H. Montgomery
Chairman, Camden National Corporation
Past Chairman, Allen Agency
Keith C. Patten
President & CEO, Camden National Corporation
Chairman, Camden National Bank
Carroll R. Pickard
President, Pleasant Hill Diversities
- -----------------------------------------------------------------
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
Mark E. Russell
Vice President & Mortgage Loan Manager
Lori L. Martin
Assistant Vice President & Administrative Officer
Nathan R. Williams
Assistant Vice President & Commercial Loan Officer
- -------------------------------------------------------------------
Branch Administration of United Bank
Brent A. Folster
Vice President
Manager, Bangor Office
Darcel S. Bryant
Manager, Hermon Office
Linda J. Colbath
Manger, East Corinth Office
Laura J. Hollis
Manager, Hampden Office
Marilyn J. Chalker
Manager, Jackman Office
- -------------------------------------------------------------------
Directors of Trust Company of Maine, Inc.
Andrew P. Averill
Chairman & CEO
Trust Company of Maine, Inc.
R. Paul Pasquine
President, Trust Company of Maine, Inc.
Bruce D. Bartlett
President & 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
President, Fiduciary Services, Inc.
Treasurer, Trust Company of Maine, Inc.
- -------------------------------------------------------------------
Officers Trust Company of Maine, Inc.
Andrew P. Averill
Chairman & CEO
R. Paul Pasquine
President, COO & Senior Trust Officer
Lynn M. Bowden
Vice President & Trust Officer
Susan L. Kenney
Assistant Vice President & Trust Officer
Robert M. Parker
Assistant Vice President & Trust Officer
Shirley B. Kile
Treasurer
Announcement for Annual Meeting in bottom right corner of page 39.
Annual Meeting, Camden National Corporation Tuesday, May 5, 1998
3:30 p.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 1997 fiscal
year. Please contact: Susan M. Westfall, Camden National
Corporation, P.O. Box 310, Camden, ME 04843 (207) 236-8821
Diamond shape with phrase "On Your Corner. In Your Corner." "Your
Community Bank Member Independent Bankers Association of America.
Corporate logo Camden National Corporation
Member FDIC
[Page 40 - Photographs]
Camden National Bank, United Bank and the Trust Company of Maine
offer a full array of financial services from money market accounts
and IRAs, to home mortgages and trust management. We also stand
ready to help businesses grow with commercial banking services
designed to fit their needs.
Photograph 1. Same photo as on page 4 with Petrea Allen and Dr.
Christine Garrison looking at a home.
Photograph 2. Photo similar to photo on page 6, where Lynn Bowden
advises her new client Betty Kaynor.
Photograph 3. Photo similar to photo on page 5, where Jim Kimball
confers with Charlie Wolverton.
[Page 41 - Photographs]
Camden National has grown and changed through the years, but we
have remained committed to the same goals that guided us back in
1875...to meet the needs of local families and businesses with the
highest level of service. Our subsidiaries, Camden National Bank,
United Bank and the Trust Company of Maine, operate independently
and understand the needs of the communities we serve.
Photograph 1. Photograph of Heidi Vanorse, Tim Pratt and Jane
Pierce with presents during the Community Spirit
of Christmas project.
Photograph 2. Photograph of Brent Folster and members of the
Ronald McDonald house standing on the porch on a
winter day.
Photograph 3. Photograph similar to photo on page 7 of the
Trust Company of Maine, Inc. employees volunteering
at the Bangor Area Shelter.