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<SEC-DOCUMENT>0000927016-01-001656.txt : 20010409
<SEC-HEADER>0000927016-01-001656.hdr.sgml : 20010409
ACCESSION NUMBER: 0000927016-01-001656
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010402
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CAMDEN NATIONAL CORP
CENTRAL INDEX KEY: 0000750686
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 010413282
STATE OF INCORPORATION: ME
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-13227
FILM NUMBER: 1589345
BUSINESS ADDRESS:
STREET 1: TWO ELM ST
CITY: CAMDEN
STATE: ME
ZIP: 04843
BUSINESS PHONE: 2072368821
MAIL ADDRESS:
STREET 1: 2 ELM ST
CITY: CAMDEN
STATE: ME
ZIP: 04843
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE>
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
For the fiscal year ended December 31, 2000
Commission File No. 0-28190
CAMDEN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
MAINE 01-0413282
(State or other jurisdiction of (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 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. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 2001 is: Common stock - $114,035,937.
The number of shares outstanding of each of the registrant's classes of
common stock, as of March 26, 2001 is: Common stock - 8,145,341.
Listed hereunder are documents incorporated by reference and the relevant
Part of the Form 10-K into which the document is incorporated by reference:
(1) Certain information required in response to into Items 1, 5, 6, 7, 7A
and 8 of Part II of this Form 10-K are incorporated by reference from Camden
National Corporation's Annual Report to Shareholders for the year ended December
31, 2000.
(2) Certain information required in response to into Items 10, 11, 12 and
13 of Part III of this Form 10-K are incorporated by reference from Camden
National Corporation's Definitive Proxy Statement for the 2001 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission (the
"Commission") prior to April 30, 2001 pursuant to Regulation 14A of the General
Rules and Regulations of the Commission.
<PAGE>
Index
Item # Description Page
- ------ ----------- ----
1 Business 3
2 Properties 10
3 Pending Legal Proceedings 10
4 Submission of Matters to a Vote of Security Holders 10
5 Market for Registrant's Common Equity and Related
Stockholders Matters 11
6 Selected Financial Data 11
7 Management's Discussion and Analysis of Financial Condition
and Results of Operation 11
7A Quantitative and Qualitative Disclosures about Market Risks 18
8 Financial Statements and Supplementary Data 18
9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 18
10 Directors and Executive Officers of the Registrant 19
11 Executive Compensation 19
12 Security Ownership of Certain Beneficial Owners and Management 19
13 Certain Relationships and Related Transactions 19
14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 19
Signatures 21
Exhibit Index 22
Exhibits 23
Page 2
<PAGE>
PART I
The discussions set forth below and in the documents we incorporate by reference
herein contain certain statements that may be considered forward-looking
statements under the Private Securities Litigation Reform Act of 1995. Camden
National Corporation (the "Company") may make written or oral forward-looking
statements in other documents we file with the SEC, in our annual reports to
shareholders, in press releases and other written materials, and in oral
statements made by our officers, directors or employees. You can identify
forward-looking statements by the use of the words "believe," "may," "expect,"
"anticipate," "intend," estimate," "assume," "will," "should," and other
expressions which predict or indicate future events or trends and which do not
relate to historical matters. You should not rely on forward-looking statements,
because they involve known and unknown risks, uncertainties and other factors,
some of which are beyond the control of the Company. These risks, uncertainties
and other factors may cause the actual results, performance or achievements of
the Company to be materially different from the anticipated future results,
performance or achievements expressed or implied by the forward-looking
statements.
Some of the factors that might cause these differences include the following:
changes in general, national or regional economic conditions; changes in loan
default and charge-off rates; reductions in deposit levels necessitating
increased borrowing to fund loans and investments; changes in interest rates;
changes in laws and regulations; changes in the size and nature of the Company's
competition; and changes in the assumptions used in making such forward-looking
statements. You should carefully review all of these factors, and you should be
aware that there may be other factors that could cause these differences,
including, among others, the factors listed under "Certain Factors Affecting
Future Operating Results," beginning on page 16. Readers should carefully review
the factors described under "Certain Factors Affecting Future Operating Results"
and should not place undue reliance on our forward-looking statements.
These forward-looking statements were based on information, plans and estimates
at the date of this report, and the Company does not promise to update any
forward-looking statements to reflect changes in underlying assumptions or
factors, new information, future events or other changes.
Item 1. Business
Overview. The Company is a publicly-held, multi-bank, financial institution
holding company incorporated under the laws of the State of Maine and
headquartered in Camden, Maine. The Company makes its products services
available directly and indirectly through its subsidiaries, Camden National Bank
("CNB"), UnitedKingfield Bank ("UnitedKingfield") and Trust Company of Maine,
Inc. ("TCOM"). The Consolidated Financial Statements of the Company accompanying
this Form 10-K include the accounts of the Company, CNB, UnitedKingfield and
TCOM. All inter-company accounts and transactions have been eliminated in
consolidation.
Descriptions of the Company and the Company's Subsidiaries. A brief description
of each of the Company, CNB, UnitedKingfield and TCOM follows.
The Company. The Company was founded in January 1984 following a corporate
reorganization in which the shareholders of CNB exchanged their shares of CNB
stock for shares of the Company stock. As a result of this share exchange, the
Company became CNB's sole parent. In December 1995, the Company merged with
UnitedCorp, a bank holding company headquartered in Bangor, Maine, and, as a
result thereof, acquired (a) 100% of the outstanding stock of United Bank, a
Maine-chartered stock banking institution with its principal office in Bangor,
Maine, and (b) 51% of the outstanding stock of TCOM.
On December 20, 1999, the Company completed its acquisition of KSB Bancorp, Inc.
("KSB"), a publicly-held, bank holding company organized under the laws of the
State of Delaware and having its principal office in the State of Maine, with
one principal subsidiary, Kingfield Savings Bank ("Kingfield Bank"), a
Maine-chartered stock savings bank with its principal office in Kingfield,
Maine. The Company's acquisition of KSB was accounted for
Page 3
<PAGE>
under the pooling-of-interests method and, as such, financial information
included in this report presents the combined financial condition and results of
operations of both companies as if they had operated as a combined entity for
all periods presented. As of December 31, 2000, the Company's securities
consisted of one class of common stock, no par value, of which there were
8,145,341 shares outstanding held of record by approximately 1,026 shareholders.
The Company is a bank holding company ("BHC") registered with the Board of
Governors of the Federal Reserve System (the "FRB") under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), and is subject to supervision,
regulation and examination by the FRB. The Company is also considered a Maine
financial holding company for purposes of the laws of the State of Maine, and as
such, is also subject to the jurisdiction of the Superintendent of the Maine
Bureau of Banking (the "Superintendent").
Camden National Bank. CNB is a national banking association chartered under the
laws of the United States and having its principal office in Camden, Maine.
Originally founded in 1875, CNB became a direct, wholly owned subsidiary of the
Company as a result of a January 1984 corporate reorganization in which the
shareholders of CNB exchanged their shares of CNB stock for shares of the
Company's stock.
CNB offers its products and services primarily in the communities of Belfast,
Bucksport, Camden, Damariscotta, Rockland, Thomaston, Union, Vinalhaven and
Waldoboro, and focuses primarily on attracting deposits from the general public
through its branches and using such deposits to originate residential mortgage
loans, commercial business loans, commercial real estate loans, and a variety of
consumer loans. CNB customers may also access these products and services using
other media, including CNB's Internet web site located at
www.camdennational.com.
CNB is a Federal Reserve member bank and is subject to supervision, regulation
and examination by the Comptroller of the Currency (the "OCC"). Its deposits are
insured by the Federal Deposit Insurance Corporation (the "FDIC") up to the
maximum amount permitted by law.
UnitedKingfield Bank. UnitedKingfield, a wholly owned subsidiary of the
Company, is a financial institution chartered under the laws of the State of
Maine and having its principal office in Bangor, Maine. UnitedKingfield is the
successor by merger, effective February 4, 2000, of United Bank and Kingfield
Bank, and is subject to regulation, supervision and examination by the FDIC and
the Superintendent. Its deposits are insured by the FDIC up to the maximum
amount permitted by law.
UnitedKingfield offers its products and services primarily in the communities of
Bangor, Bingham, Corinth, Dover-Foxcroft, Farmington, Greenville, Hampden,
Hermon, Jackman, Kingfield, Lewiston, Madison, Milo, Phillips, Rangeley,
Stratton, Strong and Winterport, Maine, and focuses primarily on attracting
deposits from the general public through its branches and using such deposits to
originate residential mortgage loans, commercial business loans, commercial real
estate loans, and a variety of consumer loans. UnitedKingfield customers may
also access these products and services using other media, including
UnitedKingfield's Internet web site located at www.unitedkingfield.com.
Trust Company of Maine, Inc. TCOM, a majority owned subsidiary of the Company,
is a nondepository trust company chartered under the laws of the State of Maine
and having its principal office in Bangor, Maine. TCOM was acquired by the
Company in December 1995 through the Company's merger with UnitedCorp, then the
parent of TCOM.
TCOM provides a broad range of trust, trust- related and investment services, in
addition to retirement and pension plan management services, to both individual
and institutional clients. The financial services provided by TCOM complement
the services provided by the Company's subsidiary banks by offering customers
investment management services.
Page 4
<PAGE>
TCOM is subject to supervision, regulation and examination by the Superintendent
and also is subject to supervision, examination and reporting requirements under
the BHC Act and the regulations of the FRB.
Competition. The Company competes principally in mid-coast Maine through CNB,
its largest subsidiary bank. CNB considers its primary market areas to be in
Knox County and Waldo County, each in the State of Maine. The combined
population of these two counties is approximately 76,000 people, and their
economies are based primarily on tourism but also are supported by a substantial
population of retirees. Major competitors in these market areas 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 CNB's primary market areas include insurance companies, money market
funds, consumer finance companies and financing affiliates of consumer durable
goods manufacturers.
The Company, through UnitedKingfield, also competes in both the central and
western Maine areas. Most of UnitedKingfield's offices are located in
communities that can generally be characterized as rural areas, with the
exception of Bangor and Lewiston, each cities located in the State of Maine. The
Bangor and Lewiston areas have populations of approximately 100,000 and 39,000
people, respectively. Major competitors in these market areas 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 UnitedKingfield's market area include insurance companies, money market
funds, consumer finance companies and financing affiliates of consumer durable
goods manufacturers.
The Company and its subsidiary banks generally have been able to compete
effectively with other financial institutions emphasizing customer service,
including local decision-making, establishing long-term customer relationships
and building customer loyalty and by providing products and services designed to
address the specific needs of their customers. No assurance can be given,
however, that the Company and its subsidiary banks will continue to be able to
compete effectively with other financial institutions in the future.
The Company's Philosophy. The Company is committed to the philosophy of serving
the financial needs of customers in local communities. The Company, through CNB
and UnitedKingfield, has branches that are located in small towns within the
Company's geographic market area. 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 subsidiary 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, and no material
portion of the Company's loans are concentrated within a single industry or
group of related industries.
The Company's Growth. The Company had consolidated asset growth of 8.9%, or
$82.5 million, during 2000. The primary factor contributing to this growth was
the increase in lending activity at the Company's subsidiary banks. As the
business continued to grow during this past year, each of the Company's
subsidiary banks focused on customer service. The Company's performance-based
compensation program also supported this growth by creating an environment where
employees have a more personal interest in the performance of the Company and
are rewarded for balancing profit with growth and quality with productivity.
The Company's Employees. The Company employs approximately 300 people on a full-
time equivalent basis. The Company's management believes that employee relations
are good, and there currently are no known disputes between management and
employees.
The Company's Employee Incentives. All Company employees are eligible for
participation in the Company's Retirement Savings 401(k) Plan, and certain
Executive Officers of the Company may also participate in the Company's 1993
Stock Option Plan and its Supplemental Executive Retirement Plan.
Page 5
<PAGE>
In addition, the Company, as successor to KSB, maintains a Bank Recognition and
Retention Plan ("BRRP") as a method of providing certain officers and other
employees of the Company with a proprietary interest in the Company. During
1994, the Company contributed funds to the BRRP to enable certain officers and
employees to acquire, in the aggregate, 56,045 shares of common stock of the
Company. Participants are vested at a rate of 20% per year commencing one year
from the date of the award. All previous awards made under the BRRP will be
vested in 2003. The Company does not intend to make any additional awards under
the BRRP.
Supervision and Regulation. The business in which the Company and its
subsidiaries are engaged is subject to extensive supervision, regulation and
examination by various federal and state bank regulatory agencies, including the
FRB, the OCC, the FDIC and the Superintendent, as well as other governmental
agencies in the states in which the Company and its subsidiaries operate. The
supervision, regulation and examination to which the Company and its
subsidiaries are subject are intended primarily to protect depositors or are
aimed at carrying out broad public policy goals, and not necessarily for the
protection of shareholders.
Some of the more significant statutory and regulatory provisions applicable to
banks and BHCs to which the Company and its subsidiaries are
subject are described more fully below, together with certain statutory and
regulatory matters concerning the Company and its subsidiaries. The description
of these statutory and regulatory provisions does not purport to be complete and
is qualified in its entirety by reference to the particular statutory or
regulatory provision. Any change in applicable law or regulation may have a
material effect on the Company's business and operations, as well as those of
its subsidiaries. The Company's shareholders generally are not subject to these
statutory and regulatory provisions.
BHCs - Activities and Other Limitations. As a registered BHC, the Company is
subject to regulation under the BHC Act and to examination and supervision by
the FRB, and is required file reports with, and provide additional information
requested by, the FRB. The FRB has the authority to issue orders to BHCs to
cease and desist from unsound banking practices and violations of conditions
imposed by, or violations of agreements with, the FRB. The FRB is also empowered
to assess civil monetary penalties against companies or individuals who violate
the BHC Act or orders or regulations thereunder, to order termination of non-
banking activities of non-banking subsidiaries of BHCs, and to order termination
of ownership and control of a non-banking subsidiary by a BHC.
Various other laws and regulations, including Sections 23A and 23B of the
Federal Reserve Act, as amended (the "FRA"), generally limit borrowings,
extensions of credit and certain other transactions between the Company and its
non-bank subsidiaries and its affiliate insured depository institutions. Section
23A of the FRA also generally requires that an insured depository institution's
loans to non-bank affiliates be secured in appropriate amounts, and Section 23B
of the FRA generally requires that transactions between an insured depository
institution and its non-bank affiliates be on arm's length terms. These laws and
regulations also limit BHCs and their subsidiaries from engaging in certain
tying arrangements in connection with any extension of credit, sale or lease of
property, or furnishing of services.
The principal purpose of the BHC Act and the FRB's implementing regulation,
Regulation Y, is to regulate the acquisition of control of banks by companies
and individuals, to define and regulate the nonbanking activities in which BHCs
may engage, and to provide procedures for securing approval for these
transactions and activities, as necessary.
The BHC Act prohibits a BHC from acquiring substantially all the assets of a
bank or acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any bank, or increasing such ownership or control of any bank,
or merging or consolidating with any BHC without prior FRB approval. Provided
that a BHC does not become a "financial holding company" under the Gramm-Leach-
Bliley Act of 1999 (as discussed below), the BHC Act also prohibits a BHC from
acquiring a direct or indirect interest in or control of more than 5% of the
voting shares of any company which is not a bank or BHC and from engaging
directly or indirectly in activities other than those of banking, managing or
controlling banks or furnishing services to its subsidiary banks, except that it
may engage in
Page 6
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and may own shares of companies engaged in certain activities the FRB has
determined to be so closely related to banking managing of and controlling banks
as to be a proper incident thereto. In making such determinations, the FRB is
required to weigh the expected benefit to the public, such as greater
convenience, increased competition or gains in efficiency, against the possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interests or unsound banking practices. In addition,
Maine law imposes certain approval requirements with respect to acquisitions of
banks and other entities by a Maine financial institution holding company.
The Gramm-Leach-Bliley Act of 1999 repeals provisions of the Glass-Steagall Act:
Section 20, which restricted the affiliation of banks with firms "engaged
principally" in specified securities activities; and Section 32, which
restricted officer, director, or employee interlocks between a bank and any
company or person "primarily engaged" in specified securities activities.
Moreover, the general effect of the law is to establish a comprehensive
framework to permit affiliations among commercial banks, insurance companies,
securities firms, and other financial service providers by revising and
expanding the BHC Act framework to permit a holding company system, such as the
Company, to engage in a full range of financial activities through a new entity
known as a financial holding company. "Financial activities" is broadly defined
to include not only banking, insurance, and securities activities, but also
merchant banking and additional activities that the FRB, in consultation with
the Secretary of the Treasury, determines to be financial in nature, incidental
to such financial activities, or complementary activities that do not pose a
substantial risk to the safety and soundness of depository institutions or the
financial system generally. In sum, the Gramm-Leach-Bliley Act of 1999 permits
BHCs that qualify and elect to be treated as a financial holding company to
engage in a significantly broader range of financial activities than the
companies described above that are not so treated.
Generally, the Gramm-Leach-Bliley Act of 1999 and its implementing regulations:
o repeal historical restrictions on, and eliminates many federal and state
law barriers to, affiliations among banks, securities firms, insurance
companies, and other financial service providers;
o permit investment in non-financial enterprises, subject to significant
operational, holding period and other restrictions;
o provide a uniform framework for the functional regulation of the
activities of banks, savings institutions, and their holding companies;
o broaden the activities that may be conducted by national banks (and
derivatively state banks), banking subsidiaries of BHCs, and their
financial subsidiaries;
o require all financial institutions to provide notice of their privacy
policies at specified times to their retail customers and consumers of
their financial products or services, and permits retail customers and
consumers, under certain circumstances, to prohibit financial institutions
from sharing certain nonpublic personal information pertaining to them by
opting out of such sharing;
o establish guidelines for safeguarding the security, confidentiality and
integrity of customer information;
o adopt a number of provisions related to the capitalization, membership,
corporate governance, and other measures designed to modernize the Federal
Home Loan Bank system;
o modify the laws governing the implementation of the Community Reinvestment
Act of 1977; and
o address a variety of other legal and regulatory issues affecting both
day-to-day operations and long-term activities of financial institutions.
Page 7
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In order to elect to become a financial holding company and engage in the new
activities, a BHC, such as the Company, must meet certain tests and file an
election form with the FRB, which generally is acted on within 30 days. To
qualify, all of a BHC's subsidiary banks must be well-capitalized and
well-managed, as measured by regulatory guidelines. In addition, to engage in
the new activities each of the BHC's banks must have been rated `satisfactory'
or better in its most recent federal Community Reinvestment Act evaluation.
Furthermore, a BHC that elects to be treated as a financial holding company may
face significant consequences if its banks fail to maintain the required capital
and management ratings, including entering into an agreement with the FRB which
imposes limitations on its operations and may even require divestitures. Such
possible ramifications may limit the ability of a bank subsidiary to
significantly expand or acquire less than well-capitalized and well-managed
institutions. At this time, the Company has not determined whether it will
become a financial holding company.
Further, the Gramm-Leach-Bliley Act of 1999, which includes new sections of the
National Bank Act and the Federal Deposit Insurance Act governing the
establishment and operation of financial subsidiaries, permits national banks
and state banks, to the extent permitted under state law, such as CNB and
UnitedKingfield, to engage in certain new activities which are permissible for
subsidiaries of a financial holding company. Further, the Gramm-Leach-Bliley Act
of 1999 expressly preserves the ability of national banks and state banks to
retain all existing subsidiaries. In order to form a financial subsidiary, a
national bank or state bank must be well-capitalized, and such banks would be
subject to certain capital deduction, risk management and affiliate transaction
rules. Also, the FDIC has issued final rules governing the establishment of
financial subsidiaries by insured state nonmember banks, such as
UnitedKingfield. The final rules restate the FDIC's position that activities
that a national bank could only engage in through a financial subsidiary, such
as securities underwriting, only may be conducted in a financial subsidiary by a
state nonmember bank. However, activities that a national bank could not engage
in through a financial subsidiary, such as real estate development or
investment, will continue to be governed by the FDIC's standard activities
rules. Moreover, to mirror the FRB's actions with respect to state member banks,
the FDIC's final rules provide that a state bank subsidiary that engages only in
activities that the bank could engage in directly (regardless of the nature of
the activities) will not be deemed a financial subsidiary.
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. The
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 generally
authorizes BHCs to acquire banks located in any state, possibly subject to
certain state-imposed age and deposit concentration limits, and also generally
authorizes interstate mergers and to a lesser extent, interstate branching.
Declaration of Dividends. According to its Policy Statement on Cash Dividends
Not Fully Covered by Earnings (the "FRB Dividend Policy"), the FRB considers
adequate capital to be critical to the health of individual banking
organizations and to the safety and stability of the banking system. One of the
major components of the capital adequacy of a bank or a BHC is the strength of
its earnings and the extent to which its earnings are retained and added to
capital or paid to shareholders in the form of cash dividends. Accordingly, the
FRB Dividend Policy suggests that banks and BHCs generally should not maintain
their existing rate of cash dividends on common stock unless the organization's
net income available to common shareholders over the past year has been
sufficient to fully fund the dividends and the prospective rate of earnings
retention appears consistent with the organization's capital needs, asset
quality and overall financial condition. The FRB Dividend Policy reiterates the
FRB's belief that a BHC should not maintain a level of cash dividends to its
shareholders that places undue pressure on the capital of bank subsidiaries, or
that can be funded only through additional borrowings or other arrangements that
may undermine the BHC's ability to serve as a source of strength.
Under Maine law, a corporation's board of directors may declare and the
corporation may pay dividends out of the corporation's unreserved and
unrestricted earned surplus, or out of the unreserved and unrestricted net
earnings of the current fiscal year and the next preceding fiscal year taken as
a single period, except under certain circumstances, including when the
corporation is insolvent or when the payment of the dividend would render the
corporation insolvent or when the declaration or payment would be contrary to
the corporation's charter. Similar limitations generally apply to investor-
owned, Maine financial institutions.
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Dividend payments by national banks, such as CNB, also are subject to certain
restrictions. For instance, national banks generally may not declare a dividend
in excess of the bank's undivided profits and, absent OCC approval, if the total
amount of dividends declared by the national bank in any calendar year exceeds
the total of the national bank's retained net income of that year to date
combined with its retained net income for the preceding two years. National
banks also are prohibited from declaring or paying any dividend it, after making
the dividend, the national bank would be considered "undercapitalized" (defined
by reference to other OCC regulations).
Federal bank regulatory agencies also have authority to prohibit banking
institutions from paying dividends if those agencies determine that, based on
the financial condition of the bank, such payment would constitute an unsafe or
unsound practice.
Capital Requirements. The FRB has adopted capital adequacy guidelines pursuant
to which it assesses the adequacy of capital in examining and supervising a BHC
and in analyzing applications to it under the BHC Act. The FRB's capital
adequacy guidelines apply on a consolidated basis to BHCs, such as the Company,
with consolidated assets of $150 million or more.
The FRB's capital adequacy guidelines generally require BHCs to maintain total
capital equal to 8% of total risk-adjusted assets and off-balance sheet items,
with at least one-half of that amount consisting of Tier 1 or core capital and
the remaining amount consisting of Tier 2 or supplementary capital. Tier 1
capital for BHCs generally consists of the sum of common stockholders' equity
and perpetual preferred stock (subject in the case of the latter to limitations
on the kind and amount of such stocks which may be included as Tier 1 capital),
less goodwill. Tier 2 capital generally consists of hybrid capital instruments;
perpetual preferred stock, which is not eligible to be included as Tier 1
capital; term subordinated debt and intermediate-term preferred stock; and,
subject to limitations, general allowances for loan losses. Assets are adjusted
under the risk-based guidelines to take into account different risk
characteristics.
In addition to the risk-based capital requirements, the FRB requires BHCs to
maintain a minimum leverage capital ratio of Tier 1 capital (defined by
reference to the risk-based capital guidelines) to total assets of 3.0%. Total
assets for this purpose do not include goodwill and any other intangible assets
and investments that the FRB determines should be deducted from Tier 1 capital.
The FRB has announced that the 3.0% leverage capital ratio requirement is the
minimum for the strong BHCs without any supervisory, financial or operational
weaknesses or deficiencies or those, which are not experiencing or anticipating
significant growth. All other BHCs are required to maintain a minimum leverage
capital ratio of at least 4.0%. BHCs with supervisory, financial, operational,
or managerial weaknesses, as well as BHCs that are anticipating or experiencing
significant growth, are expected to maintain capital ratios well above the
minimum levels.
The Company's risk-based capital ratio and leverage capital ratio currently are,
and its management expects these ratios to remain, in excess of regulatory
requirements. Separate, but substantially similar, capital requirements under
OCC and FDIC regulations apply to the Company's bank subsidiaries.
Information concerning the Company and its subsidiaries with respect to capital
requirements appearing under the captions "Capital Resources" and from Note 19,
"Regulatory Matters," of the Notes to Consolidated Financial Statements of the
Company's Annual Report to Shareholders for the year ended December 31, 2000 is
incorporated herein by reference.
Activities and Investments of Insured State-Chartered Banks. FDIC insured,
state-chartered banks, such as UnitedKingfield, are also subject to similar
restrictions on their business and activities. In particular, Section 24 of the
Federal Deposit Insurance Act, as amended (the "FDIA"), generally limits the
activities as principal and equity investments of FDIC-insured, state-chartered
banks, such as UnitedKingfield, to those that are permissible to national banks.
In 1999, the FDIC substantially revised its regulations implementing Section 24
of the FDIA to ease the ability of
Page 9
<PAGE>
state-chartered banks to engage in certain activities not permissible for
national banks, and to expedite FDIC review of bank applications and notice to
engage in such activities.
Activities and Investments of National Banking Associations. National banking
associations must comply with the National Bank Act and the regulations
promulgated thereunder by the OCC which limit the activities of national banking
associations to those that are deemed to be part of or incidental to the
"business of banking." Activities that are part of or incidental to the business
of banking include taking deposits, borrowing and lending money and discounting
or negotiating paper. Subsidiaries of national banking associations generally
may only engage in activities permissible for the parent national bank.
Item 2. Properties
The Company operates in 30 facilities. The headquarters of the Company and the
headquarters and main office of CNB is located at Two Elm Street, Camden, Maine,
and CNB owns these premises. The building has 15,500 square feet of space on 3
levels. CNB also owns 7 of its branches and the facility in which the operations
departments of the Company are located. None of these owned facilities is
subject to a mortgage. CNB also leases three branches under long-term leases,
which expire in, respectively, May 2010, January 2020 and December 2077. During
2000, CNB leased space in Portland, Maine from which it operates a loan
production office. This lease is for 703 square feet and expires in March 2002.
The main office of UnitedKingfield is located at 145 Exchange Street, Bangor,
Maine, and is owned by UnitedKingfield. The building has 25,600 square feet of
space on two levels. UnitedKingfield occupies 16,975 square feet of space on
both floors. TCOM leases 2,100 square feet of office space on the second floor
and 2,042 square feet on the first floor of this building. Other occupants of
this building include (a) the law firm of Russell, Lingley & Silver, P.A., which
leases 2,533 square feet on the second floor, and (b) L&H Investors, a property
management firm, and Cullen Williams, CPA, who have a joint lease for 1,920
square feet on the second floor. UnitedKingfield also owns 14 of its other
facilities, none of which is subject to a mortgage. UnitedKingfield also leases
3 branches and a parcel of land, which expire in, respectively, May 2001,
September 2002, February 2003 and August 2009.
Item 3. Pending Legal Proceedings
The Company is a party to litigation and claims arising in the normal course of
business. The Company is currently a defendant in a civil action pending in the
Cumberland County Superior Court (the "Court"), which action was commenced in
September 1999 resulting from a denial of credit. The plaintiff, Joseph A.
Gamache, has asserted causes of action against the Company for interference with
advantageous relationship, fraud, negligent misrepresentation, intentional
infliction of emotional distress, breach of fiduciary duty, negligence,
vicarious liability and punitive damages. Mr. Gamache seeks total damages
(compensatory and punitive) of approximately $6 million. In December 2000, the
Court entered a summary judgment for defendants Kingfield Bank and an employee
of the Company on the plaintiff's alleged causes of action for breach of
fiduciary duty and negligence. The remaining causes of action are scheduled for
trial on July 30, 2001. The Company believes that the lawsuit has no merit and
plans to vigorously defend itself at the trial.
There are no other material legal matters to which the Company is a party or to
which any of its property is subject; however, the Company is a party to
ordinary routine litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Page 10
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters
The information appearing under the caption "Common Stock Information" on page
31 of the Company's Annual Report to Shareholders for the year ended December
31, 2000 is incorporated herein by reference.
Item 6. Selected Financial Data
Selected year-end financial information for the past five years appearing under
the caption "Selected Five-Year Financial Data" on page 33 of the Company's
Annual Report to Shareholders for the year ended December 31, 2000 is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Annual Report, including the information incorporated herein by reference
contain certain statements that may be considered forward-looking statements
under the Private Securities Litigation Reform Act of 1995. You can identify
forward-looking statements by the use of the words "believe," "may," "expect,"
"anticipate," "intend," estimate," "assume," "will," "should," and other
expressions which predict or indicate future events or trends and which do not
relate to historical matters. The Company's actual results could differ
materially from those projected in the forward-looking statements as a result
of, among other factors, the factors discussed on page 16 below, changes in
general, national or regional economic conditions; changes in loan default and
charge-off rates; reductions in deposit levels necessitating increased borrwing
to fund loans and investments; changes in interest rates; changes in laws and
regulations; changes in the size and nature of the Company's competition; and
changes in the assumptions used in making such forward-looking statements.
Readers should carefully review the factors described on page 16 below and
should not place undue reliance on our forward looking statements. The Company
assumes no obligations to update any forward-looking statements.
The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 21 through
31 of the Company's Annual Report to Shareholders for the year ended December
31, 2000 is incorporated herein by reference and should be read in conjunction
with the following text and tables.
The following tables set forth the Company's investment securities at book
carrying amount as of December 31, 2000, 1999, and 1998.
2000 1999 1998
---- ---- ----
Dollars in thousands
Securities available for sale:
U.S. Treasury and agency $ 58,708 $ 65,046 $ 7,095
Mortgage-backed securities 30,118 13,104 81,820
State and political subdivisions 7,928 7,520 8,143
Other debt securities 44,466 46,938 2,025
Equity securities 34,327 31,389 21,769
-------- -------- --------
175,547 163,997 120,852
-------- -------- --------
Securities held to maturity:
U.S. Treasury and agency 300 5,949 6,093
Mortgage-backed securities 55,658 60,963 89,428
State and political subdivisions 1,142 1,152 1,338
Other debt securities 595 129 982
-------- -------- --------
57,695 68,193 97,841
-------- -------- --------
$233,242 $232,190 $218,693
======== ======== ========
Page 11
<PAGE>
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 of Boston ("FHLBB") loans enables the Company to hold a portion of the
portfolio to maturity. The table on the following pages summarizes the
investment portfolios maturities and yields at December 31, 2000.
<TABLE>
<CAPTION>
Available for sale Held to maturity
---------------------- ----------------------
Book Yield to Amortized Yield to
Dollars in thousands Value Maturity Cost Maturity
-------- -------- --------- --------
<S> <C> <C> <C> <C>
U.S. Treasury and Agency:
Due in 1 year or less $ 0 0.000% $ 300 3.218%
Due in 1 to 5 years 33,233 6.249% 0 0.000%
Due in 5 to 10 years 25,475 6.551% 0 0.000%
Due after 10 years 0 0.000% 0 0.000%
-------- -------- -------- --------
58,708 6.380% 300 3.218%
-------- -------- -------- --------
Mortgage-backed securities:
Due in 1 year or less 0 0.000% 1,182 7.256%
Due in 1 to 5 years 8,616 6.829% 4,758 7.714%
Due in 5 to 10 years 6,694 6.829% 3,500 7.185%
Due after 10 years 14,808 7.140% 46,218 7.393%
-------- -------- -------- --------
30,118 6.982% 55,658 7.405%
-------- -------- -------- --------
State and political subdivisions:
Due in 1 year or less 0 0.000% 415 4.400%
Due in 1 to 5 years 192 4.125% 627 6.784%
Due in 5 to 10 years 7,147 4.092% 100 6.250%
Due after 10 years 589 5.000% 0 0.000%
-------- -------- -------- --------
7,928 4.160% 1,142 5.870%
-------- -------- -------- --------
Other debt securities:
Due in 1 year or less 0 0.000% 0 0.000%
Due in 1 to 5 years 0 0.000% 595 7.776%
Due in 5 to 10 years 0 0.000% 0 0.000%
Due after 10 years 44,466 6.534% 0 0.000%
-------- -------- -------- --------
44,466 6.534% 595 7.776%
-------- -------- -------- --------
Other equity securities:
Due in 1 year or less 0 0.000% 0 0.000%
Due in 1 to 5 years 9,071 6.895% 0 0.000%
Due in 5 to 10 years 500 6.750% 0 0.000%
Due after 10 years 24,756 7.653% 0 0.000%
-------- -------- -------- --------
34,327 7.440% 0 0.000%
-------- -------- -------- --------
Total securities $175,547 6.629% $ 57,695 7.356%
======== ======== ======== ========
</TABLE>
Page 12
<PAGE>
Total loans increased by $65.9 million, or 10.4%, in 2000. 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
<TABLE>
<CAPTION>
As of December 31, 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial $364,169 $316,411 $269,747 $226,981 $185,735
Residential real estate 235,554 226,548 202,952 193,327 188,109
Consumer 90,231 83,832 78,496 50,433 30,519
Municipal 10,924 8,307 17,199 10,727 6,080
Other 462 336 1,311 1,880 893
-------- -------- -------- -------- --------
$701,340 $635,434 $569,705 $483,348 $411,336
======== ======== ======== ======== ========
</TABLE>
Loan demand also affects the Company's liquidity position. However, of the loans
maturing over 1 year, approximately 56% are variable rate loans. The following
table presents the maturities of loans at December 31, 2000:
Dollars in thousands Through More Than
1 Year 5 Years 5 Years Total
Maturity Distribution:
Fixed Rate:
Commercial $ 15,166 $ 54,795 $ 17,118 $ 87,079
Residential real estate 1,488 4,850 158,172 164,510
Consumer 3,165 18,506 20,772 42,443
Variable Rate:
Commercial 29,686 44,583 202,821 277,090
Residential real estate 20 813 70,211 71,044
Consumer 2,307 21,501 24,442 48,250
Municipal 5,387 3,761 1,776 10,924
-------- -------- -------- --------
$ 57,219 $148,809 $495,312 $701,340
======== ======== ======== ========
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 considered are foreclosure, collecting on
guarantees, restructuring the loan, or collection lawsuits.
Page 13
<PAGE>
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, 2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Nonperforming loans:
Non-accrual loans 4,644 6,135 $4,078 $3,305 $3,569
Accruing loans past due 90
days or more 1,844 196 613 1,004 599
------ ------ ------ ------ ------
Total nonperforming loans 6,488 6,331 4,691 4,309 4,168
------ ------ ------ ------ ------
Other real estate owned 380 1,405 1,052 1,532 1,381
------ ------ ------ ------ ------
Total nonperforming assets $6,868 $7,736 $5,743 $5,841 $5,549
====== ====== ====== ====== ======
Ratios:
Nonperforming loans
to total loans 0.93% 1.00% 0.82% 0.89% 1.01%
Allowance for loan losses
to nonperforming loans 166.48% 148.32% 172.50% 162.03% 128.72%
Nonperforming assets
to total assets 0.68% 0.83% 0.68% 0.80% 0.86%
Allowance for loan losses
to nonperforming assets 157.27% 121.38% 140.90% 119.53% 96.68%
The maturity dates of certificates of deposit, including broker certificates of
deposit, in denominations of $100,000 or more are 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, 2000
--------
Time remaining until maturity:
Less than 3 months $ 31,957
3 months through 6 months 18,957
6 months through 12 months 17,949
Over 12 months 32,304
--------
$101,167
========
The dividend payout ratio was 37.17%, 40.90%, 33.74%, 29.31%, and 24.70% for
2000, 1999, 1998, 1997 and 1996, respectively. The average equity to average
assets ratio was 8.55%, 8.71%, 10.05%, 10.07% and 10.96% for 2000, 1999, 1998,
1997 and 1996, respectively.
The borrowings utilized by the Company have primarily been advances from the
FHLBB. In addition, the Company uses Federal 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 6 months.
Page 14
<PAGE>
The following table sets forth certain information regarding borrowed funds for
the years ended December 31, 2000, 1999, and 1998:
<TABLE>
<CAPTION>
At or for the year ended December 31,
Dollars in thousands 2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Average balance outstanding $198,597 $146,627 $ 93,204
Maximum amount outstanding at
any month-end during the year 209,652 173,924 163,013
Balance outstanding at end of year 168,440 173,924 113,682
Weighted average interest rate during the year 5.87% 4.90% 5.23%
Weighted average interest rate at end of year 6.18% 5.07% 4.82%
</TABLE>
Interest rate sensitivity or "gap" management involves the maintenance of an
appropriate balance between interest sensitive assets and interest sensitive
liabilities. This reduces interest rate risk exposure while also providing
liquidity to satisfy the cash flow requirements of operations and 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 sets forth the amount of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2000, which are
anticipated by the Company, based upon certain assumptions, to reprice or mature
in each of the future time periods shown:
<TABLE>
<CAPTION>
Less
Than Through More Than
Dollars in thousands 1 Year 5 Years 5 Years Total
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest-earning assets:
Fixed rate loans $ 25,206 $ 81,912 $197,838 $304,956
Variable rate loans 396,384 0 0 396,384
Investment securities
Available for sale 0 51,112 124,435 175,547
Held to maturity 1,897 5,980 49,818 57,695
--------- -------- -------- --------
Total interest-earning assets 423,487 139,004 372,091 934,582
--------- -------- -------- --------
Interest-bearing liabilities:
Savings accounts 20,000 0 101,292 121,292
NOW accounts 0 0 87,270 87,270
Money market accounts 81,730 0 0 81,730
Certificate accounts 295,286 49,478 25,673 370,437
Borrowings 78,348 32,000 22,000 132,348
--------- -------- -------- --------
Total interest-bearing liabilities 475,364 81,478 236,235 793,077
--------- -------- -------- --------
Interest sensitivity gap per period $ (51,877) $ 57,526 $135,856
========= ======== ========
Cumulative interest sensitivity gap $ (51,877) $ 5,649 $141,505
========= ======== ========
Cumulative interest sensitivity gap
as a percentage of total assets (5%) 1% 14%
Cumulative interest-earning assets as a
percentage of interest-sensitive liabilities 89% 101% 118%
</TABLE>
Page 15
<PAGE>
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
Interest Rate Volatility May Reduce the Company's Profitability.
The profitability of the Company's subsidiary banks depends to a large extent
upon their net interest income, which is the difference between their interest
income on interest-earning assets, such as loans and investments, and their
interest expense in interest bearing liabilities, such as deposits and borrowed
funds.
The Company's net interest income can be affected significantly by changes in
market interest rates. In particular, changes in relative interest rates may
reduce the Company's net interest income as the difference between interest
income and interest expense decreases. As a result, the Company has adopted
asset and liability management policies to minimize the potential adverse
effects of changes in interest rates on net interest income, primarily by
altering the mix and maturity of loans, investments and funding sources.
However, the Company cannot assure you that a decrease in interest rates will
not negatively impact its results from operations or financial position. Since
market interest rates may change by differing magnitudes and at different times,
significant changes in interest rates over an extended period of time could
reduce overall net interest income. An increase in interest rates could also
have a negative impact on the Company's results of operations by reducing the
ability of borrowers to repay their current loan obligations, which could not
only result in increased loan defaults, foreclosures and write-offs, but also
necessitate further increases to the Company's allowance for loan losses.
The Company's Allowance for Loan Losses May Not Be Adequate to Cover Actual Loan
Losses.
The Company makes various assumptions and judgments about the collectibility of
its loan portfolio and provides an allowance for potential losses based on a
number of factors. If the Company's assumptions are wrong, its allowance for
loan losses may not be sufficient to cover the losses it actually experiences,
which would have an adverse effect on the Company's operating results, and may
also cause the Company to increase the allowance in the future. Further, the
Company's net income would decrease if it had to add additional amounts to its
allowance for loan losses.
The Company's loans Are Concentrated in Certain Areas of Maine and Adverse
Conditions in those Markets Could Adversely Affect Operations.
The Company is exposed to real estate and economic factors in the central,
western and midcoast areas of Maine because virtually all of its loan portfolio
is concentrated among borrowers in these markets. Further, because a substantial
portion of the Company's loan portfolio is secured by real estate in these
areas, the value of the associated collateral is also subject to regional real
estate market conditions. Adverse economic, political or business developments
or natural hazards may affect these areas and the ability of property owners in
these areas to make payments of principal and interest on the underlying
mortgages. If these regions experience adverse economic, political or business
conditions, the Company would likely experience higher rates of loss and
delinquency on its mortgage loans than if its loans were more geographically
diverse.
The Company experiences Strong Competition within Its Markets Which May Impact
Profitability.
Competition in the banking and financial services industry is strong. In its
market areas, the Company competes for loans and deposits with local independent
banks, thrift institutions, savings institutions, mortgage brokerage firms,
credit unions, finance companies, mutual funds, insurance companies, and
brokerage and investment banking firms operating locally as well as nationally.
Many of these competitors have substantially greater resources and lending
limits than those of the Company's banking subsidiaries and may offer services
that the Company's banking subsidiaries do not or cannot provide. The Company's
long-term success depends on the ability of its banking subsidiaries to compete
successfully with other financial institutions in their service areas. Because
the Company maintains a smaller staff and have fewer financial and other
resources than larger institutions with which it competes, the Company may be
limited in its ability to attract
Page 16
<PAGE>
customers. If the Company is unable to attract and retain banking customers, it
may be unable to continue its loan growth and its results of operations and
financial condition may otherwise be negatively impacted.
The Company's Cost of Funds for Banking Operations May Increase as a Result of
General Economic Conditions, Interest Rates and Competitive Pressures.
The Company's banking subsidiaries have traditionally obtained funds principally
through deposits and through borrowings. As a general matter, deposits are a
cheaper source of funds than borrowings, because interest rates paid for
deposits are typically less than interest rates charged for borrowings. If as a
result of general economic conditions, market interest rates, competitive
pressures or otherwise, the value of deposits at the Company's banking
subsidiaries decreases relative to the Company's overall banking operations, the
Company may have to rely more heavily on borrowings as a source of funds in the
future.
Our Banking Business is Highly Regulated.
BHCs, national banking associations and state-chartered banks operate in a
highly regulated environment and are subject to supervision, regulation and
examination by various federal and state bank regulatory agencies, as well as
other governmental agencies in the states in which they operate. Federal and
state laws and regulations govern numerous matters including changes in the
ownership or control of banks and BHCs, maintenance of adequate capital and the
financial condition of a financial institution, permissible types, amounts and
terms of extensions of credit and investments, permissible non-banking
activities, the level of reserves against deposits and restrictions on dividend
payments. The OCC, the FDIC and the Superintendent possess cease and desist
powers to prevent or remedy unsafe or unsound practices or violations of law by
entities subject to their regulation, and the FRB possesses similar powers with
respect to BHCs. These and other restrictions limit the manner in which the
Company and its subsidiaries may conduct business and obtain financing.
Furthermore, the Company's business is affected not only by general economic
conditions, but also by the economic, fiscal and monetary policies of the United
States and its agencies and regulatory authorities, particularly the FRB. The
economic and fiscal policies of various governmental entities and the monetary
policies of the FRB may affect the interest rates CNB and UnitedKingfield must
offer to attract deposits and the interest rates they must charge on loans, as
well as the manner in which they offer deposits and make loans. These economic,
fiscal and monetary policies have had, and are expected to continue to have,
significant effects on the operating results of depository institutions
generally including CNB and UnitedKingfield.
The Company Could Be Held Responsible for Environmental Liabilities of
Properties It Acquires Through Foreclosure.
If the Company is forced to foreclose on a defaulted mortgage loan to recover an
investment it may be subject to environmental liabilities related to the
underlying real property. Hazardous substances or wastes, contaminants,
pollutants or sources thereof may be discovered on properties during the
Company's ownership or after a sale to a third party. The amount of
environmental liability could exceed the value of the real property. There can
be no assurance that the Company would not be fully liable for the entire cost
of any removal and clean-up on an acquired property, that the cost of removal
and clean-up would not exceed the value of the property or that the Company
could recoup any of the costs from any third party.
To the Extent that the Company Acquires Other Companies in the Future, Its
Business May Be Negatively Impacted by Certain Risks Inherent with such
Acquisitions.
Although the Company does not have an aggressive acquisition strategy, it has
acquired, and in the future will continue to consider the acquisition of, other
banking companies. To the extent that the Company acquires other companies in
the future, its business may be negatively impacted by certain risks inherent
with such acquisitions.
Page 17
<PAGE>
These risks include the following:
o the risk that the acquired business will not perform in accordance
with management's expectations;
o the risk that difficulties will arise in connection with the
integration of the operations of the acquired business with the
operations of the Company's businesses;
o the risk that management will divert its attention from other
aspects of the Company's business;
o the risk that the Company may lose key employees of the acquired
business; and
o the risks associated with entering into geographic and product
markets in which the Company has limited or no direct prior
experience.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
The information required by this item is included on pages 29-30 of the
Company's Annual Report to Shareholders for the year ended December 31, 2000,
and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following financial statements and report of independent accountant are
included in the Company's Annual Report to Shareholders for the year ended
December 31, 2000 and are incorporated herein by reference. Page references are
to pages of the Company's Annual Report to Shareholders for the year ended
December 31, 2000.
PAGE
----
Consolidated Statements of Condition
December 31, 2000 and 1999 34
Consolidated Statements of Income for the years ended
December 31, 2000, 1999 and 1998 35
Consolidated Statements of Changes in the Shareholders' Equity
for the years ended December 31, 2000, 1999 and 1998 36
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 37
Notes to Consolidated Financial Statements 38-56
Report of Independent Public Accountant 57
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 on, accounting and financial
disclosures.
Page 18
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated by reference from the
material responsive to such item in the Company's Definitive Proxy Statement
for the 2001 Annual Meeting of Shareholders to filed with the Commission prior
to April 30, 2001.
Item 11. Executive Compensation
The information required by this item is incorporated by reference from the
material responsive to such item in the Company's Definitive Proxy Statement
for the 2001 Annual Meeting of Shareholders to filed with the Commission
prior to April 30, 2001.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference from the
material responsive to such item in the Company's Definitive Proxy Statement
for the 2001 Annual Meeting of Shareholders to filed with the Commission
prior to April 30, 2001.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference from the
material responsive to such item in the Company's Definitive Proxy Statement
for the 2001 Annual Meeting of Shareholders to filed with the Commission
prior to April 30, 2001.
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 the Company's independent public accountant incorporated herein by reference
is included in Item 8 of this Annual 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:
(2.1) Agreement and Plan of Merger, dated as of July 27, 1999, by and among
the Company, Camden Acquisition Subsidiary, Inc., KSB, and Kingfield
Bank (incorporated herein by reference to Exhibit 2.1 to the Company's
Form 8-K filed with the Commission on August 9, 1999).
(3.1) The Company's Articles of Incorporation, as amended to date
(incorporated herein by reference to Exhibit 3.i to the Company's
Registration Statement on Form S-4 filed with the Commission on
September 25, 1995 (Commission No. 33-97340)).
Page 19
<PAGE>
(3.2) The Company's Bylaws, as amended to date (incorporated herein by
reference to Exhibit 3.ii to the Company's Registration Statement on
Form S-4 filed with the Commission on September 25, 1995 (Commission
No. 33-97340)).
(10.1) CNB's 1993 Stock Option Plan (incorporated herein by reference to
Exhibit 10.5 to the Company's Form 10-K for the year ended December 31,
1995 filed with the Commission on April 1, 1996).
(10.2) UnitedCorp's Stock Option Plan (incorporated herein by reference to
Exhibit 10.5 to the Company's Form 10-K for the year ended December 31,
1995 filed with the Commission on April 1, 1996).
(10.3) Employment Agreement, dated as of May 4, 1999, by and between the
Company and its Chief Executive Officer (incorporated herein by
reference to Exhibit 10.8 to the Company's Form 10-Q/A for the quarter
ended June 30, 1999 filed with the Commission on November 15, 1999).
(10.4) KSB's 1993 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit 99.1 to the Company's Form S-8 filed with the
Commission on January 21, 2000 (Commission No. 333-95157)).
(10.5) Amendment No. 1 to the KSB's 1993 Stock Option Plan (incorporated
herein by reference to Exhibit 99.2 to the Company's Form S-8 filed
with the Commission on January 21, 2000 (Commission No. 333-95157)).
(10.6) KSB's 1998 Long-Term Incentive Stock Benefit Plan (incorporated herein
by reference to Appendix A to KSB's Definitive Proxy Statement filed
with the Commission on April 15, 1998).
(10.7) Summary of the Company's Supplemental Executive Retirement Plan
(incorporated herein by reference to Exhibit 10.13 to the Company's
Form 10-K for the year ended December 31, 1999 filed with the
Commission on March 30, 2000.
(10.8)* KSB's Recognition and Retention Plan and Trust Agreement.
(10.9)* Deferred Comp Plan.
(13)* The Company's Annual Report to Shareholders for the year ended December
31, 2000.
(21)* Subsidiaries of the Company.
(23)* Consent of Berry, Dunn, McNeil and Parker, LLP relating to the
Company's financial statements.
- -----------------------
* Filed herewith
Deemed filed only with respect to those portions thereof incorporated herein by
reference:
(b) Reports on Form 8-K:
None.
Page 20
<PAGE>
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
/s/ Robert W. Daigle
- ---------------------------------------------- --------------------------
Robert W. Daigle 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.
/s/ Robert W. Daigle /s/ Susan M. Westfall
- ------------------------------------- ---------------------------------------
Robert W. Daigle Date Susan M. Westfall Date
President, Director Treasurer and
and Chief Executive Officer Chief Financial Officer
/s/ Rendle A. Jones /s/ John S. McCormick, Jr.
- ------------------------------------- ---------------------------------------
Rendle A. Jones Date John S. McCormick, Jr Date
Chairman and Director Director
/s/ Robert J. Gagnon /s/ Richard N. Simoneau
- ------------------------------------- ---------------------------------------
Robert J. Gagnon Date Richard N. Simoneau Date
Director Director
/s/ Ann W. Bresnahan /s/ Arthur E. Strout
- ------------------------------------- ---------------------------------------
Ann W. Bresnahan Date Arthur E. Strout Date
Director Director
/s/ John W. Holmes /s/ Theodore C. Johanson
- ------------------------------------- ---------------------------------------
John W. Holmes Date Theodore C. Johanson Date
Director Director
/s/ Winfield F. Robinson /s/ Ward I. Graffam
- ------------------------------------- ---------------------------------------
Winfield F. Robinson Date Ward I. Graffam Date
Director Director
/s/ Robert J. Campbell
- -------------------------------------
Robert J. Campbell Date
Director
Page 21
<PAGE>
EXHIBIT INDEX
(2.1) Agreement and Plan of Merger, dated as of July 27, 1999, by and among
the Company, Camden Acquisition Subsidiary, Inc., KSB, and Kingfield
Bank (incorporated herein by reference to Exhibit 2.1 to the Company's
Form 8-K filed with the Commission on August 9, 1999).
(3.1) The Company's Articles of Incorporation, as amended to date
(incorporated herein by reference to Exhibit 3.i to the Company's
Registration Statement on Form S-4 filed with the Commission on
September 25, 1995 (Commission No. 33-97340)).
(3.2) The Company's Bylaws, as amended to date (incorporated herein by
reference to Exhibit 3.ii to the Company's Registration Statement on
Form S-4 filed with the Commission on September 25, 1995 (Commission
No. 33-97340)).
(10.1) CNB's 1993 Stock Option Plan (incorporated herein by reference to
Exhibit 10.5 to the Company's Form 10-K for the year ended December 31,
1995 filed with the Commission on April 1, 1996).
(10.2) UnitedCorp's Stock Option Plan (incorporated herein by reference to
Exhibit 10.5 to the Company's Form 10-K for the year ended December 31,
1995 filed with the Commission on April 1, 1996).
(10.3) Employment Agreement, dated as of May 4, 1999, by and between the
Company and its Chief Executive Officer (incorporated herein by
reference to Exhibit 10.8 to the Company's Form 10-Q/A for the quarter
ended June 30, 1999 filed with the Commission on November 15, 1999).
(10.4) KSB's 1993 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit 99.1 to the Company's Form S-8 filed with the
Commission on January 21, 2000 (Commission No. 333-95157)).
(10.5) Amendment No. 1 to the KSB's 1993 Stock Option Plan (incorporated
herein by reference to Exhibit 99.2 to the Company's Form S-8 filed
with the Commission on January 21, 2000 (Commission No. 333-95157)).
(10.6) KSB's 1998 Long-Term Incentive Stock Benefit Plan (incorporated herein
by reference to Appendix A to KSB's Definitive Proxy Statement filed
with the Commission on April 15, 1998).
(10.7) Summary of the Company's Supplemental Executive Retirement Plan
(incorporated herein by reference to Exhibit 10.13 to the Company's
Form 10-K for the year ended December 31, 1999 filed with the
Commission on March 30, 2000.
(10.8)* KSB's Recognition and Retention Plan and Trust Agreement.
(10.9)* Deferred Compensation Plan.
(13)* The Company's Annual Report to Shareholders for the year ended December
31, 2000.
(21)* Subsidiaries of the Company.
(23)* Consent of Berry, Dunn, McNeil and Parker, LLP relating to the
Company's financial statements.
Page 22
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>KSB'S RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.8 RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
FORM OF
KINGFIELD SAVINGS BANK
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Kingfield Savings Bank (the "Bank") hereby establishes the Recognition
and Retention Plan (the "Plan") and Trust (the "Trust") upon the terms and
conditions hereinafter stated in this Recognition and Retention Plan and Trust
Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain employees and officers of
experience and ability by providing such persons with a proprietary interest in
the Company as compensation for their contributions to the Bank and its
Affiliates and as an incentive to make such contributions and to promote the
Bank's growth and profitability in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Whenever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" means the Company and those subsidiaries of the Bank or
Company which, with the consent of the Board, agree to participate in this Plan.
3.02 "Bank" means Kingfield Savings Bank.
3.03 "Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any
or if none, his estate.
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3.04 "Board" means the Board of Directors of the Bank.
3.05 "Committee" means the Plan Committee of the Board which shall consist
solely of non-employee directors, all of whom are "disinterested directors" as
that term so defined under Rule 16b-3 under the Securities and Exchange Act of
1934, as amended promulgated by the Securities and Exchange Commission.
3.06 "Common Stock" means shares of the common stock. $.01 par value per
share, of the Company.
3.07 "Company" shall mean KSB Bancorp, Inc., the parent holding
company for the Bank.
3.08 "Conversion" shall mean the conversion of the Bank from the mutual to
stock form of organization and the acquisition of the Bank by the Company.
3.09 "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of an employee to perform the work
customarily assigned to him. Additionally, a medical doctor selected or approved
by the Board of Directors must advise the Committee that it is either not
possible to determine when such Disability will terminate or that it appears
probable that such Disability will be permanent during the remainder of the said
participant's lifetime.
3.10 "Employee" means any person who is currently employed on a full time
basis by the Bank or an Affiliate, including officers, but such term shall not
include Outside Directors.
3.11 "Executive Officer" shall mean the President, Executive Vice
President, and any Senior Vice President of the Bank.
3.12 "Plan Shares" means shares of Common Stock held in the Trust and
issued or issuable to a Recipient pursuant to the Plan.
3.13 "Plan Share Award" means a right granted under this Plan to earn Plan
Shares.
3.14 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.03 and 5.04.
3.15 "Recipient" means an Employee who receives a Plan Share Award under
the Plan.
3.16 Retirement" means termination of employment or service which
constitutes normal retirement, or early retirement under any qualified
retirement plan maintained by the Bank, or by reaching age 65.
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3.17 "Trustee" means that person(s) or entity nominated by the Committee
and approved by the Board pursuant to Sections 4.01 and 4.02 to hold legal title
to the Plan assets for the purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in this and
other Sections of the Plan. The interpretation and construction by the Committee
of any provisions of the Plan or of any Plan Share Award granted hereunder shall
be final and binding. The Committee shall act by vote or written consent of a
majority of its members. Subject to the express provisions and limitations of
the Plan, the Committee may adopt such rules, regulations and procedures as it
deemes appropriate for the conduct of its affairs. The Committee shall report
its actions and decisions with respect to the Plan to the Board at appropriate
times, but in no event less than one time per calendar year. The Committee shall
recommend to the Board one or more persons or entity to act as Trustee(s) in
accordance with the provision of this Plan and Trust and the terms of Article
VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee or
Trustees shall be appointed or approved by, and will serve at the pleasure of,
the Board. The Board may in its discretion from time to time remove members
from, or add members to, the Committee, and may remove, replace or add Trustees.
The Board shall have all of the powers allocated to it in this and other
Sections of the Plan.
4.03 Limitation on Liability. No members of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it. If
a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Bank shall indemnify such member against expense
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonable incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Bank and its Affiliates and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Bank shall contribute to the
Trust an amount sufficient to purchase two and two percent (2.0%) of the shares
of Common Stock issued by the Company in connection with the Conversion. No
contributions by Employees shall be permitted.
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5.02 Initial Investment. Any amounts held by the Trust prior to the
conversion of the Bank from a mutual to a stock savings bank, or until such
amounts are invested in accordance with Section 5.03, shall be invested by the
Trustee in such interest-bearing account or accounts at the Bank as the Trustee
shall determine to be appropriate.
5.03 Investment of Trust Assets Upon the Conversion: Creation of Plan Share
Reserve. Upon the conversion of the Bank to a stock savings bank, the Trustee
shall invest all of the Trust's assets exclusively in Common Stock except as
otherwise provided below; provided, however, that the Trust shall not invest in
more than two percent (2.0%) of the shares of Common Stock issued in the
Conversion which shall constitute the "Plan Share Reserve". In the event that
all or a portion of such shares of Common Stock are not available for purchase
by the Trust in Conversion, the Trustee, in accordance with applicable rules and
regulations, shall purchase shares of Common Stock in the open market or, in the
alternative, shall purchase authorized by unissued shares of the Common Stock
from the Company sufficient to fund the Plan share Reserve. Any earnings
received with respect to Common Stock held in the Reserve shall be held in an
interest-bearing account. Any earnings received with respect to Common Stock
subject to a Plan Share Award shall be held in an interest-bearing account on
behalf of the individual Recipient.
5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Section 6.02, or the
decision of the Committee to return Plan Shares to the Bank, the Plan Share
Reserve shall be reduced by the number of Shares subject to the Awards so
allocated or returned. Any Shares subject to an Award which may not be earned
because of a forfeiture by the Recipient pursuant to Section 7.01 shall be
returned (added) to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Employees of the Bank and its Affiliates are eligible
to receive Plan Share Awards.
6.02 Allocations. The Committee may determine which of the Employees
referenced in Section 6.01 above will be granted Plan Share Awards and the
number of Shares covered by each Award, provided, however, that the number of
Shares covered by such Awards may not exceed the number of Shares in the Plan
Share Reserve immediately prior to the grant of such Awards, and provided
further, that in no event shall any Awards be made which will violate the Stock
Charter and Bylaws of the Bank or any applicable federal or state law or
regulation. In the event Plan Shares are forfeited for any reason, the Committee
may, from time to time, determine which of the Employees referenced in Section
6.01 above will be granted additional Plan Share Awards to be awarded from
forfeited Plan Shares. In selecting those Employees to whom Plan Share Awards
will be granted and the number of Plan Shares covered by such Awards, the
Committee shall consider the position and responsibilities of the eligible
Employees, the length and value of their services to the Bank and its
Affiliates, the compensation paid to the Employees and any other factors the
Committee may deem relevant, and the Committee may
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request the written recommendation of the Chief Executive Officer and other
senior executive officers of the Bank and its Affiliates. All allocations by the
Committee shall be subject to review, and approval or rejection, by the Board.
6.03 Form of Allocation. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award has been granted, the
Committee shall notify the Recipient in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Recipient shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 Allocations Not Required. Notwithstanding anything to the contrary in
Sections 6.01 and 6.02, no Employee shall have any right or entitlement to
receive a Plan Share Award hereunder, such Awards being at the total discretion
of the Committee and the Board, nor shall the salaried Employees as a group have
such a right. The Committee may, with the approval of the Board (or, if so
directed by the Board, may) return all Common Stock in the Plan Share Reserve to
the Company at any time, and cease issuing Plan Share Awards.
ARTICLE VII
EARNING AND DISTRIBTUION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically state to the
contrary at the time a Plan Share Award is granted, Plan Shares subject to an
Award shall be earned at the rate of twenty percent of the aggregate number of
Shares covered by the Award upon the first year anniversary of the effective
date of grant of the Award, and thereafter at the rate of twenty percent at the
end of each full twelve months of consecutive employment with the Bank or an
Affiliate. Notwithstanding the preceding, the Committee may provide for a less
or more rapid earnings rate than that set forth herein for all Awards or for any
given Award. If the employment of a Recipient is terminated prior to the
Recipient fully earning an Award for any reason (except as specifically provided
in Subsections (b) and (c) below), the Recipient shall forfeit the right to earn
any Shares subject to the Award which have not theretofore been earned.
In determining the number of Plan Shares which are earned, fractional
shares shall be rounded down to the nearest whole number, provided that such
fractional shares shall be aggregated and earned on the date the final
installment of the Award is earned.
(b) Exception for Terminations Due to Death, Disability and Retirement.
Notwithstanding the general rule contained in Section 7.01(a) above, Plan Shares
subject to a Plan Share Award held by a Recipient whose employment with the Bank
or an Affiliate terminates due to death, Disability or Retirement, or any part
thereof which have not theretofore been earned, shall be deemed earned as of the
Recipients' last day of employment with the Bank or an Affiliate.
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(c) Exception for Terminations After a Change in Control. Notwithstanding
the general rule contained in Section 7.01 (a) above, all Plan Shares subject to
a Plan Share Award held by a Recipient whose employment with the Bank or an
Affiliate terminates following a Charge in Control of the Bank or Company, shall
be deemed earned as of the Recipient's last day of employment with the Bank or
an Affiliate. For purposes of this Plan, "Change in Control of the Bank of the
Company" shall mean an event of a nature that (i) would be required to be
reported in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange act"); or (ii) results in a Change in
Control of the Bank or the Company within the meaning of the Change in Bank
Control Act and the Rules and Regulations promulgated by the Federal Deposit
Insurance Corporation ("FDIC") at 12 C.F.R. (S) 303.4(a) with respect to the
Bank and the Board of Governors of the Federal Reserve System ("FRB") at 12
C.F.R. (S) 225.41(b) with respect to the Company, as in effect on the date
hereof: (iii) results in a transaction requiring prior FRB approval under the
Bank Holding Company Act of 1956 and the regulations promulgated thereunder by
the FRB at 12 C.F.R. (S) 225.11, as in effect on the date hereof; or (iv)
without limitation such a Change in Control shall be deemed to have occurred at
such time as (a) any "person" (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank
or the Company representing 20% or more of the combined voting power of the
Bank's or the Company's outstanding securities except for any securities of the
Bank purchased by the Company in connection with the conversion of the Bank to
the stock form and any securities purchased by any tax qualified employee
benefit plans of the Bank; or (b) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board, or whose nomination for
election by the Company's stockholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
clause (b), considered as though he were a member of the Incumbent Board; or (c)
a plan or reorganization, merger, consolidation, sale of all or substantially
all of the assets of the Bank or the Company or similar transaction has been
approved by the Incumbent Board and the Shareholders, or otherwise occurs, and
in which the Bank or Company is not the resulting entity.
(d) Revocation for Misconduct. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Plan Share Award, or portion thereof, previously awarded under this Plan, to
the extent Plan Shares have not been delivered thereunder to the Recipient,
whether yet earned, in the case of an Employee who is discharged from the Bank
or an Affiliate for cause (as herein defined), or who is discovered after
termination of employment to have engaged in conduct that would have justified
termination for cause. "Cause" shall mean the termination because of personal
dishonesty, willful misconduct, any breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, or the willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) which result in a material loss to the Bank or final cease and desist
order.
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7.02 Accrual of Dividends. Whenever Plan Shares are paid to a Recipient or
Beneficiary under Section 7.03, such Recipient or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends and a number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of Common Stock between the
date the relevant Plan Share Award was granted and the date the Plan Shares are
being distributed. There shall also be distributed an appropriate amount of net
earnings, if any, of the Trust with respect to any cash dividends so paid out.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in Subsection
(b) below, Plan Shares shall be distributed to the Recipient or his Beneficiary,
as the case may be, as soon as practicable after they have been earned.
(b) Form of Distribution. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned and payable.
Payments representing accumulated cash dividends (and earning thereon) shall be
made in cash.
(c) Withholding. The Trustee may withhold from any payment or distribution
made under this Plan sufficient amounts of cash or shares Common Stock to cover
any applicable withholding and employment taxes, and if the amount of such
payment is insufficient, the Trustee may require the Recipient or Beneficiary to
pay to the Trustee the amount required to be withheld as a condition of
delivering the Plan Shares. Alternatively, a Recipient may pay to the Trustee
the amount of cash necessary to be withheld for taxes in lieu of any withholding
of payments or distribution under this Plan. The Trustee shall pay over to the
Bank or Affiliate which employs or employed such Recipient any such amount
withheld from or paid by the Recipient or Beneficiary. If a Recipient elects to
have such taxes withheld, the elections must be made in compliance with Rule
16b-3 in order to receive exemptive treatment.
7.04 Voting of Plan Shares. After a Plan Share Award has been granted, the
Recipient shall be entitled to direct the Trustee as to the voting of the Plan
Shares which are covered by the Plan Share Award and which have not yet been
earned and distributed to him pursuant to Section 7.03, subject to rules and
procedures adopted by the Committee for this purpose. All shares of Common Stock
held by the Trust as to which Recipients are not entitled to direct, or have not
directed, the voting, shall be voted by the Trustee in the same proportion as
Plan Shares which have been awarded and voted.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall received, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and Trust and the applicable directions, rules, regulations,
procedures and policies established by the committee pursuant to the Plan.
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8.02 Management of Trust. It is the intent of this Plan and Trust that,
subject to the provisions of this Plan, the Trustee shall have complete
authority and discretion with respect to the management, control and investment
of the Trust, and that Trustee shall invest all assets of the Trust, except
those attributable to cash dividends paid with respect to Plan Shares, in Common
Stock to the fullest extent practicable, and except to the extent that the
Trustee determines that the holding of monies in cash or cash equivalents is
necessary to meet the obligation of the Trust. In performing their duties, the
Trustees shall have the power to do all things and execute such instruments as
may be deemed necessary or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
Common Stock without regard to any law now or hereafter in force limiting
investments for Trustees or other fiduciaries. The investment authorized herein
constitutes the only investment of the Trust, and in making such investment, the
Trustees are authorized to purchase Common Stock from the Company or an
Affiliate or from any other source, and such Common Stock so purchased may be
outstanding, newly issued, or Treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance with
(a) above in such deposit accounts, and certificates of deposit (including those
issued by the Bank), obligations of the United States government or its agencies
or such other investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time held
or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the name
of a nominee, without the addition of words indicating that such security is an
asset of the Trust (but accurate records shall be maintained showing that such
security is an asset of the Trust.)
(e) To hold cash without interest in such amounts as may be in the opinion
of the Trustee reasonable for the proper operation of the Plan and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights, duties
and obligations hereunder, and such other legal services or representation as
they may deem desirable.
(h) To hold funds and securities representing the amounts to be distributed
to a Recipient or his Beneficiary as a consequence of a dispute as to the
disposition thereof, whether in a segregated account or held in common with
other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court or to secure any order of court for the exercise of any power
herein contained, or give bond.
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8.03 Records and Accounts. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust, which shall be available
at all reasonable times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person determined by the
Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust assets
shall be allocated, in accordance with a reasonable procedure adopted by the
Committee, to bookkeeping accounts for Recipients or to the general account of
the Trust, depending on the nature and allocation of the assets generating such
earnings, gains and losses. In particular, any earnings on cash dividends
received with respect to shares of Common Stock shall be allocated to accounts
for Recipients, if such shares are subject of outstanding Plan Share Awards, or,
otherwise to the Plan Share Reserve.
8.05 Expenses. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
borne by the Bank.
8.06 Indemnification. The Bank shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustee's powers and the discharge of their duties
hereunder, unless the same shall be due to their gross negligence or willful
misconduct.
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. In the event of any change in the
outstanding shares of Common Stock of the Company by reason of any stock
dividend or split, recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other similar corporate
change, or other increase or decrease in such shares effected without receipt or
payment of consideration by the Company, the Committee shall adjust the
aggregate number of Plan Shares available for issuance pursuant to the Plan and
shall adjust the number of shares to which any Plan Share Award relates to
prevent dilution or enlargement of the rights granted to the Recipient under the
Plan.
9.02 Amendment and Termination of Plan. The Board may, by resolution, at
any time amend or terminate the Plan and Trust. The power to amend or terminate
shall include the power to direct the Trustee to return to the Bank all or any
part of the assets of the Trust, including shares of Common Stock held in the
Plan Share Reserve, as well as shares of Common Stock and other assets subject
to Plan Share Awards but not yet earned by the Employees to whom they are
allocated; provide that any shares of Common Stock held by the Trust as part of
its assets must be disposed of by the Trustee prior to returning the proceeds
representing such assets to the Bank. However, the termination of the Trust
shall not affect a Recipient's right to earn Plan Share Awards and to the
distribution of Common Stock relating thereto, including earnings thereon, in
accordance with the terms of this Plan and the grant by the Committee or Board.
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9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Recipient, and during the lifetime of the Recipient,
Plan Shares may only be earned by and paid to the Recipient who was notified in
writing of the Award by the Committee pursuant to Section 6.03.
9.04 Employment Rights. Neither the Plan nor any grant of a Plan Share Award
or Plan Shares hereunder nor any action taken by the Trustee, the Committee or
the Board in connection with the Plan shall create any right on the part of any
Employee to continue in the employ of the Bank or an Affiliate thereof, or the
Company.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a shareholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plans Shares are actually distributed to him.
9.06 Governing Law. The validity, interpretation, performance and
enforcement of the Plan and Trust shall be governed by the laws of the State of
Maine.
9.07 Effective Date. This Plan is effective as of the effective date of the
conversion of the Bank from the mutual to capital stock form of organization.
Following Conversion, the Plan shall be presented to shareholders of the Company
for ratification for purposes of (i) obtaining favorable treatment under Section
16(b) of the Securities Exchange Act of 1934; and (ii) maintaining (if listed)
listing on the Nasdaq Small-Cap Market; provided, however, that the failure to
obtain shareholder ratification will not affect the validity of the Plan and the
Plan Share Awards thereunder.
9.08 Term of Plan. This Plan shall remain in effect until the earlier of (1)
21 years from the Effective Date, (2) termination by the Board of Directors of
the Company, or (3) the distribution of all assets of the Trust. Termination of
the Plan shall not affect any Plan Share Awards previously granted, and such
Awards shall remain valid and in effect until they have been earned and paid, or
by their terms expire or are forfeited.
C-10
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>DEFERRED COMP PLAN
<TEXT>
<PAGE>
Exhibit #10.9 Deferred Compensation Plan
DEFERRED COMPENSATION PLAN
THIS PLAN is dated as of the ______ day of __________, _______ by Camden
National Corporation, a Maine Corporation, having its principal place of
business in Camden, Maine (hereinafter the "Company").
WITNESSETH:
WHEREAS, the Company has a group of Directors who serve the Company and
its wholly owned subsidiaries in a Director's capacity;
WHEREAS, the Company wishes to adopt a non-qualified deferred compensation
plan in order to supplement the funds available to this select group of
Directors upon their termination of services as herein provided;
NOW, THEREFORE, the Company hereby adopts the Camden National Corporation
DEFERRED COMPENSATION PLAN (hereinafter the "Plan") effective as of January 1,
1992 as follows:
1. PLAN YEAR
The Plan year shall commence on _________, ____ and shall end on
___________, ____, and thereafter shall be the twelve (12) month period
commencing on January 1 and ending on December 31.
2. PARTICIPATION IN PLAN
Any Eligible Director of the Company and any Eligible Director of an
affiliate, which has adopted the plan, who has complied with the provision of
Section 6 herein, shall be eligible to participate in the Plan. For the purposes
of the Plan, an Eligible Director means any Director of the Company or a
Director of an affiliate who voluntarily participates in the Plan.
3. DEFERRED COMPENSATION ACCOUNTS
Any Eligible Director may elect to become a Participant in the Plan in
accordance with Section 6 of the Plan by deferring up to one hundred percent
(100%) of his Eligible Compensation in whole percentages in any calendar year.
Such deferrals (hereinafter "Deferred Compensation") shall be made by payroll
deduction. For the purposes of this Plan, Eligible Compensation means the
Eligible Director's fees paid or accrued by the Company or its subsidiaries.
The amount of Eligible Compensation that a Participant elects to defer is
irrevocable for the Plan year for which such election is effective.
4. COMPANY CONTRIBUTIONS
The Company shall make no matching contribution of the Deferred
Compensation on behalf of each
<PAGE>
Participant under the Plan.
5. DEFERRED COMPENSATION ACCOUNTS
(a) Establishment of accounts
The Company shall record Deferred Compensation amounts made on
behalf of each Participant in a deferred compensation account, or, as a
bookkeeping entry, (hereinafter the ("Account") for such Participant. The
Company shall also credit to each Participant's Account the Camden National
Bank's statement savings rate as it may fluctuate from time to time.
(b) Investment of Accounts
At each calendar quarter, funds so credited to each
Participant's Account, if any, may be kept in cash or invested or reinvested in
mutual funds, stock (including Camden National Corporation Stock), bonds,
securities, annuity contracts, life insurance contracts, or any other assets as
the Company may select in its sole discretion. The Company, in its discretion,
may engage investment counsel, and may delegate to such counsel authority, as it
may deem appropriate with respect to the investment of such funds, if any.
(c) Funding
Each participant acknowledges that this "Deferred Compensation
Plan" is an unfunded plan. At no time shall the Participant be deemed to have
any right, title or interest in or to any specified asset or assets of the
Company.
To the extent the Participant acquires a right to receive benefits under
this Plan, such right shall be no greater than the right of any unsecured
general credit or the Company.
6. ELECTION TO DEFER COMPENSATION
(a) Election Procedure
In order for an Eligible Director to become a Participant in
the Plan, such Director must properly complete and file an election form to
defer a percentage of his Eligible Compensation as set forth in Section 3 with
the Treasurer of the Company (hereinafter the "Plan Administrator").
(b) Filing of Election Form
An Eligible Director must file such form prior to the first
day of each Plan year, except for the first Plan Year, in order to become a
Participant during such Plan Year. An Eligible Director who is hired by the
Company or one of its subsidiaries after the beginning of any Plan Year shall
become a Participant as of the first day of the month following the date on
which he commences services with the Company, provided that such Eligible
Director files the election form on or before the first day that such new
Eligible Director commences services with the Company.
An Eligible Director shall file only one election form for each Plan Year.
Such election form may not be changed after its effective date and shall remain
in effect for the Plan Year for which it is effective.
<PAGE>
(c) Improper or No Election
An Eligible Director who has not filed an election form for a
Plan Year, or who files an election form in a manner which does not comply with
the terms and conditions provided in Section 3 and this Section 6 shall not
become a Participant in the Plan.
7. DISTRIBUTION
Upon the Participant's termination of services as Director for the
Company or its subsidiaries for any reason, including death, disability or
retirement, the Company will distribute the entire amount credited to such
Participant's Account, taking into account earnings and losses thereon, to the
Participant (or his Beneficiary or Beneficiaries, as applicable) within (30)
days following the last day of the month of such termination, or within a
reasonable period of time thereafter as the Company and Participant shall
determine.
The former Participant (or his Beneficiary or Beneficiaries, as
applicable) shall receive the benefit payable in-accordance with this Section 7
in the form of a lump sum payment or monthly, quarterly, semi-annual or annual
cash installments, as elected by the former Participant (or his Beneficiary or
Beneficiaries, as applicable). The Participant shall elect such form of benefit
on an appropriate form which shall be provided by the Plan Administrator, and
filed with the Plan Administrator no later than the close of the business day
immediately preceding the first day of the first payroll period to which the
Participant makes salary reduction contributions to the Plan. The Participant
may change such elections prospectively, effective on the first day of any Plan
Year. A Participant who fails to file a timely election under this Section 7
shall be deemed to have elected to receive the benefit payable hereunder in the
form of a lump sum payment.
The Participant shall be fully vested in the portion of his Account
which is attributable to his Deferred Compensation and the earnings thereon.
8. BENEFICIARY DESIGNATION
The Participant shall designate a Beneficiary or Beneficiaries to
receive benefits hereunder in accordance with Section 7. The Participant shall
make such election on a beneficiary designation form provided by the Plan
Administrator. Such form must be filed with the Plan Administrator as the Plan
Administrator shall, in his discretion, require. The Participant may revoke or
change such beneficiary election at any time prior to the commencement of
benefits as provided in Section 7, and, provided that such beneficiary election
form is duly filed with the Plan Administrator.
9. FORFEITURE
Notwithstanding anything contained herein to the contrary, the Plan
Administrator may determine, in its sole discretion, that the Participant shall
forfeit any earnings credited to his Participant Account in the event such
Participant is terminated for "cause" Cause shall mean fraud, misuse or
misappropriation of money or property, embezzlement, or any crime by the
Participant related to the Company.
<PAGE>
10. ADMINISTRATION
This Plan is intended to be and shall be administered as an
unfunded, unsecured plan which is not qualified under Section 401 of the
Internal Revenue Code. The benefits provided hereunder shall be paid from the
Participants' Deferred Compensation and from the general assets of the Company.
11. PARTICIPANT'S RIGHTS UNSECURED
The right of any Participant (or his Beneficiary or Beneficiaries,
as applicable) to receive any benefits hereunder shall be an unsecured claim
against the general assets of the Company.
12. NON-TRANSFERABILITY
The right of the Eligible Director or any other person to the
payment of benefits hereunder shall not be assigned, transferred, pledged or
encumbered except by will or by the laws of descent and distribution.
13. COMMUNICATIONS
Any notice or communication required of the Company with respect to
this Plan shall be made in writing and may either be delivered personally or
sent by First Class mail, as the case may be:
To the Corporation:
Treasurer
Camden National Corporation
Two Elm Street
Camden, ME 04843
Each party shall have the right by written notice to change the
place to which any notice may be addressed.
14. NOTIFICATION OF BENEFIT
Within thirty (30) days of the retirement, death, disability or
termination of services of the Participant, or the merger, consolidation or sale
of the Company, the Company shall deliver to the Participant a notice (the
"Award Notice") stating the amount of benefits, and the timing of the payment of
such benefits, to which the Participant is entitled under the terms of this Plan
as a result of such event, or, it the Participant is not entitled to benefits
under this Plan as a result of such event, the reason why he is not so entitled.
15. CLAIMS PROCEDURE
(a) The Participant (or his beneficiary in the case of the
Participant's death), may make a claim for benefits in writing to the Company
within one (1) year of
(1) the Company's failure to deliver an Award Notice to the
Participant or his beneficiary in accordance with
Section 14.
(2) the delivery of an Award Notice to the Participant or
the beneficiary in accordance with Section 14 if the
Participant or beneficiary believes such Notice does not
properly state such person's entitlement to benefits
under this Plan, or
<PAGE>
(3) the failure of the Company to make any payment in
accordance with the terms of an Award Notice.
Such claim shall be reviewed by the Company. If the claim is approved or denied,
in whole or in part, the Company shall provide a written notice of approval or
denial within sixty (60) days of the Company's receipt of the notice of the
claim. In the case of denial, the notice shall set forth the specific reason for
the denial, specific reference to the provisions of the Plan upon which the
denial is based, and any additional material or information necessary to perfect
the claim and an explanation of why such material or information is to be taken
if a review of the denial is desires. If the claim is not approved or denied
within such sixty (60) days, the claim will be deemed denied.
(b) If a claim is denied and a review is desired, the Participant
(or his beneficiary in the case of the Participant's death), shall notify the
Company of his request for a review in writing within sixty (60) days of the
date the claim is denied. The Participant, his beneficiary, or his duly
authorized representative may review this Plan and any documents relating to it
and submit any written issues and comments he may feel appropriate within thirty
(30) days of his notice of request for review. In its sole discretion, the
Company shall then review the claim, and any written issues and comments
submitted by or on behalf of the Participant, and provide a written decision
within sixty (60) days of the later of the Company's receipt of the notice of
request for review or the submission of such written issues and comments. This
decision likewise shall state the specific reasons for the decision and shall
include reference to specific provisions of the Plan on which the decision is
based.
(c) Any decision of the Company shall not be binding on the
Participant, his personal representative, or any beneficiary without consent,
not shall it preclude further action by the Participant, his personal
representative or beneficiary.
16. ENTIRE AGREEMENT
This Plan constitutes the entire agreement between the parties with
respect to the subject matter hereof.
17. JURISDICTION
The terms and conditions of this Plan are subject to the laws of the
State of Maine.
18. GENDER
Any reference in this Plan to the masculine shall be deemed to
include the feminine.
19. AMENDMENTS
This Plan may not be amended except by an instrument in writing
executed by the Company, provided that no amendment that adversely affects the
Participant's rights or interest under the Plan shall take effect unless the
Participant consents thereto in writing.
20. INTERPRETATION
Any matters involving the approval or denial by the Company of
claims pursuant to Article Fifteen, the
<PAGE>
granting of approvals, consents or waivers by the Company, or the interpretation
of any term or condition of this Plan shall be referred to the Chairman of the
Board of Directors of the Company for final determination.
21. TERMINATION
The Company has established the Plan with the bonafide intention and
expectation that it will be continued indefinitely, but the Company shall have
no obligation whatsoever to maintain the Plan for any given length of time and
may discontinue or terminate the Plan at any time. If the Plan is discontinued,
all election forms shall terminate, and the Participants shall receive their
benefits as provided herein.
22. MISCELLANEOUS
This Plan shall be binding upon and insure to the benefit of the
Company, its successors and assigns and the Participants, and their heirs,
executors, administrators and legal representatives.
IN WITNESS WHEREOF, the Company has caused this Plan to be signed and sealed by
its duly authorized officers of the date first above written.
CAMDEN NATIONAL CORPORATION
__________________________________ By: __________________________________
Witness
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>THE COMPANY'S 2000 ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE>
At Camden National Corporation ...
we value
our employees,
our customers,
our communities,
and our shareholders.
And we value the quality of life
both at work and at home.
We present this 2000 Annual Report to you
as a keepsake, celebrating
the magnificent natural beauty of Maine.
1
<PAGE>
Dear Fellow Shareholders
Values are the foundation upon which Camden National Corporation was built. That
foundation is as strong today as ever. Values appear in many forms. They appear
in the products and services our subsidiaries offer to our customers; in the
continuing focus on generating earnings and long-term value for our
shareholders; in our sincere interest in the growth and development of our
employees; and in the quality of life we strive to enhance in all of the Maine
communities of which we are part. Most significantly, our Company abides by a
set of Core Values, shared with you on page 20, whose principles guide our
employees day in and day out, resulting in superior customer service and the
continued financial success of your Company.
This Annual Report is our opportunity to highlight the financial performance of
the Company over the past year, as well as share with you some of the plans and
initiatives that are directly related to our successes. For the first time we
are including profiles of our senior managers and reports from each describing
their areas of responsibility. Let me assure you that you have entrusted your
capital to one of the most talented groups of leaders at any Maine financial
institution today.
I am pleased to report to you that your Company enjoyed another very successful
year. After experiencing a slight earnings decline in 1999, there was a
resumption of growth in 2000. Diluted earnings per share grew 33% to $1.69,
compared to $1.27 per share in 1999. Looking at the 2-year period of 1998 to
2000, diluted earnings per share grew at a compounded annual rate of 10.7%.
Likewise, growth occurred in assets, deposits, loans and book value, all of
which is detailed in the following pages. By mid-summer of 2000 the Company
achieved a significant milestone when, for the first time, the combined assets
of the Company and its subsidiaries exceeded one billion dollars.
The only significant disappointment this past year was that our Company's stock
price showed little movement, despite growth in earnings. Nonetheless, I remain
optimistic that if we maintain our operational discipline and continue to
increase earnings, the market will recognize the value of our stock. Patience
appears to be the watchword.
During the first quarter of last year, we merged United Bank and newly-acquired
Kingfield Bank to form UnitedKingfield Bank. The purpose of this merger, as
reported to you last year, was to provide certain economies of scale and to
position the new bank to generate stronger market penetration into the larger
Bangor, Lewiston and Farmington population centers.
By the end of the first quarter of this year, we will have completed the planned
expansion of the Service Center. This expansion will provide the Company with
desperately needed space and resources to support our growth, including a new
mainframe computer that will speed the processing of transactions for our
subsidiaries.
During 1999 Bob Daigle, President and CEO, announced the implementation of a new
strategic planning process for the Company. During 2000 this process became
fully integrated at the subsidiary level, resulting in a consolidated approach
to our long-term planning. Progress on achieving our strategic goals is reviewed
quarterly by the Boards of Directors, and new action plans are adopted as
existing goals are successfully completed.
In addition to continuing our annual Corporate Culture Survey, this year the
Company introduced a new 360-Degree Leadership Evaluation process for reviewing
the performance of our senior executives. The leadership ability of each
executive is evaluated not only by his or her superior, but also by his or her
peers and staff. The value of each of these management tools is more fully
described in this Annual Report by June Parent, our Director of Human Resources.
It is clear that these investments are helping to create the best possible work
environment for our employees.
The final comment on operations is to advise you that we continue to improve
upon existing systems to better understand the financial needs of our customers
and address those needs ever more successfully. As a customer of one or more of
our subsidiaries, I hope that you will take advantage of the new technology that
we continue to introduce and the enhanced products and services it permits us to
provide.
2
<PAGE>
Despite strong competitive pressures, from within the banking industry as well
as from non-banking entities, I have never been more optimistic about our
potential for continued success. The Company has a strong and dynamic strategic
planning process, and adequate capital to complete our strategic objectives as
well as to capitalize on any opportunities that come our way. Our talented
management team and employees are focused on delivering superior products and
personal service, supported by state-of-the-art technology and effective,
efficient processes.
On behalf of the Board of Directors, I want to thank Peter Allen for his 9 years
of service to the Company and its shareholders. In 2000, Peter resigned as a
director of the Company. He represented shareholder interests very well, and we
will miss his insight and good humor.
Two new members joined the Company's Board of Directors--Ward I. Graffam of
Portland and Camden, and Robert J. Campbell of Rockport. Ward spent 30 years at
Unum Corporation and served as a member of senior management since 1986. He now
has his own consulting business, concentrating efforts in strategic planning.
Bob is a partner in the New York money management firm of Beck, Mack & Oliver.
Each of these individuals helps to broaden the range of experience of the Board,
by way of their understanding of the financial markets and their specific
knowledge of the businesses of insurance and investment management,
respectively.
At Camden National Corporation, we are positioning ourselves for continued
success and prosperity. With an obsession to live by the Company's Core Values,
we continue to build on the foundation of values that began over 125 years ago.
Through a staff of dedicated and motivated employees, supported by world-class
products, services and technology, we are building a unique and sustainable
competitive advantage that bodes well for the future of your Company.
Sincerely,
/s/ Rendle A. Jones
Rendle A. Jones
Chairman of the Board of Directors
Rendle A. Jones
Chairman of the Board of Directors,
Camden National Corporation
PHOTO HERE
VALUES
- --------------------------------------------------------------------------------
Table of Contents
Shareholders' Letter ......................................... 2-3
Senior Management Profiles ................................... 4-19
Core Values .................................................. 20
Management's Discussion and
Analysis of Financial Condition
and Results of Operation ..................................... 21-31
Summary of Financial Performance ............................. 32
Selected Five-Year
Financial Data ............................................... 33
Consolidated Statements ...................................... 34-37
Notes to Consolidated
Financial Statements ......................................... 38-56
Auditor's Letter ............................................. 57
Boards of Directors and
Bank Administrations ......................................... 58-59
Announcement of Annual Meeting ............................... 60
- --------------------------------------------------------------------------------
3
<PAGE>
Aldermere Farm - Rockport
- --------------------------------------------------------------------------------
PHOTO HERE
- --------------------------------------------------------------------------------
"Having been raised in rural Maine, I find Aldermere Farm to be a welcome
reminder of days gone by, when life was far more simple and tranquility reigned
supreme." - Bob Daigle
4
<PAGE>
Robert W. Daigle
Bob Daigle (right), President & CEO
of Camden National Bank:
Shown here with Mike McAvoy, Sr. VP.
PHOTO HERE
INTEGRITY
By just about any measure, the year 2000 was one of significant achievement for
Camden National Bank. Strong financial results, increased market share, wider
geographic reach, and a steadfast commitment to doing whatever it takes to
ensure customer satisfaction, all combined in providing the necessary impetus to
make this one of our most successful years ever.
In reflecting upon our record levels of loans, deposits and net income, I feel
strongly that these results were fueled by the implementation of a Preferred Way
of Selling, which encourages our customer service personnel to think of selling
as helping. Simply stated, we recommend a product or service to a customer only
when there is mutual agreement that an identified need is being appropriately
satisfied. When this approach is combined with our employees unwavering
commitment to top quality customer service--the hallmark of our Company--we are
able to nurture more meaningful and longer lasting relationships with our
customers.
Another major contributor to bottom-line improvement was our decision to open a
loan production office (LPO) in Portland. While we continue to experience steady
growth in our traditional, four-county area in the mid-coast region--as
evidenced by the most recent FDIC data which revealed market share increases
across the board--we saw an opportunity to our south that warranted this
strategic move. The office specializes in middle-market commercial real estate
lending and is staffed by one of our veteran lenders who is very familiar with
Cumberland County. Our first-year success can best be highlighted by the recent
decision to add a second business developer in the Portland Office to help us
capitalize on the opportunities.
In an industry that has undergone tremendous consolidation in recent
years--witness the fact that the number of banks in Maine has declined by 70%
since the 1970s--the enduring 125-year history of our local community bank is
truly a source of great pride, and a reason to celebrate. Celebrate we did in
2000 with a series of community events that included special open houses at each
of our branch offices, the hosting of over 2000 of our friends and neighbors to
a viewing of Andrew Wyeth's artistic masterpiece, Christina's World, at the
Farnsworth Museum, and the sponsorship of a spectacular century-welcoming
fireworks display that lit up the skies over Mt. Battie this past New Year's
Eve.
All in all it was a most successful year, made possible by the unbeatable
combination of dedicated employees and loyal customers. Our senior management
team looks forward to doing whatever it takes in 2001 to earn your continued
loyalty and ongoing support.
/s/ Robert W. Daigle
5
<PAGE>
Bigelow Preserve - Western Maine
- --------------------------------------------------------------------------------
PHOTO HERE
- --------------------------------------------------------------------------------
"Each changing season brings a new activity to Bigelow Preserve--hunting in
fall, skiing in winter, fishing in spring, hiking in summer. It's the best part
of living in Maine." - John Witherspoon
6
<PAGE>
John C. Witherspoon
John Witherspoon (left), President &
CEO of UnitedKingfield Bank:
Shown here with
Chuck Osgood (middle), Sr. VP,
and Bob Stone (right), VP.
PHOTO HERE
VIGILANCE
UnitedKingfield Bank celebrated its inaugural year in 2000. Built on values
consistent with the combined 150-year history of its two predecessor banks,
United Bank and Kingfield Bank, UnitedKingfield Bank is committed to providing
long-term value to our constituents through the efficient delivery of high
quality personalized financial services.
By virtue of our relationship with Camden National Corporation, UnitedKingfield
Bank has access to expertise in marketing, bank operations, finance and
technology, along with the financial backing of a large, well-capitalized
Company. Our lenders, relationship managers and branch staff can draw on
resources such as Internet banking, cash management, investment advice and
retirement plan administration for their customers. With respect to our business
banking capabilities, UnitedKingfield Bank is able to meet the varying needs of
customers ranging from the corner store to a corporation requiring sophisticated
cash management services and a $10 million credit facility. Importantly, as an
independent community bank, UnitedKingfield's service and credit decisions are
made and delivered locally by people familiar with the markets they serve.
For much of this past year the resources of UnitedKingfield Bank were focused
internally--restructuring the Bank, building a new management team,
strengthening our credit administration, and maximizing the use of holding
company resources. These efforts have positioned us to take advantage of the
opportunities in our markets with one of the strongest professional banking
teams in Maine, uniquely qualified to serve the diverse financial needs of our
customers.
The opportunities for our Bank are great. We plan to expand our market share in
the greater Bangor and Lewiston/Auburn regions by further leveraging the
resources available to us and focusing the Bank's resources on a sales and
service strategy. This will result in greater value to our customers by better
meeting their needs with high quality financial services. We are confident that
our unique position as an independent community bank, combined with the
resources available at Camden National Corporation, will result in enhanced
relationships with our customers and, in turn, increased value to our
shareholders.
/s/ John C. Witherspoon
7
<PAGE>
Penobscot River - West Branch
- --------------------------------------------------------------------------------
PHOTO HERE
- --------------------------------------------------------------------------------
"On the back side of the Penobscot River is the perfect calm spot between two
very rough stretches. It's indescribable ... the river is constant and flat, but
moving very fast." - Pete Averill
8
<PAGE>
Andrew P. Averill
Pete Averill (left), Chairman,
President & CEO of Trust Company of
Maine: Shown here with (left to right)
Shirley Kile, Executive VP; Lynn
Bowden, VP; and Paul Pasquine,
Executive VP.
PHOTO HERE
TEAMWORK
During the past year, Trust Company of Maine ("TCOM") continued to build its
presence and integrate its services within the Camden National family, enhancing
the Corporation's position as a diversified financial services company. TCOM
offers the clients of Camden National Bank and UnitedKingfield Bank the
opportunity to establish a relationship that encompasses their banking services,
as well as their trust, investment and estate planning needs, within one
institution.
The Employee Benefit Services department continued to maintain its revenue
stream while improving operating efficiency and service quality. Contributing to
our strong performance in 2000 were the number and quality of referrals made by
the 10 Camden National Bank branches and the 18 UnitedKingfield Bank branches.
This is particularly gratifying in light of last year's volatility in the equity
markets and bodes well for future growth.
During 2000 all of our software and operating systems were upgraded, providing
increased functionality and the necessary platform to execute our Internet
strategy, which was implemented in the fourth quarter of the year. As a result,
all TCOM clients are now able to access their accounts on-line to review
transactions or to obtain investment reviews. In addition, not only can our
business clients access their 401(k) plan on-line, individual participants in
those plans also have access to their accounts. Participants are able to make
investment election changes, check their balances, model plan loans, and educate
themselves regarding investment choices.
Going forward, our goal is to continue to build relationships with both banking
subsidiaries as well as their customers, and to contribute to the position of
the Company as the financial service provider of choice throughout the markets
it serves.
TCOM's success would not be possible without the efforts of our dedicated and
talented staff. Their strong work ethic and the sense of urgency with which they
approach their duties have contributed to our growth over the past 6 years, and
will serve to position us as a leader in providing financial services in the
future
/s/ Andrew P. Averill
9
<PAGE>
Damariscotta Lake - Jefferson
- --------------------------------------------------------------------------------
PHOTO HERE
- --------------------------------------------------------------------------------
"Each day as I pass this beautiful spot on my way to work, I recall how
fortunate we are to live in a place others can only dream of." - Laurie Bouchard
10
<PAGE>
Laurel J. Bouchard
Laurie Bouchard, VP:
Shown here as she teaches the class,
"The Preferred Way of Selling."
PHOTO HERE
PASSION
The retention, acquisition and expansion of customer relationships are the 3
primary objectives on which the efforts of the sales, marketing, and training
areas are focused. With these 3 objectives in mind, we create initiatives
designed to maximize the opportunities that exist within Camden National Bank
and UnitedKingfield Bank to increase loan portfolios, retain and attract
deposits, generate non-interest income, and enhance the overall profitability of
our customer relationships.
In order to increase loans and deposits, we first have to focus on retaining the
relationships we already have. To this end, we have redesigned the product
offerings at both banks to maximize the value we provide to our relationship
customers. Our mission in selling is to truly help our clients so that the value
they receive far exceeds what they pay us in exchange for our services. We
ensure that our most valued customers know that we appreciate them by
communicating with them at least 4 times a year with special offers, gifts, or
invitations to special events. It is also important for us to measure our client
satisfaction. Surveys are now sent quarterly to solicit feedback on how we are
doing, and the results are used to make improvements in our products, rates and
service levels.
One of the best ways to generate new loans and deposits is expanding
relationships with our existing customers. Of significance this past year, we
instituted comprehensive training for all customer service staff on our
Preferred Way of Selling. This simple process increases sales as we help
customers identify and meet their financial needs. We also use our
state-of-the-art Marketing Customer Information Files (MCIF) software to analyze
customer, account and product information, and then target market products and
services to the best prospects within our own customer base, resulting in
expanded relationships in a very efficient and effective manner.
While we enjoy exceptional market share in some areas, we have great potential
for growth in others. Strategic plans have been developed to ensure that our
marketing resources are focused on the areas where we have the most opportunity.
Attracting new customers is especially challenging as the field of competitors
for financial services expands. We are confident that our newly-designed
products are clearly different and better than those offered by our competitors,
and they are delivered and supported by a staff that is committed to excellence
in customer service. We use technology to provide added value to our customers'
banking convenience (such as on-line banking), as well as to support our staff
with product knowledge and competitor information through the use of our
intranet.
Leading the sales, marketing and training areas into 2001 and beyond, we will
continue to support the efforts of our staff at each subsidiary to retain and
increase our market share, expand existing customer relationships, and attract
new clients. And 2001 will bring an added focus to the internal education of our
employees, because it is our staff who care for our customers, and our customers
who in turn ensure an attractive return to you, our shareholders.
/s/ Laurie Bouchard
11
<PAGE>
Schoodic Point - Acadia National Park
- --------------------------------------------------------------------------------
PHOTO HERE
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"Schoodic Point is a part of my life. My husband and I love to walk on the rocks
and find quiet places to relax. We once spent an entire afternoon just watching
the waves roll in." - Joanne Campbell
12
<PAGE>
Joanne T. Campbell
Joanne Campbell (right), VP:
Shown here with Pam Fowles,
Mortgage Supervisor.
PHOTO HERE
COMMUNITY
Year 2000 was an exciting and challenging year for the Residential Real Estate
Loan department of the Company. With the acquisition of Kingfield Bank and its
merger with United Bank during the first quarter, we transitioned Camden
National Bank's mortgage processing center to the holding company in order to
provide services to both subsidiary banks, resulting in greater processing
efficiencies and universal product menus.
We offer a wide range of secondary market and portfolio mortgage products,
including a new land loan that provides for longer amortization periods and
higher loan-to-value levels than previously available. The latter is in response
to an increase in borrowers acquiring land with a goal of building in 3 to 5
years. For those prospective homeowners looking to reduce interest costs over
the life of their loan, we anticipate introducing a bi-weekly mortgage product
in the near future.
In 2001, we will focus on utilizing automated technology to improve turnaround
time for the customer while providing cost savings in the processing center.
Mortgage originators will utilize laptop computers to take applications at the
customers' convenience, and then upload the information into an automated
underwriting system to provide preliminary commitment letters at the time of
application. In addition, we will be able to e-mail documentation packages to
our closing agents by the end of the second quarter, streamlining the process
and making it more cost effective. These technological enhancements in
underwriting, processing and closing procedures will enable us to handle greater
volumes of loans without adding to staff.
As to expected levels of productivity this year, we anticipate that the
continued decline in mortgage rates may result in fairly strong refinance
activity. Consumers with higher cost credit cards and other obligations may use
this lower mortgage rate environment to obtain some payment relief by
consolidating debt.
It may not be common knowledge that Maine leads the nation in per capita
home-ownership. We would like to think that our superior knowledge of the Maine
markets in which we operate, coupled with our comprehensive product offering and
a convenient, personalized loan process, have helped more people enjoy the
quality of life Maine has to offer than would otherwise have been possible.
/s/ Joanne T. Campbell
13
<PAGE>
Sherman's Point Cove - Camden
- --------------------------------------------------------------------------------
PHOTO HERE
- --------------------------------------------------------------------------------
"Living on the coast takes on new meaning every time I walk down to Sherman's
Point Cove. The view of both ocean and mountains amplifies the changing beauty
of the seasons." - June Parent
14
<PAGE>
June B. Parent
June Parent (left), VP and Human
Resources Manager: Shown here
introducing Tammy Bryant (middle),
VP and Manager of the Main Office,
to a new employee, Tracy Leavitt
(right), Marketing Assistant.
PHOTO HERE
GROWTH
In business classes, college students are asked to debate who is most important
to a company--its customers, its shareholders, or its employees. While
satisfying the needs of all three are critical for success, the Human Resources
department believes employees are the most important. Loyal, satisfied,
well-trained and rewarded employees ensure that our customers are happy with the
products and services we deliver, and the retention of satisfied customers will
in turn ensure that we produce an attractive return on equity for our
shareholders. Thus it is only natural that we focus our energy and resources in
attracting and retaining the best possible workforce, give them the skills and
knowledge they need to excel in their jobs, and then recognize and reward them
for their achievements.
Since two elements strongly influencing employee satisfaction are effective
leadership and a positive corporate culture, we focused on these two areas in
2000. To further develop the skills of our managers, we implemented a 360-Degree
Leadership Evaluation process, where leaders receive quality feedback from their
supervisors, their staff and a group of their peers. The feedback is then used
by each individual to develop a plan that will capitalize on their strengths and
further develop areas where there is opportunity for improvement.
"Corporate culture," according to our strategic planning consultant, Cass
Bettinger, is "the sum total of the beliefs, values, attitudes, ideologies and
behavior patterns and norms which are shared and adhered to by a group." While
our first corporate culture survey, administered in 1999 to all employees within
Camden National Corporation, showed many positive characteristics to our
corporate culture, we focused our attention last year on those areas identified
by our employees as needing improvement. Each year we will repeat the survey,
monitor our progress, and use the results to refocus our energy. Using employee
feedback in this manner to make improvements directly translates into reduced
turnover and higher levels of productivity.
We are confident that our staff--at all levels and in all entities--exemplifies
a level of excellence rarely found in today's institutions. They are loyal,
talented people who work diligently on your behalf. They collectively have what
it takes to meet the mission, vision and strategic action plans put in place to
ensure your Company's continued success.
/s/ June B. Parent
15
<PAGE>
Appleton Ridge - Appleton
- --------------------------------------------------------------------------------
PHOTO HERE
- --------------------------------------------------------------------------------
"I treasure the fields of Appleton Ridge--green in spring, full of hay in
summer, vibrant with colors in fall, and blanketed by snow in winter. There's no
better place to live." -Jeff Smith
16
<PAGE>
Jeffrey D. Smith
Jeff Smith (left), VP and
Chief Operations Officer:
Shown here as he works with his
Services Management team to fully
implement the latest technology.
PHOTO HERE
PRIDE
The Services Management team moved into the year 2000 with a great deal of
confidence and enthusiasm as all of our efforts to address the Y2K challenge
were a success. Along with most other companies, our organization found
operations untouched by the speculation of date change issues deeply embedded in
computer language. The results of our energies to ensure we were prepared
provided a much greater benefit than thwarting the Y2K problem. As a result of a
comprehensive analysis of our operations and technological infrastructure, we
made a number of modifications to our processes and upgraded and standardized
many of our systems.
As our Y2K efforts were winding down, we redirected our resources to the merger
of Kingfield Bank with our existing banking subsidiary, United Bank. Working in
concert with our accounting, marketing and mortgage departments, as well as
other corporate and bank functional areas, we managed the conversion project
collectively as a team. This project from start to finish spanned some 6 months,
an impressively short time frame considering the complexity and vast number of
tasks that were required to make this a seamless transition for both our
internal and external customers. After much planning, the culmination of the
project was left in the capable hands of the Service Management staff, who
successfully orchestrated the final stages of the merger over just a short,
two-day weekend in February. At 8:00 A.M. Monday, February 7, the new
UnitedKingfield Bank opened for business.
In the late spring, having outgrown our current 15,000 square foot facility
built in 1990, we broke ground on an expansion of the Service Center in
Rockport. We doubled the size of the existing facility and completely renovated
and upgraded the original building, creating a more efficient and secure
operations center, a fully functioning training lab, as well as community and
meeting rooms. By late February 2001, the project will be complete, resulting in
a state-of-the-art facility with the capacity to support our future growth.
We look to 2001 with plans to support the expanding sales and service efforts of
our client banks. We have established a comprehensive Technology and Operations
Plan to meet the strategic initiatives of the Company and its banking and
non-banking subsidiaries. In addition to a number of initiatives to bolster the
banks' sales and customer service efforts, our ambitious plan includes an
engagement with an outside consulting firm to further refine our processes, with
an overall goal of continued improvement in the areas of efficiency and quality
service.
When all is said and done, our job is to take care of the countless, unseen
details, which create for our customers the difference between satisfactory
service and excellence. Our team is committed to delivering the latter.
/s/ J.D. Smith
17
<PAGE>
Rockland Breakwater - Penobscot Bay
- --------------------------------------------------------------------------------
PHOTO HERE
- --------------------------------------------------------------------------------
"After 20 years, I still find the view of the sun rising over the Rockland
Breakwater to be breathtaking. It's a magnificent and peaceful place to spend
the day." - Susan Westfall
18
<PAGE>
Susan M. Westfall
Susan Westfall (left), Chief Financial Officer:
Shown here with Kelly Gatcomb, Assistant
Manager, Accounting Department.
PHOTO HERE
QUALITY
The major areas of responsibility encompassed within the Accounting/Finance
department of the Company include financial reporting, both internal and
external, financial planning and all accounting functions. Since much of our
work is reflected in the financial pages of this annual report, I would like to
take this opportunity to describe to you our Company's employee incentive
program, Performance Compensation for Stakeholders.
In 1997 the Company implemented a performance-based compensation program that
motivates employees to think of themselves as "Stakeholders" in our business.
Just as shareholders have their capital invested in our stock, every employee
has a vested interest in the financial performance of our Company. Employees are
motivated by and rewarded for contributions made towards the master strategy of
balancing profit with growth and quality with productivity, which contributes to
maximizing long-term shareholder value as well as the long-term viability of the
Company. The program is designed to give employees a better understanding of the
factors that contribute to strong financial performance, to take ownership and
pride in the success of the Company, and be compensated accordingly. The
Accounting/Finance department supports the Company's Performance Compensation
for Stakeholders program by ensuring that the financial modeling of information
is distributed on a timely basis each month to all stakeholders. This enables
our managers to share the financial results with their staff, and discuss areas
where we are performing well and others where there is room for improvement.
Without question, well-informed employees, all of whom have a direct stake in
our financial results, help to maximize the long-term success of the Company.
In 2001, we will further develop the value of the Performance Compensation for
Stakeholders program by strengthening our coaching program, where managers and
supervisors work with individuals and teams to strategize on ways to improve
performance on specific "Key Performance Indicators." The ultimate objective of
coaching is to unlock each employee's potential to maximize the contributions
he/she is able to make, not only in his/her own personal performance, but to the
Company's overall success.
By clearly setting forth financial goals, providing ongoing measurement, and
offering meaningful rewards, we look forward to another outstanding year and
sharing that success with both stakeholders and shareholders alike.
/s/ Susan M. Westfall
19
<PAGE>
Our Core Values
INTEGRITY
We will all conduct our business, internally and externally,
with the highest degree of honesty, integrity, consistency and fairness.
PASSION
We will all share a passion to "WOW" our customers
by doing whatever it takes to exceed their expectations.
GROWTH
We will all demonstrate a genuine concern for all employees, by providing
opportunities for professional growth and by treating one another with
respect, fairness and compassion.
PRIDE
We will all strive to maximize individual productivity and organizational
efficiency through stakeholder pride and a strong work ethic.
COMMUNITY
We will all contribute to the strength of our communities
through direct employee involvement and volunteerism in community
organizations and events.
TEAMWORK
We will all strive to ensure that "the whole is greater than the sum of
the parts" through effective teamwork within and between all work groups in
the organization.
VIGILANCE
We will all be forever vigilant in our attention to credit quality
with respect to new loan requests and to loans within our existing portfolio.
INVOLVEMENT
We will all strive to ensure, through effective and timely
communication, that our Board of Directors is active, involved and
well-informed.
QUALITY
We will all differentiate ourselves in the marketplace
with our obsession for superior quality and professionalism.
FUN
We will all contribute to an environment of having fun.
20
<PAGE>
As we move forward in the new millennium,
Camden National Corporation
promises to continue
to serve the financial needs of the people of Maine
and to cherish the places in which we live and work --
guided by the core values we have practiced
for over 125 years.
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's discussion and analysis reviews the consolidated financial
condition of Camden National Corporation ("the Company") at December 31, 2000
and 1999, the consolidated results of operations for the past three years and,
where appropriate, factors that may affect future financial performance. This
discussion should be read in conjunction with the Consolidated Financial
Statements, Notes to Consolidated Financial Statements and Selected Consolidated
Financial Data.
Forward-Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information contained in this
discussion, or in any other written or oral statements made by the Company, is
or may be considered to be forward-looking. Forward-looking statements relate to
future operations, strategies, financial results or other developments, and
typically contain words or phrases such as "may," "believe," "expects," "should"
or similar expressions. Forward-looking statements are based upon estimates and
assumptions that are subject to significant business, economic and competitive
uncertainties, many of which are beyond the Company's control or are subject to
change.
Inherent in the Company's business are certain risks and uncertainties.
Therefore, the Company cautions the reader that its actual results could differ
materially from those expected to occur depending on factors such as economic
conditions in local markets as well as general economic conditions, including
changes in interest rates and the performance of financial markets, changes in
domestic and foreign laws, regulations and taxes, competition, industry
consolidation, credit risks and other factors. Other factors that could cause or
contribute to such differences include, but are not limited to, variances in the
actual versus projected growth in assets, return on assets, loan losses,
expenses, rates charged on loans and earned on investment securities, rates paid
on deposits, competitive effects, fee and other non-interest income earned, as
well as other factors. The Company disclaims any obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future developments, or otherwise.
GENERAL
Overview of the Company.
The Company is a multi-bank holding company headquartered in Camden,
Maine, offering a broad range of financial services in its geographic
marketplace. The Company has two wholly owned bank subsidiaries. Camden National
Bank is a national banking association based in Camden, Maine. UnitedKingfield
Bank, a state-chartered bank based in Bangor, Maine, is the successor by merger,
effective February 4, 2000, of United Bank and Kingfield Savings Bank
("Kingfield Bank"). The Company also has a 51% interest in Trust Company of
Maine, Inc., a non-bank subsidiary based in Bangor, Maine.
Business.
The Company's wholly owned bank subsidiaries are independent banks with
branches serving mid-coast, central and western 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, business loans, commercial real estate
loans and a variety of consumer loans in their respective service areas. In
addition, the Company also invests in mortgage-backed securities and securities
issued by the United States government and agencies thereof. The Company's
majority owned trust subsidiary, Trust Company of Maine, Inc., offers a broad
range of trust and trust investment services, in addition to retirement and
pension plan management services.
The Company's goal is to balance profit with growth and quality with
productivity. Therefore, the Company emphasizes increasing its loan and deposit
market shares in the communities in which its bank subsidiaries serve by
offering a wide range of quality financial products and services coupled with
local decision-making. In addition, the Company closely manages yields on
interest-earning assets and rates on interest-bearing liabilities, and strives
to increase non-interest income while controlling the growth of non-interest
expenses. It is also part of the business strategy of the Company to supplement
internal growth with acquisitions of other banks, branches of other banks and
non-bank financial service companies when such purchases are perceived to offer
enhanced long-term shareholder value.
The Company generally does not, as a matter of policy, make any specific
projections as to future earnings nor does it endorse any projections regarding
future performance that may be made by others.
21
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Acquisition.
On December 20, 1999, the Company completed the acquisition of KSB
Bancorp, Inc. ("KSB"), a bank holding company with one principal subsidiary,
Kingfield Bank. Approximately 1,481,800 shares of common stock were issued in
connection with this transaction. KSB was subsequently merged into the Company.
KSB had total assets of $191.1 million and total shareholders' equity of $14.0
million. The acquisition of KSB was accounted for under the pooling-of-interests
method and, accordingly, financial information for all periods presented prior
to the date of acquisition, including the financial information discussed below,
has been restated to present the combined financial condition and results of
operations as if the acquisition had been in effect for all such periods.
REVIEW OF FINANCIAL STATEMENTS
The discussion and analysis which follows focuses on the factors affecting
the Company's consolidated results of operations during 2000, 1999 and 1998 and
financial condition at December 31, 2000 and 1999. The Consolidated Financial
Statements and Notes to Consolidated Financial Statements beginning on page 34
of this report should be read in conjunction with this review.
RESULTS OF OPERATIONS
Overview.
The Company reported net income of $13.9 million in 2000, $10.2 million in
1999 and $11.5 million in 1998. Earnings per diluted share were $1.69 in 2000,
$1.27 in 1999 and $1.38 in 1998. Return on average assets was 1.40% in 2000
compared to 1.15% in 1999 and 1.52% in 1998. Return on average equity was 16.43%
in 2000 compared to 13.16% and 15.09% in 1999 and 1998, respectively. Net
operating income of $1.65 per diluted share represented an increase of 10.74%
per diluted share compared to $1.49 per diluted share for 1999. The net
operating amount for 2000 excluded expenses, net of income taxes of $200,000, or
$.02 per diluted share, incurred during the first quarter of 2000 related to the
Company's acquisition of KSB in December 1999 and the subsequent merger of
United Bank with Kingfield Bank to form UnitedKingfield Bank in February 2000.
Also excluded is income after taxes of $437,000, or $.06 per diluted share, due
to the changeover of the Company's defined-benefit noncontributory pension plan
to a defined contribution plan, recognized during the third quarter of 2000. The
1999 net operating amount excluded the previously referenced merger-and
acquisition-related expenses incurred during the fourth quarter. On an operating
basis, the Company's return on average assets during 2000 was 1.38% compared to
1.35% in 1999. Return on average equity, on an operating basis, during 2000 was
16.17% compared to 15.47% in 1999. Strong loan growth during 2000 contributed to
increases in interest income which, on a fully taxable equivalent basis, totaled
$78.7 million in 2000 compared to $69.9 million and $61.6 million in 1999 and
1998, respectively. During this same period the cost of interest-bearing
deposits and borrowings increased to $38.7 million in 2000 compared to $30.4
million and $26.7 million in 1999 and 1998, respectively. The net result was an
increase in net interest income, on a fully-taxable equivalent basis, to $40.0
million in 2000 compared to $39.5 million and $34.9 million in 1999 and 1998,
respectively. The Company's results of operations are also affected by the
provision for loan losses, resulting from the Company's assessment of the
adequacy of the allowance for loan losses, and other non-interest income and
expenses. Each of these principal components of the Company's operating results
is discussed on the following pages.
Net Interest Income.
Net interest income, when expressed as a percentage of average assets, is
referred to as net interest margin. The following tables on pages 23 and 24,
which present changes in interest income and interest expense by major asset and
liability category for 2000, 1999 and 1998, illustrate the impact of average
volume growth and rate changes. The income from tax-exempt assets has been
adjusted to a tax-equivalent basis, thereby allowing a uniform comparison to be
made between asset yields.
22
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Analysis Of Change In Net Interest Margin on Earning Assets
<TABLE>
<CAPTION>
(Dollars in thousands) DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Securities--taxable $224,698 $ 16,079 7.16% $216,666 $ 15,084 6.96% $175,357 $ 12,129 6.92%
Securities--nontaxable (1) 8,993 595 6.62% 9,152 606 6.62% 3,126 209 6.69%
Federal funds sold 2,215 109 4.92% 1,784 69 3.87% 4,373 195 4.46%
Loans (1) (2) 675,316 61,899 9.17% 605,271 54,157 8.95% 521,559 49,035 9.40%
-------- -------- ---- -------- -------- ---- -------- -------- ----
Total interest-earning assets 911,222 78,682 8.64% 832,873 69,916 8.39% 704,415 61,568 8.74%
-------- -------- ---- -------- -------- ---- -------- -------- ----
Cash and due from banks 27,544 24,122 19,720
Other assets 58,817 43,750 38,389
Less allowance for loan losses 10,541 8,895 7,581
-------- -------- --------
Total assets $987,042 $891,850 $754,943
======== ======== ========
Liabilities & Shareholders' Equity
Interest-bearing liabilities:
NOW accounts $ 86,783 $ 889 1.02% $ 85,861 $ 1,129 1.31% $ 61,340 $ 1,003 1.64%
Savings accounts 85,427 2,168 2.54% 109,078 3,050 2.80% 94,014 2,873 3.06%
Money market accounts 98,559 4,467 4.53% 64,562 2,347 3.64% 60,452 1,908 3.16%
Certificates of deposit 329,664 18,595 5.64% 312,019 16,317 5.23% 286,234 15,810 5.52%
Broker certificates of deposit 12,876 947 7.35% 6,010 344 5.72% 3,847 221 5.74%
Short-term borrowings 198,597 11,650 5.87% 146,627 7,182 4.90% 93,204 4,873 5.23%
-------- -------- ---- -------- -------- ---- -------- -------- ----
Total interest-bearing liabilities 811,906 38,716 4.77% 724,157 30,369 4.19% 599,091 26,688 4.45%
-------- -------- ---- -------- -------- ---- -------- -------- ----
Demand deposits 84,357 79,764 71,862
Other liabilities 6,409 10,229 8,090
Shareholders' equity 84,370 77,700 75,900
-------- -------- --------
Total liabilities
and shareholders' equity $987,042 $891,850 $754,943
======== ======== ========
Net interest income 39,966 39,547 34,880
(fully-taxable equivalent)
Less: fully-taxable
equivalent adjustment (561) (592) (342)
-------- -------- --------
$ 39,405 $ 38,955 $ 34,538
======== ======== ========
Net interest rate spread
(fully-taxable equivalent) 3.87% 4.20% 4.29%
==== ==== ====
Net interest margin
(fully-taxable equivalent) 4.39% 4.75% 4.95%
==== ==== ====
</TABLE>
(1) Reported on tax-equivalent basis calculated using a rate of 34%.
(2) Non-accrual loans are included in total average loans.
23
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Analysis of Volume and Rate Changes on Net Interest Income
<TABLE>
<CAPTION>
DECEMBER 31, 2000 VS 1999 DECEMBER 31, 1999 VS 1998
(Dollars in thousands) INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
- --------------------------------------------------------------------------------------------------
Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities--taxable $ 559 $ 436 $ 995 $2,858 $ 97 $2,955
Securities--nontaxable (11) -- (11) 403 (6) 397
Federal funds sold 17 23 40 (115) (11) (126)
Loans 6,264 1,478 7,742 7,871 (2,749) 5,122
------ ------- ------ ------ ------- ------
Total interest income 6,829 1,937 8,766 11,017 (2,669) 8,348
------ ------- ------ ------ ------- ------
Interest-bearing liabilities:
NOW accounts 12 (252) (240) 402 (276) 126
Savings accounts (662) (220) (882) 460 (283) 177
Money market accounts 1,237 883 2,120 130 309 439
Certificates of deposit 923 1,355 2,278 1,423 (916) 507
Broker certificates of deposit 393 210 603 124 (1) 123
Short-term borrowings 2,547 1,921 4,468 2,794 (485) 2,309
------ ------- ------ ------ ------- ------
Total interest expense 4,450 3,897 8,347 5,333 (1,652) 3,681
------ ------- ------ ------ ------- ------
Net interest income
(fully-taxable equivalent) $2,379 $(1,960) $ 419 $5,684 $(1,017) $4,667
====== ======= ====== ====== ======= ======
</TABLE>
The Company's net interest income, on a fully-taxable equivalent basis,
was $40.0 million, $39.5 million and $34.9 million in 2000, 1999 and 1998,
respectively. Changes in net interest income are the result of interest rate
movements, changes in the amounts and mix of interest-earning assets and
interest-bearing liabilities, and changes in the level of non-interest-earning
assets and non-interest-bearing liabilities.
Net interest income in 2000 increased by $.5 million, or 1.1%, on a
fully-taxable equivalent basis compared to 1999. This increase was due to the
increase in both the volume and yields on loans and investments, partially
offset by an increase in volume and cost of interest-bearing liabilities. During
1999, net interest income increased by $4.7 million, or 13.4%, on a
fully-taxable equivalent basis, compared to 1998. This increase was due to the
increase in loan and investment volumes, partially offset by a decrease in
yields on average loans outstanding. Net interest income, expressed as a
percentage of average interest-earning assets, was 4.39% in 2000, 4.75% in 1999
and 4.95% in 1998.
The average amount of loans outstanding increased by $70.0 million, or
11.6%, in 2000 over 1999 and by $83.7 million, or 16.1%, in 1999 over 1998.
Interest income on loans increased by $7.7 million in 2000 compared to 1999 and
by $5.1 million in 1999 compared to 1998. The weighted average yield on loans
was 9.17% in 2000 compared to 9.0% in 1999 and 9.4% in 1998.
The average amount of non-accrual loans can also affect the average yield
earned on all outstanding loans. However, the average amount of non-accrual
loans for 2000, 1999 and 1998 were minimal and, therefore, had an insignificant
effect on average loan yield.
Interest and Dividends.
Interest and dividends on investment securities increased by $1.0 million,
on a fully-taxable equivalent basis, in 2000 compared to 1999. The primary
reason was increased volume and yields. In 1999, interest and dividends on
investment securities increased by $3.4 million, on a fully-taxable equivalent
basis, compared to 1998. The reason for the increase was also increased volume
and yields. The average balance of investments outstanding totaled $233.7
million in 2000 compared to $225.8 million in 1999 and $178.5 million in 1998.
The weighted average tax-adjusted yield on investment securities was 7.14% in
2000 compared to 6.95% in 1999 and 6.91% in 1998.
Average deposits and borrowings increased by $87.7 million, or 12.1%, in
2000 over 1999 and by $125.1 million, or 20.9%, in 1999 over 1998. Interest
expense on deposits and borrowings increased by $8.3 million in 2000 compared to
1999. This increase was the result of increased volumes and rates in most
categories. Interest expense on deposits and borrowings increased by $3.7
million in 1999 compared to 1998. This increase was the result of increased
balances in all categories. The weighted average rate on interest-bearing
liabilities was 4.77% in 2000 compared to 4.19% in 1999 and 4.45% in 1998.
24
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Additionally, the Company periodically uses interest rate swaps, floors
and caps, which are common derivative financial instruments, to hedge interest
rate risk associated with purchases and sales of investments and loans, as well
as deposit practices (see Note 19, "Financial Instruments" of the Notes to
Consolidated Financial Statements, on page 51, and "Market Risk," on page 29,
for further information on derivative financial instruments).
During 2000, 1999 and 1998, the Company was a party in several agreements
requiring it to make variable market-indexed interest payments in exchange for
fixed-rate interest payments (interest rate swaps). The Company utilized
interest rate swaps to protect a portion of its net interest income stream
against the effects of falling rates on prime-based floating rate loans. The
off-balance sheet instruments have an effect on net interest income. The net
result of the Company's interest rate swap agreements was net interest income of
$108,000 in 2000, $37,000 in 1999 and $46,000 in 1998. 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 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.
Non-interest Income.
Non-interest income was $8.9 million, $7.7 million and $6.6 million for
the years ended December 31, 2000, 1999 and 1998, respectively. During 2000,
there was an increase of $1.2 million, or 15.9%, in total non-interest income
compared to 1999. Service charges on deposit accounts increased by $107,000, or
3.9%, over 1999. Other service charges and fees increased by $276,000, or 18.5%,
over the same period. The largest factors contributing to the increase in
non-interest income were trust fees that increased by $505,000, or 65.1%, and
merchant assessment fees that increased $308,000, or 20.6%.
Total non-interest income increased by $1.1 million, or 17.1%, in 1999
compared to 1998. Service charges on deposit accounts increased by $397,000, or
16.7%, over 1998. Other service charges and fees increased by $315,000, or
26.9%, over the same period. The largest factor contributing to this increase
was the full year of service charges and fee income generated by the 9 branches
added in March and October of 1998. Merchant assessment fees increased $187,000,
or 14.3%, trust fees increased $131,000, or 20.3%, and other income increased by
$91,000, or 8.5%, during 1999 over 1998.
Non-interest Expenses.
Non-interest expenses were $25.4 million, $27.6 million and $22.2 million
for the years ended December 31, 2000, 1999 and 1998, respectively. There was a
decrease of $2.2 million, or 8.0%, in total non-interest expenses during 2000
compared to 1999. Salaries and employee benefits decreased by $1.0 million, or
8.1%, during this same period. Contributing to this reduction was $645,000
related to the termination of the Company's defined-benefit noncontributory
pension plan. The remainder of the decrease was the result of reductions in
staff due to the merger of United Bank and Kingfield Bank on February 4, 2000.
All other operating expenses also decreased by $1.2 million, or 7.9%, during
2000 compared to 1999. This decrease is the net of increases in credit card,
supplies and various other general operating expenses during 2000 and the $2.0
million in merger- and acquisition-related expenses related to the acquisition
of KSB in 1999.
Total non-interest expenses increased by $5.4 million, or 24.2%, in 1999
compared to 1998. The largest increase of $2.0 million was attributed to KSB
merger- and acquisition-related costs. Salaries and employee benefits increased
by $1.4 million, or 12.5%, from $11.2 million in 1998 to $12.6 million in 1999.
The major factor contributing to this increase was the full year of expense
associated with the additional staff resulting from the branch acquisitions
during March and October of 1998. All other operating expenses increased by $4.0
million, or 36.1%, in 1999 over 1998. The major contributing factors to this
increase were credit card expenses, data processing, marketing, supply costs,
other real estate owned ("OREO") expenses and amortization of the core deposit
intangibles. With the addition of 9 new branches, higher than normal expenses
were incurred in the areas of data processing, marketing and supplies. In
addition, the amortization of the core deposit intangibles totaled $1.0 million
in 1999 and $.7 million in 1998 for the branches acquired in March and October
of 1998.
FINANCIAL CONDITION
Overview.
The year 2000 was highlighted by the merger of United Bank and Kingfield
Bank to create a new community bank known as UnitedKingfield Bank during the
first quarter of the year. This merger provided the Company with an opportunity
to capitalize on certain economies of scale. The Company acquired KSB on
December 20, 1999. Kingfield Bank had branch locations in Kingfield, Stratton,
Phillips, Strong, Rangeley, Farmington, Lewiston, Bingham and Madison. The
Company considers the acquisition of Kingfield Bank and its branches a logical
expansion of its service areas.
25
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Total assets at December 31, 2000 were $1.0 billion, an increase of $82.5
million, or 8.9%, from December 31, 1999. The change in assets consisted
primarily of a $64.5 million increase in net loans, an increase in premises and
equipment of $3.9 million, an increase in other assets of $8.4 million, an
increase of $4.7 million in cash and due from banks and federal funds sold, and
an increase in investment securities of $1.0 million. The asset growth was
supported by an increase of $76.6 million in deposits and a $13.3 million
increase in total shareholders' equity, combined with a decrease of $5.5 million
in total borrowings and $1.9 million in other liabilities.
Investment Securities.
Total investment securities increased by $1.0 million, or 0.5%, to $233.2
million at December 31, 2000. The Company has investment securities in both the
available-for-sale and held-to-maturity categories. During 2000, the Company
increased the available-for-sale portion of the investment portfolio. The change
in the investment portfolio reflects the Company's desire for greater
flexibility to achieve asset and liability objectives, while managing liquidity
and funding needs pursuant to the policies developed by the Asset/ Liability
Committee ("ALCO"). The available-for-sale category increased during 2000 by
$11.6 million. Although these securities are available for sale, the Company has
the ability to hold the debt securities in this portfolio until maturity. A
portion of the Company's investment portfolio is also classified as held to
maturity. The ability to use these securities as collateral for Federal Home
Loan Bank of Boston ("FHLBB") loans enhances the Company's ability to hold the
securities to maturity consistent with liquidity objectives. At December 31,
2000, the Company had $.8 million of unrealized losses on securities available
for sale, net of the deferred tax benefits compared to $5.8 million of
unrealized losses, net of deferred tax benefits at December 31, 1999. This
reduction of unrealized losses was attributed to a decrease in market rates.
Unrealized gains and losses do not impact income or regulatory capital, but are
recorded as adjustments to shareholders' equity net of related deferred income
taxes. In 1999, the Company had also increased the available-for-sale portion of
the investment portfolio supporting the desire for greater flexibility in
managing the portfolio.
Loans.
During 2000, the loan portfolio experienced growth in every major loan
category. Loans, including loans held for sale, totaled $701.3 million at
December 31, 2000, a 10.4% increase from total loans of $635.4 million at
December 31, 1999. This resulted from a continuation of the loan growth
experienced by the Company for the past several years.
Residential real estate mortgage loans increased by $3.1 million, or 1.4%,
in 2000. During 2000, the Company originated $11.8 million of fixed-rate
residential loans that were sold to investors in the secondary market.
Residential real estate mortgage loans increased in 1999 by $49.7 million, or
29.1%, from $170.9 million in 1998 to $220.5 million in 1999. 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. With a relatively low interest
rate environment, it was the Company's asset/liability strategy during 1999 to
hold fixed-rate mortgages in its portfolio. The yields on these assets were
higher than yields available in the investment portfolio. All of the mortgage
loans in the Company's loan portfolio are secured by properties located in
Maine.
Commercial loans increased by $47.8 million, or 15.1%, during 2000. In
1999, commercial loans increased from $269.7 million to $316.4 million, an
increase of $46.7 million, or 17.3%. Commercial loans consist of loans secured
by various corporate assets, as well as loans to provide working capital in the
form of lines of credit, which may be secured or unsecured. The commercial
category also includes commercial real estate loans secured by income producing
commercial real estate. In addition, the Company makes loans for the
acquisition, development and construction of commercial real estate. The Company
focuses on lending to financially sound small- and medium-sized business
customers within its geographic marketplace.
Consumer loans increased by $6.4 million, or 7.6%, in 2000. In 1999,
consumer loans increased from $78.5 million to $83.8 million, an increase of
$5.3 million, or 6.8%. Consumer loans are originated by the Company's bank
subsidiaries for a wide variety of purposes to meet customers' needs. Consumer
loans include credit card, overdraft protection, automobile, boat, recreation
vehicles, mobile homes, home equity, and secured and unsecured personal loans.
It is the Company's policy to discontinue the accrual of interest on loans
when, in the opinion of management, there is an indication that the borrower may
be unable to meet payments as they become due. Upon such discontinuance, all
accrued but unpaid interest is reversed. Non-performing loans, defined as
non-accrual loans plus accruing loans 90 days or more past due, totaled $6.5
million, or 0.9%, of total loans at December 31, 2000 compared to $6.3 million,
or 1.0%, of total loans at December 31, 1999.
26
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Allowance for Loan Losses / Provision for Loan Losses.
In determining the adequacy of the allowance for loan losses ("ALL"),
management relies primarily on its review of the loan portfolio both to
ascertain whether there are specific loan losses to be reserved, and to assess
the collectibility of the loan portfolio in the aggregate. Non-performing loans
are examined on an individual basis to determine the estimated probable loss on
these loans. In addition, each quarter management conducts a formal analysis of
the ALL, which considers the current loan mix and loan volumes, historical net
loan loss experience for each loan category, and current economic conditions
affecting each loan category. No assurance can be given, however, that adverse
economic conditions or other circumstances will not result in increased losses
in the portfolio. The Company continues to monitor and modify its ALL as
conditions dictate (see Note 6, "Allowance for Loan Losses," of the Notes to
Consolidated Financial Statements, on page 44, for further information).
During 2000, the Company provided $2.9 million to the allowance for loan
losses compared to $3.7 million and $2.1 million in 1999 and 1998, respectively.
Net charge-offs to average loans outstanding were .24% in 2000 compared to .39%
in 1999. During 1999, the allowance was increased due to the need for
replenishment as a result of charge-offs, primarily at United Bank. Determining
an appropriate level of ALL involves a high degree of judgment. Management
believes that the ALL at December 31, 2000 of $10.8 million, or 1.54%, 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. As a
percentage of total loans outstanding, the ALL was 1.48% in 1999.
The following table sets forth information concerning the activity in the
Company's ALL during the periods indicated.
Five-Year Activity in the Allowance for Loan Losses
<TABLE>
<CAPTION>
(Dollars in thousands) YEARS ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Allowance at the beginning of period $ 9,390 $ 8,092 $ 6,982 $ 5,365 $ 4,947
Provision for loan losses 2,930 3,670 2,056 2,207 1,228
Charge-offs:
Commercial loans 1,296 1,520 417 671 539
Residential real estate loans 432 715 415 160 210
Consumer loans 417 425 444 400 308
-------- -------- -------- -------- --------
Total loan charge-offs 2,145 2,660 1,276 1,231 1,057
Recoveries:
Commercial loans 421 64 158 473 82
Residential real estate loans 29 54 35 36 27
Consumer loans 176 170 137 132 138
-------- -------- -------- -------- --------
Total loan recoveries 626 288 330 641 247
Net charge-offs 1,519 2,372 946 590 810
-------- -------- -------- -------- --------
Allowance at the end of the period $ 10,801 $ 9,390 $ 8,092 $ 6,982 $ 5,365
======== ======== ======== ======== ========
Average loans outstanding $675,316 $605,271 $521,559 $445,599 $392,128
======== ======== ======== ======== ========
Ratio of net charge-offs to average loans outstanding 0.22% 0.39% 0.18% 0.13% 0.21%
Ratio of provision for loan losses to average loans outstanding 0.43% 0.61% 0.39% 0.50% 0.31%
Ratio of allowance for loan losses to total loans at end of
period 1.54% 1.48% 1.42% 1.44% 1.30%
Ratio of allowance for loan losses to net charge-offs 711.06% 395.87% 855.39% 1183.39% 662.35%
Ratio of allowance for loan losses to
non-performing loans at end of period 166.48% 148.32% 172.50% 162.03% 128.72%
</TABLE>
27
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
The allowance for loan losses is available to offset credit losses in
connection with any loan, but is internally allocated to various loan categories
as part of the Company's process for evaluating its adequacy. The following
table sets forth information concerning the allocation of the Company's ALL by
loan categories at the dates indicated.
Allocation of the Allowance for Loan Losses--Five-Year Schedule
<TABLE>
<CAPTION>
(Dollars in thousands) AS OF DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
Percent of Percent of Percent of Percent of Percent of
loans in loans in loans in loans in loans in
each each each each each
Balance at End of Period category to category to category to category to category to
Applicable to: Amount total loans Amount total loans Amount total loans Amount total loans Amount total loans
- -------------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans $ 5,972 55% $5,286 55% $4,288 51% $4,672 49% $3,529 47%
Residential real
estate loans 2,329 32% 2,772 35% 2,166 35% 875 37% 758 42%
Consumer loans 1,218 13% 475 13% 729 14% 657 14% 529 11%
Unfunded commitments 673 0% 329 0% 324 0% 366 0% 252 0%
Unallocated 609 N/A 528 N/A 585 N/A 412 N/A 297 N/A
------- --- ------ --- ------ --- ------ --- ------ ---
$10,801 100% $9,390 100% $8,092 100% $6,982 100% $5,365 100%
======= === ====== === ====== === ====== === ====== ===
</TABLE>
LIQUIDITY
Liquidity is defined as the ability to meet current and future financial
obligations of a short-term nature. 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 credit commitments to
borrowers. Due to the potential for unexpected fluctuations in both deposits and
loans, active management of the Company's liquidity is necessary. 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
resources in place.
Each of the Company's bank subsidiaries monitors its liquidity in
accordance with guidelines established by the Company and applicable regulatory
requirements. As of December 31, 2000 and 1999, the Company's level of liquidity
exceeded its target levels. Management believes that the Company's bank
subsidiaries currently have adequate liquidity available to respond to liquidity
demands. Sources of funds utilized by the Company's bank subsidiaries consist of
deposits, borrowings from the FHLBB and other sources, cash flows from
operations, prepayments and maturities of outstanding loans, investments and
mortgage-backed securities, and the sales of mortgage loans.
Deposits continue to represent the Company's primary source of funds. In
2000, total deposits increased by $76.6 million, or 11.5%, over 1999, ending the
year at $744.4 million. The Company experienced growth in all deposit categories
in 2000. Comparing year-end balances at 2000 to 1999, transaction accounts
(demand deposits and NOW) increased by $.8 million, money market accounts by
$10.5 million, saving accounts by $8.9 million, and certificates of deposit by
$56.4 million. In 1999, total deposits increased by $26.2 million, or 4.1%, over
1998, ending the year at $667.7 million.
Borrowings supplement deposits as a source of liquidity. In addition to
borrowings from the FHLBB, the Company's bank subsidiaries purchase federal
funds, sell securities under agreements to repurchase and utilize treasury tax
and loan accounts. Total borrowings were $168.4 million at December 31, 2000
compared to $173.9 million at December 31, 1999, a decrease of $5.5 million, or
3.2%. The reduction can be attributed to the increase in deposits, which allowed
the Company to pay down borrowings. The majority of the borrowings were from the
FHLBB, whose advances remained the largest non-deposit-related, interest-bearing
funding source for the Company in both 2000 and 1999. Qualified residential real
estate loans, certain investment securities and certain other assets available
to be pledged secure these borrowings. The Company views borrowed funds as an
alternative funding source that should be utilized when appropriate.
28
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
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
risk-based ratios of the Company and its bank subsidiaries exceeded regulatory
guidelines at December 31, 2000 and December 31, 1999. The Company's Tier 1
capital to risk-weighted assets was 11.8% and 11.7% at December 31, 2000 and
1999, respectively (see Note 20, "Regulatory Matters," of the Notes to
Consolidated Financial Statements, on page 53, for other capital ratios). 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 ratio at December 31, 2000 and 1999 was 8.6%
and 8.5%, respectively.
As part of the Company's goal to operate a safe, sound and profitable
financial organization, the Company is committed to maintaining a strong capital
base. Shareholders' equity totaled $90.9 million and $77.6 million, or 9.0% and
8.4%, of total assets at December 31, 2000 and 1999, respectively. The $13.3
million, or 17.1%, increase in shareholders' equity in 2000 was primarily
attributable to net income of $13.9 million, less 1) treasury stock activity of
$.4 million and 2) $5.2 million in cash dividends, plus 3) $5.0 million in
unrealized gains on securities available for sale, net of deferred tax benefit.
The principal cash requirement of the Company is to pay dividends on
common stock when declared. Dividends paid on the Company's common stock in 2000
represented a 21.2% increase over 1999 on a per share basis. The Company is
primarily dependent upon the payment of cash dividends by its subsidiary banks
to service its commitments. The Company, as the sole shareholder of its
subsidiary banks, is entitled to dividends when and as declared by each bank
subsidiary's Board of Directors from legally available funds. Camden National
Bank declared dividends in the aggregate amount of $5,910,000 and $8,051,000 in
2000 and 1999, respectively. UnitedKingfield Bank declared dividends in the
aggregate amounts of $1,846,000 and $205,000 in 2000 and 1999, respectively. As
of December 31, 2000, and subject to the limitations and restrictions under
applicable law, Camden National Bank and UnitedKingfield Bank had $7.7 million
available for dividends to the Company, although there is no assurance that
dividends will be paid at any time in any amount (see Note 14, "Shareholders'
Equity," of the Notes to Consolidated Financial Statements, on page 48, for
additional information).
Impact of Inflation and Changing Prices.
The Consolidated Financial Statements and the Notes to Consolidated
Financial Statements 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.
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
subsidiary's Board of Directors delegates responsibility for carrying out the
asset/liability management policies to that bank subsidiary's 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 2-year
horizon, it also utilizes additional tools to monitor potential longer-term
interest rate risk.
29
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
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 1-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 2 years.
2000
- --------------------------------------------------------------------------------
Estimated
Rate Change Changes in NII
- --------------------------------------------------------------------------------
High Low Average
+200bp (6.01%) (3.61%) (4.89%)
- -200bp 4.63% 1.96% 3.49%
1999
- --------------------------------------------------------------------------------
Estimated
Rate Change Changes in NII
- --------------------------------------------------------------------------------
High Low Average
+200bp (3.25%) 0.87% (1.25%)
- -200bp (4.50%) (0.80%) (1.87%)
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,
among others, the nature and timing of interest rate levels, yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, and reinvestment/replacement of asset and liability
cashflows. The assumptions differed in each of the 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.
The most significant factors affecting the changes in market risk
exposures during 2000 compared to 1999 were the 1) increase in interest rates
market-wide, 2) changes in the yield curve for U.S. government securities, 3)
increase in the principal amount of fixed-rate loans extended by the subsidiary
banks, 4) increases in adjustable borrowings and 5) increases in off-balance
sheet financial instruments. With increases on the balance sheet in fixed-rate
loans and variable-rate borrowings the Company was more liability sensitive
during 2000 compared to 1999. Although these balance sheet changes resulted in
increased market risk in a rising interest rate environment during 2000, this
increased risk was within the Company's policy limits.
When appropriate, the Company may utilize off-balance sheet instruments,
such as interest rate floors, caps and swaps, to hedge its interest rate risk
position. Board of Directors' approved hedging policy statements govern the use
of these instruments by the bank subsidiaries. As of December 31, 2000, the
Company had a notional principal of $35 million interest rate swap agreements,
$10 million floor contracts and $90 million cap contracts. The estimated effects
of these derivative financial instruments on the Company's earnings are included
in the sensitivity analysis presented above. ALCO monitors derivative activities
relative to its expectation and the Company's hedging policy.
Recent Accounting Pronouncements.
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities," are effective for all fiscal years beginning after June 15,
2000. These statements set accounting and reporting standards for derivative
instruments and hedging activities. They require an entity to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value.
At December 31, 2000, the fair value of derivative instruments, which will
be reported as an asset upon adoption of SFAS No. 133, was approximately
$650,000. Management is in the process of evaluating the impact on earnings of
implementing SFAS No. 133. To the extent that management determines the
derivatives are not effective as cash flow hedges, the fair value will be
included in earnings during the first quarter of 2001, net of applicable income
taxes. Effectiveness is defined as the change in the cash flows of the
derivative hedging instrument in comparison to the change in expected cash flows
of the hedged item. To the extent that management determines the derivatives are
effective and qualify as cash flow hedges, the fair value will be recorded in
other comprehensive income during the first quarter of 2001, net of applicable
income taxes. Upon implementation of SFAS No. 133 on January 1, 2001, the
Company will also transfer all of its investment securities classified as held
to maturity to available for sale. The impact of the reclassification will be an
increase to comprehensive income of $2.0 million, net of applicable income
taxes.
30
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," is effective for transfers occurring after
March 31, 2001. SFAS No. 140 replaces SFAS No. 125. This statement is expected
to have no material impact to the Company's consolidated financial condition and
results of operation.
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. The Company elected to
repurchase stock for its treasury during 1998 and 1999. In November 1998, the
shareholders approved an increase in the number of authorized shares of common
stock from 5,000,000 to 10,000,000 shares. The Board of Directors subsequently
approved a three-for-one split of the Company's common stock to shareholders of
record on November 19, 1998, with a distribution date of December 4, 1998. On
December 20, 1999, the Company completed the acquisition of KSB. Approximately
1,481,800 shares of common stock were issued in connection with this
transaction.
The Company has paid quarterly dividends since its inception in 1985. The
market price (as quoted by AMEX) and cash dividends paid, per share of the
Company's common stock, by calendar quarter for the past 2 years were as
follows:
2000
- --------------------------------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
High $15.50 $15.75 $15.88 $16.88
Low 12.63 12.50 12.00 10.13
Close 14.25 15.75 13.50 11.88
Dividend paid 0.16 0.16 0.16 0.15
1999
- --------------------------------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
High $21.06 $23.94 $22.75 $20.06
Low 16.38 16.88 17.50 17.63
Close 16.75 23.94 20.88 17.94
Dividend paid 0.13 0.13 0.13 0.13
Information concerning restrictions on the ability of the Company's
affiliates to transfer funds to the Company in the form of cash dividends is
described in the Capital Resources section on page 29.
As of December 31, 2000, there were 8,609,898 shares of the Company's
common stock outstanding, held of record by approximately 1,026 shareholders.
31
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Summary of Financial Performance
[The following tables were depicted as bar graphs in the printed material.]
NET INCOME
(IN MILLIONS)
'96 9.359
'97 10.698
'98 11.451
'99 10.229
'00 13.859
ASSETS
(IN MILLIONS)
'96 644.4
'97 726.6
'98 839.3
'99 928.4
'00 1,010.9
DEPOSITS
(IN MILLIONS)
'96 463.5
'97 485.1
'98 641.6
'99 667.7
'00 744.4
LOANS
(IN MILLIONS)
'96 411.3
'97 483.3
'98 569.7
'99 635.4
'00 701.3
EARNINGS PER SHARE
(IN DOLLARS)
'96 1.13
'97 1.31
'98 1.40
'99 1.27
'00 1.70
BOOK VALUE PER SHARE
(IN DOLLARS)
'96 8.15
'97 9.01
'98 9.61
'99 9.51
'00 11.17
32
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Selected Five-Year Financial Data
<TABLE>
<CAPTION>
(In thousands, except number of
shares and per share data) DECEMBER 31,
- ------------------------------------------------------------------------------------------
FINANCIAL CONDITION DATA 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Assets $1,010,883 $ 928,350 $ 839,280 $ 726,644 $ 644,435
Loans 701,340 635,434 569,705 483,348 411,336
Allowance for Loan Losses 10,801 9,390 8,092 6,982 5,365
Investments 233,242 232,190 218,693 204,260 190,669
Deposits 744,360 667,720 641,553 485,132 463,522
Borrowings 168,440 173,924 113,682 160,697 106,946
Shareholders' Equity 90,923 77,623 77,789 74,112 67,614
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------
OPERATIONS DATA 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Interest Income $79,555 $69,496 $61,591 $58,363 $51,719
Interest Expense 40,042 30,504 27,007 27,270 24,270
------- ------- ------- ------- -------
Net Interest Income 39,513 38,992 34,584 31,093 27,449
Provision for Loan Losses 2,930 3,670 2,056 2,207 1,228
------- ------- ------- ------- -------
Net Interest Income after
Provision for Loan Losses 36,583 35,322 32,528 28,886 26,221
Non-interest Income 8,915 7,694 6,573 4,936 4,550
Non-interest Expense 25,396 27,604 22,220 17,916 16,799
------- ------- ------- ------- -------
Income before Provision for Income Tax 20,102 15,412 16,881 15,906 13,972
Income Tax Expense 6,243 5,183 5,430 5,209 4,613
------- ------- ------- ------- -------
Net Income $13,859 $10,229 $11,451 $10,697 $ 9,359
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------
OTHER DATA 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Basic Earnings Per Share $ 1.70 $ 1.27 $ 1.40 $ 1.31 $ 1.13
Diluted Earnings Per Share 1.69 1.27 1.38 1.27 1.10
Dividends Per Share 0.63 0.52 0.47 0.38 0.28
Book Value Per Share 11.17 9.51 9.61 9.01 8.15
Return on Average Assets 1.40% 1.15% 1.52% 1.52% 1.50%
Return on Average Equity 16.43% 13.16% 15.09% 15.11% 13.70%
Allowance for Loan Losses to Total Loans 1.54% 1.48% 1.42% 1.44% 1.30%
Non-Performing Loans to Total Loans 0.93% 1.00% 0.82% 0.89% 1.01%
Stock Dividend Payout Ratio 37.17% 40.90% 33.74% 29.31% 24.70%
</TABLE>
33
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Condition
<TABLE>
<CAPTION>
(In thousands, except number of shares and per share data) DECEMBER 31,
- ------------------------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Assets
Cash and due from banks $ 29,337 $ 24,230
Federal funds sold -- 415
Securities available for sale, at market 175,547 163,997
Securities held to maturity (market value $60,698 and $68,049
at December 31, 2000 and 1999, respectively) 57,695 68,193
Residential mortgages held for sale 12,838 6,906
Loans, less allowance for loan losses of $10,801 and $9,390
at December 31, 2000 and 1999, respectively 677,701 619,138
Premises and equipment 16,023 12,093
Other real estate owned 380 1,405
Interest receivable 6,959 5,041
Core deposit intangible 6,660 7,645
Other assets 27,743 19,287
---------- ----------
Total assets $1,010,883 $ 928,350
========== ==========
Liabilities
Deposits:
Demand $ 83,631 $ 80,385
NOW 87,270 89,740
Money market 81,730 71,237
Savings 121,292 112,335
Certificates of deposit 370,437 314,023
---------- ----------
Total deposits 744,360 667,720
Borrowings from Federal Home Loan Bank 132,348 128,866
Other borrowed funds 36,092 45,058
Accrued interest and other liabilities 6,984 8,968
Minority interest in subsidiary 176 115
---------- ----------
Total liabilities 919,960 850,727
---------- ----------
Commitments (Notes 12, 14, 18, 19 and 20)
Shareholders' Equity
Common stock, no par value; authorized 10,000,000 shares,
issued 8,609,898 shares in 2000 and 1999 2,450 2,450
Surplus 5,909 5,990
Retained earnings 92,292 83,583
Accumulated other comprehensive loss
Net unrealized losses on securities available for sale, net of income tax (812) (5,782)
---------- ----------
99,839 86,241
Less remaining obligation under:
Bank recognition and retention plan 14 20
Less cost of 464,557 and 442,540 shares of
treasury stock on December 31, 2000 and 1999 8,902 8,598
---------- ----------
Total shareholders' equity 90,923 77,623
---------- ----------
Total liabilities and shareholders' equity $1,010,883 $ 928,350
========== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
34
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
(In thousands, except number of shares and per share data) YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 61,540 $ 53,771 $ 48,765
Interest on U.S. government and agency obligations 14,753 14,041 11,156
Interest on state and political subdivision obligations 393 400 138
Interest on interest rate swap agreements 1,434 172 365
Interest on federal funds sold and other investments 1,435 1,112 1,167
---------- ---------- ----------
Total interest income 79,555 69,496 61,591
---------- ---------- ----------
Interest Expense
Interest on deposits 27,066 23,187 21,815
Interest on other borrowings 11,650 7,182 4,873
Interest on interest rate swap agreements 1,326 135 319
---------- ---------- ----------
Total interest expense 40,042 30,504 27,007
---------- ---------- ----------
Net interest income 39,513 38,992 34,584
Provision for Loan Losses 2,930 3,670 2,056
---------- ---------- ----------
Net interest income after provision for loan losses 36,583 35,322 32,528
---------- ---------- ----------
Other Income
Service charges on deposit accounts 2,880 2,773 2,376
Other service charges and fees 1,764 1,488 1,173
Merchant assessments 1,802 1,494 1,307
Trust fees 1,281 776 645
Other income 1,188 1,163 1,072
---------- ---------- ----------
Total other income 8,915 7,694 6,573
---------- ---------- ----------
45,498 43,016 39,101
---------- ---------- ----------
Operating Expenses
Salaries and employee benefits 11,558 12,578 11,178
Net occupancy 1,666 1,579 1,327
Furniture, equipment and data processing 2,097 2,167 2,159
Merchant program 1,778 1,488 1,268
Amortization of core deposit intangible 986 1,011 665
Acquisition related 232 2,046 --
Other 7,079 6,735 5,623
---------- ---------- ----------
Total operating expenses 25,396 27,604 22,220
---------- ---------- ----------
Income before income taxes 20,102 15,412 16,881
Income Taxes 6,243 5,183 5,430
---------- ---------- ----------
Net Income $ 13,859 $ 10,229 $ 11,451
========== ========== ==========
Per Share Data
Basic earnings per share $ 1.70 $ 1.27 $ 1.40
Diluted earnings per share 1.69 1.27 1.38
Weighted average number of shares outstanding 8,164,188 8,033,757 8,156,968
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
35
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Net Unrealized
Gains (Losses)
on Securities
(In thousands, except number Common Retained Available
of shares and per share data) Stock Surplus Earnings for Sale
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 2,449 $ 5,953 $70,096 $ 78
------- ------- ------- -------
Net income for 1998 -- -- 11,451 --
Change in unrealized gains (losses) on securities
available for sale, net of deferred taxes of $2 -- -- -- 4
------- ------- ------- -------
Total comprehensive income -- -- 11,451 4
Purchase of treasury stock (159,339 shares) -- -- -- --
Exercise and repurchase of stock options
(93,000 shares), net of tax benefit of $604 -- (267) -- --
Retirement of treasury stock (5,019 shares) -- (13) (68) --
Payment of obligation under
employee stock ownership plan -- 230 -- --
Bank recognition and retention plan -- -- -- --
30,535 shares issued under stock option plans -- 81 -- --
Filing fees related to stock split -- -- (35) --
Cash dividends declared ($0.47 / share) -- -- (3,863) --
------- ------- ------- -------
Balance at December 31, 1998 $ 2,449 $ 5,984 $77,581 $ 82
------- ------- ------- -------
Net income for 1999 -- -- 10,229 --
Change in unrealized gains (losses) on securities
available for sale, net of tax benefit of $3 million -- -- -- (5,864)
------- ------- ------- -------
Total comprehensive income -- -- 10,229 (5,864)
Purchase of treasury stock (102,740 shares) -- -- -- --
Sale of treasury stock (125,000 shares) -- -- -- --
Exercise and repurchase of stock options
(93,000 shares), net of tax benefit of $525 -- (338) -- --
Retirement of treasury stock (31,983 shares) -- (270) (66) --
Payment of obligation under
employee stock ownership plan -- 388 21 --
Bank recognition and retention plan -- -- -- --
71,440 shares issued under stock option plans 1 226 -- --
Cash dividends declared ($0.52 / share) -- -- (4,182) --
------- ------- ------- -------
Balance at December 31, 1999 $ 2,450 $ 5,990 $83,583 $(5,782)
------- ------- ------- -------
Net income for 2000 -- -- 13,859 --
Change in unrealized gains (losses) on securities
available for sale, net of deferred taxes of $2.6 million -- -- -- 4,970
------- ------- ------- -------
Total comprehensive income -- -- 13,859 4,970
Purchase of treasury stock (24,950 shares) -- -- -- --
Exercise and repurchase of stock options
(8,680 shares), net of tax benefit of $6 -- (62) -- --
Exercise of stock options (2,933 shares),
net of deferred taxes of $11 -- (19) -- --
Bank recognition and retention plan -- -- -- --
Cash dividends declared ($0.63 / share) -- -- (5,150) --
------- ------- ------- -------
Balance at December 31, 2000 $ 2,450 $ 5,909 $92,292 $ (812)
======= ======= ======= =======
<CAPTION>
Employee Bank
Stock Recognition Total
(In thousands, except number Ownership and Retention Treasury Shareholders'
of shares and per share data) Plan Plan Stock Equity
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ (117) $ (50) $(4,297) $74,112
------- ------- ------- -------
Net income for 1998 -- -- -- 11,451
Change in unrealized gains (losses) on securities
available for sale, net of deferred taxes of $2 -- -- -- 4
------- ------- ------- -------
Total comprehensive income -- -- -- 11,455
Purchase of treasury stock (159,339 shares) -- -- (3,139) (3,139)
Exercise and repurchase of stock options
(93,000 shares), net of tax benefit of $604 -- -- (854) (1,121)
Retirement of treasury stock (5,019 shares) -- -- 81 --
Payment of obligation under
employee stock ownership plan 49 -- -- 279
Bank recognition and retention plan -- 20 -- 20
30,535 shares issued under stock option plans -- -- -- 81
Filing fees related to stock split -- -- -- (35)
Cash dividends declared ($0.47 / share) -- -- -- (3,863)
------- ------- ------- -------
Balance at December 31, 1998 $ (68) $ (30) $(8,209) $77,789
------- ------- ------- -------
Net income for 1999 -- -- -- 10,229
Change in unrealized gains (losses) on securities
available for sale, net of tax benefit of $3 million -- -- -- (5,864)
------- ------- ------- -------
Total comprehensive income -- -- -- 4,365
Purchase of treasury stock (102,740 shares) -- -- (2,337) (2,337)
Sale of treasury stock (125,000 shares) -- -- 2,249 2,249
Exercise and repurchase of stock options
(93,000 shares), net of tax benefit of $525 -- -- (637) (975)
Retirement of treasury stock (31,983 shares) -- -- 336 --
Payment of obligation under
employee stock ownership plan 68 -- -- 477
Bank recognition and retention plan -- 10 -- 10
71,440 shares issued under stock option plans -- -- -- 227
Cash dividends declared ($0.52 / share) -- -- -- (4,182)
------- ------- ------- -------
Balance at December 31, 1999 $ -- $ (20) $(8,598) $77,623
------- ------- ------- -------
Net income for 2000 -- -- -- 13,859
Change in unrealized gains (losses) on securities
available for sale, net of deferred taxes of $2.6 million -- -- -- 4,970
------- ------- ------- -------
Total comprehensive income -- -- -- 18,829
Purchase of treasury stock (24,950 shares) -- -- (394) (394)
Exercise and repurchase of stock options
(8,680 shares), net of tax benefit of $6 -- -- 40 (22)
Exercise of stock options (2,933 shares),
net of deferred taxes of $11 -- -- 50 31
Bank recognition and retention plan -- 6 -- 6
Cash dividends declared ($0.63 / share) -- -- -- (5,150)
------- ------- ------- -------
Balance at December 31, 2000 $ -- $ (14) $(8,902) $90,923
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
36
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands) YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Operating Activities
Net Income $ 13,859 $ 10,229 $ 11,451
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 2,930 3,670 2,056
Depreciation and amortization 1,371 1,089 1,626
Decrease in obligation under ESOP and BRRP 6 487 301
(Decrease) increase in interest receivable (1,117) (551) 77
Increase (decrease) in other assets 2,744 (3,755) (2,787)
(Decrease) increase in other liabilities (5,343) 6,004 (489)
Sale of residential mortgage loans held for sale 11,767 4,610 7,334
Origination of mortgage loans held for sale (17,699) (3,288) (35,387)
Increase in minority position 61 25 5
Loss on disposal of assets -- -- 3
-------- -------- --------
Net cash provided (used) by operating activities 8,579 18,520 (15,810)
-------- -------- --------
Investing Activities
Proceeds from sales and maturities of securities held to maturity 10,587 29,909 77,429
Proceeds from sales and maturities of securities available for sale 8,509 20,251 6,117
Purchase of securities available for sale (12,456) (72,072) (88,734)
Purchase of Federal Home Loan Bank Stock (174) (331) (104)
Net increase in loans (61,493) (69,424) (49,410)
Net increase (decrease) in other real estate owned 1,025 (353) 943
Purchase of premises and equipment (5,506) (1,421) (1,689)
Net decrease (increase) in federal funds sold 415 (415) 1,103
Purchase of bank-owned life insurance (10,000) -- --
Net cash provided by acquisitions -- -- 74,321
-------- -------- --------
Net cash (used) provided by investing activities (69,093) (93,856) 19,976
-------- -------- --------
Financing Activities
Net increase in demand deposits, NOW accounts,
money markets and savings accounts 20,226 22,896 35,505
Net increase in certificates of deposit 56,414 3,271 17,433
Net increase (decrease) in borrowings (5,484) 60,242 (47,536)
Purchase of treasury stock (394) (2,337) (3,139)
Sale of treasury stock -- 2,249 --
Proceeds from stock issuance under option plan 31 227 81
Exercise and repurchase of stock options (22) (975) (1,121)
Filing fees related to stock split -- -- (35)
Cash dividends paid (5,150) (4,182) (3,863)
-------- -------- --------
Net cash provided (used) by financing activities 65,621 81,391 (2,675)
-------- -------- --------
Net increase in cash and cash equivalents 5,107 6,055 1,491
Cash and cash equivalents at beginning of year 24,230 18,175 16,684
-------- -------- --------
Cash and cash equivalents at end of year $ 29,337 $ 24,230 $ 18,175
======== ======== ========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 39,516 $ 30,270 $ 26,369
Income tax 6,320 6,057 6,310
Non-Cash transactions:
Transfer from loans to other real estate owned 302 1,418 1,196
Securitization of mortgage loans -- -- 9,014
Transfer from loans held for sale to loan portfolio -- 24,637 --
</TABLE>
See Note 3, "Branch Acquisitions," of the Notes to Consolidated Financial
Statements, on page 41, for branch acquisition disclosure. The accompanying
notes are an integral part of these Consolidated Financial Statements.
37
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(Amounts in tables expressed in thousands, except number
of shares and per share data)
NATURE OF OPERATIONS.
The Company is a multi-bank and financial services holding company. The Company
has 2 wholly owned bank subsidiaries. Camden National Bank is a national banking
association based in Camden, Maine. UnitedKingfield Bank, a state-chartered bank
based in Bangor, Maine, is the successor by merger, effective February 4, 2000,
of United Bank and Kingfield Bank. The Company also has a 51% interest in Trust
Company of Maine, Inc., a non-bank subsidiary based in Bangor, Maine.
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 the Company, its wholly owned bank
subsidiaries, Camden National Bank and UnitedKingfield Bank, and its majority
owned non-bank subsidiary, Trust Company of Maine, Inc. All intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements. The
preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowance for loan losses and the
carrying value of real estate owned, management obtains independent appraisals
for significant properties.
Cash. The Company is required to comply with various laws and regulations
of the FRB which require the Company to maintain certain amounts of cash on
deposit and restrict the Company 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 Federal Deposit
Insurance Corporation ("FDIC"). For the statement of cash flows, cash
equivalents consist of cash and due from banks.
Investment Securities. The Company has classified its investment
securities into investments available for sale and investments to be held to
maturity.
Securities Available for Sale. Debt and other securities that are to be
held for indefinite periods of time are stated at market value. Changes in net
unrealized gains or losses are recorded as an adjustment to shareholders' equity
until realized.
Market values of securities are determined by prices obtained from
independent market sources. Realized gains and losses on securities sold are
computed on the identified cost basis on the trade date.
Securities 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 quoted market prices
from the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Gains and
losses from sales of residential mortgages held for sale are recognized upon
settlement with investors and recorded in other income. These activities,
together with underwriting residential mortgage loans, comprise the Company's
mortgage banking business.
Loan Servicing. 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
38
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
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.
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.
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 or upon receipt of a deed in lieu of foreclosure
and is recorded at the lower of the recorded amount of the loan or market value
of the underlying collateral, less estimated selling costs, determined by an
independent appraisal, with any difference at the time of acquisition treated as
a loan loss. Subsequent reductions in market value below the carrying 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 periods ranging from 10 to 15 years using the straight-line method. Other
intangible assets, including goodwill, are being amortized over 20 to 25 years
using the straight-line method. Amortization of software is recognized using the
straight-line method over the estimated useful lives of the various software
items. On an ongoing basis, management reviews the valuation and amortization of
intangible assets to determine possible impairment.
Other Borrowed Funds. Other borrowed funds consist of commercial and
consumer repurchase agreements and treasury tax and loan deposits. Securities
sold under agreements to repurchase generally mature within 30 days and are
reflected at the amount of cash received in connection with the transaction. The
Company may be required to provide additional collateral based on the fair value
of the underlying securities.
Treasury tax and loan deposits generally do not have fixed maturity dates.
Income Taxes. Deferred tax assets and liabilities are determined based on
the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Principal temporary differences occur with
respect to pension and other postretirement benefits, depreciation and the
provision for loan losses.
Earnings Per Share. Basic earnings per share data is computed based on the
weighted average number of the Company's common shares outstanding during each
year. Potential common stock is considered in the calculation of
weighted-average shares outstanding for diluted earnings per share, and is
determined using the treasury stock method.
In 1998, the shareholders approved a three-for-one split of the Company's
common stock to shareholders of record on November 19, 1998. The number of
shares and per share amounts have been restated to reflect this transaction.
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 presently does not intend to sell any of
these instruments.
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.
39
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Derivative Financial Instruments. As part of its asset/liability
management, the Company uses interest rate contracts, which include swaps to
hedge various exposures or to modify interest rate characteristics of various
balance sheet accounts.
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.
Fair Value Disclosures. The following methods and assumptions were used by
the Company in estimating its fair value disclosures for financial instruments:
Cash and due from banks and federal funds sold: The carrying amounts of
cash and due from banks and federal funds sold approximate their fair value.
Investment securities and securities available for sale: Fair values for
investment securities and securities available for sale are based on quoted
market prices, where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments. The carrying
amounts of other securities approximate their fair value.
Residential mortgages held for sale: Fair values are based on quoted
market prices from 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 and payable: The carrying amounts of interest
receivable and payable approximate their fair value.
Life insurance policies: The carrying amounts of life insurance policies
approximate their fair value.
Deposits: The fair value of demand and NOW 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.
Borrowings: The carrying amounts of short-term borrowings from the FHLBB,
securities under repurchase agreements and other short-term borrowings,
approximate fair value. The fair value of long-term borrowings is based on the
discounted cash flows using current rates for advances of similar remaining
maturities.
Off-balance sheet instruments: Fair values for interest rate swaps and
floor and cap contracts are based on quoted market prices.
In the course of originating loans and extending credit and standby
letters of credit, the Company charges fees in exchange for its lending
commitment. While these commitment fees have value, the Company does not believe
their value is material to its financial statements due to the short-term nature
of the underlying commitments.
Effect of Recently Issued Financial Standards. SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities," are effective for all fiscal years beginning after June 15,
2000. These statements set accounting and reporting standards for derivative
instruments and hedging activities. They require an entity to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value.
At December 31, 2000, the fair value of derivative instruments, which will
be reported an asset upon adoption of SFAS No. 133, was approximately $650,000.
Management is in the process of evaluating the impact on earnings of
implementing SFAS No. 133. To the extent that management determines the
derivatives are not effective as cash flow hedges, the fair value will be
included in earnings during the first quarter of 2001, net of applicable income
taxes. Effectiveness is defined as the change in the expected cash flows of the
derivative hedging instrument in comparison to the change in expected cash flows
of the hedged item. To the extent that management determines the derivatives are
effective and qualify as cash flow hedges, the fair value will be recorded in
other comprehensive income during the first quarter of 2001, net of applicable
income taxes. Upon implementation of SFAS No. 133 on January 1, 2001, the
Company will also transfer all of its investment securities classified as held
to maturity to available for sale. The impact of the reclassification will be an
increase to comprehensive income of $2.0 million net of applicable income taxes.
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," is effective for transfers occurring after
March 31, 2001. SFAS No. 140 replaces SFAS No. 125. This statement is expected
to have no material impact to the Company's consolidated financial condition and
results of operations.
Reclassification. Certain items from the prior year were restated to
conform with the current year presentation.
40
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
2. MERGER
On December 20, 1999, KSB was merged into the Company. The merger was accounted
for under the pooling-of-interests method. KSB had total assets of $191,084,000
and total shareholders' equity of $13,971,000. The Company exchanged
approximately 1,481,800 shares of its common stock for approximately 1,304,401
shares of KSB common stock. Under the pooling-of-interests method, the recorded
amounts of assets and liabilities of the Company and KSB 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 years ended
December 31:
1999 1998
- --------------------------------------------------------------------------------
Net income
KSB Bancorp, Inc. $ 1,236 $ 1,806
Camden National Corporation 8,993 9,645
------- -------
Combined $10,229 $11,451
Basic earnings per share
KSB Bancorp, Inc. $ 1.01 $ 1.47
Camden National Corporation 1.35 1.43
Combined 1.27 1.40
Diluted earnings per share
KSB Bancorp, Inc. $ 1.01 $ 1.41
Camden National Corporation 1.35 1.41
Combined 1.27 1.38
Dividends per share
KSB Bancorp, Inc. $ .16 $ .11
Camden National Corporation .60 .55
Combined .52 .47
On February 4, 2000, United Bank was merged with Kingfield Bank to create a new
community bank, UnitedKingfield Bank, having total assets of $325,233,000.
3. BRANCH ACQUISITIONS
During 1998, the Company's 2 bank subsidiaries acquired 8 branch locations. The
excess of cost over fair value of net assets acquired in these branch
acquisitions has been amortized to expense using the straight-line method over
10 years. The acquisition was accounted for under the purchase method of
accounting for business combinations.
The following is a summary of the transactions:
Loans acquired $ 19,340
Premises and equipment 714
Premium on deposits 8,553
Other assets 1,210
Deposits assumed 104,005
Other liabilities 133
Net cash received 74,321
Amortization expense of core deposit intangibles was $986,000, $1,011,000 and
$665,000 in 2000, 1999 and 1998, respectively.
41
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
4. INVESTMENT SECURITIES
The following tables summarize the amortized costs and market values of
securities available for sale and held to maturity, as of the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31, 2000
- ---------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale
U.S. treasury securities and obligations of
U.S. government corporations and agencies $ 57,919 $ 1,088 $ (299) $ 58,708
Obligations of states and political subdivisions 8,208 -- (280) 7,928
Mortgage-backed securities 30,174 179 (236) 30,117
Other debt securities 45,780 -- (1,313) 44,467
-------- -------- -------- --------
Total debt securities 142,081 1,267 (2,128) 141,220
-------- -------- -------- --------
Federal Home Loan Bank of Boston stock 16,193 -- -- 16,193
Federal Reserve Bank stock 39 -- -- 39
Other equity securities 18,464 150 (519) 18,095
-------- -------- -------- --------
Total equity securities 34,696 150 (519) 34,327
-------- -------- -------- --------
Total securities available for sale $176,777 $ 1,417 $ (2,647) $175,547
======== ======== ======== ========
Held to maturity
U.S. treasury securities and obligations of
U.S. government corporations and agencies $ 300 $ -- $ (25) $ 275
Obligations of states and political subdivisions 1,142 12 -- 1,154
Other debt securities 595 14 (11) 598
Mortgage-backed securities 55,658 3,038 (25) 58,671
-------- -------- -------- --------
Total securities held to maturity $ 57,695 $ 3,064 $ (61) $ 60,698
======== ======== ======== ========
<CAPTION>
DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale
U.S. treasury securities and obligations of
U.S. government corporations and agencies $ 67,466 $ 15 $ (2,435) $ 65,046
Obligations of states and political subdivisions 8,210 -- (690) 7,520
Mortgage-backed securities 13,737 -- (633) 13,104
Other debt securities 50,320 -- (3,382) 46,938
-------- -------- -------- --------
Total debt securities 139,733 15 (7,140) 132,608
-------- -------- -------- --------
Federal Home Loan Bank of Boston stock 16,019 -- -- 16,019
Federal Reserve Bank stock 39 -- -- 39
Other equity securities 16,966 32 (1,667) 15,331
-------- -------- -------- --------
Total equity securities 33,024 32 (1,667) 31,389
-------- -------- -------- --------
Total securities available for sale $172,757 $ 47 $ (8,807) $163,997
======== ======== ======== ========
Held to maturity
U.S. treasury securities and obligations of
U.S. government corporations and agencies $ 5,949 $ 60 $ (35) $ 5,974
Obligations of states and political subdivisions 1,152 11 (2) 1,161
Other debt securities 129 -- (3) 126
Mortgage-backed securities 60,963 414 (589) 60,788
-------- -------- -------- --------
Total securities held to maturity $ 68,193 $ 485 $ (629) $ 68,049
======== ======== ======== ========
</TABLE>
42
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
The amortized cost and fair values of debt securities by contractual maturity at
December 31, 2000 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 $ -- $ --
Due after one year through five years 41,386 51,112
Due after five years through ten years 39,362 39,315
Due after ten years 61,333 50,793
-------- --------
$142,081 $141,220
======== ========
Amortized Fair
Cost Value
- --------------------------------------------------------------------------------
Held to maturity
Due in one year or less $ 1,897 $ 1,871
Due after one year through five years 5,980 7,572
Due after five years through ten years 3,600 3,736
Due after ten years 46,218 47,519
------- -------
$57,695 $60,698
======= =======
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 either the available-for-sale or held-to-maturity
portfolios during 2000. Proceeds from the sale of investments classified as held
to maturity during 1999 were $5,023,000, which resulted in a gross realized gain
of $26,000. The investments were sold within 3 months of the maturity date. In
1999, proceeds from the sale of investments classified as available for sale
were $10,637,000, which resulted in a gross realized gain of $125,000. There
were no sales in the available-for-sale or held-to-maturity portfolios during
1998.
At December 31, 2000 and 1999, securities with a book value of $78,539,000 and
$85,469,000 and a fair value of $79,504,000 and $83,311,000, respectively, were
pledged to secure public deposits, securities sold under agreements to
repurchase and other purposes required or permitted by law.
5. LOANS
The composition of the Company's loan portfolio at December 31 was as follows:
2000 1999
- --------------------------------------------------------------------------------
Commercial loans $364,169 $316,411
Residential real estate loans 223,625 220,534
Consumer loans 90,231 83,832
Municipal loans 10,924 8,307
Other loans 462 336
-------- --------
Total loans 689,411 629,420
Less deferred loan fees net of costs 909 892
Less allowance for loan losses 10,801 9,390
-------- --------
$677,701 $619,138
======== ========
The Company's lending activities are conducted in mid-coast, central and western
Maine. The Company makes single family and multi-family residential loans,
commercial real estate loans, business and a variety of consumer loans. In
addition, the Company makes 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, 2000 and 1999, nonaccrual loans were $4,644,000 and
$6,136,000, respectively. Interest foregone was approximately $528,000, $408,000
and $248,000 for 2000, 1999, and 1998, respectively.
43
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
6. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
DECEMBER 31,
- --------------------------------------------------------------------------------
2000 1999 1998
Beginning balance $ 9,390 $ 8,092 $ 6,982
Provision for loan losses 2,930 3,670 2,056
Recoveries 626 288 330
Loans charged off (2,145) (2,660) (1,276)
------- ------- -------
Net charge offs (1,519) (2,372) (946)
------- ------- -------
Ending balance $10,801 $ 9,390 $ 8,092
======= ======= =======
Information regarding impaired loans is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Average investment in impaired loans $5,871 $5,455 $4,499
Interest income recognized on impaired loans, all on cash basis 241 452 525
Balance of impaired loans 4,644 6,136 5,009
Less portion for which no allowance for loan losses is allocated -- -- 2,745
Portion of impaired loan balance for which an allowance for credit losses is allocated 4,644 6,136 2,264
Portion of allowance for loan losses allocated to the impaired loan balance 860 1,179 487
</TABLE>
7. 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 Freddie Mac. Under loan sale and servicing
agreements with the investor, the Company generally continues to service the
residential real estate mortgages. The Company pays the investor an agreed-upon
rate on the loan, which, including a guarantee fee paid to Freddie Mac, is less
than the interest rate the Company receives from the borrower. The difference is
retained by the Company as a fee for servicing the residential real estate
mortgages. As required by SFAS No. 125, the Company capitalizes mortgage
servicing rights at their fair value upon sale of the related loans. Capitalized
servicing rights totaled $107,000, $171,000 and $115,000 during 2000, 1999 and
1998, respectively. Amortization expense totaled $32,000 and $22,000 for 2000
and 1999, respectively. There was no amortization expense during 1998, the year
SFAS No. 125 was implemented.
Mortgage loans serviced for others are not included in the accompanying
Consolidated Statements of Condition of the Company. The unpaid principal
balance of mortgage loans serviced for others was $111,002,000, $105,263,000 and
$112,052,000 at December 31, 2000, 1999 and 1998, respectively.
Custodial escrow balances maintained in connection with the foregoing loan
servicing, and included in demand deposits, were $267,000 and $216,000 at
December 31, 2000 and 1999, respectively.
8. PREMISES AND EQUIPMENT
Details of premises and equipment, at cost, at December 31 were as follows:
2000 1999
- --------------------------------------------------------------------------------
Land and buildings $12,265 $11,505
Furniture, fixtures and equipment 12,813 11,671
Leasehold improvements 1,186 604
Construction in process 2,524 223
------- -------
28,788 24,003
Less: Accumulated depreciation and amortization 12,765 11,910
------- -------
$16,023 $12,093
======= =======
Depreciation expense was $1,529,000, $1,553,000 and $1,489,000 for 2000, 1999
and 1998, respectively.
44
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
9. OTHER REAL ESTATE OWNED
The transactions in other real estate owned for the years ended December 31 were
as follows:
2000 1999 1998
- --------------------------------------------------------------------------------
Beginning balance $1,405 $1,052 $1,532
Additions 302 1,418 1,196
Properties sold 1,180 491 1,599
Writedowns 147 574 77
------ ------ ------
Ending balance $ 380 $1,405 $1,052
====== ====== ======
10. DEPOSITS
The aggregate amount of certificates of deposit, each with a minimum
denomination of $100,000, was approximately $74,329,000 and $52,224,000 at
December 31, 2000 and 1999, respectively. Certificates of deposit included
brokered deposits in the amount of $26,931,000 and $6,014,000 at December 31,
2000 and 1999, respectively.
At December 31, 2000, the scheduled maturities of certificates of deposit were
as follows:
2001 $295,286
2002 35,771
2003 7,734
2004 3,756
2005 2,217
Thereafter 25,673
--------
$370,437
========
11. BORROWINGS
A summary of the borrowings, including the outstanding balance of lines of
credit, from the FHLBB is as follows:
DECEMBER 31, 2000
- --------------------------------------------------------------------------------
Principal Amounts Interest Rates Maturity Date
$ 78,348 6.52% - 6.67% 2001
32,000 6.08% - 6.12% 2003
12,000 4.88% - 4.97% 2009
10,000 4.95% 2010
--------
$132,348
========
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Principal Amounts Interest Rates Maturity Date
$ 83,866 4.06% - 6.05% 2000
2,000 6.08% 2003
1,000 4.80% 2004
5,000 5.09% 2008
37,000 4.83% - 5.35% 2009
--------
$128,866
========
Short- and long-term borrowings from the FHLBB consist of both fixed and
adjustable rate borrowings and are collateralized by all stock in the FHLBB and
a blanket lien on qualified collateral consisting primarily of loans with first
mortgages secured by one-to-four family properties, certain unencumbered
investment securities and other qualified assets. The carrying value of loans
pledged as collateral was $228,511,000 and $225,039,000 at December 31, 2000 and
1999, respectively. The FHLBB at its discretion can call $52,000,000 of the
Company's long-term borrowings. The Company, through its bank subsidiaries, has
an available line of credit with FHLBB of $12,980,000 and $14,292,000 at
December 31, 2000 and 1999, respectively. The Company had no outstanding balance
on its line of credit with the FHLBB at December 31, 2000 and $1,284,000
outstanding at December 31, 1999.
45
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
11. Borrowings continued
The Company utilizes other borrowings in the form of federal funds purchased;
treasury, tax and loan deposits; and repurchase agreements secured by U.S.
government or agency securities. Balances outstanding at December 31 are shown
in the table below:
2000 1999
- --------------------------------------------------------------------------------
Federal funds purchased $ -- $ 1,300
Treasury, tax and loan deposits 1,031 1,523
Securities sold under repurchase agreements 35,061 42,235
------- -------
Total other borrowed funds $36,092 $45,058
======= =======
Weighted-average rate at the end of period 4.24% 4.10%
12. EMPLOYEE BENEFIT PLANS
Pension and Other Postretirement Plans
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.
On October 17, 2000, the Company terminated the defined-benefit noncontributory
pension plan, which covered substantially all eligible employees over 21 years
of age with 1 year of employment. Total plan assets of $5,168,000 are expected
to be distributed to eligible employees during the first half of 2001. During
2000, the Company recognized $437,000 of net income due to the over accrual of
the benefit obligation at the date of plan termination.
POSTRETIREMENT
BENEFITS
- --------------------------------------------------------------------------------
2000 1999 1998
Change in benefit obligation
Benefit obligation at beginning of the year $ 481 $ 399 $ 356
Service cost 38 25 21
Interest cost 32 28 26
Actuarial gain 200 50 15
Benefits paid (27) (21) (19)
----- ----- -----
Benefit obligation at end of year 724 481 399
----- ----- -----
Funded status (724) (481) (399)
Unrecognized net actuarial loss 273 77 27
Unrecognized net prior service cost (94) (110) (126)
----- ----- -----
Accrued benefit cost $(545) $(514) $(498)
===== ===== =====
Weighted-average discount rate assumption 7.0% 7.0% 7.5%
POSTRETIREMENT
BENEFITS
- --------------------------------------------------------------------------------
2000 1999 1998
Components of net periodic benefit cost
Service cost $ 38 $ 25 $ 21
Interest cost 32 28 26
Amortization of prior service cost (16) (16) (16)
Recognized net actuarial loss 3 -- --
----- ----- -----
Net periodic benefit cost $ 57 $ 37 $ 31
===== ===== =====
46
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
For measurement purposes, a 6.4% annual rate of increase in the per capita cost
to cover health care benefits was assumed for 2001. The rate was assumed to
decrease gradually to a 6.0% annual growth rate after 7 years, and remain at a
6.0% annual growth rate thereafter. A 1.0% increase or decrease in the assumed
health care cost trends rate would not have a material impact on the accumulated
postretirement benefit obligation due to a built-in cap on annual benefits.
The Company also sponsors an unfunded, non-qualified supplemental retirement
plan for certain officers. The agreement provides supplemental retirement
payments payable in installments over 15 years upon retirement or death.
Effective September 1, 1999, active participants will be paid a life annuity
upon retirement or death.
The expense of this supplemental plan was $347,000, $309,000 and $217,000 in
2000, 1999 and 1998, respectively. The accrued liability of this plan at
December 31, 2000, 1999 and 1998 was $1,318,000, $1,198,000 and $955,000,
respectively.
401(k) Plan
The Company has a 401(k) plan whereby substantially all employees participate in
the plan. Employees may contribute up to 15% of their compensation subject to
certain limits based on federal tax laws. The Company makes matching
contributions based on Board of Director approval. For the years ended December
31, 2000, 1999 and 1998, expenses attributable to the 401(k) plan amounted to
$214,000, $171,000 and $138,000, respectively.
Employee Stock Ownership Plan
During 1999 and 1998, the Company, as successor to KSB, had an Employee Stock
Ownership Plan ("ESOP"). As of the merger date (December 20, 1999), all
liabilities related to this plan were paid. Total ESOP expense was $368,765 and
$279,770 in 1999 and 1998, respectively.
Bank Recognition and Retention Plan
The Company, as successor to KSB, maintains a Bank Recognition and Retention
Plan ("BRRP") as a method of providing certain officers and other employees of
the Company with a proprietary interest in the Company. During 1994, the Company
contributed funds to the BRRP to enable such Company officers and employees to
acquire, in the aggregate, 56,045 shares of common stock of the Company. The
Company recognizes expense related to the BRRP based on the vesting schedule.
Participants are vested at a rate of 20% per year commencing 1 year from the
date of the award. Total expense related to the BRRP was $5,712, $9,726 and
$21,194 for 2000, 1999 and 1998, respectively.
A summary of shares outstanding under the BRRP is presented below:
2000 1999 1998
- --------------------------------------------------------------------------------
Outstanding at beginning of year 56,045 56,045 44,488
Granted during the year -- -- 11,557
Forfeited during the year -- -- --
------ ------ ------
Outstanding at end of year 56,045 56,045 56,045
====== ====== ======
13. SEGMENT REPORTING
The Company, through its bank and non-bank subsidiaries, provides a broad range
of financial services to individuals and companies in mid-coast, central and
western Maine. These services include lending, demand, savings and time
deposits; cash management; and trust services. While the Company's senior
management team monitors operations of each subsidiary, these subsidiaries are
primarily organized to operate in the banking industry. Substantially all
revenues and services are derived from banking products and services in Maine.
Accordingly, the Company's subsidiaries are considered by management to be
aggregated in 1 reportable operating segment.
47
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
14. SHAREHOLDERS' EQUITY
Dividends paid by subsidiaries are the primary source of funds available to the
Company for payment of dividends to its shareholders. The Company's subsidiary
banks are subject to certain requirements imposed by state and federal banking
laws and regulations. These requirements, among other things, establish minimum
levels of capital and restrict the amount of dividends that may be distributed
by the subsidiary banks to the Company.
The Company has 4 fixed stock option plans accounted for under Accounting
Principles Board Opinion 25 and related interpretations. The plans allow the
Company to grant options to employees for up to 676,140 shares of Company common
stock. Under 2 plans, options are vested 20% per year from the date of the grant
and expire 10 years from the date of the grant. Under the remaining 2 plans, the
options are immediately vested when granted, and expire 10 years from the date
the option was granted. The exercise price of all options equals the market
price of the Company's stock on the date of grant. Accordingly, no compensation
cost has been recognized for the plans. Had compensation cost for the plans been
determined based on the fair value of the options at the grant dates consistent
with the method of SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net income and earnings per share for 1999 and 1998 would have been
reduced to the pro forma amounts indicated below. The Company's net income and
earnings per share for 2000 is equal to pro forma amounts since there were no
options granted during the year ended December 31, 2000.
EARNINGS PER SHARE
NET INCOME BASIC DILUTED
- --------------------------------------------------------------------------------
2000
As reported $13,859 $1.70 $1.69
Pro forma 13,859 1.70 1.69
1999
As reported $10,229 $1.27 $1.27
Pro forma 9,985 1.24 1.24
1998
As reported $11,451 $1.40 $1.38
Pro forma 10,256 1.26 1.23
The fair value of each option granted 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 1998 dividend yield of 3.0%, expected
volatility of 1.35%, risk-free interest rate of 4.75%, and expected lives of 10
years; in 1999 dividend yield of 3.3%, expected volatility of 1.35%, risk-free
interest rate of 4.75%, and expected lives of 10 years.
A summary of the status of the Company's fixed stock option plans as of December
31, 2000, 1999 and 1998, and changes during the years ended on those dates is
presented below.
2000
- --------------------------------------------------------------------------------
Number of Weighted-average
Shares Exercise Price
Outstanding at beginning of year 199,842 $ 14.13
Exercised during the year 11,613 11.55
Forfeited during the year 4,500 14.47
------- -------
Outstanding at end of year 183,729 $ 14.29
======= =======
Exercisable at end of year 183,729 $ 14.29
======= =======
48
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[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
1999
- ---------------------------------------------------------------------------------------------------------
Number of Weighted-average
Shares Exercise Price
<S> <C> <C>
Outstanding at beginning of year 337,366 $ 9.62
Granted during the year 18,180 16.28
Exercised during the year 164,440 4.91
Reload options granted during the year 8,736 10.26
------- -------
Outstanding at end of year 199,842 $ 14.13
======= =======
Exercisable at end of year 184,393 $ 13.95
======= =======
Weighted-average fair value of options granted during the year $ 13.42
<CAPTION>
1998
- --------------------------------------------------------------------------------------------------------
Number of Weighted-average
Shares Exercise Price
<S> <C> <C>
Outstanding at beginning of year 371,018 $ 6.47
Granted during the year 88,272 16.55
Exercised during the year 123,535 5.21
Reload options granted during the year 5,019 16.23
Forfeited during the year 3,408 16.29
------- -------
Outstanding at end of year 337,366 $ 9.62
======= =======
Exercisable at end of year 270,228 $ 8.33
======= =======
Weighted-average fair value of options granted during the year $ 13.54
</TABLE>
The following table summarizes information related to options outstanding at
December 31, 2000:
Number Remaining Weighted-average
Outstanding Contractual Life Exercise Price
10,822 2.0 $12.95
70,500 5.0 12.33
9,542 6.0 6.75
80,365 7.0 16.44
12,500 8.0 18.38
------- --- ------
183,729 6.0 $14.29
======= === ======
15. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
2000 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income, as reported $ 13,859 $ 10,229 $ 11,451
Weighted-average shares 8,164,188 8,033,757 8,156,968
Effect of dilutive employee stock options 14,617 33,877 153,658
Adjusted weighted-average shares and assumed conversion 8,178,805 8,067,634 8,310,626
Basic earnings per share $ 1.70 $ 1.27 $ 1.40
Diluted earnings per share $ 1.69 $ 1.27 $ 1.38
</TABLE>
Options to purchase 93,908 and 24,500 shares of common stock at an average
exercise price of $16.54 and $18.56 per share were outstanding at December 31,
2000 and 1999, respectively, but were not included in the computation of diluted
earnings per share because the options exercise price was greater than the
average market price of the common stock.
49
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CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
16. INCOME TAXES
The current and deferred components of income tax expense were as follows:
2000 1999 1998
- --------------------------------------------------------------------------------
Current:
Federal $ 5,070 $ 5,095 $ 5,889
State 219 188 183
------- ------- -------
5,289 5,283 6,072
Deferred:
Federal 954 (100) (642)
------- ------- -------
$ 6,243 $ 5,183 $ 5,430
======= ======= =======
The actual expense differs from the expected tax expense computed by applying
the applicable U.S. fbederal corporate income tax rate to earnings before income
taxes, as follows:
<TABLE>
<CAPTION>
2000 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed tax expense $ 7,036 $ 5,394 $ 5,881
Increase (reduction) in income taxes resulting from:
Tax exempt income (471) (349) (184)
State taxes, net of federal benefit 142 122 119
Income from life insurance (264) (92) (80)
Acquisition costs 27 452 --
Low income housing credits (106) (77) (304)
Other (121) (267) (2)
------- ------- -------
$ 6,243 $ 5,183 $ 5,430
======= ======= =======
</TABLE>
Items which give rise to deferred income tax assets and liabilities and the tax
effect of each are as follows:
<TABLE>
<CAPTION>
2000 1999
- --------------------------------------------------------------------------------------------------------
Asset Liability Asset Liability
<S> <C> <C> <C> <C>
Allowance for possible losses on loans $3,697 $ -- $2,930 $ --
Allowance for investment losses 86 -- 86 --
Capitalized costs 231 -- -- 34
Pension and other benefits 652 -- 855 --
Depreciation -- 183 -- 134
Deferred loan origination fees -- 226 -- 207
Deferred compensation and benefits 312 -- 268 --
Unrealized gains on investments available for sale 418 -- 2,978 --
Unrealized appreciation on loans held for sale 167 -- -- 447
Valuation of other real estate owned 20 -- 148 --
Interest receivable 185 -- 122 --
Deposit premium 80 -- 38 --
Mortgage servicing rights -- 82 26 --
Other 26 -- 126 --
------ ------ ------ ------
$5,874 $ 491 $7,577 $ 822
====== ====== ====== ======
</TABLE>
The related income taxes have been calculated using a rate of 35%. No valuation
allowance is deemed necessary for the deferred tax asset, which is included in
other assets.
Retained earnings include $222,000 representing an allocation for income tax bad
debt deductions prior to 1988, referred to as the base year reserve. No income
taxes have been provided for the base year reserve, though it continues to be
subject to provisions of present law that require recapture in the case of
certain excess distributions to shareholders.
50
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
17. RELATED PARTIES
In the ordinary course of business, the Company has made 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:
2000 1999
- --------------------------------------------------------------------------------
Balance, January 1, $16,178 $15,933
Loans made/advanced and additions 4,545 9,866
Repayments and reductions 6,425 9,621
------- -------
Balance, December 31 $14,298 $16,178
======= =======
In addition to the loans noted above, the Company had deposits at December 31,
2000 and 1999 to the same individuals of $4,763,000 and $5,970,000,
respectively.
18. LEGAL CONTINGENCIES
Various legal claims also arise from time to time in the normal course of
business which, in the opinion of management, will have no material effect on
the Company's Consolidated Financial Statements.
19. FINANCIAL INSTRUMENTS
In the normal course of business, the Company is a party to financial
instruments with off-balance sheet risk, which are not reflected in the
accompanying Consolidated Statements of Condition. The Company's significant
off-balance sheet risks are lending commitments, letters of credit, interest
rate floors, 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 Consolidated Statements 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 has not incurred any losses on its commitments in
2000, 1999 or 1998.
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, 2000, the Company had $35 million (notional
principal amount) in interest rate swaps, $10 million in floor contracts and $90
million in cap contracts. The Company has interest rate swaps maturing in 2004,
2006 and 2010. The floor contracts have a strike rate of 6.00% and mature in
2005. The two cap contracts ($20 million and $70 million) have strike rates of
7.50% and 7.00%, respectively, and both mature in 2002.
At December 31, 2000 and 1999, the contractual or notional amounts of
off-balance sheet financial instruments were as follows:
2000 1999
- --------------------------------------------------------------------------------
Contractual
Commitments to extend credit $ 99,108 $119,586
Letters of credit 1,865 1,303
Notional
Swaps 35,000 10,000
Floors 10,000 --
Caps 90,000 --
51
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
19. Financial Instruments continued
The estimated fair values of the Company's financial instruments reported in
the Consolidated Statements of Condition were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 2000 DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks and federal funds sold $ 29,337 $ 29,337 $ 24,645 $ 24,645
Securities available for sale 175,547 175,547 163,997 163,997
Securities held to maturity 57,695 60,698 68,193 68,049
Residential mortgages held for sale 12,838 12,838 6,906 6,906
Loans receivable 677,701 674,814 619,138 616,935
Interest receivable 6,959 6,959 5,041 5,041
Life insurance policies 16,842 16,842 5,402 5,402
Financial liabilities:
Deposits $744,360 $745,291 $667,720 $665,231
Borrowings from Federal Home Loan Bank 132,348 131,680 128,866 126,010
Other borrowed funds 36,092 36,092 45,058 45,058
Interest payable 3,963 3,963 3,162 3,162
</TABLE>
The estimated fair values of the Company's off-balance sheet instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 2000
- ------------------------------------------------------------------------------------------
Fair Value
Notional Contract Maturity Including
Principal Date Date Accruals
<S> <C> <C> <C> <C>
Interest Rate Swaps $10,000 23-Dec-99 23-Dec-04 $316
20,000 11-Aug-00 11-Aug-10 39
5,000 23-Aug-00 23-Feb-06 13
------- ----
$35,000 $368
======= ====
Interest Rate Floors $10,000 10-May-00 12-May-05 $258
======= ====
Interest Rate Caps $20,000 26-Jul-00 26-Jul-02 $ 12
70,000 23-Oct-00 23-Oct-02 31
------- ----
$90,000 $ 43
======= ====
<CAPTION>
DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------
Fair Value
Notional Contract Maturity Including
Principal Date Date Accruals
<S> <C> <C> <C> <C>
Interest Rate Swaps $10,000 23-Dec-99 23-Dec-04 $ --
======= ====
</TABLE>
52
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
20. REGULATORY MATTERS
The Company and its bank subsidiaries are subject to various regulatory capital
requirements administered by the FRB, the Comptroller of the Currency, and the
FDIC. Failure to meet minimum capital requirements can result in mandatory and
possible additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Company's Consolidated 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 practices. The Company's capital classification is also
subject to qualitative judgments by its 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 of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier 1 capital to average assets (as defined). Management believes that,
as of December 31, 2000, the Company and its bank subsidiaries meet all capital
requirements to which they are subject.
As of December 31, 2000, both bank subsidiaries were categorized by their
supervisory regulatory agencies as well capitalized. To be categorized as well
capitalized, each bank subsidiary of the Company must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the
table. There are no conditions or events that management believes have changed
the banks' respective capital categories.
The Company's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount> Ratio> Amount> Ratio>
- - - -
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 2000
Total Capital (To Risk-Weighted Assets):
Consolidated $94,077 13.1% $57,618 8.0% N/A
Camden National Bank 59,373 12.3% 38,735 8.0% $48,419 10.0%
UnitedKingfield Bank 27,685 11.7% 18,883 8.0% 23,603 10.0%
Tier 1 Capital (To Risk-Weighted Assets):
Consolidated $85,074 11.8% $28,809 4.0% N/A
Camden National Bank 53,320 11.0% 19,368 4.0% $29,051 6.0%
UnitedKingfield Bank 24,734 10.5% 9,441 4.0% 14,162 6.0%
Tier 1 Capital (To Average Assets):
Consolidated $85,074 8.6% $39,482 4.0% N/A
Camden National Bank 53,320 8.3% 25,722 4.0% $32,152 5.0%
UnitedKingfield Bank 24,734 7.3% 13,548 4.0% 16,935 5.0%
As of December 31, 1999
Total Capital (To Risk-Weighted Assets):
Consolidated $83,841 13.0% $51,725 8.0% N/A
Camden National Bank 52,998 12.6% 33,568 8.0% $41,960 10.0%
UnitedKingfield Bank 25,975 11.4% 18,157 8.0% 22,697 10.0%
Tier 1 Capital (To Risk-Weighted Assets):
Consolidated $75,759 11.7% $25,863 4.0% N/A
Camden National Bank 47,753 11.4% 16,784 4.0% $25,176 6.0%
UnitedKingfield Bank 23,138 10.2% 9,079 4.0% 13,618 6.0%
Tier 1 Capital (To Average Assets):
Consolidated $75,759 8.5% $35,674 4.0% N/A
Camden National Bank 47,753 8.3% 22,974 4.0% $28,717 5.0%
UnitedKingfield Bank 23,138 7.4% 12,587 4.0% 15,734 5.0%
</TABLE>
53
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
21. HOLDING COMPANY
Following are the condensed Statements of Condition, Income and Cash Flows for
the Company.
Statements of Condition
DECEMBER 31,
- --------------------------------------------------------------------------------
2000 1999
Assets
Cash $ 216 $ 81
Premises and equipment 4,731 1,533
Investment in subsidiaries:
Bank subsidiaries 83,903 72,755
Other subsidiaries 184 120
Amounts receivable from subsidiaries -- 2,367
Goodwill 41 46
Other assets 2,762 2,633
------- -------
Total assets $91,837 $79,535
======= =======
Liabilities & Shareholders' Equity
Amounts due to subsidiaries $ 663 $ 1,300
Accrued and other expenses 251 612
Shareholders' equity 90,923 77,623
------- -------
Total liabilities and shareholders' equity $91,837 $79,535
======= =======
<TABLE>
<CAPTION>
Statements of Income
FOR YEARS ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Operating Income
Dividend income from subsidiaries $ 7,756 $ 8,256 $ 8,682
Fees from subsidiaries 6,300 3,579 3,323
Other income 70 10 14
------- ------- -------
Total operating income 14,126 11,845 12,019
------- ------- -------
Operating Expenses
Salaries and employee benefits 3,698 2,158 2,030
Net occupancy 218 155 170
Furniture, equipment and data processing 886 709 653
Other operating expenses 1,558 1,353 905
Acquisition related expenses 129 1,019 --
------- ------- -------
Total operating expenses 6,489 5,394 3,758
------- ------- -------
Income before equity in undistributed earnings of subsidiaries 7,637 6,451 8,261
Equity in undistributed earnings of subsidiaries 6,240 3,705 3,166
------- ------- -------
Income before income taxes 13,877 10,156 11,427
Income tax (expense) benefit (18) 73 24
------- ------- -------
Net Income $13,859 $10,229 $11,451
======= ======= =======
</TABLE>
54
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Statements of Cash Flows
FOR YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Operating Activities
Net income $13,859 $10,229 $11,451
Adjustments to reconcile net income earnings to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries (6,240) (3,705) (3,166)
Depreciation and amortization 299 300 361
Decrease in obligation under ESOP and BRRP 6 487 301
Amortization of goodwill 5 5 4
(Increase) decrease in amount receivable from subsidiaries 2,367 (427) (1,869)
Increase in other assets (131) (2,292) (103)
(Decrease) increase in payables (998) (1,799) 4,003
Other -- -- (265)
------- ------- -------
Net cash provided by operating activities 9,167 2,798 10,717
------- ------- -------
Investing Activities
Purchase of premises and equipment (3,497) (347) (172)
------- ------- -------
Net cash used by investing activities (3,497) (347) (172)
------- ------- -------
Financing Activities
Proceeds from sale of treasury stock -- 2,249 --
Exercise and repurchase of stock options (22) (975) (1,121)
Purchase of treasury stock (394) (2,337) (3,139)
Dividends paid (5,150) (4,182) (3,863)
Proceeds from stock issuance under stock plan 31 227 81
Filing fee related to stock split -- -- (35)
------- ------- -------
Net cash used by financing activities (5,535) (5,018) (8,077)
------- ------- -------
Net increase (decrease) in cash 135 (2,567) 2,468
Cash at beginning of year 81 2,648 180
------- ------- -------
Cash at end of year $ 216 $ 81 $ 2,648
======= ======= =======
</TABLE>
55
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
22. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 2000 and 1999:
THREE MONTHS ENDED
- --------------------------------------------------------------------------------
Mar 31 June 30 Sept 30 Dec 31
2000
Interest income $18,694 $19,547 $20,386 $20,928
Interest expense 8,795 9,795 10,577 10,875
Net interest income 9,899 9,752 9,809 10,053
Provision for loan losses 644 644 609 1,033
Income before income taxes 4,632 4,781 5,902 4,787
Applicable income taxes 1,438 1,458 1,878 1,469
Net income 3,194 3,323 4,024 3,318
Per common share:
Basic 0.39 0.41 0.49 0.41
Diluted 0.39 0.41 0.49 0.40
THREE MONTHS ENDED
- --------------------------------------------------------------------------------
Mar 31 June 30 Sept 30 Dec 31
1999
Interest income $16,548 $17,107 $17,601 $18,240
Interest expense 7,246 7,601 7,736 7,921
Net interest income 9,302 9,506 9,865 10,319
Provision for loan losses 585 655 775 1,655
Income before income taxes 4,506 4,625 4,549 1,732
Applicable income taxes 1,445 1,513 1,445 780
Net income 3,061 3,112 3,104 952
Per common share:
Basic 0.38 0.39 0.38 0.12
Diluted 0.38 0.39 0.38 0.12
During the third quarter of 2000, the Company recognized net income of $437,000,
or $0.06 per diluted share, resulting from a changeover of the Company's
defined-benefit noncontributory pension plan to a 401(k) defined contribution
plan and company profit-sharing program.
During the fourth quarter of 1999, the Company made a special provision to its
loan loss reserve and had OREO writedowns aggregating $1.9 million. In addition,
during that period the Company incurred merger- and acquisition-related
expenses, net of income taxes, in the amount of $1,434,000, or $0.17 per diluted
share, due to its acquisition of KSB in December 1999, and the subsequent merger
of United Bank and Kingfield Bank in February 2000.
56
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Auditor's Letter
57
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Boards of Directors and Bank Administrations
- ------------------------------------
Directors of
Camden National Corporation
Rendle A. Jones
Chairman, Camden National Corporation
Attorney & Partner,
Harmon, Jones, Sanford & Elliot, LLP
Ann W. Bresnahan
Civic Leader
Robert J. Campbell
Partner, Beck, Mack & Oliver, LLC
Robert W. Daigle
President & CEO, Camden National Corporation
& Camden National Bank
Robert J. Gagnon
Store Manager, Rockland Shop 'n Save
Ward I. Graffam
Graffam & Associates
John W. Holmes
President, Consumers Fuel Company
Theodore C. Johanson
Managing Director, Harbor Wharf, LLC
John S. McCormick, Jr.
Engineer & Developer,
Consolidated Real Estate and Engineering
Winfield F. Robinson
President, Timber Resource Group, LLC
Richard N. Simoneau, C.P.A.
Tax Partner,
Simoneau, Norton, Masters & Alex, P.A.
Arthur E. Strout
Attorney, Strout & Payson, P.A.
- ------------------------------------
Administration of
Camden National Corporation
Robert W. Daigle
President & CEO
Laurel J. Bouchard
Vice President, Corporate Sales
& Marketing Officer
Joanne T. Campbell
Vice President & Residential Real Estate
Administration Officer
James C. Ebbert
Assistant to the President
June B. Parent
Vice President & Human Resource Manager
Jeffrey D. Smith
Vice President & Chief Operations Officer
Susan M. Westfall
Vice President, Clerk, Treasurer
& Chief Financial Officer
John A. Gobel
Vice President & Information Systems Manager
Kimberly J. Nason
Assistant Vice President
& Residential Real Estate Loan Officer
Kathryn M. Ryder
Assistant Vice President, Financial Officer
& Accounting Manager
Lee Ann Szelog
Assistant Vice President & Marketing Manager
Robert E. Cleveland, Jr.
Senior Network Administrator
Kathleen L. Downing
Risk Management Officer
Ellen L. Ellis
Loan Servicing Manager
Ann E. Filley
Training Manager
Pamela J. Fowles
Residential Real Estate Loan Officer
Lorraine M. Ivers
Quality Services Manager
Elizabeth L. Laiho
Call Center/Internet Banking Manager
Jennifer F. Mazurek
Unit Manager, Deposit Services
& Electronic Banking
Jane G. Pierce
Residential Real Estate Underwriter
Timothy J. Pratt
Unit Manager, Items Processing
& Loan Servicing
- ------------------------------------
Directors of
Camden National Bank
Rendle A. Jones
Chairman, Camden National Bank
Attorney & Partner,
Harmon, Jones, Sanford & Elliot, LLP
Ann W. Bresnahan
Civic Leader
Robert W. Daigle
President & CEO, Camden National Corporation
& Camden National Bank
David C. Flanagan
President, Viking Lumber, Inc.
Robert J. Gagnon
Store Manager, Rockland Shop 'n Save
John W. Holmes
President, Consumers Fuel Company
John S. McCormick, Jr.
Engineer & Developer,
Consolidated Real Estate and Engineering
Richard N. Simoneau, C.P.A.
Tax Partner,
Simoneau, Norton, Masters & Alex, P.A.
Arthur E. Strout
Attorney, Strout & Payson, P.A.
Rosemary B. Weymouth
President, Megunticook Management Co.
- ------------------------------------
Associate Directors of
Camden National Bank
C.R. de Rochemont
C.R. de Rochemont, Realtor
Kenneth C. Dickey
Retired Vice Chairman,
Camden National Corporation
Haskell & Corthell Real Estate
Frederick G. "Ted" Hanley
Retired Executive Vice President,
Camden National Bank
David H. Montgomery
Retired Chairman, Camden National Corporation
Past Chairman, Allen Agency
Keith C. Patten
Retired Chairman, Camden National Bank
Retired President & CEO,
Camden National Corporation
- ------------------------------------
Administration of
Camden National Bank
Robert W. Daigle
President & CEO
Michael A. McAvoy
Senior Vice President, Senior Loan Officer,
Commercial Services Group
John P. "Jack" Williams
Senior Vice President, Small Business Group
Jayne Crosby-Giles
Vice President, Small Business Group
Barbara B. Hanson
Vice President, Small Business Group
Michael F. Jones
Vice President, Commercial Services Group
Richard E. Littlefield
Vice President, Commercial Services Group
Stephen C. Staples
Vice President, Small Business Group
Stephen C. Wallace
Vice President, Retail Group
58
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Boards of Directors and Bank Administrations
Vera E. Rand
Assistant Vice President,
Commercial Services Group
Todd L. Savage
Assistant Vice President,
Commercial Services Group
Stephen J. Matteo
Credit Administrator
Barry J. King
Credit Analyst
- ------------------------------------
Branch Administration of
Camden National Bank
Tamara J. Bryant
Vice President, Manager,
Main Office & Camden Square Office
Robert P. Wheeler
Vice President, Manager, Vinalhaven Office
Judith L. Brogden
Manager, Thomaston Office
Laverne M. Hatch
Manager, Belfast Office & Bucksport Office
Susan L. O'Brien
Manager, Union Office
Walter C. Reynolds
Manager, Waldoboro Office
R. Todd Starbird
Manager, Rockland Office
Raymond B. Teixeira
Manager, Damariscotta Office
- ------------------------------------
Directors of UnitedKingfield Bank
Winfield F. Robinson
Chairman, UnitedKingfield Bank
President, Timber Resource Group, LLC
Robert W. Daigle
President & CEO, Camden National Corporation
& Camden National Bank
William Dubord
Attorney & Senior Partner,
Marden, Dubord, Bernier & Stevens
William T. Gardner
President, William T. Gardner & Sons, Inc.
Dr. Joyce B. Hedlund
President, Eastern Maine Technical College
Theodore C. Johanson
Managing Director, Harbor Wharf, LLC
Rendle A. Jones
Attorney & Partner,
Harmon, Jones, Sanford & Elliott, LLP
C. Charles Lumbert
President, Moose River Co., Inc.
Roger G. Spear
Chief Financial Officer,
University of Maine at Farmington
John C. Witherspoon
President & CEO, UnitedKingfield Bank
- ------------------------------------
Administration of
UnitedKingfield Bank
John C. Witherspoon
President & CEO
Charles D. Osgood
Senior Vice President & Senior Loan Officer
Timothy P. Nightingale
Regional Vice President & Market Manager,
Penobscot & Piscataquis Counties
Gordon A. Flint
Regional Vice President & Market Manager,
Franklin & Somerset Counties
Robert D. Stone
Vice President & Market Manager,
Androscoggin County
Gerard R. Belanger
Regional Vice President, Commercial Loan
Officer, Androscoggin County
Valarie A. Coolong
Commercial Loan Officer, Bangor
Joseph E. Hackett
Commercial Loan Officer, Bangor
John B. Ellrich
Commercial Loan Officer, Franklkin County
Joseph T. McOscar
Credit Administrator
Susan H. Froehlich
Retail Underwriting Manager
- ------------------------------------
Branch Administration of
UnitedKingfield Bank
Michael A. Durgin
Regional Sales Manager, Hermon
John M. Farrell
Regional Sales Manager, Lewiston
Leslie M. Ferguson
Regional Sales Manager, Rangeley
Linda D. Gilbert
Regional Sales Manager, Dover-Foxcroft
Cynthia J. Gilmore
Regional Sales Manager, Kingfield
Stephen D. Gray
Regional Sales Manager, Farmington
Joseph G. Poulin
Regional Sales Manager, Madison
Catherine L. Moore
Branch Administrator
- ------------------------------------
Directors of
Trust Company of Maine, Inc.
Andrew P. Averill
Chairman, President & CEO,
Trust Company of Maine, Inc.
Randall A. Bishop
Chief Financial Officer,
William T. Gardner & Sons, Inc.
Robert W. Daigle
President & CEO, Camden National Corporation
& Camden National Bank
Shirley B. Kile
Executive Vice President & Treasurer,
Trust Company of Maine, Inc.
R. Paul Pasquine
Executive Vice President,
Trust Company of Maine, Inc.
Richard N. Simoneau, C.P.A.
Tax Partner,
Simoneau, Norton, Masters & Alex, P.A.
John C. Witherspoon
President & CEO, UnitedKingfield Bank
- ------------------------------------
Administration of
Trust Company of Maine, Inc.
Andrew P. Averill
President & CEO
R. Paul Pasquine
Executive Vice President & Senior Trust Officer
Shirley B. Kile
Executive Vice President
Employee Benefits Division
Lynn M. Bowden
Vice President, New Business Development
Susan L. Kenney
Assistant Vice President & Trust Officer
Robert M. Parker, Jr.
Assistant Vice President & Trust Officer
Pamela M. Webster
Sr. Employee Benefits Officer
Jana D. Hanscom
Employee Benefits Officer
Leander MacVane
Employee Benefits Officer
Kathy Pelletier
Employee Benefits Officer
59
<PAGE>
[GRAPHIC]
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
Annual Meeting
Camden National Corporation
- --------------------------------------------------------------------------------
Tuesday, May 1, 2001, 3:30 pm.
The Camden Opera House
The Company will provide, upon written request and without
charge, a copy of Camden National Corporation's 2000 Annual
Report on Securities and Exchange Commission Form 10K.
Please contact: Susan M. Westfall, Chief Financial Officer
Camden National Corporation
P.O. Box 310
Camden, Maine 04843
207-236-9131, ext. 2165
swestfall@camdennational.com
- --------------------------------------------------------------------------------
[MAP]
Sharing Maine's Natural Beauty ...
A. Bull Moose at Sandy Stream Pond, Baxter State Park - Cover
B. Katahdin Falls, Baxter State Park - 1
C. Aldermere Farm, Rockport - 4
D. Bigelow Preserve, Western Maine - 6
E. Penobscot River, West Branch - 8
F. Damariscotta Lake, Jefferson - 10
G. Schoodic Point, Acadia National Park - 12
H. Sherman's Point Cove, Camden - 14
I. Appleton Ridge, Appleton - 16
J. Rockland Breakwater, Penobscot Bay - 18
K. Mooselookmeguntic Lake, Rangeley - Inside Back Cover
Credits ...
Copy Editing - Joanne Miller
Design & Layout - Peggy Mason, ABC-webdesign & graphics, inc.
Photography
Nature Photographs - Thomas Mark Szelog
Rendell Jones Portrait - Mark Haskell
Senior Management Portraits - Benjamin Magro
Printing - Spectrum Printing & Graphics Inc.
60
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>SUBSIDIARIES TO THE COMPANY
<TEXT>
<PAGE>
Exhibit #21 Subsidiaries of the Company
Camden National Bank, a national banking association chartered under the laws
of the United States of America.
UnitedKingfield Bank, a financial institution chartered under the laws of the
State of Maine.
Trust Company of Maine, Inc., a nondepository trust company chartered under the
laws of the State of Maine.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>CONSENT OF BERRY, DUNN, MCNEIL, & PARKER LLP
<TEXT>
<PAGE>
Exhibit #23 Consent of Independent Public Accountants
Consent of Independent Public Accountants
As the independent public accountants of Camden National Corporation, we hereby
consent to the incorporation of our report included in this Form 10-K, into the
Company's previously filed Registration File Number 333-95157.
Berry, Dunn, McNeil and Parker, LLP
Portland, Maine
March 27, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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