Camden National Corporation Announces a 17.7% Increase in First Half 2008 Earnings Per Share Results

Business Wire, July 29, 2008

CAMDEN, Maine -- Robert W. Daigle, president and chief executive officer of Camden National Corporation (NASDAQ: CAC; the "Company"), today announced 2008 year-to-date earnings per diluted share of $1.73, a $0.26, or 17.7%, increase over the first six months of 2007, which includes the impact of the Company's acquisition of Union Bankshares Company ("Union"). The second quarter 2008 earnings per diluted share were $0.92, which was $0.17, or 22.7%, over the $0.75 per diluted share for the second quarter of 2007.

Net income for the first six months of 2008 increased 36.8% to $13.3 million, compared to the $9.7 million reported for the six months ended June 30, 2007, and net income for the recently completed second quarter was $7.1 million, an increase of 43.8% over the $4.9 million earned in the same three-month period in 2007. Increases in both periods primarily reflect the impact of the January 3, 2008 addition of Union's $547.4 million asset base.

For the six months ended June 30, 2008, the returns on average equity and average assets were 15.77% and 1.17%, compared to 17.97% and 1.12%, respectively, for the six months ended June 30, 2007. The decline in return on average equity is primarily the result of $38.4 million of goodwill created from the Union acquisition. During the first half of 2008, return on average tangible equity (which excludes goodwill and other intangibles) was 22.21% compared to 18.75% for the same period in 2007.

Daigle commented, "We believe that a successful strategic acquisition and a steady, conservative and disciplined approach in carrying on normal day-to-day activities have produced solid operating results."

Net interest income for the second quarter of 2008 increased 45.1% to $17.9 million, compared to $12.3 million for same period of 2007. This increase in net interest income was primarily attributable to a $463.2 million, or 27.8%, increase in average earning assets resulting from the Union acquisition. In addition, the net interest margin increased 31 basis points to 3.37% for the first half of 2008, compared to the same period in 2007, as a result of the recent rate moves by the Federal Reserve and a positively sloped yield curve.

During the second quarter of 2008, the Company provided $450,000 to the allowance for loan and lease losses ("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 non-performing loans as a percentage of total loans to 0.90% at June 30, 2008, compared to 0.56% at June 30, 2007. Additionally, net charge-offs to average loans increased to 0.11% for the six months ended June 30, 2008, compared to 0.09% for the six months ended June 30, 2007. The ALLL was 1.13% of total loans outstanding at June 30, 2008, compared to 1.17% of loans outstanding on the same date in 2007. The ALLL was 125.6% of total non-performing loans at June 30, 2008, compared to 207.2% at June 30, 2007.

With respect to credit quality, Daigle commented, "Despite being proactive in re-tooling our loan origination practices and increasing our vigilance on all matters relating to risk management, we have not been immune from the adverse effects of a weakening economy. These indicators are not where we are accustomed to seeing them, however, I have the utmost confidence in the people and processes we have in place to guide us through these difficult times."

Non-interest income of $4.7 million for the quarter ended June 30, 2008 was up 45.0% from the same quarter a year ago. Resulting primarily from the customer relationships gained in the acquisition of Union, the Company recorded increases in service charges on deposit accounts, income from fiduciary services at Acadia Trust, N.A., and brokerage commission income at Acadia Financial Consultants ("AFC").

Non-interest expense for the second quarter of 2008 was $11.9 million, an increase of $3.4 million, or 40.2%, over the same quarter in the prior year primarily due to the Union acquisition. The Company's efficiency ratio for the six-month period ended June 30, 2008 was 54.80%, compared to 55.00% for the six months ended June 30, 2007.

In comparing the second and first quarters of 2008, which represent the first two quarters following the Union acquisition, the Company highlighted the following results:

* Earnings per diluted share of $0.92 were $0.12, or 15.0%, higher than the $0.80 reported in the first quarter.

* Net income of $7.1 million was $913,000, or 14.8%, greater than the $6.2 million reported in the first quarter.

* Net interest income for the second quarter increased $736,000, or 4.3%, over the first quarter primarily due to a reduction in the cost of funds.

* Non-interest income for the second quarter increased $249,000, or 5.7%, over the first quarter due to increased service charges on deposit accounts and brokerage commission income at AFC.

* Non-interest expenses decreased $348,000 reflecting non-recurring integration-related costs recorded in the first quarter, and the run-off of core deposit intangible amortization related to the 1998 branch acquisition.