Camden National (CAC) 8-K Camden National Corporation Reports Fourth Quarter and Year End 2008 Results

Exhibit 99.1

Camden National Corporation Reports Fourth Quarter and Year End 2008 Results

CAMDEN, Maine--(BUSINESS WIRE)--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

		Year Ended						Three Months Ended
(In thousands, except per share data)		December 31, 2008						December 31, 2008
		Amount			Per Share			Amount			Per Share
Net income, GAAP basis / Earnings per diluted share, GAAP basis	$	15,335		$	2.00		$	10,054		$	1.32
Adjustment to eliminate investment securities losses		15,574			2.02			1,000			0.12
Adjustment to eliminate tax effect of investment securities losses		(5,451	)		(0.71	)		(5,233	)		(0.68	)
Operating net income / Operating earnings per diluted share	$	25,458		$	3.31		$	5,821		$	0.76
Operating efficiency ratio		53.89	%					50.96	%
Operating return on average equity		14.96	%					13.53	%
Operating return on average tangible equity		21.35	%					18.68	%
Operating return on average assets		1.10	%					1.00	%

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.

Statement of Income Data (unaudited)
		Year Ended						Three Months Ended
		December 31,						December 31,
(In thousands, except number of shares & per share data)		2008			2007			2008			2007
Interest income
Interest and fees on loans	$	96,716		$	84,603		$	22,913		$	20,441
Interest on securities and other		30,404			23,133			7,784			6,298
Total interest income		127,120			107,736			30,697			26,739
Interest expense
Interest on deposits		31,700			36,452			7,447			8,603
Interest on borrowings		25,199			21,414			5,504			5,216
Total interest expense		56,899			57,866			12,951			13,819
Net interest income		70,221			49,870			17,746			12,920
Provision for loan and lease losses		4,397			100			2,277			-
Net interest income after provision		65,824			49,770			15,469			12,920
Non-interest income
Service charges on deposit accounts		5,375			3,447			1,306			865
Other service charges and fees		2,720			1,833			661			453
Income from fiduciary services		6,453			4,914			1,422			1,246
Other income		2,736			2,458			419			672
Total non-interest income before net investment securities losses		17,284			12,652			3,808			3,236
Net investment securities losses		(15,574	)		-			(1,000	)		-
Total non-interest income		1,710			12,652			2,808			3,236
Non-interest expenses
Salaries and employee benefits		24,093			18,486			4,963			4,592
Premises and fixed assets		7,597			5,084			1,882			1,354
Other expenses		15,126			10,116			4,138			2,274
Total non-interest expenses		46,816			33,686			10,983			8,220
Income before income tax expense (benefit)		20,718			28,736			7,294			7,936
Income tax expense (benefit)		5,383			8,453			(2,760	)		2,376
Net income	$	15,335		$	20,283		$	10,054		$	5,560
Efficiency ratio (1)		65.08	%		53.88	%		53.43	%		50.88	%
Return on average equity		9.15	%		18.34	%		24.78	%		19.08	%
Return on average tangible equity		12.86	%		19.35	%		35.01	%		20.82	%
Return on average assets		0.67	%		1.16	%		1.73	%		1.26	%
Per Share Data
Basic earnings per share	$	2.00		$	3.09		$	1.32		$	0.85
Diluted earnings per share		2.00			3.09			1.32			0.85
Cash dividends declared per share	$	1.00		$	0.96		$	0.25		$	0.24
Weighted average number of shares outstanding		7,674,827			6,557,102			7,638,343			6,513,380
Core Operating Results (unaudited)
		Year Ended						Three Months Ended
(In thousands, except per share data)		December 31, 2008						December 31, 2008
		Amount			Per Share			Amount			Per Share
Net income, GAAP basis / Earnings per diluted share, GAAP basis	$	15,335		$	2.00		$	10,054		$	1.32
Adjustment to eliminate investment securities losses		15,574			2.02			1,000			0.12
Adjustment to eliminate tax effect of investment securities losses		(5,451	)		(0.71	)		(5,233	)		(0.68	)
Operating net income / Operating earnings per diluted share	$	25,458		$	3.31		$	5,821		$	0.76
Operating efficiency ratio (2)		53.89	%					50.96	%
Operating return on average equity (2)		14.96	%					13.53	%
Operating return on average tangible equity (2)		21.35	%					18.68	%
Operating return on average assets (2)		1.10	%					1.00	%
(1) Computed by dividing non-interest expense by the sum of net interest income and non-interest income.
(2) Computed excluding effects of investment securities losses.

Statement of Condition Data (unaudited)
		December 31,
(In thousands, except number of shares)		2008			2007
Assets
Cash and due from banks	$	35,195		$	28,790
Securities available for sale, at market value		606,031			423,108
Securities held to maturity		42,040			40,726
Federal Home Loan and Federal Reserve Bank stock		21,969			19,814
Loans, less allowance for loan losses of $17,691 and $13,653 at December 31, 2008 and December 31, 2007, respectively
		1,483,217			1,131,986
Premises and equipment, net		25,872			19,650
Other real estate owned		4,024			400
Goodwill		41,857			3,991
Other assets		81,291			48,323
Total assets	$	2,341,496		$	1,716,788
Liabilities
Deposits:
Demand	$	180,407		$	141,858
NOW		202,061			132,331
Money market		298,017			298,677
Savings		132,586			85,931
Certificates of deposit		593,013			385,136
Brokered deposits		83,433			74,118
Total deposits		1,489,517			1,118,051
Borrowings from Federal Home Loan Bank		419,260			271,558
Other borrowed funds		198,947			142,492
Junior subordinated debentures		43,410			36,083
Note payable		188			10,000
Accrued interest and other liabilities		23,774			18,401
Total liabilities		2,175,096			1,596,585
Shareholders' Equity
Common stock, no par value; authorized 20,000,000 shares, issued and outstanding 7,638,713 and 6,513,573 at December 31, 2008 and December 31, 2007, respectively
		2,851			2,522
Surplus		46,133			2,629
Retained earnings		118,564			114,289
Accumulated other comprehensive (loss) income
Net unrealized (losses) gains on securities available for sale, net of tax		(89	)		1,516
Net unrealized losses on post-retirement plans, net of tax		(1,059	)		(753	)
Total accumulated other comprehensive (loss) income		(1,148	)		763
Total shareholders' equity		166,400			120,203
Total liabilities and shareholders' equity	$	2,341,496		$	1,716,788

Average Balance Sheet Data (unaudited)
		December 31,
(In thousands)		2008			2007
Assets
Investments	$	617,788		$	472,345
Loans		1,517,863			1,187,627
Allowance for loan losses		(17,303	)		(14,393	)
Cash and due from banks		37,351			29,357
Other assets		147,623			73,000
Total Assets	$	2,303,322		$	1,747,936
Liabilities and Shareholders Equity
Demand deposits	$	186,924		$	148,751
NOW accounts		186,652			106,920
Savings accounts		133,128			89,705
Money market accounts		345,834			311,171
Certificates of deposit		531,539			389,565
Brokered deposits		71,513			121,221
Junior subordinated debentures		43,356			36,083
Borrowings		612,532			418,894
Other liabilities		24,275			15,032
Shareholders equity		167,569			110,594
Total Liabilities and Shareholders Equity	$	2,303,322		$	1,747,936
Earning Asset and Funding Yields Data (unaudited)
		For the Year Ended
		December 31,
		2008			2007
Interest-earning Assets
Investments		5.16	%		5.08	%
Loans		6.40	%		7.17	%
Total Interest-earning Assets		6.04	%		6.57	%
Interest-bearing Liabilities
NOW accounts		0.84	%		0.40	%
Savings accounts		0.58	%		0.37	%
Money market accounts		2.18	%		4.32	%
Certificates of deposit		3.58	%		4.39	%
Brokered deposits		4.05	%		4.22	%
Junior subordinated debentures		6.80	%		6.60	%
Borrowings		3.63	%		4.54	%
Total Interest-bearing Liabilities		2.96	%		3.93	%
Net Interest Rate Spread (fully-taxable equivalent)		3.08	%		2.64	%
Net Interest Margin (fully-taxable equivalent)		3.37	%		3.09	%

Asset Quality Data (unaudited)
				December 31,
(In thousands)				2008			2007
Loans 90 days past due and still accruing			$	206		$	6
Non-performing loans				12,501			10,625
Other real estate owned				4,024			400
Net charge-offs				4,728			1,380
Allowance for loan and lease losses			$	17,691		$	13,653
Allowance for loan and lease losses to total loans				1.18	%		1.19	%
Non-performing loans to total loans				0.85	%		0.93	%
Non-performing assets to total assets				0.71	%		0.64	%
Net charge-offs to average loans				0.31	%		0.12	%
Allowance for loan and lease losses to non-performing loans				139.22	%		128.43	%
Other Data (unaudited)
				December 31,
				2008			2007
Tier 1 leverage capital ratio				7.19	%		8.20	%
Tier 1 risk-based capital ratio				11.11	%		12.82	%
Total risk-based capital ratio				12.32	%		14.04	%
Tangible equity to total assets				5.10	%		6.75	%
Tangible book value per share (1)			$	15.62		$	17.79
Investment Data (unaudited)
		December 31, 2008
		Amortized		Unrealized			Unrealized			Fair
(In thousands)		Cost		Gains			Losses			Value
Available for sale
Obligations of U.S. government sponsored enterprises	$	4,539	$	64		$	-		$	4,603
Obligations of states and political subdivisions		25,457		105			(215	)		25,347
Mortgage-backed securities:
Issued or guaranteed by U.S. government sponsored enterprises
		514,049		11,339			(52	)		525,336
Other mortgage-backed securities (2)		57,123		1			(10,347	)		46,777
Total mortgage-backed securities		571,172		11,340			(10,399	)		572,113
Total debt securities		601,168		11,509			(10,614	)		602,063
DNP Auction Preferred Stock (3)		5,000		-			(1,032	)		3,968
Total equity securities		5,000		-			(1,032	)		3,968
Total securities available for sale	$	606,168	$	11,509		$	(11,646	)	$	606,031
Held to maturity
Obligations of states and political subdivisions	$	42,040	$	213		$	(299	)	$	41,954
Total securities held to maturity	$	42,040	$	213		$	(299	)	$	41,954
(1) Computed by dividing total shareholders’ equity less goodwill and other intangible assets by the number of common shares outstanding.
(2) Other mortgage-backed securities rated either AAA or Aaa by two of the three rating agencies (Moody’s, Standard & Poor’s or Fitch).
(3) The Duff & Phelps (DNP) Select Income Fund Auction Preferred Stock failed at auction. We are currently collecting all amounts due according to contractual terms and have the ability and intent to hold the security until it clears auction, is called or matures on December 22, 2021; therefore, the security is not considered other-than-temporarily impaired.

CONTACT:
Camden National Corporation
Suzanne Brightbill, 207-230-2120
Public Relations Officer
sbrightbill@camdennational.com