Camden National (CAC) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Dear Shareholders:

The performance of your Company, through June 30, 2005, provides increasing evidence that the investments made a year ago, of time, effort and capital spent crafting and implementing a strategic game plan to pursue our envisioned future, is beginning to yield the anticipated outcomes, even as we navigate in a challenging economic environment.

For the first six months of this year, net income per diluted share increased 9.84% to $1.34, compared to $1.22 per diluted share earned during the first half of 2004. Net income for the six-month period ended June 30, 2005 was $10.3 million, an increase of 8.73% from the same period a year ago. These results translated into a return on average equity of 16.73% and a return on average assets of 1.35% for the six months ended June 30, 2005, compared to 15.73% and 1.40%, respectively, for the same six-month period in 2004.

For the three-month period ended June 30, 2005, net income per diluted share of $0.71 was up 10.94% compared to $0.64 for the second quarter of 2004. Net income for the recently completed quarter was $5.5 million, which compared favorably to $5.0 million for the quarter ended June 30, 2004. The results of the past three months represent positive momentum heading into our traditionally stronger quarters of the year, those heavily influenced by tourism.

Factors aiding this positive year-to-date net income trend include strong asset growth, an improving net interest margin, and our focus on keeping non-interest expenses in check. Balance sheet improvement is reflected in loans outstanding, which are up $120.4 million, or 11.92%, versus a year ago. Our commitment, and corresponding investment, in consumer-oriented products and services contributed to strong growth in the residential mortgage and consumer loan portfolios, up 12.57% and 22.94% respectively, from June 30, 2004 to June 30, 2005.

Quality within the overall loan portfolio remains satisfactory at June 30, 2005. The percentage of non-performing loans to total loans is unchanged from a year ago at 0.57%. Year-to-date net charge-offs of $175,000, while higher than the net recovery position at June 30, 2004, still represents a very modest 0.02% of total loans, well below the industry average.

The nine consecutive 0.25% increases in the Fed Funds rate, which started early last year, are having a beneficial effect on the net interest margin. It is safe to say that the net interest margin has stabilized following considerable narrowing over an extended period. Although the Company’s funding costs are on the rise, we have been able to mitigate this trend through a combination of re-pricing within the various loan portfolios, effective use of newly installed relationship pricing technology, and solid growth in low-cost deposit categories.

The Company’s commitment to fostering innovation within the workforce, initiated in 2004, is beginning to flourish. Countless examples of process improvements, product refinements and customer-service enhancements are underway throughout the Company, all with the goal of creating what we callThe Camden National Experience.^SM Tangible evidence of the beneficial effect of these activities is reflected in total non-interest expenses, where year-on-year comparisons, through June 30, reveal a slight decline and an improved efficiency ratio of 50.05%, down from 52.39%. This important performance assessment ratio represents how much

revenue a company is capable of generating for every dollar of non-interest expense (overhead) it incurs. At Camden National Corporation, the most recent six-month results suggest that we are producing nearly $2.00 for every $1.00 expended. By any measurement standard in the industry, this is quite remarkable. It speaks to a committed, and invested, workforce.

The latter seems an appropriate segue to the sidebar theme selected for this quarter’s letter –Vitalizing Communities.Many times I am asked, “What does it mean to call oneself a community banker?” The simplest way I can explain it is by reciting our Company’sCore Purpose – “Through each interaction, we will enrich the lives of people, help businesses succeed, and vitalize communities.” The “we,” of course, refers to my colleagues and me. In most people’s minds, we are the Company. Who we are and what we do ‘on the clock,’ and often times ‘off the clock,’ defines who we are as an organization.

Along these lines, I am compelled to share with you a few distinctions bestowed upon some of my colleagues this past quarter, further illustrating what community banking is all about. The Mid-Coast Board of Realtors recognized Janet Weaver, Mortgage Loan Officer, as ‘Affiliate of the Year’, an honor conveyed to an individual in a real estate-related industry who provides exemplary service to the Board and the community at large. Gary Stone, Lincoln County Market Manager, was named ‘Community Banker of the Year’ by the Maine Bankers Association for his outstanding community service. Finally, several individuals, representing all three of our subsidiaries, were recognized as America’s Promise volunteers dedicated to “Making a Difference for Kids and Communities” by Governor John E. Baldacci at a recent Statehouse ceremony. These recognitions of volunteerism, one of the hallmarks of community banking, speak to one thing - commitment. Being remarkable requires an impassioned workforce, it just doesn’t happen.

I’m aware that, as Shareholders, you may find it unusual to hear me describe our Company more in terms of individual employees than as an inanimate corporate entity. Why? It’s who we are as a Company and why we’ve been successful for 130 years. Those among you who do business with us know full well what I am referring to, which is why I’m convinced that our success going forward is all about providing our customers the kind of remarkable experiences that build strong bonds and lead to partnerships more so than relationships. And while this may all sound a bit “warm and fuzzy,” I invite you to sample theExperience.See for yourself, today, what the future of community banking is all about at your Company.

Sincerely,

Robert W. Daigle

President & Chief Executive Officer

Consolidated Statements of Condition(unaudited)

	June 30,						December 31, 2004
(In thousands, except number of shares & per share data)	2005			2004
Assets
Cash and due from banks	$	27,271		$	32,351		$	31,573
Securities available for sale, at market value		346,715			265,116			321,881
Securities held to maturity		13,932			—			2,117
Loans, less allowance for loan and lease losses of $14,040, $14,520, and $13,641 at June 30, 2005 and 2004 and December 31, 2004, respectively		1,116,443			995,521			1,055,653
Premises and equipment, net		16,506			16,106			16,392
Goodwill		3,991			3,989			3,991
Other assets		62,126			59,272			58,258
Total assets	$	1,586,984		$	1,372,355		$	1,489,865
Liabilities
Deposits:
Demand	$	136,487		$	122,234		$	131,998
NOW		124,026			113,628			120,203
Money market		221,271			204,163			211,060
Savings		103,837			108,893			112,010
Certificates of deposit		492,426			415,312			439,330
Total deposits		1,078,047			964,230			1,014,601
Borrowings from Federal Home Loan Bank		310,409			213,083			277,690
Other borrowed funds		60,818			64,994			59,130
Accrued interest and other liabilities		11,135			11,281			12,039
Total liabilities		1,460,409			1,253,588			1,363,460
Shareholders’ Equity
Common stock, no par value; authorized 20,000,000 shares, issued and outstanding 7,588,461, 7,670,847 and 7,634,975 shares on June 30, 2005, June 30, 2004 and December 31, 2004, respectively		2,450			2,450			2,450
Surplus		4,158			4,482			4,440
Retained earnings		120,542			112,908			118,764
Accumulated other comprehensive (loss) income
Net unrealized (losses) gains on securities available for sale, net of tax		(575	)		(1,386	)		751
Net unrealized gains on derivative instruments marked to market, net of tax		—			313			—
Total accumulated other comprehensive (loss) income		(575	)		(1,073	)		751
Total shareholders’ equity		126,575			118,767			126,405
Total liabilities and shareholders’ equity	$	1,586,984		$	1,372,355		$	1,489,865

Consolidated Statements of Income(unaudited)

	Six Months Ended June 30,				Three Months Ended June 30,
(In thousands, except number of shares & per share data)	2005		2004		2005		2004
Interest Income
Interest and fees on loans	$	33,790	$	28,047	$	17,519	$	13,922
Interest on securities		7,398		6,512		3,873		3,090
Interest on interest rate swap agreements		173		1,035		—		517
Other interest income		404		210		220		110
Total interest income		41,765		35,804		21,612		17,639
Interest Expense
Interest on deposits		9,318		7,164		4,956		3,673
Interest on other borrowings		5,939		3,844		3,250		1,850
Interest on interest rate swap agreements		142		607		—		299
Total interest expense		15,399		11,615		8,206		5,822
Net interest income		26,366		24,189		13,406		11,817
Provision for Loan and Lease Losses		575		165		345		—
Net interest income after provision for loan and lease losses		25,791		24,024		13,061		11,817
Non-interest Income
Service charges on deposit accounts		1,702		1,866		884		970
Other service charges and fees		618		643		347		353
Income from fiduciary services		1,971		1,966		1,024		978
Life insurance earnings		322		464		161		232
Other income		477		962		248		826
Total non-interest income		5,090		5,901		2,664		3,359
Non-interest Expenses
Salaries and employee benefits		8,933		8,664		4,709		4,221
Premises and fixed assets		2,109		2,184		1,012		1,076
Amortization of core deposit intangible		443		454		221		223
Other expenses		4,260		4,461		1,915		2,210
Total non-interest expenses		15,745		15,763		7,857		7,730
Income before income taxes		15,136		14,162		7,868		7,446
Income Taxes		4,839		4,692		2,412		2,496
Net Income	$	10,297	$	9,470	$	5,456	$	4,950
Per Share Data
Basic earnings per share	$	1.35	$	1.23	$	0.72	$	0.65
Diluted earnings per share		1.34		1.22		0.71		0.64
Cash dividends per share	$	0.90	$	0.40	$	0.20	$	0.20
Weighted average number of shares outstanding		7,629,786		7,724,485		7,615,464		7,699,523