FORWARD LOOKING INFORMATION

The discussions set forth below and in the documents we incorporate by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. The Company may make written or oral forward-looking statements in other documents we file with the SEC, in our annual reports to stockholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements 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. You should not rely on forward-looking statements, 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, but are not limited to, the following:

• general, national, regional or local economic conditions which are less favorable than anticipated, including fears of global recession and continued sub-prime and credit issues, 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 could affect the allowance for loan and lease losses;

• adverse weather conditions and increased energy costs could negatively impact State and local tourism, thus potentially affecting the ability of loan customers to meet their repayment obligations;

• declines in the equity and financial markets which could result in impairment of goodwill;

• reductions in deposit levels 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, as substantially all of the assets and virtually all of the liabilities are monetary in nature;

• further actions by the U.S. government and Treasury Department, similar to the FHLMC conservatorship, which 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;

• 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 our ability to take appropriate action to protect our financial interests in certain loan situations;

• changes in industry-specific and information system technology creating operational issues or requiring significant capital investment;

• changes in the size and nature of the Company's competition, including industry consolidation and financial services provided by non-bank entities affecting customer base and profitability;

• risks related to the acquisition of Union Bankshares Company with and into the Company, including but not limited to staffing issues, adverse customer service issues, and failing to meet the financial objectives of the acquisition;

• changes in the global geo-political environment, such as acts of terrorism and military action; and

• changes in the assumptions used in making such forward-looking statements.

You should carefully review all of these factors, and you should be aware that there might be other factors that could cause these differences, including, among others, the risk factors listed in Item 1A. Risk Factors within our Annual Report on Form 10-K for the year ended December 31, 2007. Readers should carefully review the risk factors described therein and should not place undue reliance on our forward-looking statements.

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

CRITICAL ACCOUNTING POLICIES

Management's discussion and analysis of our financial condition are based on the consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The preparation of such financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those noted below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis in making judgments about the carrying values of assets that are not readily apparent from other sources. Under different assumptions or conditions, actual results could differ from the amount derived from our existing estimates.

Allowance for Loan and Lease Losses. In preparing the Consolidated Financial Statements, the ALLL requires the most significant amount of management estimates and assumptions. The ALLL, which is established through a charge to the provision for loan and lease 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 ALLL 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. We use a risk rating system to determine the credit quality of our loans. In assessing the risk rating of a particular loan, among the factors considered include the obligor's debt capacity and financial flexibility, the level of the obligor's earnings, the amount and sources of repayment, the level and nature of contingencies, management strength, and the industry and geography in which the obligor operates. These factors are based on an evaluation of historical information, as well as subjective assessment and interpretation. 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 by us to that loan. We also apply judgment to derive loss factors associated with each credit facility. These loss factors are determined by facility structure, collateral and type of obligor. The use of different estimates or assumptions could produce different provisions for loan and lease losses, which would affect our earnings. A smaller provision for loan and lease losses results in higher net income, and when a greater amount of provision for loan and lease losses is necessary, the result is lower net income. Monthly, the Corporate Risk Management group reviews the ALLL with the Camden National Bank Board of Directors. On a quarterly basis, a more in-depth review of the ALLL, including the methodology for calculating and allocating the ALLL, is reviewed with our Board of Directors, as well as the Camden National Bank Board of Directors. For further ALLL information, refer to Item 1A. Risk Factors and the Notes to Consolidated Financial Statements.

Other Real Estate Owned (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 at the lower of the "book value of the loan satisfied" or its net realizable value on the date of acquisition. At the time of acquisition, if the net realizable value of the property is less than the book value of the loan, a charge or reduction in the ALLL 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 showing a charge against current earnings. Upon acquisition of a property, a current appraisal or a broker's opinion must substantiate "market value" for the property.

Allowance for Credit Losses. The allowance for credit losses covers our portfolio of lending related commitments. We assess the need for an allowance for lending-related commitments based upon, among other factors, the amount of open commitments, the financial condition of the borrower, and historical losses on credit commitments. In addition, all draw downs on credit commitments undergo underwriting processes in accordance with our Loan Policy, thus must meet the same underwriting standards.

Other-Than-Temporary Impairment. 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 other-than-temporary impairment 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.

Mortgage Servicing Rights. Servicing assets are recognized as separate assets when servicing rights are acquired through sale of residential mortgage assets. Capitalized servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial residential mortgage assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized costs. Fair value is determined based upon discounted cash flows using market-based assumptions. In periods of falling market interest rates, accelerated loan prepayment speeds can adversely impact the fair value of these mortgage-servicing rights relative to their book value. In the event that the fair value of these assets was to increase in the future, we can recognize the increased fair value to the extent of the impairment allowance but cannot recognize an asset in excess of its amortized book value. When the book value exceeds the fair value, an impairment of these servicing assets, as a result of changes in observable market data relating to market interest rates, loan prepayment speeds and other factors, could impact our financial condition and results of operations either positively or adversely. We have engaged a recognized third party to periodically evaluate the valuation of the mortgage servicing rights asset.

Valuation of Acquired Assets and Liabilities. 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. Such assets are subject to ongoing periodic impairment tests and are evaluated using various fair value techniques.

Impairment of Goodwill and Other Intangibles. SFAS No. 142, Goodwill and Other Intangibles, addresses the method of identifying and measuring goodwill and other intangible assets acquired in a business combination, eliminates further amortization of goodwill, and requires periodic impairment evaluations of 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. We prepare the valuation analyses, which are then reviewed by the Board of Directors. Different estimates or assumptions are also utilized to determine the appropriate carrying value of other assets including, but not limited to, property, plant and equipment, core deposit intangible, and the overall collectibility of loans and receivables.

Interest Income Recognition. Interest on loans is included in income as earned based upon interest rates applied to unpaid principal. Interest is not accrued on loans 90 days or more past due unless they are adequately secured and in the process of collection or on other loans when we believe collection is doubtful. All loans considered impaired are non-accruing. Interest on non-accruing loans is recognized as income when the ultimate collectibility of interest is no longer considered doubtful. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current-period interest income; therefore, an increase in loans on non-accrual status reduces interest income. If a loan is removed from non-accrual status, all previously unrecognized interest is collected and recorded as interest income.

Accounting for Post-retirement Plans. We use a December 31 measurement date to determine the expenses for our post-retirement plans and related financial disclosure information. Post-retirement 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.

Tax Estimates. 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 recognizable. Although not currently under review, income tax returns for the years ended December 31, 2007, 2006, and 2005 are open to audit by federal and Maine authorities. If the Company, as a result of an audit, was 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, 2008:

Net income decreased $9.4 million, or 64.1%, for the nine-month period ended September 30, 2008, compared to the nine-month period ended September 30, 2007. Net income per diluted share decreased 69.2% to $0.69, compared to $2.24 per diluted share earned during the first nine months of 2007. The following were major factors contributing to the results of the first nine months of 2008 compared to the same period of 2007:

• The Company recorded a $14.0 million write-down of other-than-temporarily-impaired securities ("OTTI write-down") during the third quarter of 2008. As described in Note 15 to the Notes to Consolidated Financial Statement and in accordance with Revenue Procedure 2008-64, the OTTI write-down will be treated as an ordinary loss, and the Company will record a tax benefit of $4.9 million in the fourth quarter.

• The Company completed its acquisition of Union Bankshares Company ("Union") on January 3, 2008, thus the results of Union Bankshares and its wholly-owned subsidiary, Union Trust Company, have been included in the results of the Company since that date.

• Net interest income increased $15.5 million, or 42.0%, which was a net result of:

• an increase in interest income of $15.4 million, or 19.0%, which was primarily due to increased earning asset balances resulting from the Union acquisition and earnings on investments as new securities were added at higher yields than maturities, and

• a decrease in interest expense of $99,000, or 0.2%, primarily due to a decrease in the overall cost of funds resulting from the declining short-term rate environment, mostly offset by the net impact of increased average borrowings and deposits resulting from the Union acquisition.

• Provision for loan and lease losses increased $2.0 million primarily due to the deterioration of a select number of credits and greater stress in the Company's loan portfolio brought on by the weakening economy.

• Non-interest income decreased $10.5 million, primarily due to the OTTI write-down and net losses on the sale of securities, partially offset by an increase in income from fiduciary services at Acadia Trust, N.A. and in brokerage and insurance commissions at Acadia Financial Consultants driven by the increases in assets under management resulting from the Union acquisition, and an increase in service charges on deposit accounts and other service charges due the addition of several thousand new accounts related to the Union acquisition.

• Non-interest expense increased $10.4 million, or 40.7%, primarily due to an increase in salary and benefits resulting from the Union acquisition and normal salary and benefit increases, an increase in net occupancy and fixed asset costs resulting from the addition of branches resulting from the Union acquisition, and an increase in other expenses due to one-time merger integration costs.

For the three months ended September 30, 2008:

For the three-month period ended September 30, 2008, a net loss of ($8.0) million was a decline of $13.0 million from the $5.0 million of net income earned in the three-month period ended September 30, 2007. Net loss per diluted share was ($1.05) for the third quarter of 2008, compared to earnings per diluted share of $0.77 during the third quarter of 2007. The following were major factors contributing to the results of the third quarter of 2008 compared to the same period of 2007:

• Net interest income increased $5.2 million, or 43.0%, which was a result of:

• an increase in interest income of $4.6 million, or 17.0%, which was primarily due to increased earning asset balances resulting from the Union acquisition, and

• a decrease in interest expense of $682,000, or 4.7%, primarily due to the net impact of a decrease in the rates paid on deposits, partially offset by increased average borrowings resulting from the Union acquisition.

• Provision for loan and lease losses increased $1.2 million primarily due to the deterioration of a select number of credits and greater stress in the Company's loan portfolio brought on by the weakening economy.

• Non-interest income decreased $13.3 million primarily due to the OTTI write-down and net losses on the sale of securities, partially offset by an increase in income from fiduciary services at Acadia Trust, N.A. and in brokerage and insurance commissions at Acadia Financial Consultants driven by the increases in assets under management resulting from the Union acquisition, and an increase in service charges on deposit accounts and other service charges due the addition of several thousand new accounts related to the Union acquisition.

• Non-interest expense increased $3.3 million, or 38.8%, primarily due to an increase in salary and benefits resulting from the Union acquisition and normal salary and benefit increases, and an increase in net occupancy and fixed asset costs resulting from the addition of branches resulting from the Union acquisition.

Financial condition at September 30, 2008 compared to December 31, 2007:

• Loans increased $373.7 million, or 32.6%, as the Company acquired $366.6 million in loans in the Union acquisition and had net growth in the loan portfolio.

• Investments increased $123.0 million, or 26.5%, as the Company acquired $121.4 million in investments in the Union acquisition.

• Deposits increased $391.4 million, or 35.0%, as the Company assumed $331.5 million in deposits in the Union acquisition and experienced recent growth in certificate of deposit balances.

• Total borrowings increased $161.1 million, or 35.0%, as the Company assumed $165.3 million in borrowings in the Union acquisition, partially offset by the decrease in overnight borrowings due to the increase in deposit balances.

Core Operating Results

Due to the significance and nonrecurring nature of the OTTI write-down, the Company believes that 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 the non-cash OTTI write-down, provide a more meaningful comparison for effectively evaluating the Company's core operating results.

In the third quarter of 2008, the Company recorded a $13.95 million OTTI write-down (included in non-interest income) on Auction Pass-Through Certificates with an amortized cost of $14.95 million issued by trusts sponsored by Merrill Lynch & Co, specifically $10.0 million in Auction Pass-Through Certificates, Series 2007-8 Class A Certificates relating to FHLMC 6.02% Non-Cumulative Perpetual Preferred Stock, Series X, and $4.95

million Auction Pass-Through Certificates Series 2007-1 Class A Certificates relating to FHLMC 5.1% Non-Cumulative Preferred Stock, 5.57% Non-Cumulative Perpetual Preferred Stock and 5.9% Non-Cumulative Perpetual Preferred Stock. The assets of the trusts consisted of Federal Home Loan Mortgage Corporation ("Freddie Mac") preferred stock. On September 6, 2008, the U.S. Treasury Department placed Freddie Mac in conservatorship and, as a result of this action, the payment of dividends ceased on all Freddie Mac issued stock, including the preferred stock supporting the auction pass-through certificates. The Freddie Mac preferred stock collateralizing the securities severely declined in value resulting in the impairment of the Company's investment. In accordance with recently issued Revenue Procedure 2008-64, the OTTI write-down will be treated as an ordinary loss, thus allowing the Company to record a tax benefit in the fourth quarter of $4.9 million, or $0.64 per diluted share, related to the OTTI write-down.

                             Core Operating Results



                                                      Nine Months Ended           Three Months Ended
(In thousands, except per share data)                 September 30, 2008          September 30, 2008
Net income (loss), GAAP basis / Earnings (loss)
per diluted share, GAAP basis                      $     5,281       $ 0.69    $    (8,020 )    $ (1.05 )
Adjustment to eliminate
other-than-temporary-impairment write-down              13,950         1.81         13,950         1.82

Operating net income / Operating earnings per
diluted share                                      $    19,231       $ 2.50    $     5,930      $  0.77

Operating efficiency ratio                               54.85 %                     54.97 %
Operating return on average equity                       15.14 %                     13.91 %
Operating return on average tangible equity              21.05 %                     19.34 %
Operating return on average assets                        1.12 %                      1.02 %

Operating earnings per diluted share (excluding the OTTI write-down) for the nine months ended September 30, 2008 were $2.50, a $0.26, or 11.6%, increase over the same period of 2007. Operating earnings per diluted share for the third quarter of 2008 were $0.77, which was equal to the third quarter of 2007.

Operating net income (excluding the OTTI write-down) for the nine months ended September 30, 2008 was $19.2 million, a $4.5 million, or 30.6%, increase over the same period of 2007, which includes the impact of the Company's acquisition of Union. Operating net income (excluding the OTTI write-down) for the third quarter of 2008 was $5.9 million, a $932,000, or 18.6%, increase over the third quarter of 2007. Increases in both periods primarily reflect the impact of the January 3, 2008 acquisition of Union's $547.4 million asset base.

Operating non-interest income (excluding the OTTI write-down) for the nine months ended September 30, 2008 was $12.9 million, a $3.4 million, or 36.5%, increase over the same period of 2007. Operating non-interest income for the third quarter of 2008 was $3.8 million, a $632,000, or 20.0%, increase over the third quarter of 2007.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, for the nine months ended September 30, 2008 was $53.8 million, a $15.8 million, or 41.5%, increase compared to the net interest income of $38.0 million for the first nine months of 2007. We experienced an increase in interest income on investments of $6.1 million, or 34.7%, during the first nine months of 2008 compared to the same period in 2007, primarily due to increases in volumes related to the Union acquisition and a slight increase in yields as a result of new investments added to the portfolio at the end of 2007 at higher yields than maturing investments. Interest income on loans increased $9.5 million, or 14.7%, during the nine-month period of 2008 compared to the same period of 2007, due to an overall increase in the average balance of loans outstanding related to the Union acquisition (primarily residential real estate loans), partially offset by a 71 basis point decline in the yield on loans as the Prime Rate decreases have had a negative impact on income on adjustable rate loans. Total interest expense decreased $179,000, or 0.4%, during the first nine months of 2008 compared to the same period in 2007. This decrease was the result of declines in rates paid on borrowings and retail time deposit products due to declines in market rates, . . .