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, 1999 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 [ ] No [X] 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. ( ) The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 27, 2000 is: Common stock - $94,730,153 The number of shares outstanding of each of the registrant's classes of common stock, as of March 27, 2000 is: Common stock - 8,167,358 Listed hereunder are documents incorporated by reference and the Part of the form 10-K into which the document is incorporated: (1) Portions of the Annual Report to Stockholders for the year ended December 31, 1999 are incorporated by reference into Part II, Items 5, 6, 7 and 8. (2) The definitive Proxy Statement for the 2000 Annual Meeting of Shareholders to be filed with the commission prior to April 29, 2000 pursuant to Regulation 14A of the General Rules and Regulations of The Commission is incorporated into Part III of the Form 10-K.
INDEX <TABLE> <CAPTION> Item # Description Page - ----------- ---------------------------------------------------------------------- ---- <S> <C> <C> 1 Business 3 2 Properties 7 3 Pending Legal Proceeding 8 4 Submission of Matters to a Vote of Security Holders 8 5 Market for Registrant's Common Equity and Related Stockholders Matters 8 6 Selected Financial Data 8 7 Management's Discussion and Analysis of Financial Condition and Results of Operation 9 7A Quantitative and Qualitative Disclosures about Market Risks 13 8 Financial Statements and Supplementary Data 14 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 14 10 Directors and Executive Officers of the Registrant 14 11 Executive Compensation 14 12 Security Ownership of Certain Beneficial Owners and Management 14 13 Certain Relationships and Related Transactions 14 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 15 </TABLE>
PART I ITEM 1. BUSINESS Camden National Corporation, (the "Company") is a multi-bank financial services holding company headquartered in Camden, Maine. The Company was founded on January 2, 1985 as a result of a corporate reorganization, in which the shareholders of Camden National Bank, which was founded in 1875, exchanged their stock for shares of the Company, and Camden National Bank became a wholly- owned subsidiary of the Company. As of December 29, 1995 the Company acquired 100% of the outstanding stock of United Bank and 51% of the outstanding stock of Trust Company of Maine, Inc. by merging with their then parent company, UNITEDCORP, Bangor, Maine. On December 20, 1999, the Company completed the acquisition of KSB Bancorp, Inc. ("KSB"), a bank holding company with one principal subsidiary, Kingfield Bank. The acquisition of KSB was accounted for 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, 1999, the Company's securities consisted of one class of common stock, no par value, of which there were 8,167,358 shares outstanding held of record by approximately 1,130 shareholders. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Camden National Bank and UnitedKingfield Bank, and its majority-owned subsidiary, Trust Company of Maine, Inc. UnitedKingfield Bank is the successor by merger, effective February 4, 2000 of United Bank and Kingfield Bank. All inter-company accounts and transactions have been eliminated in consolidation. The Company's wholly-owned bank subsidiaries operate as separate commercial 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, commercial business loans, commercial real estate loans, and a variety of consumer loans. Camden National Bank is a national banking organization organized under the laws of the United States. Camden National Bank is subject to regulation, supervision and regular examination by the Office of the Comptroller of the Currency. Camden National Bank is based in Camden, Maine, and offers services in the communities of Camden, Union, Rockland, Thomaston, Belfast, Bucksport, Vinalhaven, Damariscotta, and Waldoboro. Customers also have access to services offered by Camden National Bank through the internet at www.camdennational.com. UnitedKingfield Bank is a banking organization chartered under the laws of the State of Maine. UnitedKingfield is subject to regulation, supervision and regular examination by the FDIC and the Maine Superintendent. UnitedKingfield Bank is based in Bangor, Maine, and is the successor by merger, effective February 4, 2000, of United Bank and Kingfield Bank. UnitedKingfield Bank offers services 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. Customers also have access to services offered by UnitedKingfield bank through the internet at www.unitedkingfield.com. The Company's majority-owned trust company subsidiary, Trust Company of Maine, Inc., offers a broad range of trust and trust investment services, in addition to retirement and pension plan management services. The financial services provided by the Trust Company of Maine, Inc., complement the services provided by the Company's bank subsidiaries by offering customers investment management services. The Company competes principally in mid-coast Maine through its largest subsidiary, Camden National Bank. Camden National Bank considers its primary market areas to be in two counties, Knox and Waldo. These two counties have a combined population of approximately 76,000 people. The economy of these counties is based primarily on tourism, and is also supported by a substantial population of retirees. Major competitors in these markets include local branches of large regional bank affiliates, as well as local independent banks, thrift institutions and credit unions. Other competitors for deposits and loans within Camden National Bank's market include insurance companies, money market funds, consumer finance companies and financing affiliates of consumer durable goods manufacturers. Page 3
The Company, through UnitedKingfield Bank, 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. The greater Bangor area has a population of approximately 100,000 people. Major competitors in these markets include local branches of large regional bank affiliates, as well as local independent banks, thrift institutions and credit unions. Other competitors for deposits and loans within UnitedKingfield Bank's market include insurance companies, money market funds, consumer finance companies and financing affiliates of consumer durable goods manufacturers. The Company is committed to the philosophy of serving the financial needs of customers in local communities. The Company, through Camden National Bank and UnitedKingfield Bank has branches that are located in small towns within the Company's geographic market areas. The Company believes that the local needs, and its comprehensive retail and small business products, together with rapid decision-making at the branch level, enable its banks to compete effectively. No single person or group of persons provides a material portion of the Company's deposits, the loss of any one or more of which would have a materially adverse effect on the business of the Company, nor is a material portion of the Company's loans concentrated within a single industry or group of related industries. The Company had consolidated asset growth of 10.7% or $89.1 million during 1999. The primary contributing factor to this growth was the increase in lending activity at the Company's bank subsidiaries. As the business continued to grow during this past year, each subsidiary focused on customer service. Supporting this concept, is the Company's performance-based compensation program. This program is designed to create an environment where employees take a more personal interest in the performance of the Company and are rewarded for balancing profit with growth and quality with productivity. The Company employs approximately 278 people on a full-time equivalent basis. Management believes that employee relations are good, and there are no known disputes between management and employees. Certain eligible employees who are at least 21 years of age and who have worked for the Company for at least one year are eligible for participation in the Company's Retirement Savings 401(k) Plan and Defined Benefit Retirement Plan. Certain eligible employees of the Company also receive group insurance benefits. Certain Executive Officers of the Company may also participate in the 1993 Stock Option Plan and the Supplemental Executive Retirement Plan. 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. The Company contributed funds to the recognition plan to enable them to acquire, in aggregate, 56,045 shares of common stock. Participants are vested at a rate of 20% per year commencing one year from the date of the award. As a registered bank holding company under the Bank Holding Company Act of 1956 (the "BHC Act"), the Company is subject to the regulations and supervision of the Federal Reserve Bank (FRB). The BHC Act requires the Company to file reports with the FRB and provide additional information requested by the FRB. The Company must receive the approval of the FRB before it may acquire all or substantially all of the assets of any bank, or ownership or control of the voting shares of any bank if, after giving effect to such acquisition of shares, the Company would own or control more than 5 percent of the voting shares of such bank. The Company and its subsidiaries, including any it may acquire or organize in the future, will be deemed to be affiliates of Camden National Bank and UnitedKingfield Bank under the Federal Reserve Act. That Act establishes certain restrictions that limit bank transactions with affiliates. The Company will also be subject to restrictions on the underwriting and the public sale and distribution of securities. It is prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, sale or lease of property, or furnishing of services. On November 12, 1999. President Clinton signed into law legislation that allows bank holding companies to engage in a wider range of nonbanking activities, including greater authority to engage in securities and insurance activities. Under the Gramm-Leach-Bliley Act ("GLB Act"), a bank holding company that elects to become a financial holding company may engage in any activity that the Federal Reserve Board, in consultation with the Secretary of the Treasury, determines by regulation or order is (1) financial in nature, (2) incidental to any such financial activity, or (3) complementary to any such financial activity and does not pose a Page 4
substantial risk to the safety or soundness of depository institutions or the financial system generally. The GLB Act makes significant changes in U.S. Banking law, principally by repealing the restrictive provisions of the 1933 Glass-Steagall Act. The GLB Act specifies certain activities that are deemed to be financial in nature, including lending, exchanging, transferring, investing for others, or safeguarding money or securities; underwriting and selling insurance; providing financial, investment, or economic advisory services; underwriting, dealing in or making a market in, securities; and any activity currently permitted for bank holding companies by the Federal Reserve Board under section 4(c)(8) of the Banking Holding Company Act. The GLB Act does not authorize banks or their affiliates to engage in commercial activities that are not financial in nature. A bank holding company may elect to be treated a s a financial holding company only if all depository institution subsidiaries or the holding company are well capitalized, well managed and have at least a satisfactory rating under the Community Reinvestment Act. National banks are also authorized by the GLB Act to engage, through "financial subsidiaries," in any activity that is permissible for a financial holding company (as described above) and any activity that the Secretary of the Treasury, in consultation with the Federal Reserve Board, determines is financial in nature or incidental to any such financial activity, except (1) insurance underwriting, (2) real estate development or real estate investment activities (unless otherwise permitted by law), (3) insurance company portfolio investments and (4) merchant banking. The authority of a national bank to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank must be well managed and well capitalized (after deducting from the bank's capital outstanding investments in financial subsidiaries). The GLB Act provides that state banks may invest in financial subsidiaries (assuming they have the requisite investment authority under applicable state law) subject to the same conditions that apply to national bank investments in financial subsidiaries. The GLB Act also contains a number of other provisions that will affect the Company's operations and the operations of all financial institutions. One of the new provisions relates to the financial privacy of consumers, authorizing federal banking regulators to adopt rules that will limit the ability of banks and other financial entities to disclose non-public information about consumers to non-affiliated entities. These limitations are expected to require more disclosure to consumers, and in some circumstances, to require consent by the consumer before information is allowed to be provided to a third party. At this time, the Company is unable to predict the impact the GLB Act may have upon its or its subsidiaries financial condition or results of operations. Federal Reserve Regulation "Y" (12 C.F.R. Part 225) sets forth those activities which are regarded as closely related to banking or managing or controlling banks and, thus, are permissible activities that may be engaged in by bank holding companies, subject to approval in individual cases by the FRB. Litigation has challenged the validity of certain activities authorized by the FRB for the bank holding companies, and the FRB has various regulations and applications in this regard still under consideration. Under Maine law, dividends and other distributions by the Company with respect to its stock are subject to declaration by the Board of Directors at its discretion out of net assets. Dividends cannot be declared and paid when such payment would make the Company insolvent or unable to pay its debts as they come due. FRB policy prohibits a bank holding company from declaring or paying a cash dividend which would impose undue pressure on the capital of subsidiary banks or would be funded only through borrowings or other arrangements that might adversely affect the holding company's financial position. The policy further declares that a bank holding company should not continue its existing rate of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend and its prospective rate of earnings retention appears consistent with its capital needs, asset quality and overall financial condition. Other FRB policies forbid the payment by bank subsidiaries to their parent companies of management fees that are unreasonable in amount or exceed a fair market value of the services rendered (or, if no market exists, actual costs plus a reasonable profit). In addition, the FRB has authority to prohibit banks that it regulates from engaging in practices, which in the opinion of the FRB are unsafe or unsound. Such practices may include the payment of dividends under some Page 5
circumstances. Moreover, the payment of dividends may be inconsistent with capital adequacy guidelines. The Company may be subject, under State and/or Federal law, to assessment to restore the capital of the Bank should it become impaired. The Company is subject to the minimum capital requirements of the FRB. As a result of these requirements, the growth in assets of the Company is limited by the amount of its capital accounts as defined by the FRB. Capital requirements may have an effect on profitability and the payment of distributions by the Company. If the Company is unable to increase its assets without violating the minimum capital requirements, or is forced to reduce assets, its ability to generate earnings would be reduced. The FRB has adopted guidelines utilizing a risk-based capital structure. These guidelines apply to the Company on a consolidated basis. The risk-based guidelines require the Company to maintain a level of capital based primarily on the risk of its assets and off-balance sheet items. Assets and off-balance sheet items are placed in one of four risk categories. Assets in the first category, such as cash, have no risk and, therefore, carry a zero percent risk-weight and require no capital support. Capital support is required for assets in the remaining three risk categories--those categories having a risk-weight of 20 percent, 50 percent and 100 percent, respectively. A banking organization's risk-based capital ratio is calculated by dividing its qualifying total capital base by its risk-weighted assets. Qualifying capital is divided into two tiers. Core capital (Tier 1) consists of common shareholders' equity capital, noncumulative perpetual preferred stock and minority interests in equity capital accounts of consolidated subsidiaries, less goodwill and other intangible assets. Supplementary capital (Tier 2) consists of, among other items, allowance for possible loan and lease losses, cumulative and limited-life preferred stock, mandatory convertible securities and subordinated debt. Tier 2 capital will qualify as a part of the Bank's total capital up to a maximum of 100 percent of the Bank's Tier 1 capital. Amounts in excess of these limits may be issued but are not included in the calculation of the risk-based capital ratio. Under current guidelines, banking organizations must maintain a risk-based capital ratio of 8 percent, of which at least 4 percent must be in the form of core capital. The Company is and expects to remain in compliance with these guidelines. The purposes of the risk-based capital guidelines are twofold--to make capital requirements more sensitive to differences in risk profiled among banking organizations, and to aid in making the definition of bank capital uniform internationally. To achieve these purposes, the guidelines recognize the riskiness of assets by lowering capital requirements for some assets that clearly have less risk than others, and they recognize that there are risks inherent in off-balance sheet activities. The guidelines require that banking organizations hold capital to support such activities. In addition, the guidelines establish a definition of capital and minimum risk-based capital standards which are consistent on an international basis and that place a greater emphasis on equity capital. The FRB has also adopted a minimum leverage ratio which is intended to supplement the risk-based capital requirements and to insure that all financial institutions continue to maintain a minimum level of capital. As with the risk- based capital guidelines, the leverage capital guidelines apply to the Company on a consolidated basis. The leverage-based capital requirement stipulates that banking organizations maintain a minimum level of Tier 1 capital to total assets. The most highly rated banks in terms of safe and sound operation that are not experiencing or anticipating significant growth are required to have Tier 1 capital equal to at least 3 percent of total assets. All other banks are expected to maintain a minimum leverage capital ratio (i.e., Tier 1 capital divided by total assets) in excess of the 3 percent minimum level. The FDIC regulations require a financial institution to maintain a minimum ratio of 4 percent to 5 percent, depending on the condition of the institution. The Company's leverage ratio is and its management expects it to remain in excess of regulatory requirements. Page 6
Camden National Bank is a national bank organized under the laws of the United States. Camden National Bank is a member of the Federal Reserve System and its deposits are insured by the FDIC. Camden National Bank is subject to regulation, supervision and regular examination by the Office of the Comptroller of the Currency (the "OCC"). The ability of Camden National Bank to pay dividends is subject to the banking laws of the United States and to the powers of the OCC and the FDIC. Under federal banking law, dividends can only be paid out of the retained earnings of Camden National Bank's current and two preceding fiscal years, or with the prior approval of the OCC. Under federal banking regulation, a bank is prohibited from declaring a dividend or from making any other capital distribution if the payment or distribution would cause the bank to fail to meet minimum capital requirements. UnitedKingfield Bank is a banking organization chartered under the laws of the State of Maine. UnitedKingfield Bank is subject to regulation, supervision and regular examination by the Federal Deposit Insurance Corporation (the "FDIC") and the Maine State Bureau of Banking. Under Maine law, dividends are subject to declaration by the Board of Directors at its discretion. Dividends cannot be declared and paid when such payment would make the bank insolvent or unable to pay its debts as they come due. The principal sources of funds essential to the business of banks and bank holding companies are deposits, shareholders' equity, and borrowed funds. The availability of these various sources of funds and other potential sources, such as preferred stock or commercial paper, and the extent to which they are utilized, depends on many factors, the most important of which are the FRB's monetary policies and the relative costs of different types of funds. An important function of the FRB is to regulate the national supply of bank credit in order to combat recession and curb inflationary pressure. Among the instruments of monetary policy used by the FRB to implement these objectives are open market operations in United States Government securities, changes in the discount rate on bank borrowings, and changes in reserve requirement against bank deposits. The monetary policies of the FRB have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of the recent changes in regulations affecting commercial banks and other actions and proposed actions by the federal government and its monetary and fiscal authorities, including proposed changes in the structure of banking in the United States, no prediction can be made as to future changes in interest rates, credit availability, deposit levels, the overall performance of banks generally or of the Company. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was enacted by Congress in September of 1994. Under the Act, beginning on September 29, 1995, bank holding companies may acquire banks in any state, notwithstanding contrary state law, and all banks commonly owned by a bank holding company may act as agents for one another. An agent bank may receive deposits, renew time deposits, accept payments, and close and service loans for its principal bank, but will not be considered a branch of that principal bank. A bank may also merge with a bank in another state or operate either office as a branch, notwithstanding pre-existing contrary state law. This interstate merger provision automatically became effective in all states on June 1, 1997, unless 1) the law became effective in a given state at any earlier date selected by legislation in that state; or 2) the law did not become effective at all in a given state because of legislation enacted before June 1, 1997 allowing that state to opt out of coverage by the interstate merger provision. Upon consummation of an interstate merger, the resulting bank may acquire or establish branches on the same basis that any participant in the merger could have if the merger had not taken place. Banks may also merge with branches of banks in other states without merging with the banks themselves, or may establish de novo branches in other states, if the laws of the other states expressly permit such mergers or such interstate de novo branching. ITEM 2. PROPERTIES The Company operates in thirty facilities. The headquarters of the Company and the headquarters and main office of Camden National Bank is located at Two Elm Street, Camden, Maine, and is owned by Camden National Bank. The building has 15,500 square feet of space on three levels. Camden National Bank also owns seven of its branches and the facility in which the operations departments of the Company are located. Page 7
None of the owned facilities is subject to a mortgage. Camden National Bank also leases three branches under long-term leases, expiring in May of 2010, January of 2020 and December of 2077. The main office of UnitedKingfield Bank is at 145 Exchange Street, Bangor, Maine, and is owned by UnitedKingfield Bank. The building has 25,600 square feet of space on two levels. UnitedKingfield Bank occupies 16,975 square feet of space on both floors. The Trust Company of Maine, Inc., a non-depository trust company and a subsidiary of the Company, leases 2,100 square feet of office space on the second floor of the facility and its wholly owned subsidiary, Fiduciary Services, Inc., leases 2,042 square feet on the first floor of the facility. Other occupants of the facility include the law firm of Russell, Lingley & Silver, P.A., which leases 2,533 square feet on the second floor, and L&H Investors, a property management firm, and Cullen Williams, CPA, who have a joint lease on 1,920 square feet on the second floor. UnitedKingfield Bank also owns fourteen of its other facilities, none of which is subject to a mortgage. UnitedKingfield Bank also leases four branches, expiring in May of 2000, May of 2001, September of 2002 and February of 2003. ITEM 3. PENDING LEGAL PROCEEDINGS The Company is a party to litigation and claims arising in the normal course of business. On December 9, 1999, Joseph R. Gamache, filed a lawsuit naming Kingfield Bank and one of its employees as defendants. The plaintiff is seeking $1,860,000 in damages, as well as punitive damages, which he alleges resulted from the denial of a loan. The case is currently in the discovery stage. The Company believes the lawsuit has no merit and plans to vigorously defend it. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) A special meeting of shareholders was held on November 16, 1999. (c) Matters voted upon a the meeting. 1) To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of July 27, 1999. Total votes cast: 4,695,045, with 4,159,396 for, 379,799 against, and 155,850 abstained. 2) To elect as director nominees - Winfield F. Robinson to serve a three year term to expire at the annual meeting in 2002 and Theodore C. Johanson to serve a two year term to expire at the annual meeting in 2001. Total votes cast: 5,379,876, with 5,109,039 for and 270,837 withheld. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS The information required is contained on page 19 of the Company's Annual Report to Shareholders for the year ended December 31, 1999 and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Selected year-end financial information for the past five years is contained on page 21 of the Company's Annual Report to Shareholders for the year ended December 31, 1999 and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained in the section captioned "Management's Discussion and Analysis of Financial Page 8
Condition and Results of Operations" on pages 9 through 19 of the Company's Annual Report to Shareholders for the year ended December 31, 1999 should be read in conjunction with the following text and tables, and is incorporated herein by reference. The following table set forth the Company's investment securities at book carrying amount as of December 31, 1999, 1998, and 1997. Dollars in thousands 1999 1998 1997 -------- -------- -------- SECURITIES AVAILABLE FOR SALE: - ----------------------------------- U.S. Treasury and agency $ 65,046 $ 7,095 $ 4,312 Mortgage-backed securities 13,104 81,820 9,261 State and political subdivisions 7,520 8,143 0 Other debt securities 46,938 2,025 0 Equity securities 31,389 21,769 15,622 -------- -------- -------- 163,997 120,852 29,195 -------- -------- -------- SECURITIES HELD TO MATURITY: - ----------------------------------- U.S. Treasury and agency 5,949 6,093 48,566 Mortgage-backed securities 60,963 89,428 123,544 State and political subdivisions 1,152 1,338 2,955 Other debt securities 129 982 0 -------- -------- -------- 68,193 97,841 175,065 -------- -------- -------- $232,190 $218,693 $204,260 ======== ======== ======== To enhance the Company's ability to manage liquidity, the investment portfolio is divided into two parts: investments available for sale and investments held to maturity. The ability to use securities as collateral for Federal Home Loan Bank loans enables the Company to hold a portion of the portfolio to maturity. The following table summarizes the investment portfolios maturities and yields at December 31, 1999. AVAILABLE FOR SALE HELD TO MATURITY - ----------------------------------- --------------------- ------------------- BOOK YIELD TO AMORTIZED YIELD TO Dollars in thousands VALUE MATURITY COST MATURITY --------- ---------- -------- --------- U.S. TREASURY AND AGENCY: Due in 1 year or less $ 1,298 5.82% $ 0 0.00% Due in 1 to 5 years 26,229 5.80% 2,318 7.11% Due in 5 to 10 years 27,759 6.74% 2,248 7.77% Due after 10 years 9,670 6.80% 1,383 7.05% -------- ---- ------- ---- 65,046 6.35% 5,949 7.45% -------- ---- ------- ---- MORTGAGE-BACKED SECURITIES: Due in 1 year or less 0 0.00% 0 0.00% Due in 1 to 5 years 0 0.00% 3,249 6.95% Due in 5 to 10 years 4,793 6.23% 6,239 8.03% Due after 10 years 8,311 6.65% 51,475 7.76% -------- ---- ------- ---- 13,104 6.50% 60,963 7.74% -------- ---- ------- ---- Page 9
STATE AND POLITICAL SUBDIVISIONS: Due in 1 year or less 0 0.00% 0 0.00% Due in 1 to 5 years 0 0.00% 1,052 6.58% Due in 5 to 10 years 5,975 5.74% 100 9.09% Due after 10 years 1,545 5.96% 0 0.00% -------- ---- ------- ---- 7,520 5.79% 1,152 6.80% -------- ---- ------- ---- OTHER DEBT SECURITIES: Due in 1 year or less 0 0.00% 0 0.00% Due in 1 to 5 years 1,000 7.50% 129 7.72% Due in 5 to 10 years 0 0.00% 0 0.00% Due after 10 years 45,938 6.50% 0 0.00% -------- ---- ------- ---- 46,938 6.52% 129 7.72% -------- ---- ------- ---- OTHER EQUITY SECURITIES: Due in 1 year or less 0 0.00% 0 0.00% Due in 1 to 5 years 4,925 6.85% 0 0.00% Due in 5 to 10 years 2,857 6.63% 0 0.00% Due after 10 years 23,607 6.74% 0 0.00% -------- ---- ------- ---- 31,389 6.75% 0 0.00% -------- ---- ------- ---- Total securities $163,997 6.46% $68,193 7.69% ======== ==== ======= ==== Total loans increased by $65.7 million, or 11.5%, in 1999. The following table provides a summary of the loan portfolio for the past five years. Management does not foresee any significant changes occurring in the loan mix during the coming year. Dollars in thousands AS OF DECEMBER 31, 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Commercial $316,411 $269,747 $226,981 $185,735 $163,704 Residential real estate 226,548 202,952 193,327 188,109 169,947 Consumer 83,832 78,496 50,433 30,519 31,304 Municipal 8,307 17,199 10,727 6,080 5,214 Other 336 1,311 1,880 893 1,689 -------- -------- -------- -------- -------- $635,434 $569,705 $483,348 $411,336 $371,858 ======== ======== ======== ======== ======== Loan demand also affects the Company's liquidity position. However, of the loans maturing over one year, approximately 52% are variable rate loans. The following table presents the maturities of loans at December 31, 1999. Page 10
Dollars in thousands THROUGH MORE THAN 1 YEAR 5 YEARS 5 YEARS TOTAL Maturity Distribution: - --------------------------- Fixed Rate: Commercial $ 23,597 $ 46,875 $ 22,769 $ 93,241 Residential real estate 4,089 5,233 134,792 144,114 Consumer 5,666 15,255 16,140 37,061 Variable Rate: Commercial 32,103 34,570 156,497 223,170 Residential real estate 4 1,063 81,367 82,434 Consumer 6,701 11,764 28,642 47,107 Municipal 3,110 3,166 2,031 8,307 -------- -------- -------- -------- $ 75,270 $117,926 $442,238 $635,434 ======== ======== ======== ======== 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. The following table sets forth the amount of the Company's non-performing assets as of the dates indicated: <TABLE> <CAPTION> Dollars in thousands AS OF DECEMBER 31, 1999 1998 1997 1996 1995 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> NONPERFORMING LOANS: - ----------------------------------- Non-accrual loans $ 6,136 $ 4,079 $ 3,305 $ 3,569 $ 4,276 Accruing loans past due 90 days or more 195 613 1,004 599 353 Restructured loans (in compliance with modified terms) 0 0 0 0 0 ------- ------- ------- ------- ------- Total nonperforming loans 6,331 4,692 4,309 4,168 4,629 ------- ------- ------- ------- ------- Other real estate owned 1,405 1,052 1,532 1,381 1,127 ------- ------- ------- ------- ------- Total nonperforming assets $ 7,736 $ 5,744 $ 5,841 $ 5,549 $ 5,756 ======= ======= ======= ======= ======= RATIOS: - ----------------------------------- Nonperforming loans to total loans 1.00% 0.82% 0.89% 1.01% 1.24% Allowance for loan losses to nonperforming loans 148.32% 172.50% 162.03% 128.72% 106.87% Nonperforming assets to total assets 0.83% 0.68% 0.80% 0.86% 0.95% Allowance for loan losses to nonperforming assets 121.38% 140.90% 119.53% 96.68% 85.95% </TABLE> Page 11
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, 1999 ------- Time remaining until maturity: Less than 3 months $17,242 3 months through 6 months 15,416 6 months through 12 months 14,603 Over 12 months 10,826 ------- $58,087 ======= The dividend payout ratio was 40.90%, 33.74%, 29.31%, 24.70%, and 17.58% for 1999, 1998, 1997, 1996 and 1995 respectively. The average equity to average assets ratio was 8.71%, 10.05%, 10.07%, 10.96%, and 9.91% for 1999, 1998, 1997, 1996 and 1995 respectively. The borrowings utilized by the Company have primarily been advances from the FHLB of Boston. In addition, the Company utilizes fed funds, treasury, tax and loan deposits, and repurchase agreements secured by the United States Government or Agency securities. The major portion of all borrowings matures or reprices within the next six months. The following table sets forth certain information regarding borrowed funds for the years ended December 31, 1999, 1998, and 1997. Dollars in thousands AT OR FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997 -------- -------- -------- Average balance outstanding $146,627 $ 93,204 $155,688 Maximum amount outstanding at any month-end during the year 173,924 163,013 192,836 Balance outstanding at end of year 173,924 113,682 160,697 Weighted average interest rate during the year 4.90% 5.23% 5.59% Weighted average interest rate at end of year 5.07% 4.82% 5.57% 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 Page 12
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, 1999 which are anticipated by the Company, based upon certain assumptions, to reprice or mature in each of the future time periods shown. <TABLE> <CAPTION> Dollars in thousands THROUGH MORE THAN 1 YEAR 5 YEARS 5 YEARS TOTAL ----------- ---------- ---------- -------- <S> <C> <C> <C> <C> Interest-earning assets: Fixed rate loans $ 36,462 $ 70,529 $175,732 $282,723 Variable rate loans 352,711 0 0 352,711 Investment securities Available for sale 1,298 32,154 130,545 163,997 Held to maturity 0 6,748 61,445 68,193 --------- -------- -------- -------- Total interest-earning assets 390,471 109,431 367,722 867,624 --------- -------- -------- -------- INTEREST-BEARING LIABILITIES: Savings accounts 20,000 0 92,335 112,335 NOW accounts 0 0 89,740 89,740 Money market accounts 71,237 0 0 71,237 Certificate accounts 248,605 64,944 474 314,023 Borrowings 166,924 2,000 5,000 173,924 --------- -------- -------- -------- Total interest-bearing liabilities 506,766 66,944 187,549 761,259 --------- -------- -------- -------- Interest sensitivity gap per period $(116,295) $ 42,487 $180,173 ========= ======== ======== Cumulative interest sensitivity gap $(116,295) $(73,808) $106,365 ========= ======== ======== Cumulative interest sensitivity gap as a percentage of total assets (13%) 5% 19% Cumulative interest-earning assets as a percentage of interest-sensitive liabilities 77% 87% 114% </TABLE> ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. The information required is included in the Company's 1999 Annual Report to Shareholders on pages 18-19 and is incorporated herein by reference. Page 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements and report of independent accountant, included in the Company's 1999 Annual Report to Shareholders, are incorporated herein by reference. Page references are to pages of the Company's 1999 Annual Report to Shareholders. PAGE ----- Consolidated Statements of Financial Condition December 31, 1999 and 1998 22 Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997 23 Consolidated Statements of Changes in the Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997 24 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 25 Notes to Consolidated Financial Statements 26-46 Report of Independent Public Accountant 47 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE During the past two years the Company has not made changes in and has not had disagreements with its independent accountant. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Company responds to this item by incorporating herein by reference the material responsive to such item in the Company's definitive Proxy Statement for the 2000 Annual Meeting of Shareholders to be filed with the Commission prior to April 29, 2000. ITEM 11. EXECUTIVE COMPENSATION The Company responds to this item by incorporating herein by reference to the material responsive to such item in the Company's definitive Proxy Statement for the 2000 Annual Meeting of Shareholders to be filed with the Commission prior to April 29, 2000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company responds to this item by incorporating herein by reference to the material responsive to such item in the Company's definitive Proxy Statement for the 2000 Annual Meeting of Shareholders to be filed with the Commission prior to April 29, 2000. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company responds to this item by incorporating herein by reference to the material responsive to such item in the Company's definitive Proxy Statement for the 2000 Annual Meeting of Shareholders to be filed with the Commission prior to April 29, 2000 Page 14
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Index to Financial Statements: A list of the consolidated financial statements of the Company and report of independent public accountant incorporated herein is included in Item 8 of this Report. 2. Financial Statement Schedules: Schedules have been omitted because they are not applicable or are not required under the instructions contained in Regulation S-X or because the information required to be set forth therein is included in the consolidated financial statements or notes thereto. 3. Exhibits filed herewith: (2.1) Agreement and Plan of Merger, dated as of July 27, 1999, by and among Camden National Corporation, Camden Acquisition Subsidiary, Inc., KSB Bancorp, Inc., and Kingfield Savings Bank, dated as of July 27, 1999 (incorporated herein by reference to Exhibit 2.1 to Form 8-K of Camden filed August 9, 1999). (3.i) The Articles of Incorporation of Camden National Corporation, as amended to date, Exhibit 3.i to the Company's Registration statement Form S-4 filed with the Commission on September 25, 1995, file number 33- 97340, are incorporated herein by reference. (3.ii) The Bylaws of Camden National Corporation, as amended to date, Exhibit 3.ii to the Company's Registration Statement on Form S-4 filed with the Commission on September 25, 1995, file number 33-97340, are incorporated herein by reference. (10.1) Lease Agreement for the facility occupied by the Thomaston Branch of Camden National Bank, between Knox Hotel Associates(Lessor) and Camden National Bank (Lessee) filed with Form 10-K, December 31, 1995, is incorporated herein by reference. (10.2) Lease Agreement for the facility occupied by the Camden Square Branch of Camden National Bank, between Milliken, Tomlinson Company (Lessor) and Camden National Bank (Lessee) filed with Form 10-K, December 31, 1995, is incorporated herein by reference. Page 15
(10.3) Lease Agreement for the facility occupied by the Hampden Branch of UnitedKingfield Bank, Parway Realty Development Corporation (Lessor) and UnitedKingfield Bank (Lessee) filed with Form 10-K, December 31, 1995, is incorporated herein by reference. (10.4) Camden National Corporation 1993 Stock Option Plan, filed with Form 10- K, December 31, 1995, is incorporated herein by reference. (10.5) UNITEDCORP Stock Option Plan, filed with Form 10-K, December 31, 1995, is incorporated herein by reference. (10.6) Lease Agreement for the facility occupied by the Damariscotta Branch of Camden National Bank, between Keybank National Association (Lessor) and Camden National Bank (Lessee), filed with Form 10-K, December 31, 1998, is incorporated herein by reference. (10.7) Lease Agreement for the facility occupied by the Milo Branch of UnitedKingfield Bank, between Cabrel Company (Lessor) and UnitedKingfield Bank (Lessee), filed with Form 10-K, December 31, 1998, is incorporated herein by reference. (10.8) Lease Agreement for the facility occupied by the Dover-Foxcroft Branch of UnitedKingfield Bank, between Bangor Savings Bank (Lessor) and UnitedKingfield Bank (Lessee), filed with Form 10-K, December 31, 1998, is incorporated herein by reference (10.9) Employment Agreement with Chief Executive Officer, filed with form 10- Q/A, June 30, 1999, is incorporated herein by reference. (10.10) KSB Bancorp, Inc. 1993 Incentive Stock Option Plan, filed with Form S- 8, January 21, 2000, is incorporated herein by reference. (10.11) Amendment No. 1 to KSB Bancorp, Inc. 1993 Stock Option Plan, filed with Form S-8, January 21, 2000, is incorporated herein by reference. (10.12) KSB Bancorp, Inc. 1998 Long-Term Incentive Stock Benefit Plan (Incorporated by reference to Appendix A of the Proxy Statement of KSB Bancorp, Inc. relating to its May 13, 1998 annual meeting of stockholders). (10.13) Camden National Corporation's Supplemental Executive Retirement Plan Summary. (13) Camden National Corporation's 1999 Annual Report to Shareholders.* (21) Subsidiaries of the Company (23.1) Consent of Berry, Dunn, McNeil & Parker, LLC relating to the financial statements of Camden. (27) Financial Data Schedule Deemed filed only with respect to those portions thereof incorporated herein by reference (b) Reports on Form 8-K. None filed. Page 16
SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CAMDEN NATIONAL CORPORATION (REGISTRANT) /s/ Robert W. Daigle 3/28/00 - ------------------------------ ---------------------------- 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 3/28/00 /s/ Susan M. Westfall 3/28/00 - -------------------------------- ------------------------------ Robert W. Daigle Date Susan M. Westfall Date President, Director Treasurer and and Chief Executive Officer Chief Financial Officer /s/ Rendle A. Jones 3/28/00 /s/ John S. McCormick, Jr. 3/28/00 - -------------------------------- ------------------------------------ Rendle A. Jones Date John S. McCormick, Jr Date Chairman and Director Director /s/ Robert J. Gagnon 3/28/00 /s/ Richard N. Simoneau 3/28/00 - -------------------------------- ------------------------------------ Robert J. Gagnon Date Richard N. Simoneau Date Director Director /s/ Ann W. Bresnahan 3/28/00 /s/ Arthur E. Strout 3/28/00 - -------------------------------- ------------------------------------ Ann W. Bresnahan Date Arthur E. Strout Date Director Director /s/ John W. Holmes 3/28/00 /s/ Theodore C. Johanson 3/28/00 - -------------------------------- ------------------------------------ John W. Holmes Date Theodore C. Johanson Date Director Director /s/ Winfield F. Robinson 3/28/00 /s/ Ward I. Graffam 3/28/00 - -------------------------------- ------------------------------------ Winfield F. Robinson Date Ward I. Graffam Date Director Director /s/ Robert J. Campbell 3/28/00 - -------------------------------- Robert J. Campbell Date Director Page 17