CNC Posts Fourth Quarter & 2008 Results

CAMDEN NATIONAL CORPORATION REPORTS FOURTH QUARTER AND YEAR END 2008 RESULTS - 1/27/2009

CAMDEN, Maine, January 27, 2009: Gregory A. Dufour, president and chief executive officer of Camden National Corporation (NASDAQ: CAC; the "Company"), reported net earnings of $10.1 million, or $1.32 per diluted share, for the fourth quarter of 2008, and $15.3 million, or $2.00 per diluted share for the year ended December 31, 2008. The results compare to $5.6 million, or $0.85 earnings per diluted share, and $20.3 million, or $3.09 earnings per diluted share, for the fourth quarter of 2007 and year ended December 31, 2007, respectively. The 2008 results were impacted by investment securities losses and higher loan loss provisions, in part offset by the favorable earnings impact of the Union Bankshares Company ("Union") acquisition on January 3, 2008.

"Camden National is weathering the economic downturn by bolstering our balance sheet and reserves while focusing on our customers," said Dufour. "During the fourth quarter, we closed out our exposure to auction rate securities collateralized by Freddie Mac preferred stock and increased our allowance for loan losses while at the same time continuing to exceed regulatory capital guidelines to be a well-capitalized financial institution."

Commenting on Maine's business climate, Dufour said, "Even though the State has seen a slowdown related to the economic recession, our loan pipeline is solid as we have seen some competitors retrench and more rational pricing in the market. Our wealth management subsidiary, Acadia Trust, N.A., is also seeing continued demand for its services as its 2008 above-benchmark investment performance has attracted investors."

The Company recorded net losses on its investment securities portfolio totaling $15.6 million in 2008 with $1.0 million recorded in the fourth quarter. In addition, the fourth quarter results include a $4.9 million tax benefit related to the previous quarter's investment security loss in accordance with a change in tax treatment enacted in the Emergency Economic Stabilization Act of 2008.

For the year ended December 31, 2008, the returns on average equity and average assets were 9.15% and 0.67%, compared to 18.34% and 1.16%, respectively, for the year ended December 31, 2007. The decline in return on average equity is the result of the investment securities losses and the $37.9 million of goodwill created from the Union acquisition. For the year ended December 31, 2008, return on average tangible equity (which excludes goodwill and other intangibles) was 12.86% compared to 19.35% for the year ended December 31, 2007.

Operating earnings per diluted share, operating net income and other operating disclosures, determined in accordance with generally accepted accounting principles ("GAAP") excluding the effects of investment securities losses and related tax benefit noted above, provide a more meaningful comparison for effectively evaluating the Company's core operating results:

Core Operating Results

Operating earnings per diluted share for the year ended December 31, 2008 were $3.31, a $0.22, or 7.1%, increase over the same period of 2007. Operating earnings per diluted share for the fourth quarter of 2008 were $0.76, a $0.09, or 10.6%, decrease compared to the fourth quarter of 2007. This decline is primarily due to the 1.2 million shares issued in the first quarter of 2008 related to the Union acquisition and an increase in the provision to the allowance for loan and lease losses ("ALLL") of $2.3 million in the fourth quarter of 2008.

Operating net income for the fourth quarter of 2008 was $5.8 million, a $262,000, or 4.7%, increase over the fourth quarter of 2007. Operating net income for the year ended December 31, 2008 was $25.5 million, a $5.2 million, or 25.5%, increase over the same period of 2007. Increases in both periods reflect the impact of the acquisition of Union's $547.4 million asset base, partially offset by an increase in the ALLL.

The Company's total assets at December 31, 2008 were $2.3 billion, an increase of $624.7 million compared to total assets at December 31, 2007, which includes the assets acquired from Union. Total loans at December 31, 2008 were $1.5 billion, an increase of $355.3 million compared to total loans at December 31, 2007. Excluding the $366.6 million of loans acquired from Union, the Company's loan balance declined $11.3 million primarily in the commercial and commercial real estate portfolios, in part offset by an increase in the consumer loan portfolio reflecting continued demand for home equity loans. Investments increased $184.2 million, which includes $121.4 million from the Union acquisition, and net purchases during the year of $62.8 million. Total deposits of $1.5 billion at December 31, 2008 increased $371.5 million over the same period a year ago, primarily reflecting the assumption of $331.5 million of deposits from the Union acquisition. The remaining $40.0 million of net deposit growth was primarily in retail certificate of deposit accounts.

Net interest income for the fourth quarter of 2008 increased 37.4% to $17.7 million, compared to $12.9 million for same period of 2007. This increase in net interest income was primarily attributable to an increase in average earning assets resulting from the Union acquisition. In addition, the net interest margin increased 28 basis points to 3.37% for the year ended December 31, 2008, compared to the year ended December 31, 2007, as a result of the 400 basis point reduction in the Fed Funds rate implemented by the Federal Reserve in 2008 and a positively sloped yield curve.

During the fourth quarter of 2008, the Company provided $2.3 million to the ALLL compared to no provision to the ALLL for the same quarter of 2007. The increase in the provision to the ALLL resulted from an increase in net charge-offs and non-performing assets. Net charge-offs to average loans were 0.31% compared to 0.12% for the years ended December 31, 2008 and 2007, respectively. The higher level of net charge-off activity for 2008 was mainly associated with commercial real estate and commercial real estate development. Non-performing assets as a percentage of total assets amounted to 0.71% at December 31, 2008, compared to 0.64% at December 31, 2007, primarily resulting from an increase in other real estate owned. The ALLL was 1.18% of total loans outstanding and 139.2% of total non-performing loans at December 31, 2008, compared to 1.19% and 128.4%, respectively, at December 31, 2007.

The Company's $15.6 million of net investment securities losses for the year ended December 31, 2008 was primarily due to the $15.0 million write-down of other-than-temporarily-impaired securities, including the $1.0 million recorded in the fourth quarter of 2008, resulting from investments in auction pass-through certificates issued by trusts that were sponsored by Merrill Lynch & Co. The assets of the trusts consisted of Federal Home Loan Mortgage Corporation ("Freddie Mac") preferred stock. Through December 31, 2008, the Freddie Mac preferred stock collateralizing the securities has severely declined in value, and as a result, the Company has recorded full impairment of the investment.

Non-interest income (excluding investment securities losses) for the fourth quarter of 2008 was $3.8 million, a 17.7% increase over the same quarter a year ago. The increase was driven by increases in service charges on deposit accounts, income from fiduciary services at Acadia Trust, N.A., and brokerage commission income at Acadia Financial Consultants resulting primarily from the customer relationships gained in the acquisition of Union.

Non-interest expense for the fourth quarter of 2008 was $11.0 million, an increase of $2.8 million, or 33.6%, over the same quarter in the prior year. This increase was primarily due to the expansion of the Company's banking franchise with the Union acquisition, an increase in expenses on other real estate owned, and increases in foreclosure and collection costs. During the fourth quarter of 2008, the Company reduced its incentive expense to align with the annual performance of the Company. The Company's operating efficiency ratio (excluding the investment securities losses) for the year ended December 31, 2008 was 53.89%, which is consistent with the prior year ratio of 53.88%.

The Company reported earlier that the Board of Directors approved a dividend of $0.25 per share, payable on January 30, 2009 for shareholders of record on January 15, 2009, which is a 4.2% increase over the dividend declared in the same period last year.

At December 31, 2008, the Company had a total risk-based capital ratio of 12.32%, Tier 1 capital ratio of 11.11%, and Tier 1 leverage capital ratio of 7.19%. At December 31, 2008, Camden National Bank (the "Bank") reported a total risk-based capital ratio of 11.53%, Tier 1 capital ratio of 10.30%, and Tier 1 leverage capital ratio of 6.61%. The Company and the Bank exceeded the minimum ratios of 10.0%, 6.0%, and 5.0%, respectively, required by the Federal Reserve for an institution to be considered "well capitalized."

On November 20, 2008, the Company announced that it would not participate in the U.S. Treasury capital purchase program, the Troubled Assets Relief Program ("TARP"). Dufour indicated, "After a careful review of Camden National's strategic plan and capital position, and the constraints and uncertainties surrounding the TARP, the Company did not believe that participation was in the best interest of our shareholders."

Camden National Corporation, ranked in the top 20 in USBanker's 2008 list of top-performing mid-tier banks, headquartered in Camden, Maine, and listed on the NASDAQ® Global Select Market ("NASDAQ") under the symbol CAC, is the holding company employing 440 Maine residents for two financial services companies, including Camden National Bank (CNB), a full-service community bank with a network of 37 banking offices serving coastal, western, central, and eastern Maine, and Acadia Trust, N.A., offering investment management and fiduciary services with offices in Portland, Bangor, and Ellsworth. Acadia Financial Consultants is a division of CNB, offering full-service brokerage services.

This press release and the documents incorporated by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume,""will," "should," and other expressions which predict or indicate future events or trends and which do not relate to historical matters. Forward-looking statements should not be relied on, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following: changes in general, national or regional economic conditions; changes in loan default and charge-off rates; reductions in deposit levels necessitating increased borrowing to fund loans and investments; changes in interest rates; changes in laws and regulations, including changes in tax treatment; changes in the size and nature of the Company's competition; and changes in the assumptions used in making such forward-looking statements. Other factors could also cause these differences. For more information about these factors please see our Annual Report on Form 10-K on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements.

These forward-looking statements were based on information, plans and estimates at the date of this press release, and the Company does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Contact:

Suzanne Brightbill

Public Relations Officer

Camden National Corporation

207.230.2120

sbrightbill@camdennational.com