Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2010
OR
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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
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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).
Yes ¨
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
(
Do not check if a smaller reporting company)
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨
No x
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practical date:
Outstanding
at November 1, 2010: Common stock (no par value) 7,657,098
shares.
CAMDEN
NATIONAL CORPORATION
FORM
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2010
TABLE
OF CONTENTS OF INFORMATION REQUIRED IN REPORT
|
|
|
PAGE
|
|
|
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
|
|
ITEM
1.
|
FINANCIAL
STATEMENTS
|
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
3
|
|
|
|
|
|
Consolidated
Statements of Condition September 30, 2010 and December 31,
2009
|
|
4
|
|
|
|
|
|
Consolidated
Statements of Income Three and Nine Months Ended September 30,
2010 and 2009
|
|
5
|
|
|
|
|
|
Consolidated
Statements of Changes in Shareholders’ Equity Nine Months Ended September
30, 2010 and 2009
|
|
6
|
|
|
|
|
|
Consolidated
Statements of Cash Flows Nine Months Ended September 30, 2010 and
2009
|
|
7
|
|
|
|
|
|
Notes
to Consolidated Financial Statements Nine Months Ended September 30, 2010
and 2009
|
|
8-19
|
|
|
|
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
20-33
|
|
|
|
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
|
34-35
|
|
|
|
|
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
|
36
|
|
|
|
|
PART
II. OTHER INFORMATION
|
|
|
|
|
|
|
ITEM
1.
|
LEGAL
PROCEEDINGS
|
|
37
|
|
|
|
|
ITEM
1A.
|
RISK
FACTORS
|
|
37
|
|
|
|
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
37
|
|
|
|
|
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
|
37
|
|
|
|
|
ITEM
4.
|
[REMOVED
AND RESERVED]
|
|
37
|
|
|
|
|
ITEM
5.
|
OTHER
INFORMATION
|
|
37
|
|
|
|
|
ITEM
6.
|
EXHIBITS
|
|
38
|
|
|
|
|
SIGNATURES
|
|
39
|
|
|
|
|
EXHIBIT
INDEX
|
|
40
|
|
|
|
|
EXHIBITS
|
|
|
PART
I. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Shareholders and Board of Directors
Camden
National Corporation
We have
reviewed the accompanying interim consolidated financial information of Camden
National Corporation and Subsidiaries as of September 30, 2010, and for the
three-month and nine-month periods ended September 30, 2010 and 2009. These
financial statements are the responsibility of the Company's
management.
We
conducted our reviews in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is to express an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on
our reviews, we are not aware of any material modifications that should be made
to the accompanying financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.
/s/
Berry, Dunn, McNeil & Parker
|
Berry,
Dunn, McNeil &
Parker
|
Bangor,
Maine
November
5, 2010
CAMDEN
NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CONDITION
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
(In Thousands, Except Number of Shares)
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
33,382
|
|
|
$
|
29,772
|
|
Securities
|
|
|
|
|
|
|
|
|
Securities
available for sale, at fair value
|
|
|
541,235
|
|
|
|
479,708
|
|
Securities
held to maturity, at amortized cost (fair value $39,901 and $39,639 at
September 30, 2010 and December 31, 2009, respectively)
|
|
|
36,745
|
|
|
|
37,914
|
|
Federal
Home Loan Bank and Federal Reserve Bank stock, at cost
|
|
|
21,962
|
|
|
|
21,965
|
|
Total
securities
|
|
|
599,942
|
|
|
|
539,587
|
|
Trading
account assets
|
|
|
2,173
|
|
|
|
1,725
|
|
Loans
held for sale
|
|
|
2,456
|
|
|
|
—
|
|
Loans
|
|
|
1,536,077
|
|
|
|
1,526,758
|
|
Less
allowance for loan losses
|
|
|
(22,336
|
)
|
|
|
(20,246
|
)
|
Net
loans
|
|
|
1,513,741
|
|
|
|
1,506,512
|
|
Goodwill
and other intangible assets
|
|
|
45,966
|
|
|
|
46,398
|
|
Bank-owned
life insurance
|
|
|
42,796
|
|
|
|
41,677
|
|
Premises
and equipment, net
|
|
|
25,884
|
|
|
|
26,054
|
|
Deferred
tax asset
|
|
|
11,317
|
|
|
|
10,317
|
|
Prepaid
FDIC assessment
|
|
|
6,686
|
|
|
|
8,197
|
|
Interest
receivable
|
|
|
7,337
|
|
|
|
7,236
|
|
Other
real estate owned
|
|
|
2,630
|
|
|
|
5,479
|
|
Other
assets
|
|
|
13,692
|
|
|
|
12,429
|
|
Total
assets
|
|
$
|
2,308,002
|
|
|
$
|
2,235,383
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Demand
|
|
$
|
226,678
|
|
|
$
|
193,549
|
|
Interest
checking, savings and money market
|
|
|
747,000
|
|
|
|
675,681
|
|
Retail
certificates of deposit
|
|
|
492,397
|
|
|
|
545,789
|
|
Brokered
deposits
|
|
|
116,173
|
|
|
|
80,788
|
|
Total
deposits
|
|
|
1,582,248
|
|
|
|
1,495,807
|
|
Federal
Home Loan Bank advances
|
|
|
164,397
|
|
|
|
209,710
|
|
Other
borrowed funds
|
|
|
287,810
|
|
|
|
274,125
|
|
Junior
subordinated debentures
|
|
|
43,589
|
|
|
|
43,512
|
|
Accrued
interest and other liabilities
|
|
|
25,768
|
|
|
|
21,668
|
|
Total
liabilities
|
|
|
2,103,812
|
|
|
|
2,044,822
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
Equity
|
|
|
|
|
|
|
|
|
Common
stock, no par value; authorized 20,000,000 shares, issued and outstanding
7,657,098 and 7,644,837 shares on September 30, 2010 and December 31,
2009, respectively
|
|
|
50,763
|
|
|
|
50,062
|
|
Retained
earnings
|
|
|
146,179
|
|
|
|
133,634
|
|
Accumulated
other comprehensive income
|
|
|
|
|
|
|
|
|
Net
unrealized gains on securities available for sale, net of
tax
|
|
|
10,817
|
|
|
|
7,083
|
|
Net
unrealized (losses) gains on derivative instruments, at fair value, net of
tax
|
|
|
(2,636
|
)
|
|
|
739
|
|
Net
unrecognized losses on postretirement plans, net of tax
|
|
|
(933
|
)
|
|
|
(957
|
)
|
Total
accumulated other comprehensive income
|
|
|
7,248
|
|
|
|
6,865
|
|
Total
shareholders’ equity
|
|
|
204,190
|
|
|
|
190,561
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,308,002
|
|
|
$
|
2,235,383
|
|
See
Report of Independent Registered Public Accounting Firm.
The
accompanying notes are an integral part of these consolidated financial
statements.
CAMDEN
NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(unaudited)
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
(In Thousands, Except Number of Shares and per Share Data)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$
|
20,685
|
|
|
$
|
21,121
|
|
|
$ |
61,725
|
|
|
$
|
64,012
|
|
Interest
on U.S. government and sponsored enterprise obligations
|
|
|
5,037
|
|
|
|
6,229
|
|
|
|
15,366
|
|
|
|
20,229
|
|
Interest
on state and political subdivision obligations
|
|
|
528
|
|
|
|
602
|
|
|
|
1,601
|
|
|
|
1,876
|
|
Interest
on federal funds sold and other investments
|
|
|
28
|
|
|
|
28
|
|
|
|
84
|
|
|
|
99
|
|
Total
interest income
|
|
|
26,278
|
|
|
|
27,980
|
|
|
|
78,776
|
|
|
|
86,216
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits
|
|
|
3,734
|
|
|
|
5,413
|
|
|
|
11,812
|
|
|
|
17,743
|
|
Interest
on borrowings
|
|
|
2,953
|
|
|
|
3,630
|
|
|
|
9,357
|
|
|
|
11,267
|
|
Interest
on junior subordinated debentures
|
|
|
712
|
|
|
|
712
|
|
|
|
2,108
|
|
|
|
2,136
|
|
Total
interest expense
|
|
|
7,399
|
|
|
|
9,755
|
|
|
|
23,277
|
|
|
|
31,146
|
|
Net
interest income
|
|
|
18,879
|
|
|
|
18,225
|
|
|
|
55,499
|
|
|
|
55,070
|
|
Provision
for credit losses
|
|
|
1,291
|
|
|
|
2,000
|
|
|
|
5,237
|
|
|
|
6,514
|
|
Net
interest income after provision for credit losses
|
|
|
17,588
|
|
|
|
16,225
|
|
|
|
50,262
|
|
|
|
48,556
|
|
Non-Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from fiduciary services
|
|
|
1,618
|
|
|
|
1,471
|
|
|
|
4,697
|
|
|
|
4,332
|
|
Service
charges on deposit accounts
|
|
|
1,151
|
|
|
|
1,361
|
|
|
|
3,716
|
|
|
|
3,943
|
|
Other
service charges and fees
|
|
|
945
|
|
|
|
777
|
|
|
|
2,507
|
|
|
|
2,202
|
|
Bank-owned
life insurance
|
|
|
401
|
|
|
|
368
|
|
|
|
1,119
|
|
|
|
1,108
|
|
Brokerage
and insurance commissions
|
|
|
419
|
|
|
|
378
|
|
|
|
1,065
|
|
|
|
1,021
|
|
Mortgage
banking income
|
|
|
160
|
|
|
|
351
|
|
|
|
332
|
|
|
|
1,222
|
|
Net
(loss) gain on sale of securities
|
|
|
(188
|
)
|
|
|
1
|
|
|
|
(188
|
)
|
|
|
1
|
|
Other
income
|
|
|
2,331
|
|
|
|
437
|
|
|
|
2,765
|
|
|
|
913
|
|
Total
non-interest income before other-than-temporary impairment of
securities
|
|
|
6,837
|
|
|
|
5,144
|
|
|
|
16,013
|
|
|
|
14,742
|
|
Other-than-temporary
impairment of securities
|
|
|
(38
|
)
|
|
|
—
|
|
|
|
(217
|
)
|
|
|
—
|
|
Total
non-interest income
|
|
|
6,799
|
|
|
|
5,144
|
|
|
|
15,796
|
|
|
|
14,742
|
|
Non-Interest
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
6,949
|
|
|
|
6,071
|
|
|
|
19,472
|
|
|
|
18,195
|
|
Furniture,
equipment and data processing
|
|
|
1,150
|
|
|
|
1,045
|
|
|
|
3,396
|
|
|
|
3,078
|
|
Regulatory
assessments
|
|
|
832
|
|
|
|
693
|
|
|
|
2,149
|
|
|
|
3,304
|
|
Net
occupancy
|
|
|
899
|
|
|
|
874
|
|
|
|
2,830
|
|
|
|
2,954
|
|
Consulting
and professional fees
|
|
|
589
|
|
|
|
566
|
|
|
|
1,926
|
|
|
|
1,750
|
|
Other
real estate owned and collection costs
|
|
|
636
|
|
|
|
779
|
|
|
|
2,768
|
|
|
|
1,941
|
|
Amortization
of intangible assets
|
|
|
144
|
|
|
|
144
|
|
|
|
432
|
|
|
|
433
|
|
Other
expenses
|
|
|
2,260
|
|
|
|
1,975
|
|
|
|
6,265
|
|
|
|
6,199
|
|
Total
non-interest expenses
|
|
|
13,459
|
|
|
|
12,147
|
|
|
|
39,238
|
|
|
|
37,854
|
|
Income
before income taxes
|
|
|
10,928
|
|
|
|
9,222
|
|
|
|
26,820
|
|
|
|
25,444
|
|
Income
Taxes
|
|
|
3,487
|
|
|
|
2,894
|
|
|
|
8,480
|
|
|
|
7,898
|
|
Net
Income
|
|
$
|
7,441
|
|
|
$
|
6,328
|
|
|
$ |
18,340
|
|
|
$
|
17,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.97
|
|
|
$
|
0.83
|
|
|
$ |
2.40
|
|
|
$
|
2.30
|
|
Diluted
earnings per share
|
|
$
|
0.97
|
|
|
$
|
0.83
|
|
|
$ |
2.39
|
|
|
$
|
2.29
|
|
Weighted
average number of common shares outstanding
|
|
|
7,657,098
|
|
|
|
7,644,829
|
|
|
|
7,655,097
|
|
|
|
7,641,705
|
|
Diluted
weighted average number of common shares outstanding
|
|
|
7,663,051
|
|
|
|
7,654,175
|
|
|
|
7,660,919
|
|
|
|
7,645,824
|
|
See
Report of Independent Registered Public Accounting Firm.
The
accompanying notes are an integral part of these consolidated financial
statements.
CAMDEN
NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited)
(In Thousands, Except Number of
Shares and per Share Data)
|
|
Common
Stock
|
|
|
Retained
Earnings
|
|
|
Net
Unrealized
Gains
(Losses)
on
Securities
Available
for Sale
|
|
|
Net
Unrealized
Gains
(Losses) on
Derivative
Instruments
|
|
|
Net
Unrecognized
Losses on
Postretirement
Plans
|
|
|
Total
Shareholders’
Equity
|
|
Balance at December 31,
2008
|
|
$
|
48,984
|
|
|
$
|
118,564
|
|
|
$
|
(89
|
)
|
|
$
|
—
|
|
|
$
|
(1,059
|
)
|
|
$
|
166,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
—
|
|
|
|
17,546
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,546
|
|
Change
in unrealized gains on securities available for sale, net of taxes of
($4,443)
|
|
|
—
|
|
|
|
—
|
|
|
|
8,252
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,252
|
|
Change
in unrealized gains on derivative instruments at fair value, net of taxes
of ($6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11
|
|
|
|
—
|
|
|
|
11
|
|
Change
in net unrecognized losses on postretirement plans, net of taxes of
($25)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47
|
|
|
|
47
|
|
Total
comprehensive income
|
|
|
—
|
|
|
|
17,546
|
|
|
|
8,252
|
|
|
|
11
|
|
|
|
47
|
|
|
|
25,856
|
|
Stock-based
compensation expense
|
|
|
295
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
295
|
|
Exercise
of stock options and issuance of restricted stock (5,009
shares)
|
|
|
10
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
Common
stock repurchased (1,690 shares)
|
|
|
—
|
|
|
|
(55
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(55
|
)
|
Cash
dividends declared ($0.75/share)
|
|
|
—
|
|
|
|
(5,735
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,735
|
)
|
Balance
at September 30, 2009
|
|
$
|
49,289
|
|
|
$
|
130,320
|
|
|
$
|
8,163
|
|
|
$
|
11
|
|
|
$
|
(1,012
|
)
|
|
$
|
186,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2009
|
|
$
|
50,062
|
|
|
$
|
133,634
|
|
|
$
|
7,083
|
|
|
$
|
739
|
|
|
$
|
(957
|
)
|
|
$
|
190,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
—
|
|
|
|
18,340
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,340
|
|
Change
in unrealized gains on securities available for sale, net of taxes of
($2,010)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,734
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,734
|
|
Change
in unrealized losses on derivative instruments at fair value, net of taxes
of $1,816
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,375
|
)
|
|
|
—
|
|
|
|
(3,375
|
)
|
Change
in net unrecognized losses on postretirement plans, net of taxes of
($13)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24
|
|
|
|
24
|
|
Total
comprehensive income
|
|
|
—
|
|
|
|
18,340
|
|
|
|
3,734
|
|
|
|
(3,375
|
)
|
|
|
24
|
|
|
|
18,723
|
|
Stock-based
compensation expense
|
|
|
623
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
623
|
|
Exercise
of stock options and issuance of restricted stock (10,940
shares)
|
|
|
78
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
78
|
|
Common
stock repurchased (1,385 shares)
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(44
|
)
|
Cash
dividends declared ($0.75/share)
|
|
|
—
|
|
|
|
(5,751
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2010
|
|
$
|
50,763
|
|
|
$
|
146,179
|
|
|
$
|
10,817
|
|
|
$
|
(2,636
|
)
|
|
$
|
(933
|
)
|
|
$
|
204,190
|
|
See Report of Independent
Registered Public Accounting Firm.
The
accompanying notes are an integral part of these consolidated financial
statements.
CAMDEN
NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
|
|
Nine Months Ended September 30,
|
|
(In Thousands)
|
|
2010
|
|
|
2009
|
|
Operating
Activities
|
|
|
|
|
|
|
Net
income
|
|
$ |
18,340 |
|
|
$ |
17,546 |
|
Adjustments
to reconcile net income to net cash provided (used) by operating
activities:
|
|
|
|
|
|
|
|
|
Provision
for credit losses
|
|
|
5,237 |
|
|
|
6,514 |
|
Depreciation
and amortization
|
|
|
2,560 |
|
|
|
2,028 |
|
Stock-based
compensation expense
|
|
|
623 |
|
|
|
295 |
|
(Increase)
decrease in interest receivable
|
|
|
(101 |
) |
|
|
676 |
|
Amortization
of intangible assets
|
|
|
432 |
|
|
|
433 |
|
Net
increase in trading assets
|
|
|
(448 |
) |
|
|
(363 |
) |
Net
investment securities losses (gains)
|
|
|
188 |
|
|
|
(1 |
) |
Other-than-temporary
impairment of securities
|
|
|
217 |
|
|
|
— |
|
Net
increase in other real estate owned valuation allowance
|
|
|
21 |
|
|
|
1,011 |
|
Originations
of mortgage loans held for sale
|
|
|
(4,690 |
) |
|
|
(72,529 |
) |
Proceeds
from the sale of mortgage loans
|
|
|
2,234 |
|
|
|
71,231 |
|
Gain
on sale of mortgage loans
|
|
|
(83 |
) |
|
|
(102 |
) |
Liquidation
of defined benefit pension plan
|
|
|
— |
|
|
|
(735 |
) |
Decrease
in prepaid FDIC assessment
|
|
|
1,511 |
|
|
|
— |
|
Increase
in other assets
|
|
|
(4,391 |
) |
|
|
(4,407 |
) |
(Decrease)
increase in other liabilities
|
|
|
(825 |
) |
|
|
898 |
|
Net
cash provided by operating activities
|
|
|
20,825 |
|
|
|
22,495 |
|
Investing
Activities
|
|
|
|
|
|
|
|
|
Proceeds
from maturities of securities held to maturity
|
|
|
1,130 |
|
|
|
2,606 |
|
Proceeds
from sales and maturities of securities available for sale
|
|
|
121,929 |
|
|
|
138,200 |
|
Purchase
of securities available for sale
|
|
|
(178,245 |
) |
|
|
(45,616 |
) |
Net
increase in loans
|
|
|
(13,205 |
) |
|
|
(22,468 |
) |
Proceeds
from the sale of other real estate owned
|
|
|
4,169 |
|
|
|
448 |
|
Purchase
of premises and equipment
|
|
|
(1,736 |
) |
|
|
(1,152 |
) |
Net
cash (used) provided by investing activities
|
|
|
(65,958 |
) |
|
|
72,018 |
|
Financing
Activities
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
86,432 |
|
|
|
23,794 |
|
Proceeds
from Federal Home Loan Bank long-term advances
|
|
|
20,177 |
|
|
|
8,163 |
|
Repayments
on Federal Home Loan Bank long-term advances
|
|
|
(65,489 |
) |
|
|
(56,593 |
) |
Net
change in short-term Federal Home Loan Bank borrowings
|
|
|
(24,335 |
) |
|
|
(116,375 |
) |
Net
increase in other borrowed funds
|
|
|
37,670 |
|
|
|
47,164 |
|
Exercise
of stock options and issuance of restricted stock
|
|
|
78 |
|
|
|
10 |
|
Common
stock repurchased
|
|
|
(44 |
) |
|
|
(55 |
) |
Cash
dividends paid on common stock
|
|
|
(5,746 |
) |
|
|
(5,735 |
) |
Net
cash provided (used) by financing activities
|
|
|
48,743 |
|
|
|
(99,627 |
) |
Net
increase (decrease) in cash and cash equivalents
|
|
|
3,610 |
|
|
|
(5,114 |
) |
Cash
and cash equivalents at beginning of year
|
|
|
29,772 |
|
|
|
35,195 |
|
Cash
and cash equivalents at end of period
|
|
$ |
33,382 |
|
|
$ |
30,081 |
|
|
|
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
23,777 |
|
|
$ |
31,837 |
|
Income
taxes paid
|
|
|
9,860 |
|
|
|
5,200 |
|
Transfer
from loans to loans held for sale
|
|
|
4,690 |
|
|
|
1,298 |
|
Transfer
from loans to other real estate owned
|
|
|
1,341 |
|
|
|
2,900 |
|
See
Report of Independent Registered Public Accounting Firm.
The
accompanying notes are an integral part of these consolidated financial
statements.
CAMDEN
NATIONAL CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
in Tables Expressed in Thousands, Except Number of Shares and per Share
Data)
NOTE
1 - BASIS OF PRESENTATION
The
accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
disclosures required by accounting principles generally accepted in the United
States of America (“GAAP”) for complete presentation of financial statements. In
the opinion of management, the consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the consolidated statements of condition of Camden National Corporation
(the “Company”) as of September 30, 2010 and December 31, 2009, the consolidated
statements of income for the three and nine months ended September 30, 2010 and
2009, the consolidated statements of changes in shareholders' equity for the
nine months ended September 30, 2010 and 2009, and the consolidated statements
of cash flows for the nine months ended September 30, 2010 and 2009. All
significant intercompany transactions and balances are eliminated in
consolidation. Certain items from the prior year were reclassified to conform to
the current year presentation. The income reported for the three-month and
nine-month periods ended September 30, 2010 is not necessarily indicative of the
results that may be expected for the full year. The information in this report
should be read in conjunction with the consolidated financial statements and
accompanying notes included in the December 31, 2009 Annual Report on Form
10-K.
NOTE
2 – EARNINGS PER SHARE
Basic
earnings per common share (“EPS”) excludes dilution and is computed by dividing
net income applicable to common stock by the weighted average number of common
shares outstanding for the year. Diluted EPS reflects the potential dilution
that could occur if certain securities or other contracts to issue common stock
(such as stock options) were exercised or converted into additional common
shares that would then share in the earnings of the Company. Diluted EPS is
computed by dividing net income applicable to common stock by the weighted
average number of common shares outstanding for the year, plus an incremental
number of common-equivalent shares computed using the treasury stock method. The
following table sets forth the computation of basic and diluted earnings per
share under the two-class method, as unvested share-based payment awards include
the nonforfeitable right to receive dividends and therefore are considered
participating securities:
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net
income, as reported
|
|
$ |
7,441 |
|
|
$ |
6,328 |
|
|
$ |
18,340 |
|
|
$ |
17,546 |
|
Weighted-average
common shares outstanding – basic
|
|
|
7,657,098 |
|
|
|
7,644,829 |
|
|
|
7,655,097 |
|
|
|
7,641,705 |
|
Dilutive
effect of stock-based compensation
|
|
|
5,953 |
|
|
|
9,346 |
|
|
|
5,822 |
|
|
|
4,119 |
|
Weighted-average
common and potential common shares – diluted
|
|
|
7,663,051 |
|
|
|
7,654,175 |
|
|
|
7,660,919 |
|
|
|
7,645,824 |
|
Basic
earnings per share – common stock
|
|
$ |
0.97 |
|
|
$ |
0.83 |
|
|
$ |
2.40 |
|
|
$ |
2.30 |
|
Basic
earnings per share – unvested share-based payment awards
|
|
|
0.97 |
|
|
|
0.83 |
|
|
|
2.40 |
|
|
|
2.30 |
|
Diluted
earnings per share – common stock
|
|
|
0.97 |
|
|
|
0.83 |
|
|
|
2.39 |
|
|
|
2.29 |
|
Diluted
earnings per share – unvested share-based payment awards
|
|
|
0.97 |
|
|
|
0.83 |
|
|
|
2.39 |
|
|
|
2.29 |
|
For the
three-month and nine-month periods ended September 30, 2010, options to purchase
92,050 and 87,750 shares, respectively, of common stock were not
considered in the computation of potential common shares for purposes of diluted
EPS, since the exercise prices of the options were greater than the average
market price of the common stock for the respective periods. For the
three-month and nine-month periods ended September 30, 2009, options to purchase
64,750 and 79,800 shares, respectively, of common stock were not considered in
the computation of potential common shares for purposes of diluted EPS, since
the exercise prices of the options were greater than the average market price of
the common stock for the respective periods.
NOTE
3 – SECURITIES
The
following tables summarize the amortized costs and estimated fair values of
securities available for sale and held to maturity, as of the dates
indicated:
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. Government sponsored enterprises
|
|
$
|
49,992
|
|
|
$
|
333
|
|
|
$
|
—
|
|
|
$
|
50,325
|
|
Obligations
of states and political subdivisions
|
|
|
16,502
|
|
|
|
709
|
|
|
|
—
|
|
|
|
17,211
|
|
Mortgage-backed
securities issued or guaranteed by U.S. government sponsored
enterprises
|
|
|
428,210
|
|
|
|
18,484
|
|
|
|
(51
|
)
|
|
|
446,643
|
|
Private
issue collateralized mortgage obligations
|
|
|
24,889
|
|
|
|
58
|
|
|
|
(2,389
|
)
|
|
|
22,558
|
|
Total
debt securities
|
|
|
519,593
|
|
|
|
19,584
|
|
|
|
(2,440
|
)
|
|
|
536,737
|
|
Equity
securities
|
|
|
5,000
|
|
|
|
—
|
|
|
|
(502
|
)
|
|
|
4,498
|
|
Total
securities available for sale
|
|
$
|
524,593
|
|
|
$
|
19,584
|
|
|
$
|
(2,942
|
)
|
|
$
|
541,235
|
|
Held
to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of states and political subdivisions
|
|
$
|
36,745
|
|
|
$
|
3,156
|
|
|
$
|
—
|
|
|
$
|
39,901
|
|
Total
securities held to maturity
|
|
$
|
36,745
|
|
|
$
|
3,156
|
|
|
$
|
—
|
|
|
$
|
39,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of states and political subdivisions
|
|
$
|
17,587
|
|
|
$
|
473
|
|
|
$
|
—
|
|
|
$
|
18,060
|
|
Mortgage-backed
securities issued or guaranteed by U.S. government sponsored
enterprises
|
|
|
412,113
|
|
|
|
16,608
|
|
|
|
(365
|
)
|
|
|
428,356
|
|
Private
issue collateralized mortgage obligations
|
|
|
34,121
|
|
|
|
12
|
|
|
|
(5,261
|
)
|
|
|
28,872
|
|
Total
debt securities
|
|
|
463,821
|
|
|
|
17,093
|
|
|
|
(5,626
|
)
|
|
|
475,288
|
|
Equity
securities
|
|
|
5,000
|
|
|
|
—
|
|
|
|
(580
|
)
|
|
|
4,420
|
|
Total
securities available for sale
|
|
$
|
468,821
|
|
|
$
|
17,093
|
|
|
$
|
(6,206
|
)
|
|
$
|
479,708
|
|
Held
to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of states and political subdivisions
|
|
$
|
37,914
|
|
|
$
|
1,725
|
|
|
$
|
—
|
|
|
$
|
39,639
|
|
Total
securities held to maturity
|
|
$
|
37,914
|
|
|
$
|
1,725
|
|
|
$
|
—
|
|
|
$
|
39,639
|
|
During
the third quarter of 2010, the Company recorded proceeds of $4.2 million on the
sale of an investment classified as available for sale, which resulted in gross
realized losses of $188,000. The investment sold had been downgraded
to non-investment grade in 2009 and, although the Company’s tranche was
comprised of high quality loans, credit support had declined noticeably over the
past few months due to poor performance of other tranches. The
Company had not recorded any other-than-temporary impairment (“OTTI”) on this
security; however, with the increased deterioration and an increase in market
price, in a relatively illiquid market for the non-agency sector, management
decided to sell the security during the quarter. Unrealized gains on
securities available for sale arising during the nine months ended September 30,
2010 and included in other comprehensive income amounted to $3.7 million, net of
deferred taxes of $2.0 million.
At
September 30, 2010, securities with an amortized cost of $378.2 million and an
estimated fair value of $395.9 million were pledged to secure Federal Home Loan
Bank (“FHLB”) advances, public deposits, securities sold under agreements to
repurchase and other purposes required or permitted by law.
The
amortized cost and estimated fair values of debt securities by contractual
maturity at September 30, 2010 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
Cost
|
|
|
Fair
Value
|
|
Available
for sale
|
|
|
|
|
|
|
Due
in one year or less
|
|
$
|
2,017
|
|
|
$
|
2,031
|
|
Due
after one year through five years
|
|
|
75,395
|
|
|
|
76,691
|
|
Due
after five years through ten years
|
|
|
66,604
|
|
|
|
69,786
|
|
Due
after ten years
|
|
|
375,577
|
|
|
|
388,229
|
|
|
|
$
|
519,593
|
|
|
$
|
536,737
|
|
Held
to maturity
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
$
|
165
|
|
|
$
|
166
|
|
Due
after one year through five years
|
|
|
3,922
|
|
|
|
4,191
|
|
Due
after five years through ten years
|
|
|
31,997
|
|
|
|
34,852
|
|
Due
after ten years
|
|
|
661
|
|
|
|
692
|
|
|
|
$
|
36,745
|
|
|
$
|
39,901
|
|
Management
reviews the investment portfolio on a periodic basis to determine the cause,
magnitude and duration of declines in the fair value of each security. Thorough
evaluations of the causes of the unrealized losses are performed to determine
whether the impairment is temporary or other than temporary in nature.
Considerations such as the ability of the securities to meet cash flow
requirements, levels of credit enhancements, risk of curtailment, recoverability
of invested amount over a reasonable period of time and the length of time the
security is in a loss position, for example, are applied in determining OTTI.
Once a decline in value is determined to be other-than-temporary, the value of
the security is reduced and a corresponding charge to earnings is
recognized.
The
following table shows the unrealized gross losses and estimated fair values of
investment securities at September 30, 2010 and December 31, 2009, by length of
time that individual securities in each category have been in a continuous loss
position:
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
September
30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities
|
|
$ |
20,547 |
|
|
$ |
(50 |
) |
|
$ |
74 |
|
|
$ |
(1 |
) |
|
$ |
20,621 |
|
|
$ |
(51 |
) |
Private
issue collateralized mortgage obligations
|
|
|
495 |
|
|
|
(17 |
) |
|
|
19,996 |
|
|
|
(2,372 |
) |
|
|
20,491 |
|
|
|
(2,389 |
) |
Equity
securities
|
|
|
— |
|
|
|
— |
|
|
|
4,498 |
|
|
|
(502 |
) |
|
|
4,498 |
|
|
|
(502 |
) |
Total
|
|
$ |
21,042 |
|
|
$ |
(67 |
) |
|
$ |
24,568 |
|
|
$ |
(2,875 |
) |
|
$ |
45,610 |
|
|
$ |
(2,942 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities
|
|
$ |
25,003 |
|
|
$ |
(364 |
) |
|
$ |
57 |
|
|
$ |
(1 |
) |
|
$ |
25,060 |
|
|
$ |
(365 |
) |
Private
issue collateralized mortgage obligations
|
|
|
— |
|
|
|
— |
|
|
|
27,910 |
|
|
|
(5,261 |
) |
|
|
27,910 |
|
|
|
(5,261 |
) |
Equity
securities
|
|
|
— |
|
|
|
— |
|
|
|
4,420 |
|
|
|
(580 |
) |
|
|
4,420 |
|
|
|
(580 |
) |
Total
|
|
$ |
25,003 |
|
|
$ |
(364 |
) |
|
$ |
32,387 |
|
|
$ |
(5,842 |
) |
|
$ |
57,390 |
|
|
$ |
(6,206 |
) |
At
September 30, 2010, $45.6 million of the Company’s investment securities had
unrealized losses that are primarily considered temporary. A large portion of
the unrealized loss was related to the private issue collateralized mortgage
obligations (“CMOs”), which includes $10.6 million that have been downgraded to
non-investment grade. The Company’s share of these downgraded CMOs is in the
senior tranches. Management believes the unrealized loss for the CMOs is
primarily the result of current market illiquidity and the underestimation of
value in the market. Including the CMOs, there were 22 securities with a fair
value of $24.6 million in the portfolio which had unrealized losses for twelve
months or longer. Management currently has the intent and ability to retain
these investment securities with unrealized losses until the decline in value
has been recovered. Stress tests are performed regularly on the higher risk
securities in the portfolio using current statistical data to determine expected
cash flows and forecast potential losses. The results of the stress tests at
September 30, 2010 reflect potential future credit losses in the base case.
Based on this analysis the Company recorded a $38,000 OTTI write-down in the
third quarter of 2010, bringing the total OTTI write-down on three private issue
CMOs during the first nine months of 2010 to $217,000.
At
September 30, 2010, the Company held Duff & Phelps Select Income Fund
Auction Preferred Stock with an amortized cost of $5.0 million which has failed
at auction since 2008. The security is rated Triple-A by Moody’s and Standard
and Poor’s. Management believes the failed auctions are a temporary liquidity
event related to this asset class of securities. The Company is currently
collecting all amounts due according to contractual terms and has the ability
and intent to hold the securities until they clear auction, are called, or
mature; therefore, the securities are not considered other-than-temporarily
impaired.
NOTE
4 – LOANS AND ALLOWANCE FOR LOAN LOSSES
The
composition of the Company’s loan portfolio, excluding residential loans held
for sale, at September 30, 2010 and December 31, 2009 was as
follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Residential
real estate loans
|
|
$
|
614,176
|
|
|
$
|
627,979
|
|
Commercial
real estate loans
|
|
|
449,672
|
|
|
|
434,783
|
|
Commercial
loans
|
|
|
187,091
|
|
|
|
191,214
|
|
Consumer
loans
|
|
|
285,424
|
|
|
|
273,106
|
|
Deferred
loan fees net of costs
|
|
|
(286
|
)
|
|
|
(324
|
)
|
Total
loans
|
|
$
|
1,536,077
|
|
|
$
|
1,526,758
|
|
The
Company’s lending activities are primarily conducted in Maine. The Company makes
single family and multi-family residential loans, commercial real estate loans,
business loans, municipal loans 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.
Non-accrual
loans at September 30, 2010 were $18.0 million, or 1.37% of total loans,
compared to $17.9 million, or 1.29% of total loans, at December 31, 2009.
Non-accrual loans at September 30, 2010 were comprised of $6.7 million in
commercial real estate loans, $5.8 million in residential real estate loans,
$4.3 million in commercial loans, and $1.2 million in consumer loans.
Non-accrual loans at December 31, 2009 consisted of $6.5 million in commercial
real estate loans, $6.2 million in residential real estate loans, $4.1 million
in commercial loans, and $1.1 million in consumer loans.
The
allowance for loan losses (“ALL”) is management’s best estimate of inherent risk
of loss in the loan portfolio as of the statement of condition date. Management
makes various assumptions and judgments about the collectability of the loan
portfolio and provides an allowance for potential losses based on a number of
factors. If the assumptions are wrong, the ALL may not be sufficient to cover
losses and may cause an increase in the allowance in the future. Among the
factors that could affect the Company’s ability to collect loans and require an
increase to the allowance in the future are: general real estate and economic
conditions; regional credit concentration; industry concentration, for example
in the hospitality, tourism and recreation industries; and a requirement by
federal and state regulators to increase the provision for loan losses or
recognize additional charge-offs.
The
following is a summary of activity in the allowance for loan
losses:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
Balance
at beginning of period
|
|
$
|
22,266
|
|
|
$
|
18,654
|
|
|
$
|
20,246
|
|
|
$
|
17,691
|
|
Loan
charge-offs
|
|
|
(1,395
|
)
|
|
|
(1,356
|
)
|
|
|
(3,805
|
)
|
|
|
(5,354
|
)
|
Recoveries
on loans previously charged off
|
|
|
173
|
|
|
|
137
|
|
|
|
653
|
|
|
|
584
|
|
Net
charge-offs
|
|
|
(1,222
|
)
|
|
|
(1,219
|
)
|
|
|
(3,152
|
)
|
|
|
(4,770
|
)
|
Provision
for loan losses
|
|
|
1,292
|
|
|
|
2,000
|
|
|
|
5,242
|
|
|
|
6,514
|
|
Balance
at end of period
|
|
$
|
22,336
|
|
|
$
|
19,435
|
|
|
$
|
22,336
|
|
|
$
|
19,435
|
|
NOTE
5 – GOODWILL, CORE DEPOSIT AND TRUST RELATIONSHIP INTANGIBLES
In 2008,
the Company acquired $37.9 million of goodwill, $5.0 million of core deposit
intangible and $753,000 of trust relationship intangible related to the
acquisition of Union Bankshares Company (“Union Bankshares”). The changes in
goodwill, core deposit intangible and trust relationship intangible for the nine
months ended September 30, 2010 are shown in the table below:
|
|
Goodwill
|
|
|
|
Banking
|
|
|
Financial
Services
|
|
|
Total
|
|
Balance
at December 31, 2009
|
|
$
|
34,720
|
|
|
$
|
7,060
|
|
|
$
|
41,780
|
|
2010
activity
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance
at September 30, 2010
|
|
$
|
34,720
|
|
|
$
|
7,060
|
|
|
$
|
41,780
|
|
|
|
Core Deposit Intangible
|
|
|
|
Total
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Balance
at December 31, 2009
|
|
$
|
14,444
|
|
|
$
|
(10,428
|
)
|
|
$
|
4,016
|
|
2010
amortization
|
|
|
—
|
|
|
|
(376
|
)
|
|
|
(376
|
)
|
Balance
at September 30, 2010
|
|
$
|
14,444
|
|
|
$
|
(10,804
|
)
|
|
$
|
3,640
|
|
|
|
Trust Relationship Intangible
|
|
|
|
Total
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Balance
at December 31, 2009
|
|
$
|
753
|
|
|
$
|
(151
|
)
|
|
$
|
602
|
|
2010
amortization
|
|
|
—
|
|
|
|
(56
|
)
|
|
|
(56
|
)
|
Balance
at September 30, 2010
|
|
$
|
753
|
|
|
$
|
(207
|
)
|
|
$
|
546
|
|
During
the fourth quarter of 2009, the Company completed its annual impairment
evaluation of goodwill and did not identify any impairment.
The
following table reflects the expected amortization schedule for intangible
assets at September 30, 2010:
|
|
Trust
Relationship
|
|
|
Core Deposit
|
|
|
|
Intangible
|
|
|
Intangible
|
|
2010
|
|
$
|
19
|
|
|
$
|
126
|
|
2011
|
|
|
75
|
|
|
|
502
|
|
2012
|
|
|
75
|
|
|
|
502
|
|
2013
|
|
|
75
|
|
|
|
502
|
|
2014
|
|
|
75
|
|
|
|
502
|
|
Thereafter
|
|
|
227
|
|
|
|
1,506
|
|
Total
unamortized intangible
|
|
$
|
546
|
|
|
$
|
3,640
|
|
NOTE
6 – EMPLOYEE BENEFIT PLANS
Supplemental
Executive Retirement Plan
The
Company maintains an unfunded, non-qualified supplemental executive retirement
plan for certain officers. The components of net period benefit cost
for the periods ended September 30, 2010 and 2009 were as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net
period benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
45
|
|
|
$
|
51
|
|
|
$
|
135
|
|
|
$
|
153
|
|
Interest
cost
|
|
|
107
|
|
|
|
104
|
|
|
|
321
|
|
|
|
312
|
|
Recognized
net actuarial loss
|
|
|
7
|
|
|
|
19
|
|
|
|
23
|
|
|
|
57
|
|
Recognized
prior service cost
|
|
|
4
|
|
|
|
4
|
|
|
|
14
|
|
|
|
13
|
|
Net
period benefit cost
|
|
$
|
163
|
|
|
$
|
178
|
|
|
$
|
493
|
|
|
$
|
535
|
|
Other
Postretirement Benefit Plan
The
Company provides medical and life insurance to certain eligible retired
employees. The components of net period benefit cost for the periods
ended September 30, 2010 and 2009 were as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net
period benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
18
|
|
|
$
|
16
|
|
|
$
|
52
|
|
|
$
|
48
|
|
Interest
cost
|
|
|
35
|
|
|
|
34
|
|
|
|
107
|
|
|
|
102
|
|
Recognized
net actuarial loss
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
Net
period benefit cost
|
|
$
|
54
|
|
|
$
|
50
|
|
|
$
|
160
|
|
|
$
|
151
|
|
NOTE
7 – STOCK-BASED COMPENSATION PLANS
On March
11, 2010, the Company granted 7,500 restricted stock awards to certain executive
officers of the Company and/or Camden National Bank (“CNB”), its subsidiary
bank, from the 2003 Stock Option and Incentive Plan. The holders of these awards
participate fully in the rewards of stock ownership of the Company, including
voting and dividend rights. The restricted stock awards have been determined to
have a fair value of $32.49, based on the market price of the Company’s common
stock on the date of grant. The restricted stock awards vest over a three-year
period.
On March
15, 2010, the Company awarded options to purchase 30,750 shares of common stock
from the 2003 Stock Option and Incentive Plan to certain officers of the Company
and/or CNB. The expected volatility, expected life, expected dividend yield, and
expected risk free interest rate for this grant used to determine the fair value
of the shares as determined on March 15, 2010 were 50%, 5 years, 3.08%, and
2.36%, respectively. The options have been determined to have a fair value of
$11.74 per share. The options vest over a five-year period and have a
contractual life of ten years from date of grant.
Under the
Management Stock Purchase Plan, the Company granted management employees an
aggregate of 1,677 shares of common stock during the first quarter of 2010 and
an aggregate of 174 shares of common stock during the third quarter of 2010 in
lieu of incentive bonuses. During the first quarter of 2010, the
Company granted 1,565 Deferred Stock Awards under the Defined Contribution
Retirement Plan.
NOTE
8 – FAIR VALUE
GAAP
permits an entity to choose to measure eligible financial instruments and other
items at fair value. The Company has not made any fair value elections as of
September 30, 2010.
Pursuant
to GAAP, fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A three-level hierarchy exists in GAAP for
fair value measurements based upon the inputs to the valuation of an asset or
liability.
Level 1:
Valuation is based on quoted prices in active markets for identical
assets and liabilities.
Level 2:
Valuation is determined from quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar
instruments in markets that are not active or by model-based techniques in which
all significant inputs are observable in the market.
Level 3:
Valuation is derived from model-based and other techniques in which
at least one significant input is unobservable and which may be based on the
Company’s own estimates about the assumptions that market participants would use
to value the asset or liability.
When
available, the Company attempts to use quoted market prices in active markets to
determine fair value and classifies such items as Level 1 or Level 2. If quoted
market prices in active markets are not available, fair value is often
determined using model-based techniques incorporating various assumptions
including interest rates, prepayment speeds and credit losses. Assets and
liabilities valued using model-based techniques are classified as either Level 2
or Level 3, depending on the lowest level classification of an input that is
considered significant to the overall valuation. The following is a description
of the valuation methodologies used for the Company’s assets and liabilities
that are measured on a recurring basis at estimated fair value.
The
following table summarizes assets and liabilities measured at estimated fair
value on a recurring basis:
Fair Value Measurement at September 30, 2010
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
Measurements at
September 30,
2010
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. government sponsored enterprises
|
|
$
|
—
|
|
|
$
|
50,325
|
|
|
$
|
—
|
|
|
$
|
50,325
|
|
Obligations
of states and political subdivisions
|
|
|
—
|
|
|
|
17,211
|
|
|
|
—
|
|
|
|
17,211
|
|
Mortgage-backed
securities issued or guaranteed by U.S. government sponsored
enterprises
|
|
|
—
|
|
|
|
446,643
|
|
|
|
—
|
|
|
|
446,643
|
|
Private
issue collateralized mortgage obligations
|
|
|
—
|
|
|
|
22,558
|
|
|
|
—
|
|
|
|
22,558
|
|
Equity
securities
|
|
|
—
|
|
|
|
4,498
|
|
|
|
—
|
|
|
|
4,498
|
|
Trading
account assets
|
|
|
2,173
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,173
|
|
Loans
held for sale
|
|
|
2,456
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,456
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
instruments
|
|
|
—
|
|
|
|
4,055
|
|
|
|
—
|
|
|
|
4,055
|
|
Fair Value Measurement at
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Measurements at
December 31,
2009
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of states and political subdivisions
|
|
$
|
—
|
|
|
$
|
18,060
|
|
|
$
|
—
|
|
|
$
|
18,060
|
|
Mortgage-backed
securities issued or guaranteed by U.S. government sponsored
enterprises
|
|
|
—
|
|
|
|
428,356
|
|
|
|
—
|
|
|
|
428,356
|
|
Private
issue collateralized mortgage obligations
|
|
|
—
|
|
|
|
28,872
|
|
|
|
—
|
|
|
|
28,872
|
|
Equity
securities
|
|
|
—
|
|
|
|
4,420
|
|
|
|
—
|
|
|
|
4,420
|
|
Trading
account assets
|
|
|
1,725
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,725
|
|
Derivatives
instruments
|
|
|
—
|
|
|
|
1,136
|
|
|
|
—
|
|
|
|
1,136
|
|
The
following table summarizes assets and liabilities measured at fair value on a
non-recurring basis:
Fair
Value Measurement at September 30,
2010
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
Measurements at
September 30,
2010
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
$
|
—
|
|
$
|
16,247
|
|
$
|
—
|
|
$
|
16,247
|
|
Other
real estate owned (OREO)
|
|
|
—
|
|
|
—
|
|
|
2,630
|
|
|
2,630
|
|
Mortgage
servicing rights
|
|
|
—
|
|
|
652
|
|
|
—
|
|
|
652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Measurement at December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2009
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
$ |
— |
|
$ |
16,135 |
|
$ |
— |
|
$ |
16,135 |
|
OREO
|
|
|
— |
|
|
— |
|
|
5,479 |
|
|
5,479 |
|
Mortgage
servicing rights
|
|
|
— |
|
|
965 |
|
|
— |
|
|
965 |
|
The
following table reconciles the beginning and ending balances of OREO measured at
fair value on a nonrecurring basis using significant unobservable (Level 3)
inputs:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Balance
at beginning of year
|
|
$
|
5,479
|
|
|
$
|
4,024
|
|
Additions
|
|
|
1,341
|
|
|
|
3,420
|
|
Net
increase in OREO valuation allowance
|
|
|
(21
|
)
|
|
|
(1,006
|
)
|
Properties
sold
|
|
|
(4,169
|
)
|
|
|
(959
|
)
|
Balance
at end of period
|
|
$
|
2,630
|
|
|
$
|
5,479
|
|
OREO
properties acquired through foreclosure or deed-in-lieu of foreclosure are
recorded at the fair value less costs to sell at the time of foreclosure. The
fair value of real estate owned assets is generally based on recent real estate
appraisals adjusted for estimated selling costs. These appraisals may utilize a
single valuation approach or a combination of approaches including comparable
sales and the income approach. Adjustments are routinely made in the appraisal
process by the appraisers to adjust for differences between the comparable sales
and income data available. Such adjustments are typically immaterial and result
in a Level 2 classification of the inputs for determining fair
value. Any write-down of the recorded investment in the related loan
is charged to the allowance for loan losses upon transfer to OREO. After
foreclosure, management periodically obtains updated valuations of the OREO
assets and, if additional impairments are deemed necessary, the subsequent
write-downs for declines in value are recorded through a valuation allowance and
a provision for losses charged to other non-interest expense.
The
carrying amounts and estimated fair value for financial instrument assets and
liabilities are presented in the following table:
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
33,382 |
|
|
$ |
33,382 |
|
|
$ |
29,772 |
|
|
$ |
29,772 |
|
Securities
available for sale
|
|
|
541,235 |
|
|
|
541,235 |
|
|
|
479,708 |
|
|
|
479,708 |
|
Securities
held to maturity
|
|
|
36,745 |
|
|
|
39,901 |
|
|
|
37,914 |
|
|
|
39,639 |
|
Trading
account assets
|
|
|
2,173 |
|
|
|
2,173 |
|
|
|
1,725 |
|
|
|
1,725 |
|
Loans
held for sale
|
|
|
2,456 |
|
|
|
2,456 |
|
|
|
— |
|
|
|
— |
|
Federal
Home Loan Bank and Federal Reserve Bank stock
|
|
|
21,962 |
|
|
|
21,962 |
|
|
|
21,965 |
|
|
|
21,965 |
|
Loans
receivable, net of allowance
|
|
|
1,513,741 |
|
|
|
1,546,769 |
|
|
|
1,506,512 |
|
|
|
1,526,148 |
|
Mortgage
servicing rights
|
|
|
632 |
|
|
|
652 |
|
|
|
810 |
|
|
|
965 |
|
Interest
receivable
|
|
|
7,337 |
|
|
|
7,337 |
|
|
|
7,236 |
|
|
|
7,236 |
|
Derivatives
instruments
|
|
|
— |
|
|
|
— |
|
|
|
1,136 |
|
|
|
1,136 |
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,582,248 |
|
|
|
1,592,447 |
|
|
|
1,495,807 |
|
|
|
1,502,020 |
|
Federal
Home Loan Bank advances
|
|
|
164,397 |
|
|
|
172,965 |
|
|
|
209,710 |
|
|
|
216,373 |
|
Commercial
repurchase agreements
|
|
|
106,383 |
|
|
|
115,073 |
|
|
|
126,466 |
|
|
|
135,189 |
|
Other
borrowed funds
|
|
|
181,427 |
|
|
|
181,427 |
|
|
|
147,659 |
|
|
|
147,659 |
|
Junior
subordinated debentures
|
|
|
43,589 |
|
|
|
51,085 |
|
|
|
43,512 |
|
|
|
51,075 |
|
Interest
payable
|
|
|
2,093 |
|
|
|
2,093 |
|
|
|
2,593 |
|
|
|
2,593 |
|
Derivatives
instruments
|
|
|
4,055 |
|
|
|
4,055 |
|
|
|
— |
|
|
|
— |
|
The
following assumptions, methods and calculations were used in determining the
estimated fair value of financial instruments:
Cash and Due from
Banks: The carrying amounts of cash and due from banks
approximate their fair value.
Securities Available for Sale and
Trading Account Assets: The fair value of securities available
for sale and trading account assets is reported utilizing prices provided by an
independent pricing service based on recent trading activity and other
observable information including, but not limited to, dealer quotes, market
spreads, cash flows, market interest rate curves, market consensus prepayment
speeds, credit information, and the bond’s terms and conditions. The fair value
of equity securities was calculated using a discounted cash flow analysis using
observable information including, but not limited to, cash flows, risk-adjusted
discount rates and market spreads.
Securities Held to
Maturity: Fair values of securities held to maturity 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.
Federal Home Loan Bank and Federal
Reserve Bank Stock: The carrying amount approximates fair
value.
Loans Held for
Sale: Loans held for sale are reported at the lower of cost or
market in the aggregate, with any adjustment for net unrealized losses reported
as non-interest income. Market is based on executed sales agreements
for these loans.
Loans: 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. Loan impairment is deemed to exist when
full repayment of principal and interest according to the contractual terms of
the loan is no longer probable. Impaired loans are reported based on one of
three measures: the present value of expected future cash flows discounted at
the loan’s effective interest rate; the loan’s observable market price; or the
fair value of the collateral if the loan is collateral dependent. If the fair
value measure is less than an impaired loan’s recorded investment, an impairment
loss is recognized as part of the ALL. Accordingly, certain impaired loans may
be subject to measurement at fair value on a non-recurring basis. Management has
estimated the fair values of these assets using Level 2 inputs, such as the fair
value of collateral based on independent third-party appraisals for
collateral-dependent loans.
Derivatives: The
determination of the fair value of many derivatives is mainly derived from
inputs that are observable in the market place. Such inputs include yield
curves, publicly available volatilities, and floating indexes, and accordingly
are classified as Level 2 inputs. Valuations of derivative assets and
liabilities reflect the value of the instruments including the values associated
with counterparty risk. With the issuance of FASB ASC Topic 820, these
values must also take into account the Company’s own credit standing, thus
including in the valuation of the derivative instrument the value of the net
credit differential between the counterparties to the derivative contract. The
Company does not determine credit value adjustment on derivative assets and
liabilities where the Company and/or its affiliates are the counterparties,
because it believes there is no material exposure to counterparty credit
risk.
Mortgage Servicing
Rights: Mortgage servicing rights are evaluated regularly for
impairment based upon the fair value of the servicing rights as compared to
their amortized cost. The fair value of mortgage servicing rights is based on a
valuation model that calculates the present value of estimated net servicing
income. The Company obtains a third-party valuation based upon loan level data
including note rate, type and term of the underlying loans. The model utilizes a
variety of observable inputs for its assumptions, the most significant of which
are loan prepayment assumptions and the discount rate used to discount future
cash flows. Other assumptions include delinquency rates, servicing cost
inflation, and annual unit loan cost.
Interest Receivable and
Payable: The carrying amounts approximate their fair
value.
Deposits: The fair
value of deposits with no stated maturity is equal to the carrying amount. The
fair value of certificates of deposit is estimated using a discounted cash flow
calculation that applies interest rates and remaining maturities for currently
offered certificates of deposit.
Borrowings: The
carrying amounts of short-term borrowings from the FHLB, securities sold under
repurchase agreements, notes payable and other short-term borrowings approximate
fair value. The fair value of long-term borrowings and commercial repurchase
agreements is based on the discounted cash flows using current rates for
advances of similar remaining maturities.
Junior Subordinated
Debentures: The fair value is estimated using a discounted
cash flow calculation that applies current rates for debentures of similar
maturity.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
Legal
Contingencies
In the
normal course of business, the Company and its subsidiaries are named defendants
in various lawsuits and counter-claims. In the opinion
of management, after consultation with legal counsel, none of these lawsuits are
expected to have a materially adverse effect on the financial position, results
of operations or cash flows of the Company.
Financial
Instruments
In the
normal course of business, the Company is a party to both on-balance sheet and
off-balance sheet financial instruments involving, to varying degrees, elements
of credit risk and interest rate risk in addition to the amounts recognized in
the Consolidated Statements of Condition.
The
following is a summary of the contractual and notional amounts of the Company’s
financial instruments:
|
|
September 30,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
Lending-Related
Instruments:
|
|
|
|
|
|
|
|
Loan
origination commitments and unadvanced lines of credit:
|
|
|
|
|
|
|
|
Home
equity
|
|
$
|
160,353
|
|
$
|
153,245
|
|
Commercial
and commercial real estate
|
|
|
95,091
|
|
|
116,412
|
|
Residential
|
|
|
17,203
|
|
|
9,009
|
|
Letters
of credit
|
|
|
2,769
|
|
|
3,089
|
|
Commercial
commitment letters
|
|
|
7,244
|
|
|
4,103
|
|
Derivative
Financial Instruments:
|
|
|
|
|
|
|
|
Interest
rate cap
|
|
|
—
|
|
|
20,000
|
|
Forward
interest rate swap
|
|
|
30,000
|
|
|
20,000
|
|
Lending-Related
Instruments
The
contractual amounts of the Company’s lending-related financial instruments do
not necessarily represent future cash requirements since certain of these
instruments may expire without being funded and others may not be fully drawn
upon. These instruments are subject to the Company’s credit approval process,
including an evaluation of the customer’s creditworthiness and related
collateral requirements. Commitments generally have fixed expiration dates or
other termination clauses.
Derivative
Financial Instruments
The
Company uses derivative financial instruments for risk management purposes and
not for trading or speculative purposes. The Company controls the credit risk of
these instruments through collateral, credit approvals and monitoring
procedures.
The
Company has a notional amount of $30.0 million in forward interest rate swap
agreements on its junior subordinated debentures. As the interest on these
debentures converts from a fixed interest rate to a variable interest rate on
June 30, 2011, the Company swapped a portion of the variable cost for a fixed
cost. On March 18, 2009, the Company purchased a 10-year forward interest rate
swap with a notional amount of $10.0 million, a fixed cost of 5.09% and a
maturity date of June 20, 2021. On July 8, 2009, the Company purchased an
18-year forward interest rate swap with a notional amount of $10.0 million, a
fixed cost of 5.84% and a maturity of June 30, 2029. On May 6, 2010, the Company
purchased a 19-year forward interest rate swap with a notional amount of $10.0
million, a fixed cost of 5.71% and a maturity of June 30, 2030. The fair value
of the swap agreements at September 30, 2010 was $4.1 million and, as these
instruments qualify as highly effective cash flow hedges, the change in fair
value was recorded in other comprehensive income, net of tax, and other
liabilities.
Forward
Commitments to Sell Residential Mortgage Loans
The
Company enters into forward commitments to sell residential mortgages in order
to reduce the market risk associated with originating loans for sale in the
secondary market. There was a commitment to sell mortgages at September 30, 2010
of $2.2 million and no commitments at December 31, 2009.
As part
of originating residential mortgage and commercial loans, the Company may enter
into rate lock agreements with customers, and may issue commitment letters to
customers. Commitments to fund certain mortgage loans (interest rate lock
commitments) and forward commitments for the future delivery of mortgage loans
to third party investors are considered derivatives. At September 30, 2010, the
notional amounts of the interest rate lock commitments and forward commitments
were $17.2 million and $2.2 million, respectively. At December 31,
2009, the notional amount of the interest rate lock commitments was $10.3
million. Based upon the minimal change in market interest rates
between the commitment date and reporting period, the Company determined the
balance sheet impact resulting from the change in fair value of the interest
rate lock commitments was not material.
NOTE
10 – RECENT ACCOUNTING PRONOUNCEMENTS
In
June 2009, the Financial Accounting Standards Board (“FASB”) issued
guidance (incorporated in the FASB Accounting Standards Codification (“ASC”) via
Accounting Standards Update (“ASU”) 2009-16, Transfers and Servicing: Accounting
for Transfers of Financial Assets, in December 2009) which provides
amended guidance relating to transfers of financial assets that eliminates the
concept of a qualifying special-purpose entity. This guidance must be applied as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first
annual reporting period, and for interim and annual reporting periods
thereafter. This guidance must be applied to transfers occurring on or after its
effective date. On and after the effective date, the concept of a qualifying
special-purpose entity is no longer relevant for accounting purposes. Therefore,
formerly qualifying special-purpose entities should be evaluated for
consolidation by reporting entities on and after the effective date in
accordance with the applicable consolidation guidance. The new guidance also
changed the requirements which must be satisfied in order for an entity to treat
a loan participation as a sale. The disclosure provisions were also
amended and apply to transfers that occurred both before and after the effective
date of this guidance. The adoption of this update did not have a significant
impact on the Company’s consolidated financial statements.
In
June 2009, the FASB issued guidance (incorporated in the FASB ASC via ASU
2009-17, Consolidations:
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities, in December 2009) which provides amended guidance for
consolidation of a variable interest entity by replacing the quantitative-based
risks and rewards calculation for determining which enterprise, if any, has a
controlling financial interest in a variable interest entity. The amended
guidance uses an approach that focuses on identifying which enterprise has the
power to direct the activities of a variable interest entity that most
significantly impact the entity’s economic performance and (1) the
obligation to absorb losses of the entity or (2) the right to receive
benefits from the entity. Additional disclosures about an enterprise’s
involvement in variable interest entities are also required. This guidance is
effective as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods
thereafter. The adoption of this update did not have a significant impact on the
Company’s consolidated financial statements.
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures: Improving Disclosures about Fair Value Measurements, to
amend the disclosure requirements related to recurring and nonrecurring fair
value measurements. The guidance requires new disclosures regarding
transfers of assets and liabilities between Level 1 (quoted prices in active
market for identical assets or liabilities) and Level 2 (significant other
observable inputs) of the fair value measurement hierarchy, including the
reasons and the timing of the transfers. Additionally, the guidance
requires a rollforward of activities, separately reporting purchases, sales,
issuance, and settlements, for assets and liabilities measured using significant
unobservable inputs (Level 3 fair value measurements). The guidance is
effective for annual reporting periods that begin after December 15, 2009,
and for interim periods within those annual reporting periods, except for the
changes to the disclosure of rollforward activities for any Level 3 fair value
measurements, which are effective for annual reporting periods that begin after
December 15, 2010, and for interim periods within those annual reporting
periods. Other than requiring additional disclosures, adoption of
this new guidance did not have a material impact on the Company’s consolidated
financial statements.
In
February 2010, the FASB issued ASU 2010-09, Subsequent Events: Amendments to
Certain Recognition and Disclosure Requirements, related to events that
occur after the statement of condition date but before financial statements are
issued. This guidance amends existing standards to address potential conflicts
with Securities and Exchange Commission (“SEC”) guidance and refines the scope
of the reissuance disclosure requirements to include revised financial
statements only. Under this guidance, SEC filers are no longer required to
disclose the date through which subsequent events have been evaluated. The
adoption of this update did not have a material effect on the Company’s
consolidated financial statements.
In July
2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures
about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses. This ASU is intended to provide additional information to assist
financial statement users in assessing an entity’s credit risk exposures and
evaluating the adequacy of its allowance for credit losses. The guidance is
effective for interim and annual reporting periods ending after December 15,
2010. Other than requiring additional disclosures, adoption of this new guidance
is not expected to have a material impact on the Company’s consolidated
financial statements.
NOTE
11 – SUBSEQUENT EVENTS
The
Company has evaluated events and transactions subsequent to September 30, 2010
for potential recognition or disclosure as required by GAAP.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND
RESULTS OF OPERATIONS
FORWARD-LOOKING
STATEMENTS
Certain
statements contained in this Quarterly Report on Form 10-Q that are not
historical facts may constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, and are intended to be
covered by the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve risks and uncertainties.
These statements, which are based on certain assumptions and describe the
Company’s future plans, strategies and expectations, can generally be identified
by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,”
“potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,”
“target” and similar expressions. Forward-looking statements are based on the
current assumptions and beliefs of management and are only expectations of
future results. The Company’s actual results could differ materially from those
projected in the forward-looking statements as a result of, among others,
general, national, regional or local economic conditions which are less
favorable than anticipated, including continued global recession, impacting the
performance of the Company’s investment portfolio, quality of credits or the
overall demand for services; changes in loan default and charge-off rates which
could affect the allowance for credit losses; declines in the equity and
financial markets; reductions in deposit levels which could necessitate
increased and/or higher cost borrowing to fund loans and investments; declines
in mortgage loan refinancing, equity loan and line of credit activity which
could reduce net interest and non-interest income; changes in the domestic
interest rate environment and inflation; changes in the carrying value of
investment securities and other assets; further actions by the U.S. government
and Treasury Department that could have a negative impact on the Company’s
investment portfolio and earnings; misalignment of the Company’s
interest-bearing assets and liabilities; increases in loan repayment rates
affecting interest income and the value of mortgage servicing rights; changing
business, banking, or regulatory conditions or policies, or new legislation
affecting the financial services industry, such as the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010, that could lead to changes in the
competitive balance among financial institutions, restrictions on bank
activities, changes in costs (including deposit insurance premiums), increased
regulatory scrutiny, declines in consumer confidence in depository institutions,
or changes in the secondary market for bank loan and other products; and changes
in accounting rules, federal and state laws, IRS regulations, and other
regulations and policies governing financial holding companies and their
subsidiaries which may impact the Company’s ability to take appropriate action
to protect the Company’s financial interests in certain loan
situations.
You
should not place undue reliance on the Company’s forward-looking statements, and
are cautioned that forward-looking statements are inherently uncertain. Actual
performance and results of operations may differ materially from those projected
or suggested in the forward-looking statements due to certain risks and
uncertainties, which are included in more detail in the Company’s Annual Report
on Form 10-K and other filings submitted to the Securities and Exchange
Commission. The Company does not undertake any obligation to update
any forward-looking statement to reflect circumstances or events that occur
after the date the forward-looking statements are made.
FINANCIAL
REGULATORY REFORM LEGISLATION
On July
21, 2010, the President signed the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the “Act”) into law. The Act comprehensively
reforms the regulation of financial institutions, products and
services. Among other things, the Act provides for new capital
standards that eliminate the treatment of trust preferred securities as Tier 1
capital. Existing trust preferred securities are grandfathered for
banking entities with less than $15 billion of assets, such as the
Company. The Act permanently raises deposit insurance levels to
$250,000, retroactive to January 1, 2008, and extends for two years the
Transaction Account Guarantee Program, which will become mandatory for all
insured depository institutions. Pursuant to the Act, deposit
insurance assessments will be calculated based on an insured depository
institution’s assets rather than its insured deposits and the minimum reserve
ratio will be raised to 1.35%. In addition, the Act authorizes the
Federal Reserve Board to regulate interchange fees for debit card transactions
and establishes new minimum mortgage underwriting standards for residential
mortgages. The Act also establishes the Bureau of Consumer Financial
Protection (“CFPB”) as an independent bureau of the Federal Reserve
Board. The CFPB has the exclusive authority to prescribe rules
governing the provision of consumer financial products and
services.
The Act
grants the SEC express authority to adopt rules granting proxy access for
shareholder nominees, and grants shareholders a non-binding vote on executive
compensation and “golden parachute” payments. Pursuant to
modifications of the proxy rules under the Act, the Company will be required to
disclose the relationship between executive pay and financial performance, the
ratio of the median pay of all employees to the pay of the chief executive
officer, and employee and director hedging activities. The Act also
requires that stock exchanges amend their listing rules (i) to require, among
other things, that each listed company’s compensation committee be granted the
authority and funding to retain independent advisors and (ii) to prohibit the
listing of any security of an issuer that does not adopt policies governing the
claw back of excess executive compensation based on inaccurate financial
statements.
CRITICAL
ACCOUNTING POLICIES
In
preparing the Consolidated Financial Statements, management is required to make
significant estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. Actual results could differ from our
current estimates, as a result of changing conditions and future events. Several
estimates are particularly critical and are susceptible to significant near-term
change, including the allowance for credit losses, accounting for acquisitions
and review of goodwill and other identifiable intangible assets for impairment,
valuation of other real estate owned, other-than-temporary impairment of
investments, accounting for postretirement plans and income taxes. Our
significant accounting policies and critical estimates are summarized in Note 1
to the consolidated financial statements contained in our Annual Report on Form
10-K for the year ended December 31, 2009.
Allowance for Credit Losses.
The allowance for credit losses consists of two components: 1) the
allowance for loan losses (“ALL”) which is present as a contra to total gross
loans in the asset section of the statement of condition, and 2) the reserve for
unfunded commitments included in other liabilities on the statement of
condition. In preparing the Consolidated Financial Statements, the ALL requires
the most significant amount of management estimates and assumptions. The ALL,
which is established through a charge to the provision for credit losses, is
based on our evaluation of the level of the allowance required in relation to
the estimated loss exposure in the loan portfolio. We regularly evaluate the ALL
for adequacy by taking into consideration, among other factors, local industry
trends, management’s ongoing review of individual loans, trends in levels of
watched or criticized assets, an evaluation of results of examinations by
regulatory authorities and other third parties, analyses of historical trends in
charge-offs and delinquencies, the character and size of the loan portfolio,
business and economic conditions and our estimation of probable
losses.
In
determining the appropriate level of ALL, we use a methodology to systematically
measure the amount of estimated loan loss exposure inherent in the loan
portfolio. The methodology includes four elements: (1) identification of loss
allocations for specific loans, (2) loss allocation factors for certain loan
types based on credit grade and loss experience, (3) general loss allocations
for other environmental factors, and (4) the unallocated portion of the
allowance. The specific loan component relates to loans that are classified as
doubtful, substandard or special mention. For such loans that are also
classified as impaired, an allowance is established when the discounted cash
flows (or collateral value or observable market price) of the impaired loan is
lower than the carrying value of that loan. The methodology is in accordance
with accounting principles generally accepted in the United States of
America.
We use a
risk rating system to determine the credit quality of our loans and apply the
related loss allocation factors. In assessing the risk rating of a particular
loan, we consider, among other factors, the obligor’s debt capacity, financial
condition and flexibility, the level of the obligor’s earnings, the amount and
sources of repayment, the performance with respect to loan terms, the adequacy
of collateral, the level and nature of contingencies, management strength, and
the industry in which the obligor operates. These factors are based on an
evaluation of historical information, as well as subjective assessment and
interpretation of current conditions. Emphasizing one factor over another, or
considering additional factors that may be relevant in determining the risk
rating of a particular loan but which are not currently an explicit part of our
methodology, could impact the risk rating assigned to that loan. We periodically
reassess and revise the loss allocation factors used in the assignment of loss
exposure to appropriately reflect our analysis of loss experience. Portfolios of
more homogenous populations of loans including residential mortgages and
consumer loans are analyzed as groups taking into account delinquency rates and
other economic conditions which may affect the ability of borrowers to meet debt
service requirements, including interest rates and energy costs. We also
consider the results of regulatory examinations, historical loss ranges,
portfolio composition, and other changes in the portfolio. An additional
allocation is determined based on a judgmental process whereby management
considers qualitative and quantitative assessments of other environmental
factors. For example, a significant portion of our loan portfolio is
concentrated among borrowers in southern Maine and a substantial portion of the
portfolio is collateralized by real estate in this area. Another portion of the
commercial and commercial real estate loans are to borrowers in the hospitality,
tourism and recreation industries. Finally, an unallocated portion of the total
allowance is maintained to allow for shifts in portfolio composition and account
for uncertainty in the economic environment.
Since the
methodology is based upon historical experience and trends as well as
management’s judgment, factors may arise that result in different estimations.
Significant factors that could give rise to changes in these estimates may
include, but are not limited to, changes in economic conditions in our market
area, concentration of risk, declines in local property values, and results of
regulatory examinations. While management’s evaluation of the ALL as of
September 30, 2010 determined the allowance to be appropriate, under adversely
different conditions or assumptions, we may need to increase the allowance. The
Corporate Risk Management group reviews the ALL with the Camden National Bank
Board of Directors on a monthly basis. A more comprehensive review of the ALL is
reviewed with the Company’s Board of Directors, as well as the Camden National
Bank Board of Directors, on a quarterly basis.
The
adequacy of the reserve for unfunded commitments is determined similarly to the
allowance for loan losses, with the exception that management must also estimate
the likelihood of these commitments being funded and becoming loans. This is
done by evaluating the historical utilization of each type of unfunded
commitment and estimating the likelihood that the historical utilization rates
could change in the future.
Accounting for Acquisitions and
Review of Goodwill and Identifiable Intangible Assets for
Impairment. We are required to record assets acquired and
liabilities assumed at their fair value, which is an estimate determined by the
use of internal or other valuation techniques. These valuation estimates result
in goodwill and other intangible assets and are subject to ongoing periodic
impairment tests and are evaluated using various fair value techniques. Goodwill
impairment evaluations are required to be performed annually and may be required
more frequently if certain conditions indicating potential impairment exist. If
we were to determine that our goodwill was impaired, the recognition of an
impairment charge could have an adverse impact on our results of operations in
the period that the impairment occurred or on our financial position. Goodwill
is evaluated for impairment using several standard valuation techniques
including discounted cash flow analyses, as well as an estimation of the impact
of business conditions. The use of different estimates or assumptions could
produce different estimates of carrying value.
Valuation of
OREO. Periodically, we acquire property in connection with
foreclosures or in satisfaction of debt previously contracted. The valuation of
this property is accounted for individually based on its fair value on the date
of acquisition. At the acquisition date, if the fair value of the property less
the costs to sell such property is less than the book value of the loan, a
charge or reduction in the ALL is recorded. If the value of the property becomes
permanently impaired, as determined by an appraisal or an evaluation in
accordance with our appraisal policy, we will record the decline by charging
against current earnings. Upon acquisition of a property, we use a current
appraisal or broker’s opinion to substantiate fair value for the
property.
Other-Than-Temporary Impairment
("OTTI") of Investments. We record an investment impairment
charge at the point we believe an investment has experienced a decline in value
that is other than temporary. In determining whether an OTTI has occurred, we
review information about the underlying investment that is publicly available,
analysts’ reports, applicable industry data and other pertinent information, and
assess our ability to hold the securities for the foreseeable future. The
investment is written down to its current market value at the time the
impairment is deemed to have occurred. Future adverse changes in market
conditions, continued poor operating results of underlying investments or other
factors could result in further losses that may not be reflected in an
investment’s current carrying value, possibly requiring an additional impairment
charge in the future.
Effectiveness of Hedging
Derivatives. The Company maintains an overall interest rate
risk management strategy that incorporates the use of interest rate contracts,
which are generally non-leveraged generic interest rate and basis swaps, to
minimize significant fluctuations in earnings that are caused by interest rate
volatility. Interest rate contracts are used by the Company in the management of
its interest rate risk position. The Company’s goal is to manage interest rate
sensitivity so that movements in interest rates do not significantly adversely
affect earnings. As a result of interest rate fluctuations, hedged assets and
liabilities appreciate or depreciate in fair value. Gains or losses on the
derivative instruments that are linked to the hedged assets and liabilities are
expected to substantially offset this unrealized appreciation or depreciation.
The Company utilizes a third party service to evaluate the effectiveness
of its cash flow hedges on a quarterly basis. The effective portion
of a gain or loss on a cash flow hedge is recorded in other comprehensive
income, net of tax, and other assets or other liabilities on the balance
sheet. The ineffective portions of cash flow hedging transactions are
included in “other income” in the income statement if material.
Accounting for Postretirement
Plans. We use a December 31 measurement date to determine the
expenses for our postretirement plans and related financial disclosure
information. Postretirement plan expense is sensitive to changes in eligible
employees (and their related demographics) and to changes in the discount rate
and other expected rates, such as medical cost trends rates. As with the
computations on plan expense, cash contribution requirements are also sensitive
to such changes.
Stock-Based Compensation.
The fair value of restricted stock and stock options is determined
on the date of grant and amortized to compensation expense, with a corresponding
increase in common stock, over the longer of the service period or performance
period, but in no event beyond an employee’s retirement date. For
performance-based restricted stock, we estimate the degree to which performance
conditions will be met to determine the number of shares that will vest and the
related compensation expense. Compensation expense is adjusted in the period
such estimates change. Non-forfeitable dividends, if any, paid on shares of
restricted stock are recorded to retained earnings for shares that are expected
to vest and to compensation expense for shares that are not expected to
vest.
Income Taxes. We
account for income taxes by deferring income taxes based on estimated future tax
effects of differences between the tax and book basis of assets and liabilities
considering the provisions of enacted tax laws. These differences result in
deferred tax assets and liabilities, which are included in the Consolidated
Statement of Condition. We must also assess the likelihood that any deferred tax
assets will be recovered from future taxable income and establish a valuation
allowance for those assets determined not likely to be recoverable. Judgment is
required in determining the amount and timing of recognition of the resulting
deferred tax assets and liabilities, including projections of future taxable
income. Although we have determined a valuation allowance is not required for
all deferred tax assets, there is no guarantee that these assets will be
realized. Although not currently under review, income tax returns for the years
ended December 31, 2007 through 2009 are open to audit by federal and Maine
authorities. If we, as a result of an audit, were assessed interest and
penalties, the amounts would be recorded through other non-interest expense.
RESULTS
OF OPERATIONS
Executive
Overview
For
the nine months ended September 30, 2010:
Net
income of $18.3 million for the nine-month period ended September 30, 2010
increased $794,000 compared to the nine-month period ended September 30,
2009. Net income per diluted share increased to $2.39 compared to
$2.29 per diluted share earned during the first nine months of 2009. The
following were major factors contributing to the results of the first nine
months of 2010 compared to the same period of 2009:
|
•
|
Net
interest income on a fully-taxable equivalent basis for the first nine
months of 2010 increased to $56.6 million due to the decline in cost of
funds being greater than the decline in yield on average earning assets
even though average earnings assets decreased $35.9
million,
|
|
•
|
The
provision for loan losses decreased by $1.3 million to $5.2 million in the
first nine months of 2010 compared to the same period of
2009,
|
|
•
|
For
the nine months ended September 30, 2010, net charge-offs totaled $3.2
million, or an annualized rate of 0.27% of average loans, compared to $4.8
million, or 0.42% of average loans, for the same period of 2009.
Non-performing assets as a percentage of total assets was 1.03% and 1.04%
at September 30, 2010 and 2009,
respectively,
|
|
•
|
Non-interest
income for the first nine months of 2010 was $15.8 million, a 7% increase
from the first nine months of 2009, primarily due to a $2.0 million legal
settlement (the “Legal Settlement”) related to a $15.0 million investment
write-down of auction pass-through certificates with Federal Home Loan
Mortgage Corporation preferred stock assets recorded in 2008, partially
offset by a reduction in mortgage banking income of $890,000,
and
|
|
•
|
Non-interest expense for the
first nine months of 2010 was $39.2 million, an increase of $1.4 million,
or 4%, from the first nine months of
2009.
|
For
the three months ended September 30, 2010:
Net
income of $7.4 million for the three-month period ended September 30, 2010
increased $1.1 million compared to the three-month period ended September 30,
2009. Net income per diluted share increased to $0.97, compared to
$0.83 per diluted share earned during the same three months of 2009. The
following were major factors contributing to the results of the third quarter of
2010 compared to the same period of 2009:
|
•
|
Net
interest income on a fully-taxable equivalent basis for the third quarter
of 2010 increased 3% to $19.3 million compared to the same period of 2009
due to lower rates on deposit accounts, maturing retail certificates of
deposit and wholesale funding combined with a favorable change in the
Company’s deposit mix as a result of growth in lower cost transaction
accounts,
|
|
•
|
The
provision for loan losses of $1.3 million decreased $709,000 in the third
quarter of 2010 compared to the same period of
2009,
|
|
•
|
Non-interest
income for the third quarter of 2010 was $6.8 million, a $1.7 million, or
32%, increase compared to the third quarter of 2009 primarily related to
the $2.0 million Legal Settlement,
and
|
|
•
|
Non-interest
expense for the third quarter of 2010 was $13.5 million, an increase of
$1.3 million, or 11%, from the third quarter of 2009 primarily due to
increases in salaries and employee benefits, an increase in FDIC
assessments, and higher debit card
costs.
|
Financial
condition at September 30, 2010 compared to December 31, 2009:
|
•
|
Total
loans at September 30, 2010 were $1.5 billion, an increase of $9.3 million
compared to December 31, 2009. The increase in loan balances was primarily
in the commercial real estate and consumer
portfolios,
|
|
•
|
Investment
securities increased to $599.9 million at September 30, 2010 compared to
$539.6 million at December 31, 2009 due to securities being added to the
portfolio,
|
|
•
|
Deposits
at September 30, 2010 were $1.6 billion, an increase of $86.4 million
compared to December 31, 2009. The increase in deposit balances
was in the demand, interest checking, savings, money market and brokered
deposits, and
|
|
•
|
Shareholders’ equity increased 7%
compared to December 31, 2009 due to current year earnings and other
comprehensive income, in part offset by dividends
declared.
|
Net
Interest Income
Net
interest income is our largest source of revenue and accounts for approximately
75% of total revenues. Net interest income reflects revenues generated through
income from earning assets plus loan fees, less interest paid on
interest-bearing deposits and borrowings. Net interest income is affected by
changes in interest rates, by loan and deposit pricing strategies and
competitive conditions, the volume and mix of interest-earning assets and
interest-bearing liabilities, and the level of non-performing
assets. Net interest income was $56.6 million on a fully-taxable
equivalent basis for the nine months ended September 30, 2010, compared to $56.4
million for the first nine months of 2009, an increase of $199,000, or 4%. The
increase in net interest income is primarily due to an improvement of seven
basis points in the net interest margin to 3.59%. Total average
interest-earning assets decreased $35.9 million for the nine months ended
September 30, 2010 compared to the same period in 2009, due to a decrease in
investments, partially offset by increases in average loans of $31.8
million. The yield on earning assets for the first nine months of
2010 decreased 40 basis points compared to the same period in 2009, reflecting
the impact of the low interest rate environment on both investment and loan
yields as these earning assets were booked or repriced. Average
interest-bearing liabilities decreased $70.1 million for the nine months ended
September 30, 2010 compared to the same period in 2009, primarily due to
declines in wholesale funding, in part offset by an increase in brokered
deposits. Total cost of funds decreased 49 basis points due to the decline in
short-term interest rates combined with a favorable shift in average balances to
low cost deposits.
The
following table presents, for the periods noted, average balance sheets,
interest income, interest expense, and the corresponding average yields earned
and rates paid, as well as net interest income, net interest rate spread and net
interest margin:
Average
Balance, Interest and Yield/Rate Analysis
|
|
Nine Months Ended
September 30, 2010
|
|
|
Nine Months Ended
September 30, 2009
|
|
(Dollars in Thousands)
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities – taxable
|
|
$
|
497,312
|
|
|
$
|
15,434
|
|
|
|
4.14
|
%
|
|
$
|
555,525
|
|
|
$
|
20,312
|
|
|
|
4.88
|
%
|
Securities – nontaxable
(1)
|
|
|
55,047
|
|
|
|
2,463
|
|
|
|
5.97
|
%
|
|
|
64,956
|
|
|
|
2,886
|
|
|
|
5.92
|
%
|
Trading
account assets
|
|
|
1,895
|
|
|
|
16
|
|
|
|
1.13
|
%
|
|
|
1,413
|
|
|
|
16
|
|
|
|
1.55
|
%
|
Loans
(1)
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
|
623,409
|
|
|
|
25,125
|
|
|
|
5.37
|
%
|
|
|
621,407
|
|
|
|
27,089
|
|
|
|
5.81
|
%
|
Commercial
real estate
|
|
|
440,720
|
|
|
|
19,039
|
|
|
|
5.70
|
%
|
|
|
408,622
|
|
|
|
18,803
|
|
|
|
6.07
|
%
|
Commercial
|
|
|
175,689
|
|
|
|
7,236
|
|
|
|
5.43
|
%
|
|
|
183,775
|
|
|
|
7,700
|
|
|
|
5.53
|
%
|
Municipal
|
|
|
16,417
|
|
|
|
675
|
|
|
|
5.50
|
%
|
|
|
23,756
|
|
|
|
913
|
|
|
|
5.14
|
%
|
Consumer
|
|
|
278,116
|
|
|
|
9,887
|
|
|
|
4.75
|
%
|
|
|
265,006
|
|
|
|
9,826
|
|
|
|
4.96
|
%
|
Total
loans
|
|
|
1,534,351
|
|
|
|
61,962
|
|
|
|
5.36
|
%
|
|
|
1,502,566
|
|
|
|
64,331
|
|
|
|
5.69
|
%
|
Total
interest-earning assets
|
|
|
2,088,605
|
|
|
|
79,875
|
|
|
|
5.08
|
%
|
|
|
2,124,460
|
|
|
|
87,545
|
|
|
|
5.48
|
%
|
Cash
and due from banks
|
|
|
33,930
|
|
|
|
|
|
|
|
|
|
|
|
28,055
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
162,130
|
|
|
|
|
|
|
|
|
|
|
|
154,800
|
|
|
|
|
|
|
|
|
|
Less:
allowance for loan losses
|
|
|
(21,913
|
)
|
|
|
|
|
|
|
|
|
|
|
(18,388
|
)
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,262,752
|
|
|
|
|
|
|
|
|
|
|
$
|
2,288,927
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
checking accounts
|
|
$
|
249,441
|
|
|
|
681
|
|
|
|
0.36
|
%
|
|
$
|
212,402
|
|
|
|
759
|
|
|
|
0.48
|
%
|
Savings
accounts
|
|
|
153,781
|
|
|
|
358
|
|
|
|
0.31
|
%
|
|
|
138,039
|
|
|
|
368
|
|
|
|
0.36
|
%
|
Money
market accounts
|
|
|
285,972
|
|
|
|
1,781
|
|
|
|
0.83
|
%
|
|
|
293,253
|
|
|
|
2,407
|
|
|
|
1.10
|
%
|
Certificates
of deposit
|
|
|
528,784
|
|
|
|
7,694
|
|
|
|
1.95
|
%
|
|
|
584,747
|
|
|
|
12,727
|
|
|
|
2.91
|
%
|
Total
retail deposits
|
|
|
1,217,978
|
|
|
|
10,514
|
|
|
|
1.15
|
%
|
|
|
1,228,441
|
|
|
|
16,261
|
|
|
|
1.77
|
%
|
Broker
deposits
|
|
|
104,135
|
|
|
|
1,298
|
|
|
|
1.67
|
%
|
|
|
80,973
|
|
|
|
1,482
|
|
|
|
2.45
|
%
|
Junior
subordinated debentures
|
|
|
43,553
|
|
|
|
2,108
|
|
|
|
6.47
|
%
|
|
|
43,449
|
|
|
|
2,136
|
|
|
|
6.57
|
%
|
Borrowings
|
|
|
477,023
|
|
|
|
9,357
|
|
|
|
2.62
|
%
|
|
|
559,886
|
|
|
|
11,267
|
|
|
|
2.69
|
%
|
Total
wholesale funding
|
|
|
624,711
|
|
|
|
12,763
|
|
|
|
2.73
|
%
|
|
|
684,308
|
|
|
|
14,885
|
|
|
|
2.91
|
%
|
Total
interest-bearing liabilities
|
|
|
1,842,689
|
|
|
|
23,277
|
|
|
|
1.69
|
%
|
|
|
1,912,749
|
|
|
|
31,146
|
|
|
|
2.18
|
%
|
Demand
deposits
|
|
|
200,515
|
|
|
|
|
|
|
|
|
|
|
|
180,702
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
22,200
|
|
|
|
|
|
|
|
|
|
|
|
21,448
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
197,348
|
|
|
|
|
|
|
|
|
|
|
|
174,028
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,262,752
|
|
|
|
|
|
|
|
|
|
|
$
|
2,288,927
|
|
|
|
|
|
|
|
|
|
Net
interest income (fully-taxable equivalent)
|
|
|
|
|
|
|
56,598
|
|
|
|
|
|
|
|
|
|
|
|
56,399
|
|
|
|
|
|
Less:
fully-taxable equivalent adjustment
|
|
|
|
|
|
|
(1,099
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,329
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
55,499
|
|
|
|
|
|
|
|
|
|
|
$
|
55,070
|
|
|
|
|
|
Net
interest rate spread (fully-taxable equivalent)
|
|
|
|
|
|
|
|
|
|
|
3.39
|
%
|
|
|
|
|
|
|
|
|
|
|
3.30
|
%
|
Net
interest margin (fully-taxable equivalent)
|
|
|
|
|
|
|
|
|
|
|
3.59
|
%
|
|
|
|
|
|
|
|
|
|
|
3.52
|
%
|
|
(1)
|
Reported
on tax-equivalent basis calculated using a rate of
35%.
|
|
(2)
|
Loans
held for sale and non-accrual loans are included in total average
loans.
|
Provision
and Allowance for Loan Losses
The ALL
is our best estimate of inherent risk of loss in the loan portfolio as of the
balance sheet date. The ALL was $22.3 million, or 1.45%, of total loans, at
September 30, 2010 compared to $20.2 million, or 1.33%, of total loans, at
December 31, 2009. For the nine months ended September 30, 2010, our provision
for credit losses charged to earnings was $5.2 million, compared to $6.5 million
for the same period in 2009. The decrease in the provision was based on
management’s assessment of various factors affecting the loan portfolio,
including, among others, growth in the loan portfolio, levels of nonperforming
assets, loan losses, and our evaluation of credit quality and general economic
conditions. For the first nine months of 2010, the annualized ratio
of net loan charge-offs to average loans was 0.27% compared to 0.42% for the
same period in 2009. See additional ALL discussion under the caption
“Asset Quality.”
Non-Interest
Income
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Income
from fiduciary services
|
|
$
|
1,618
|
|
|
$
|
1,471
|
|
|
$
|
4,697
|
|
|
$
|
4,332
|
|
Service
charges on deposit accounts
|
|
|
1,151
|
|
|
|
1,361
|
|
|
|
3,716
|
|
|
|
3,943
|
|
Other
service charges and fees
|
|
|
945
|
|
|
|
777
|
|
|
|
2,507
|
|
|
|
2,202
|
|
Bank-owned
life insurance
|
|
|
401
|
|
|
|
368
|
|
|
|
1,119
|
|
|
|
1,108
|
|
Brokerage
and insurance commissions
|
|
|
419
|
|
|
|
378
|
|
|
|
1,065
|
|
|
|
1,021
|
|
Mortgage
banking income
|
|
|
160
|
|
|
|
351
|
|
|
|
332
|
|
|
|
1,222
|
|
Net
(loss) gain on sale of securities
|
|
|
(188
|
)
|
|
|
1
|
|
|
|
(188
|
)
|
|
|
1
|
|
Other
income
|
|
|
2,331
|
|
|
|
437
|
|
|
|
2,765
|
|
|
|
913
|
|
Total
non-interest income before other-than-temporary
impairment of securities
|
|
|
6,837
|
|
|
|
5,144
|
|
|
|
16,013
|
|
|
|
14,742
|
|
Other-than-temporary
impairment of securities
|
|
|
(38
|
)
|
|
|
—
|
|
|
|
(217
|
)
|
|
|
—
|
|
Total
non-interest income
|
|
$
|
6,799
|
|
|
$
|
5,144
|
|
|
$
|
15,796
|
|
|
$
|
14,742
|
|
Non-interest
income for the nine month periods ended September 30, 2010 and September 30,
2009, totaled $15.8 million and $14.7 million, respectively. The
significant changes include:
|
•
|
Increase
in other income of $1.9 million primarily due to the $2.0 million Legal
Settlement,
|
|
•
|
Increase
in income from fiduciary services of $365,000, or 8%, resulting from
market value increases in assets under
administration,
|
|
•
|
Increase
in other service charges and fees of $305,000, or 14%, resulting from
increased debit card income associated with increased transaction
volume,
|
|
•
|
Decrease
in mortgage banking income of $890,000, or 73%, primarily due to the sale
of $72.5 million in residential loans during the first nine months of 2009
compared to loan sales of $4.7 million in the first nine months of 2010,
and
|
|
•
|
An
OTTI write-down of $217,000 on private issue collateralized mortgage
obligations in the first nine months of
2010.
|
Non-interest
income for the three month periods ended September 30, 2010 and September 30,
2009 was $6.8 million and $5.1 million, respectively. The significant
changes include:
|
•
|
Increase in other income of $1.9
million resulting primarily from the $2.0 million Legal
Settlement,
|
|
•
|
Decrease
in service charges on deposit accounts of $210,000, or 18%, resulting
primarily from a decrease in overdraft protection fee income associated
with recent regulation prohibiting financial institutions from charging
consumers fees for paying overdrafts on automated teller machines (ATM)
and debit card transactions, unless a consumer consents, or opts in, to
the overdraft service for those types of
transactions,
|
|
•
|
Increase
in other service charges and fees of $168,000, or 22%, resulting from
increased debit card income associated with increased transaction volume,
and
|
|
•
|
Decrease
in mortgage banking income of $191,000, or 54%, primarily due to the sale
of $28.5 million in residential loan sales during the third quarter of
2009 compared to $4.7 million in the third quarter of
2010.
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Salaries
and employee benefits
|
|
$
|
6,949
|
|
|
$
|
6,071
|
|
|
$
|
19,472
|
|
|
$
|
18,195
|
|
Furniture,
equipment and data processing
|
|
|
1,150
|
|
|
|
1,045
|
|
|
|
3,396
|
|
|
|
3,078
|
|
Regulatory
assessments
|
|
|
832
|
|
|
|
693
|
|
|
|
2,149
|
|
|
|
3,304
|
|
Net
occupancy
|
|
|
899
|
|
|
|
874
|
|
|
|
2,830
|
|
|
|
2,954
|
|
Consulting
and professional fees
|
|
|
589
|
|
|
|
566
|
|
|
|
1,926
|
|
|
|
1,750
|
|
OREO
and collection costs
|
|
|
636
|
|
|
|
779
|
|
|
|
2,768
|
|
|
|
1,941
|
|
Amortization
of intangible assets
|
|
|
144
|
|
|
|
144
|
|
|
|
432
|
|
|
|
433
|
|
Other
expenses
|
|
|
2,260
|
|
|
|
1,975
|
|
|
|
6,265
|
|
|
|
6,199
|
|
Total
non-interest expenses
|
|
$
|
13,459
|
|
|
$
|
12,147
|
|
|
$
|
39,238
|
|
|
$
|
37,854
|
|
Non-interest
expense increased $1.4 million, or 4%, for the nine months ended September 30,
2010 compared to the same period in 2009. The significant changes
include:
|
•
|
Increase
in salaries and employee benefits of $1.3 million, or 7%, primarily due to
a $401,000 increase in salaries, $459,000 increase in health care costs
and a reduction in deferred salary costs of $502,000 related to high
mortgage production volume in 2009,
|
|
•
|
Decrease
in regulatory assessments of $1.2 million, or 35%, related to the Federal
Deposit Insurance Corporation special assessment imposed on all banks in
May 2009,
|
|
•
|
Increase
in furniture, equipment and data processing of $318,000, or 10%, related
to depreciation associated with investments in technology, including a
telephone system, and
|
|
•
|
Increase in costs associated with
foreclosure and collection costs and expenses on OREO of $827,000, or 43%,
which includes OREO write-downs of $1.4 million due to declining real
estate values.
|
The
efficiency ratio (non-interest expense divided by net interest income on a tax
equivalent basis plus non-interest income excluding net investment securities
gains/losses) was 53.90% for the nine month period ended September 30, 2010
compared to 53.21% for the nine month period ended September 30,
2009.
Non-interest
expense increased $1.3 million, or 11%, for the three months ended September 30,
2010 compared to the same period in 2009. The significant changes
include:
|
•
|
Increase in salaries and employee
benefits of $878,000, or 14%, primarily due to a $441,000 increase in
incentive compensation resulting from the success of exceeding financial
performance targets, as well as general salary increases of $249,000
related to merit increases and new positions and an increase in health
insurance costs of $108,000,
|
|
•
|
Increase in regulatory
assessments of $139,000, or
20%,
|
|
•
|
Decrease in costs associated with
foreclosure and collection costs and expenses on OREO of $143,000, or 18%,
and
|
|
•
|
Increase in other expenses of
$285,000, or 13%, primarily due to higher debit card expense of $117,000
and an increase in employee hiring and training costs of
$87,000.
|
The
efficiency ratio (non-interest expense divided by net interest income on a tax
equivalent basis plus non-interest income excluding net investment securities
gains/losses) was 51.22% for the three month period ended September 30, 2010
compared to 51.02% for September 30, 2009.
FINANCIAL
CONDITION
Overview
Total
assets at September 30, 2010 were $2.3 billion, an increase of $72.6 million, or
3%, from December 31, 2009. The change in assets was due to increases in
investments of $60.4 million, loans of $11.8 million (including loans held for
sale), and cash and due from banks of $3.6 million. These increases
were partially offset by a decline in OREO of $2.8 million. Total
liabilities increased $59.0 million primarily due to an $86.4 million increase
in deposits partially offset by a reduction in borrowed funds of $31.6 million.
Total shareholders’ equity increased $13.6 million, which was a result of
current year earnings and other comprehensive income, partially offset by
dividends declared to shareholders.
During
the first nine months of 2010, average assets of $2.3 billion decreased $26.2
million, compared to the same period in 2009. This decrease was
primarily the result of a decline in average investments of $68.1 million,
partially offset by a $31.8 million increase in the loan portfolio and a $7.4
million increase in prepaid FDIC assessments. Average liabilities decreased
$49.5 million for the nine months ended September 30, 2010 compared to the same
period of 2009, primarily due to a decrease in wholesale funding of $82.9
million, partially offset by a $32.5 million increase in average deposits
(including brokered deposits). The increase in deposits was primarily
derived from low cost deposits with an increase in average demand deposit
accounts of 11%, an increase in average interest checking of 17%, and an
increase in average savings and money market accounts of 11%. Average
brokered funds increased $23.2 million as a result of more favorable pricing
compared to other funding alternatives, including average retail certificates of
deposit which declined $56.0 million. Average shareholders’ equity
increased $23.3 million, which was the result of retained earnings and other
comprehensive income, partially offset by dividends declared to
shareholders.
Assets
Investment Securities.
Investments in securities of U.S. government sponsored enterprises, states and
political subdivisions, mortgage-backed securities, FHLB and Federal Reserve
Bank (“FRB”) stock, investment grade corporate bonds and equities are used to
diversify our revenues, to provide interest rate and credit risk diversification
and to provide for liquidity and funding needs. Total investment security
balances at September 30, 2010 of $599.9 million increased $60.4 million, or
11%, from December 31, 2009. We have investment securities in both
the available-for-sale and held-to-maturity categories.
Unrealized
gains or losses from investments categorized as “held to maturity” are only
recorded when, and if, the security is sold or is considered
other-than-temporarily impaired. Unrealized gains or losses on securities
classified as “available for sale” are recorded as adjustments to shareholders’
equity, net of related deferred income taxes and are a component of other
comprehensive income in the Consolidated Statement of Changes in Shareholders’
Equity. At September 30, 2010, we had $10.8 million of unrealized gains on
securities available for sale, net of deferred taxes, compared to $7.1 million
of unrealized gains, net of deferred taxes, at December 31, 2009. The change is
primarily attributed to a decline in market interest rates.
At
September 30, 2010, $8.9 million of our private issue collateralized mortgage
obligations (“CMOs”) have been downgraded to non-investment grade. The Company’s
share of these downgraded CMOs is in the senior tranches. Management believes
the unrealized loss for the CMOs is the result of current market illiquidity and
the underestimation of value in the market. Stress tests are
performed regularly on the higher risk bonds in the portfolio using current
statistical data to determine expected cash flows and forecast potential
losses. The results of the stress tests at September 30, 2010 reflect
potential future credit losses in the base case. Based on this
analysis, the Company recorded a $217,000 OTTI write-down on three private issue
CMOs during the first nine months of 2010. During the third quarter
of 2010, the Company recorded proceeds of $4.2 million on the sale of one
downgraded CMO investment classified as available for sale, which resulted in
gross realized losses of $188,000.
At
September 30, 2010, the Company held Duff & Phelps Select Income Fund
Auction Preferred Stock with an amortized cost of $5.0 million which has failed
at auction. The security is rated Triple-A by Moody’s and Standard and Poor’s.
Management believes the failed auctions are a temporary liquidity event related
to this asset class of securities. The Company is currently collecting all
amounts due according to contractual terms and has the ability and intent to
hold the securities until they clear auction, are called, or mature; therefore,
the securities are not considered other than temporarily impaired.
In early
2009, the FHLB advised its members that it is focusing on preserving capital in
response to ongoing market volatility. Accordingly, payments of
quarterly dividends were suspended and payment of any quarterly dividends in
2010 is unlikely. Further, the FHLB has placed a moratorium on excess stock
repurchases from its members. We will continue to monitor our investment in FHLB
stock.
Federal Home Loan Bank Stock.
We are required to maintain a level of investment in FHLB stock based on the
level of our FHLB advances. As of September 30, 2010, our investment in FHLB
stock totaled $21.0 million. No market exists for shares of FHLB. FHLB stock may
be redeemed at par value five years following termination of FHLB membership,
subject to limitations which may be imposed by the FHLB or its regulator, the
Federal Housing Finance Board, to maintain capital adequacy of the FHLB. While
we currently have no intention to terminate our FHLB membership, the ability to
redeem our investment in FHLB stock would be subject to the conditions imposed
by the FHLB.
Loans. At September 30, 2010,
loans of $1.5 billion (including loans held for sale) increased $11.8 million
from December 31, 2009 primarily due to an increase in commercial real estate,
consumer, and loans held for sale of $14.9 million, $12.3 million and $2.5
million, respectively. These increases were partially offset by declines in the
residential real estate portfolio of $13.8 million and commercial loans of $4.1
million as a result of pay-downs, prepayments and decreased demand.
During the first nine months of 2010, $4.7
million in residential real estate production was sold.
Asset Quality
Non-Performing
Assets. Non-performing assets include non-accrual loans,
accruing loans 90 days or more past due, renegotiated loans and property
acquired through foreclosure or repossession.
The
following table sets forth the amount of our non-performing assets as of the
dates indicated:
|
|
September 30,
|
|
|
December 31,
|
|
(Dollars in Thousands)
|
|
2010
|
|
|
2009
|
|
Non-accrual
loans
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
5,793
|
|
|
$
|
6,161
|
|
Commercial
real estate
|
|
|
6,725
|
|
|
|
6,476
|
|
Commercial
|
|
|
4,334
|
|
|
|
4,145
|
|
Consumer
|
|
|
1,155
|
|
|
|
1,158
|
|
Total
non-accrual loans
|
|
|
18,007
|
|
|
|
17,940
|
|
Accruing
loans past due 90 days
|
|
|
1,034
|
|
|
|
1,135
|
|
Renegotiated
loans not included above
|
|
|
2,055
|
|
|
|
581
|
|
Total
non-performing loans
|
|
|
21,096
|
|
|
|
19,656
|
|
Other
real estate owned
|
|
|
2,630
|
|
|
|
5,479
|
|
Total
non-performing assets
|
|
$
|
23,726
|
|
|
$
|
25,135
|
|
Non-performing
loans to total loans
|
|
|
1.37
|
%
|
|
|
1.29
|
%
|
Allowance
for credit losses to non-performing loans
|
|
|
106.10
|
%
|
|
|
103.26
|
%
|
Non-performing
assets to total assets
|
|
|
1.03
|
%
|
|
|
1.13
|
%
|
Allowance
for credit losses to non-performing assets
|
|
|
94.34
|
%
|
|
|
80.75
|
%
|
Potential Problem
Loans. Potential problem loans consist of classified accruing
commercial and commercial real estate loans that were between 30 and 89 days
past due. Such loans are characterized by weaknesses in the financial condition
of borrowers or collateral deficiencies. Based on historical experience, the
credit quality of some of these loans may improve due to changes in collateral
values or the financial condition of the borrowers, while the credit quality of
other loans may deteriorate, resulting in some amount of loss. These loans are
not included in the analysis of non-accrual loans above. At September 30, 2010,
potential problem loans amounted to approximately $1.9 million, or 0.12%, of
total loans, compared to $1.7 million, or 0.11% of total loans at December 31,
2009.
Past Due Loans. Past due
loans consist of accruing loans that were between 30 and 89 days past due. The
following table sets forth information concerning the past due loans at the date
indicated:
|
|
September 30,
|
|
December 31,
|
|
(Dollars in Thousands)
|
|
2010
|
|
|
2009
|
|
Loans
30-89 days past due:
|
|
|
|
|
|
|
|
|
Residential
real estate loans
|
|
$
|
3,186
|
|
|
$
|
1,847
|
|
Commercial
real estate
|
|
|
1,234
|
|
|
|
2,196
|
|
Commercial
loans
|
|
|
2,772
|
|
|
|
639
|
|
Consumer
loans
|
|
|
436
|
|
|
|
563
|
|
Total
loans 30-89 days past due
|
|
$
|
7,628
|
|
|
$
|
5,245
|
|
|
|
|
|
|
|
|
|
|
Loans
30-89 days past due to total loans
|
|
|
0.50
|
%
|
|
|
0.34
|
%
|
Allowance for Loan
Losses. We use a methodology to systematically measure the amount of
estimated loan loss exposure inherent in the loan portfolio for purposes of
establishing a sufficient ALL. Through the first nine months of 2010, there were
no significant changes to the allowance assessment methodology. The ALL is
management’s best estimate of the probable loan losses as of the balance sheet
date. The allowance is increased by provisions charged to earnings and by
recoveries of amounts previously charged off, and is reduced by charge-offs on
loans.
The
following table sets forth information concerning the activity in our ALL during
the periods indicated:
|
|
Nine Months Ended September
30,
|
|
(Dollars in Thousands)
|
|
2010
|
|
|
2009
|
|
Allowance
at the beginning of the period
|
|
$
|
20,246
|
|
|
$
|
17,691
|
|
Provision
for loan losses
|
|
|
5,242
|
|
|
|
6,514
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
Residential
real estate loans
|
|
|
1,103
|
|
|
|
752
|
|
Commercial
real estate
|
|
|
844
|
|
|
|
1,843
|
|
Commercial
loans
|
|
|
1,098
|
|
|
|
1,865
|
|
Consumer
loans
|
|
|
760
|
|
|
|
894
|
|
Total
loan charge-offs
|
|
|
3,805
|
|
|
|
5,354
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
Residential
real estate loans
|
|
|
220
|
|
|
|
9
|
|
Commercial
real estate loans
|
|
|
30
|
|
|
|
41
|
|
Commercial
loans
|
|
|
208
|
|
|
|
276
|
|
Consumer
loans
|
|
|
195
|
|
|
|
258
|
|
Total
loan recoveries
|
|
|
653
|
|
|
|
584
|
|
Net
charge-offs
|
|
|
(3,152
|
)
|
|
|
(4,770
|
)
|
Allowance
at the end of the period
|
|
$
|
22,336
|
|
|
$
|
19,435
|
|
|
|
|
|
|
|
|
|
|
Components
of allowance for credit losses:
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
$
|
22,336
|
|
|
$
|
19,435
|
|
Liability
for unfunded credit commitments
|
|
|
47
|
|
|
|
51
|
|
Balance
of allowance for credit losses at end of the period
|
|
$
|
22,383
|
|
|
$
|
19,486
|
|
Average
loans outstanding
|
|
$
|
1,534,351
|
|
|
$
|
1,502,566
|
|
|
|
|
|
|
|
|
|
|
Net
charge-offs (annualized) to average loans outstanding
|
|
|
0.27
|
%
|
|
|
0.42
|
%
|
Provision
for credit losses (annualized) to average loans
outstanding
|
|
|
0.26
|
%
|
|
|
0.58
|
%
|
Allowance
for loan losses to total loans
|
|
|
1.45
|
%
|
|
|
1.28
|
%
|
Allowance
for credit losses to net charge-offs (annualized)
|
|
|
532.63
|
%
|
|
|
305.60
|
%
|
Allowance
for loan losses to non-performing loans
|
|
|
106.10
|
%
|
|
|
106.79
|
%
|
Allowance
for loan losses to non-performing assets
|
|
|
94.34
|
%
|
|
|
82.13
|
%
|
During
the first nine months of 2010, the Company provided $5.2 million of expense to
the ALL compared to $6.5 million for the same period of 2009. The determination
of an appropriate level of ALL, and subsequent provision for loan losses, which
affects earnings, is based on our analysis of various economic factors and
review of the loan portfolio, which may change due to numerous factors including
loan growth, payoffs of lower quality loans, recoveries on previously
charged-off loans, improvement in the financial condition of the borrowers, risk
rating downgrades/upgrades and charge-offs. We utilize a comprehensive approach
toward determining the ALL, which includes an expanded risk rating system to
assist us in identifying the risks being undertaken, as well as migration within
the overall loan portfolio. Non-performing assets as a percentage of total
assets amounted to 1.03% at September 30, 2010 compared to 1.04% and 1.13% at
September 30, 2009 and December 31, 2009, respectively. Our local economy has
continued to experience a decline in retail sales, rising unemployment, and an
overall decline in real estate values. We believe the ALL of $22.3
million, or 1.45% of total loans outstanding and 106.1% of total non-performing
loans at September 30, 2010, was appropriate given the current economic
conditions in our service area and the condition of the loan portfolio,
although, if conditions continue to deteriorate, more provision may be
needed. The ALL was 1.28% of total loans outstanding and 106.8% of
total non-performing loans at September 30, 2009, and 1.33% of total loans
outstanding and 103.0% of total non-performing loans at December 31,
2009.
Liabilities
and Shareholders’ Equity
Total
liabilities have increased $59.0 million, or 3%, since December 31, 2009, to
$2.1 billion at September 30, 2010. Borrowings declined $31.6 million
with a decrease of $45.3 million in advances from the FHLB, offset by an
increase in other borrowings of $13.7 million. Total deposits including brokered
deposits increased $86.4 million primarily due to increases in demand deposits
of $33.1 million, interest checking, savings and money market balances of $71.3
million and brokered deposits of $35.4 million, partially offset by a decline in
retail certificates of deposit of $53.4 million.
Total
shareholders’ equity increased $13.6 million, or 7%, since December 31, 2009
which was a result of current year earnings of $18.3 million, and a slight
increase in other comprehensive income of $383,000, offset by dividends declared
to shareholders of $5.8 million.
The
following table presents certain information regarding shareholders’ equity for
the periods ended:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Return
on average equity
|
|
|
12.43
|
%
|
|
|
12.81
|
%
|
Average
equity to average assets
|
|
|
8.72
|
%
|
|
|
7.80
|
%
|
Dividend
payout ratio
|
|
|
31.36
|
%
|
|
|
33.56
|
%
|
Dividends
declared per share
|
|
$
|
0.75
|
|
|
$
|
1.00
|
|
Book
value per share
|
|
|
26.67
|
|
|
|
24.93
|
|
LIQUIDITY
Liquidity
needs require the availability of cash to meet the withdrawal demands of
depositors and credit commitments to borrowers. Liquidity is defined as our
ability to maintain availability of funds to meet customer needs, as well as to
support our asset base. The primary objective of liquidity management is to
maintain a balance between sources and uses of funds to meet our cash flow needs
in the most economical and expedient manner. Due to the potential for unexpected
fluctuations in both deposits and loans, active management of liquidity is
necessary. We maintain various sources of funding and levels of liquid assets in
excess of regulatory guidelines in order to satisfy their varied liquidity
demands. We monitor liquidity in accordance with internal guidelines and all
applicable regulatory requirements. As of September 30, 2010 and 2009, our level
of liquidity exceeded target levels. We believe that we currently have
appropriate liquidity available to respond to liquidity demands. Sources of
funds that we utilize consist of deposits, borrowings from the FHLB 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 our primary source of funds. For the first nine months of
2010, average deposits (including brokered deposits) of $1.5 billion increased
$32.5 million compared to the same period of 2009. Comparing average
deposits for the first nine months of 2010 to the same period of 2009, average
demand deposits, interest checking, savings balances and brokered deposits
increased $19.8 million, $37.0 million, $15.7 million, and $23.3 million,
respectively. Included in the money market and interest checking
deposit categories are deposits from Acadia Trust, representing client funds.
The balance in the Acadia Trust client accounts, which was $93.1 million on
September 30, 2010, could increase or decrease depending upon changes in the
portfolios of the clients of Acadia Trust. The shift from retail certificates of
deposit to other core deposit categories reflects customers continuing to shift
to more liquid deposit instruments given the low interest rate
environment.
Borrowings
are used to supplement deposits as a source of liquidity. In addition to
borrowings from the FHLB, we purchase federal funds, sell securities under
agreements to repurchase and utilize treasury tax and loan accounts. Average
borrowings and long-term debt for the first nine months of 2010 was $520.6
million, a decrease of $82.8 million from the first nine months of 2009. We
secure borrowings from the FHLB, whose advances remain the largest
non-deposit-related funding source, with qualified residential real estate
loans, certain investment securities and certain other assets available to be
pledged. The carrying value of loans pledged as collateral at the FHLB was
$719.0 million and $705.3 million at September 30, 2010 and 2009, respectively.
The carrying value of securities pledged as collateral at the FHLB was $79.5
million and $40.7 million at September 30, 2010 and 2009, respectively. Through
CNB, we had an available line of credit with the FHLB of $9.9 million at
September 30, 2010 and 2009. We had no outstanding balance on the line of credit
with the FHLB at September 30, 2010.
The
Company also has a $10.0 million line of credit through a correspondent bank
available to us through December 28, 2010. We had no outstanding
balance on this line of credit at September 30, 2010.
We
believe the investment portfolio and residential loan portfolio provide a
significant amount of contingent liquidity that could be accessed in a
reasonable time period through sales of those portfolios. We also believe that
we have additional untapped access to the brokered deposit market, commercial
reverse repurchase transaction market and the FRB discount window. These sources
are considered as liquidity alternatives in our contingent liquidity plan. We
believe that the level of liquidity is sufficient to meet current and future
funding requirements. However, changes in economic conditions, including
consumer saving habits and availability or access to the national brokered
deposit and commercial repurchase markets, could significantly impact our
liquidity position.
CAPITAL
RESOURCES
Under FRB
guidelines, we are required to maintain capital based on risk-adjusted assets.
These capital requirements represent quantitative measures of our assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. Our capital classification is also subject to qualitative
judgments by our regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require us 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). These guidelines apply to us 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 (as defined). Our risk-based ratios, and those of CNB,
exceeded regulatory guidelines at September 30, 2010 and December 31, 2009. The
Company’s Tier 1 capital to risk weighted assets was 13.30% and 12.24% at
September 30, 2010 and December 31, 2009, respectively and total capital to
risk weighted assets was 14.56% and 13.49% at September 30, 2010 and
December 31, 2009, respectively. 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. Our leverage ratio was 8.65% and 8.17% at
September 30, 2010 and December 31, 2009, respectively.
Although
the junior subordinated debentures are recorded as a liability on our Statement
of Condition, we are permitted, in accordance with regulatory guidelines, to
include, subject to certain limits, the trust preferred securities in our
calculation of risk-based capital. At September 30, 2010, $43.0 million of the
trust preferred securities was included in Tier 1 and total risk-based
capital.
As part
of our goal to operate a safe, sound and profitable financial organization, we
are committed to maintaining a strong capital base. Shareholders’ equity totaled
$204.2 million and $190.6 million at September 30, 2010 and December 31, 2009,
respectively, which amounted to 8.9% of total assets at September 30, 2010 and
8.5% of total assets at December 31, 2009.
Our
principal cash requirement is the payment of dividends on our common stock, as
and when declared by the Board of Directors. We paid dividends to shareholders
in the aggregate amount of $5.7 million for each of the nine month periods ended
September 30, 2010 and 2009. Our Board of Directors approves cash dividends on a
quarterly basis after careful analysis and consideration of various factors,
including the following: a) capital position relative to total assets, b)
risk-based assets, c) total classified assets, d) economic conditions, e) growth
rates for total assets and total liabilities, f) earnings performance and
projections and g) strategic initiatives and related capital requirements. All
dividends declared and distributed by the Company will be in compliance with
applicable state corporate law and regulatory requirements.
We are
primarily dependent upon the payment of cash dividends by our subsidiaries to
service our commitments. We, as the sole shareholder of our subsidiaries, are
entitled to dividends, when and as declared by each subsidiary’s Board of
Directors from legally available funds. CNB declared dividends in
the aggregate amount of $9.0 million for each of the first nine months of 2010
and the first nine months of 2009. If we are required to use dividends from CNB
to service unforeseen commitments in the future we may be required to reduce the
dividends paid to our shareholders going forward.
CONTRACTUAL
OBLIGATIONS AND COMMITMENTS
In the
normal course of business, we are a party to credit related financial
instruments with off-balance sheet risk, which are not reflected in the
Consolidated Statements of Condition. These financial instruments include
lending commitments and letters of credit. Those instruments involve varying
degrees of credit risk in excess of the amount recognized in the Consolidated
Statements of Condition. We follow the same credit policies in making
commitments to extend credit and conditional obligations as we do for on-balance
sheet instruments, including requiring similar collateral or other security to
support financial instruments with credit risk. Our 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. At September 30, 2010, we had the following levels of
commitments to extend credit:
|
|
Total Amount
Committed
|
|
Commitment Expires in:
|
|
(Dollars in Thousand)
|
|
|
|
<1 Year
|
|
|
1 – 3 Years
|
|
|
4 – 5 Years
|
|
|
>5 Years
|
|
Letters
of Credit
|
|
$
|
2,769
|
|
|
$
|
2,769
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial
Commitment Letters
|
|
|
7,244
|
|
|
|
7,244
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
Loan Origination
|
|
|
17,203
|
|
|
|
17,203
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Home
Equity Line of Credit Commitments
|
|
|
160,353
|
|
|
|
16,120
|
|
|
|
5,154
|
|
|
|
6,136
|
|
|
|
132,943
|
|
Other
Commitments to Extend Credit
|
|
|
95,091
|
|
|
|
92,750
|
|
|
|
1,049
|
|
|
|
1,035
|
|
|
|
257
|
|
Total
|
|
$
|
282,660
|
|
|
$
|
136,086
|
|
|
$
|
6,203
|
|
|
$
|
7,171
|
|
|
$
|
133,200
|
|
We are a
party to several off-balance sheet contractual obligations through lease
agreements on a number of branch facilities. We have an obligation and
commitment to make future payments under these contracts. At September 30, 2010,
we had the following levels of contractual obligations:
|
|
Total Amount
of Obligations
|
|
Payments Due per Period
|
(Dollars in Thousands)
|
|
|
|
<1 Year
|
|
|
1 – 3 Years
|
|
|
4 – 5 Years
|
|
|
>5 Years
|
|
Operating
Leases
|
|
$
|
3,174
|
|
|
$
|
716
|
|
|
$
|
1,078
|
|
|
$
|
474
|
|
|
$
|
906
|
|
Capital
Leases
|
|
|
1,190
|
|
|
|
38
|
|
|
|
95
|
|
|
|
92
|
|
|
|
965
|
|
FHLB
Borrowings – Overnight
|
|
|
7,840
|
|
|
|
7,840
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
FHLB
Borrowings – Advances
|
|
|
164,397
|
|
|
|
62,055
|
|
|
|
35,965
|
|
|
|
41,326
|
|
|
|
25,051
|
|
Commercial
Repurchase Agreements
|
|
|
106,383
|
|
|
|
—
|
|
|
|
101,000
|
|
|
|
—
|
|
|
|
5,383
|
|
Other
Borrowed Funds
|
|
|
171,718
|
|
|
|
171,718
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Junior
Subordinated Debentures
|
|
|
43,589
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43,589
|
|
Note
Payable
|
|
|
690
|
|
|
|
304
|
|
|
|
352
|
|
|
|
34
|
|
|
|
—
|
|
Other
Contractual Obligations
|
|
|
162
|
|
|
|
162
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
499,143
|
|
|
$
|
242,833
|
|
|
$
|
138,490
|
|
|
$
|
41,926
|
|
|
$
|
75,894
|
|
Borrowings
from the FHLB consist of short- and long-term fixed and variable rate borrowings
and are collateralized by all stock in the FHLB and a blanket lien on qualified
collateral consisting primarily of loans with first mortgages secured by
one-to-four family properties, certain pledged investment securities and other
qualified assets. Other borrowed funds include treasury, tax and loan deposits
and securities sold under repurchase agreements. We have an obligation and
commitment to repay all borrowings and debentures. These commitments,
borrowings, junior subordinated debentures and the related payments are made
during the normal course of business.
We may
use derivative instruments as partial hedges against large fluctuations in
interest rates. We may also use fixed-rate interest rate swap and floor
instruments to partially 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.
We may also use variable-rate interest rate swap and cap instruments to
partially 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 interest rate swap and cap instruments. These financial
instruments are factored into our overall interest rate risk position. We
regularly review the credit quality of the counterparty from which the
instruments have been purchased. At September 30, 2010, the Company had three
forward interest rate swaps, each with a notional amount of $10.0 million,
related to the junior subordinated debentures, expiring on June 30, 2021, June
30, 2029 and June 30, 2030.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT
MARKET RISK
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. Our primary market risk exposure is interest
rate risk. The ongoing monitoring and management of this risk is an important
component of our asset/liability management process, which is governed by
policies established by the CNB Board of Directors, and are reviewed and
approved annually. The Board of Directors’ Asset/Liability Committee (“Board
ALCO”) delegates responsibility for carrying out the asset/liability management
policies to the Management Asset/Liability Committee (“Management ALCO”). In
this capacity, Management ALCO develops guidelines and strategies impacting our
asset/liability management-related activities based upon estimated market risk
sensitivity, policy limits and overall market interest rate levels/trends. The
Management ALCO and Board ALCO jointly meet on a quarterly basis to review
strategies, policies, economic conditions and various activities as part of the
management of these risks.
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 our financial instruments also change, thereby impacting net
interest income (“NII”), the primary component of our earnings. Board and
Management ALCO utilize the results of a detailed and dynamic simulation model
to quantify the estimated exposure of NII to sustained interest rate changes.
While Board and Management ALCO routinely monitor simulated NII sensitivity over
a rolling 2-year horizon, they also utilize additional tools to monitor
potential longer-term interest rate risk.
The
simulation model captures the impact of changing interest rates on the interest
income received and interest expense paid on all interest-earning assets and
interest-bearing liabilities reflected on our Statement of Condition, as well as
for derivative financial instruments, if any. 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 a 200 basis point
(“bp”) upward and 200 bp downward shift in interest rates. Although our policy
specifies a downward shift of 200 bp, this could result in negative rates as
many benchmark rates are currently below 2.00%. A parallel and pro rata shift in
rates over a 12-month period is assumed. Using this approach, we are able to
produce reports that illustrate the effect that both a gradual change of rates
(year-1) and a “rate shock” (year-2 and beyond) has on margin
expectations. In the down 100 bp scenario, Fed Funds and Treasury
yields are floored at .01% while Prime is floored at 3.00%. All other
market rates are floored at 0.25%. During the third quarter of 2010
and 2009, our NII sensitivity analysis reflected the following changes to NII
assuming no balance sheet growth and a parallel shift in interest rates over a
1-year horizon. All rate changes were “ramped” over the first
12-month period and then maintained at those levels over the remainder of the
ALCO simulation horizon.
|
|
Estimated Changes in NII
|
|
Rate Change
|
|
September
30, 2010
|
|
|
September
30, 2009
|
|
Year
1
|
|
|
|
|
|
|
+400
bp
|
|
|
(0.30
|
)%
|
|
|
(0.10
|
)%
|
+200
bp
|
|
|
(0.40
|
)%
|
|
|
(0.10
|
)%
|
-100
bp
|
|
|
(0.00
|
)%
|
|
|
(1.00
|
)%
|
Year
2
|
|
|
|
|
|
|
|
|
+400
bp
|
|
|
(1.50
|
)%
|
|
|
2.30
|
%
|
+200
bp
|
|
|
0.50
|
%
|
|
|
2.00
|
%
|
-100
bp
|
|
|
(6.00
|
)%
|
|
|
(4.10
|
)%
|
The
preceding sensitivity analysis does not represent a 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 cash
flows. While assumptions are developed based upon current economic and local
market conditions, we 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 exposure during the
first nine months of 2010 were the increase in the investment balances, higher
balances of low costing deposits, and an overall reduction in the cost of funds
that outpaced the drop in the yield on average assets. If rates
remain at or near current levels and the balance sheet mix remains similar, net
interest income is projected to trend downward through the first two years of
the simulation as the asset base adjusts into the lower rate environment,
resulting in a narrowing spread and pushing net interest income levels
down. By the end of the second year, an increase in net interest
income levels is evident as a large block of wholesale funding comes due and is
expected to be replaced with short term borrowings at a significantly lower
cost. Thereafter, net interest income continues to trend downward as
asset cash flow continues to reset lower. In a falling interest rate
environment, net interest income is expected to trend in line with the base case
scenarios before developing a downward trend thereafter. Beyond the
first year, opportunities to reduce funding costs become more difficult while
mortgage related cash flows accelerate and are replaced at lower rate levels,
resulting in tighter spreads and a decrease in expected net interest
income. Rising rate scenarios continue to be the best case scenario
for the Bank over the long term. In the early stages of a rising rate
environment, net interest income comes under pressure due to short term funding
that resets quickly and asset yields that are slower to
respond. Thereafter, the longer term asset sensitive structure of the
balance sheet results in the asset base continuing to be repriced or replaced at
higher levels, widening spread and driving net interest income levels
upward. If the yield curve were to flatten as rates rise (in an up
500bp environment over two years), net interest income levels would initially
trend below the parallel 200bp shift, but the longer term benefit would be
greater.
Periodically,
if deemed appropriate, we use interest rate swaps, floors and caps, which are
common derivative financial instruments, to hedge interest rate risk position.
The Board of Directors has approved hedging policy statements governing the use
of these instruments. As of September 30, 2010, we had a notional principal
amount of $30.0 million in interest rate swap agreements related to the junior
subordinated debentures. Board and Management ALCO monitor derivative activities
relative to their expectations and our hedging policies.
ITEM
4. CONTROLS AND PROCEDURES
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), the Company’s management conducted an evaluation with the
participation of the Company’s Chief Executive Officer and Chief Financial
Officer (Principal Financial & Accounting Officer), regarding the
effectiveness of the Company’s disclosure controls and procedures, as of the end
of the last fiscal quarter covered by this report. In designing and
evaluating the Company’s disclosure controls and procedures, the Company and its
management recognize that any controls and procedures, no matter how well
designed and operated, can provide only a reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating and implementing possible controls and
procedures. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer (Principal Financial & Accounting Officer)
concluded that they believe the Company’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in
the reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms.
There was
no change in the internal control over financial reporting that occurred during
the period covered by this Quarterly Report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
In the
normal course of business, the Company and its subsidiaries are named defendants
in various lawsuits and counter-claims. In the opinion
of management, after consultation with legal counsel, none of these lawsuits are
expected to have a materially adverse effect on the financial position, results
of operations or cash flows of the Company.
ITEM
1A. RISK FACTORS
There
have been no material changes in the Risk Factors described in Item 1A.of the
Company’s Annual Report on Form 10-K for the year ended December 31,
2009.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
The
following table provides information with respect to purchases made by or on
behalf of the Company or an "affiliated purchaser" (as defined in Rule
10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company's common
stock during the three months ended September 30, 2010.
Period
|
|
Total Number of Shares Purchased
|
|
|
Average Price Paid per Share
|
|
|
Total Number of shares Purchased as Part of Publicly Announced Plan
|
|
|
Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period
|
|
July
1, 2010 to July 31, 2010
|
|
|
—
|
|
|
$ |
— |
|
|
|
—
|
|
|
|
— |
|
August
1, 2010 to August 31, 2010
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
— |
|
September
1, 2010 to September 30, 2010
|
|
|
— |
|
|
|
—
|
|
|
|
—
|
|
|
|
— |
|
Total Purchases of Equity
Securities
|
|
|
—
|
|
|
$ |
—
|
|
|
|
—
|
|
|
|
— |
|
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. [REMOVED AND RESERVED]
ITEM
5. OTHER INFORMATION
None
ITEM
6. EXHIBITS
(a) Exhibits
(10.1)
Amended and Restated Long Term Performance Plan (incorporated herein by
reference to the Company’s Periodic Report on Form 8-K filled with the SEC on
July 1, 2010).
(23.1)
Consent of Berry, Dunn, McNeil & Parker relating to the financial statements
of Camden National Corporation*
(31.1)
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934*
(31.2)
Certification of Chief Financial Officer, Principal Financial & Accounting
Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934*
(32.1)
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
(32.2)
Certification of Chief Financial Officer, Principal Financial & Accounting
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002*
* Filed
herewith
SIGNATURES
Pursuant
to the requirements of the Securities 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/
Gregory A. Dufour
|
|
November 5, 2010
|
Gregory
A. Dufour
|
|
Date
|
President
and Chief Executive Officer
|
|
|
|
|
|
/s/
Deborah A. Jordan
|
|
November 5, 2010
|
Deborah
A. Jordan
|
|
Date
|
Chief
Financial Officer and Principal
|
|
|
Financial
& Accounting Officer
|
|
|
Exhibit
Index
|
|
|
(10.1)
|
Amended
and Restated Long Term Performance Plan (incorporated herein by reference
to the Company’s Periodic Report on Form 8-K filled with the SEC on July
1, 2010).
|
|
|
(23.1)
|
Consent
of Berry, Dunn, McNeil & Parker relating to the financial statements
of Camden National Corporation*
|
|
|
(31.1)
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934*
|
|
|
(31.2)
|
Certification
of Chief Financial Officer, Principal Financial & Accounting Officer
pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934*
|
|
|
(32.1)
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*
|
|
|
(32.2)
|
Certification
Chief Financial Officer, Principal Financial & Accounting Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002*
|
*Filed
herewith