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 Securities Exchange Commission, in our annual reports to shareholders, 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:

• continuing adverse general, national, regional or local economic conditions that could impact 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 losses;

• 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;

• changes in the carrying value of investment securities and other assets;

• further actions by the U.S. government and Treasury Department, similar to the Federal Home Loan Mortgage Corporation 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; and

• changing business, banking, or regulatory conditions or policies, or new legislation affecting the financial services industry, that could lead to changes in the competitive balance among financial institutions, restrictions on bank activities, changes in costs (including deposit insurance premiums), increased regulatory scrutiny, declines in consumer confidence in depository institutions, or changes in the secondary market for bank loan and other products;

• changes in accounting rules, Federal and State laws, Internal Revenue Service 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.

You should carefully review all of these factors, and be aware that there may be other factors that could cause differences, including the risk factors listed in Item 1A. Risk Factors within our Annual Report on Form 10-K for the year ended December 31, 2008. 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.

In preparing the Consolidated Financial Statements, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from our current estimates, as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near-term change, including the allowance for loan losses ("ALL"), accounting for acquisitions and review of goodwill and other identifiable intangible assets for impairment, valuation of other real estate owned, other than temporary impairment of investments, accounting for postretirement plans and income taxes. Our significant accounting policies and critical estimates are summarized in Note 1 of our Annual Report on Form 10-K for the year ended December 31, 2008.

Allowance for Loan Losses. In preparing the Consolidated Financial Statements, the ALL requires the most significant amount of management estimates and assumptions. The ALL, which is established through a charge to the provision for loan 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 ALL 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.

In determining the appropriate level of ALL, we use a methodology to systematically measure the amount of estimated loan loss exposure inherent in the loan portfolio. The methodology includes four elements: (1) identification of loss allocations for certain specific loans, (2) loss allocation factors for certain loan types based on credit grade and loss experience, (3) general loss allocations for other environmental factors, and (4) unallocated allowance. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The methodology is in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). We use a risk rating system to determine the credit quality of our loans and apply the related loss allocation factors. In assessing the risk rating of a particular loan, we consider, among other factors, the obligor's debt capacity, financial condition and flexibility, the level of the obligor's earnings, the amount and sources of repayment, the performance with respect to loan terms, the adequacy of collateral, the level and nature of contingencies, management strength, and the industry in which the obligor operates. These factors are based on an evaluation of historical information, as well as subjective assessment and interpretation of current conditions. 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 to that loan. We periodically reassess and revise the loss allocation factors used in the assignment of loss exposure to appropriately reflect our analysis of loss experience. Portfolios of more homogenous populations of loans including residential mortgages and consumer loans are analyzed as groups taking into account delinquency rates and other economic conditions which may affect the ability of borrowers to meet debt service requirements, including interest rates and energy costs. We also consider the results of regulatory examinations, historical loss ranges, portfolio composition, and other changes in the portfolio. An additional allocation is determined based on a judgmental process whereby management considers qualitative and quantitative assessments of other environmental factors. For example, a significant portion of our loan portfolio is concentrated among borrowers in southern Maine and a substantial portion of the portfolio is collateralized by real estate in this area. Another portion of the commercial and commercial real estate loans are to borrowers in the hospitality, tourism and recreation industries. Finally, an unallocated portion of the total allowance is maintained to allow for shifts in portfolio composition.

Since the methodology is based upon historical experience and trends as well as management's judgment, factors may arise that result in different estimations. Significant factors that could give rise to changes in these estimates may include, but are not limited to, changes in economic conditions in our market area, concentration of risk, declines in local property values, and results of regulatory examinations. While management's evaluation of the ALL as of September 30, 2009 determined the allowance to be appropriate, under adversely different conditions or assumptions, we may need to increase the allowance. The Corporate Risk Management group reviews the ALL with the Camden National Bank Board of Directors on a monthly basis. A more in-depth review of the ALL, including the methodology for calculating and allocating the ALL, is reviewed with the Company's Board of Directors, as well as the Camden National Bank Board of Directors, on a quarterly basis.

Accounting for Acquisitions and Review of Goodwill and Identifiable Intangible Assets for Impairment. 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 and are subject to ongoing periodic impairment tests and are evaluated using various fair value techniques. 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.

Valuation of 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 based on its net realizable value on the date of acquisition. At the acquisition date, if the net realizable value of the property is less than the book value of the loan, a charge or reduction in the ALL 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 charging against current earnings. Upon acquisition of a property, a current appraisal or broker's opinion must substantiate market value for the property.

Other Than Temporary Impairment of Investments. 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 security 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.

Accounting for Postretirement Plans. We use a December 31 measurement date to determine the expenses for our postretirement plans and related financial disclosure information. Postretirement 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 trend rates. As with the computations of plan expense, cash contribution requirements are also sensitive to such changes.

Income Taxes. 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, 2005 through 2008 are open to audit by federal and Maine authorities. If we, as a result of an audit, were assessed interest and penalties, the amounts would be recorded through other non-interest expense.

Executive Overview

For the nine months ended September 30, 2009:

Net income of $17.5 million for the nine-month period ended September 30, 2009 increased $12.3 million, compared to the nine-month period ended September 30, 2008. Net income per diluted share increased to $2.29, compared to $0.69 per diluted share earned during the first nine months of 2008. The following were major factors contributing to the results of the first nine months of 2009 compared to the same period of 2008:

• Net interest income on a fully-taxable equivalent basis for the first nine months of 2009 increased 4.6% to $56.4 million due to lower funding costs and an improvement in the net interest margin.
• The provision for loan losses of $6.5 million increased $4.4 million in the first nine months of 2009 compared to the same period of 2008 as a result of an increase in net charge-offs and non-performing assets.

• For the nine months ended September 30, 2009, net charge-offs totaled $4.8 million, or an annualized rate of 0.42% of average loans, compared to $2.9 million, or 0.26%, for the same period of 2008. Non-performing assets as a percentage of total assets amounted to 1.04% and 0.69% at September 30, 2009 and 2008, respectively.
• Non-interest income before net investment securities gains/losses and securities impairment write-down for the first nine months of 2009 was $14.7 million, a 9.9% increase over the first nine months of 2008. The increase was driven by an increase in mortgage banking income, including mortgage-servicing income and gains on the sale of loans, in part offset by a decline in income from fiduciary services at Acadia Trust, N.A. ("Acadia Trust").

• We recorded net losses on our investment securities portfolio totaling $14.6 million in the first nine months of 2008 primarily due to a $14.0 million write-down of other-than-temporarily-impaired securities ("OTTI write-down") during the third quarter of 2008. In accordance with Revenue Procedure 2008-64, the OTTI write-down was treated as an ordinary loss, and the Company was able to record a tax benefit of $4.9 million in the fourth quarter of 2008.
• Non-interest expense for the first nine months of 2009 was $37.9 million, an increase of $2.0 million, or 5.7%, over the first nine months of the prior year, which was primarily due to an increase in Federal Deposit Insurance Corporation (FDIC) insurance assessment rates as well as a special assessment of $1.1 million levied in the second quarter of 2009. There were also increases in foreclosed properties and collection costs, in part offset by a 4.9% decline in salary and benefit costs and a decrease in the amortization of the core deposit intangible.

For the three months ended September 30, 2009:

Net income for the three-month period ended September 30, 2009 increased $14.4 million, compared to the three-month period ended September 30, 2008. Net income per diluted share for the third quarter 2009 increased to $0.83, compared to a loss of $1.05 per diluted share earned in 2008. The following were major factors contributing to the results of the third quarter of 2009 compared to the same period of 2008:

• Net interest income on a fully-taxable equivalent basis for the third quarter of 2009 increased 3.9% to $18.6 million due to lower funding costs and an improvement in the net interest margin.
• The provision for loan losses of $2.0 million increased $830,000 in the third quarter of 2009 compared to the same period of 2008 as a result of an increase in net charge-offs and non-performing assets.

• Non-interest income before net investment securities gains/losses and securities impairment write-down for the third quarter of 2009 was $5.1 million, a 14.4% increase over the third quarter of 2008. The increase was driven by an increase in mortgage banking income, including mortgage-servicing income and gains on the sale of loans, in part offset by a decline in income from fiduciary services at the Company's subsidiary Acadia Trust.
• Net losses on our investment securities portfolio for the third quarter 2008 totaling $14.8 million were recorded primarily due to a $14.0 million write-down of other-than-temporarily-impaired securities. In accordance with Revenue Procedure 2008-64, the OTTI write-down was treated as an ordinary loss, and the Company was able to record a tax benefit of $4.9 million in the fourth quarter of 2008.

• Non-interest expense for the third quarter of 2009 was $12.2 million, an increase of $493,000, or 4.2%, over the third quarter of the prior year, which was primarily due to an increase in foreclosed properties and collection costs.

Financial condition at September 30, 2009 compared to December 31, 2008:

• Total loans at September 30, 2009 were $1.5 billion (including loans held for sale), an increase of $20.1 million (including loans held for sale) compared to December 31, 2008. The increase in loan balances was primarily in the commercial and residential real estate portfolios.
• Investment securities declined $82.7 million at September 30, 2009 compared to December 31, 2008 due to security prepayments.

• Total liabilities at September 30, 2009 of $2.1 billion decreased $89.1 million, or 4.1%, as borrowings decreased $117.4 million, primarily in Federal Home Loan Bank of Boston ("FHLBB") borrowings, due to the decline in earning asset balances.
• Shareholders' equity increased 12.2% due to current year earnings and other comprehensive income, in part offset by dividends declared.

Net Interest Income

Net interest income is our largest source of revenue and accounts for approximately 80% of total revenues. Net interest income reflects revenues generated through income from earning assets plus loan fees, less interest paid on interest-bearing deposits and borrowings. Net interest income is affected by changes in interest rates, by loan and deposit pricing strategies and competitive conditions, the volume and mix of interest-earning assets and interest-bearing liabilities, and the level of non-performing assets.

Net interest income was $56.4 million on a fully-taxable equivalent basis for the nine months ended September 30, 2009, compared to $53.9 million for the first nine months of 2008, an increase of $2.5 million or 4.6%. The increase in net interest income is largely due to an improvement of 19 basis points in the net interest margin, to 3.55%, for the first nine months of 2009. The increase in the net interest margin resulted from a decrease in the cost of funds, offset in part by a decrease in income on earning assets, both of which were caused by the decline in interest rates. Average interest-earning assets decreased by $12.8 million for the nine months ended September 30, 2009 compared the same period in 2008, primarily due to decreases in most loan categories, partially offset by increases in investment securities and consumer loans. The yield on earning assets for the first nine months of 2009 decreased 61 basis points, reflecting a decline in the interest rate environment impacting both the investment and loan yields. Average interest-bearing liabilities decreased $8.5 million for the nine months ended September 30, 2009 compared to the same period in 2008, primarily due to declines in wholesale funding, in part offset by an increase in retail deposits driven by increases in certificate of deposit accounts. Total cost of funds decreased 88 basis points due to the decline in short-term interest rates.

Net interest income, on a fully taxable equivalent basis, for the three months ended September 30, 2009 was $18.6 million, a 3.9%, or $696,000, increase compared to $17.9 million in net interest income for the same period in 2008. The increase was primarily due to lower funding costs as the Company was able to improve pricing on deposits and borrowings and minimize the decline of interest rates on loans that resulted in an improved net interest margin.

The following table presents, for the periods noted, average balance sheets, interest income, interest expense, and the corresponding average yields earned and rates paid, as well as net interest income, net interest rate spread and net interest margin.

               Average Balance, Interest and Yield/Rate Analysis

                                          Nine Months Ended                            Nine Months Ended
                                          September 30, 2009                           September 30, 2008
                                 Average                       Yield/         Average                       Yield/
(Dollars in Thousands)           Balance        Interest        Rate          Balance        Interest        Rate
           ASSETS
Interest-earning assets:
Securities - taxable           $   555,525      $  20,344          4.88 %   $   544,416      $  20,665          5.05 %
Securities - nontaxable (1)         64,956          2,842          5.83 %        70,621          3,067          5.80 %
Trading account assets               1,413             16          1.51 %         1,561             35          2.99 %
Federal funds sold                       -              -             - %           451             10          2.96 %
Loans (1) (2) :
Residential real estate            621,407         27,089          5.81 %       627,896         28,367          6.03 %
Commercial real estate             408,622         18,803          6.15 %       416,533         22,159          7.11 %
Commercial                         183,258          7,700          5.62 %       210,016         11,161          7.10 %
Municipal                           23,756            880          4.95 %        22,422            889          5.30 %
Consumer                           265,523          9,826          4.95 %       243,345         11,505          6.32 %
Total loans                      1,502,566         64,298          5.71 %     1,520,212         74,081          6.50 %
Total interest-earning
assets                           2,124,460         87,500          5.50 %     2,137,261         97,858          6.11 %
Cash and due from banks             28,056                                       37,534
Other assets                       155,118                                      143,541
Less: allowance for loan
losses                             (18,388 )                                    (17,343 )
Total assets                   $ 2,289,246                                  $ 2,300,993
LIABILITIES & SHAREHOLDERS'
           EQUITY
Interest-bearing
liabilities:
Interest checking accounts     $   199,795            692          0.46 %   $   185,142          1,226          0.88 %
Savings accounts                   138,039            368          0.36 %       133,566            618          0.62 %
Money market accounts              305,860          2,474          1.08 %       348,652          6,126          2.35 %
Certificates of deposit            584,747         12,726          2.91 %       512,686         14,103          3.67 %
Total retail deposits            1,228,441         16,260          1.77 %     1,180,046         22,073          2.50 %
Broker deposits                     80,973          1,483          2.45 %        67,453          2,239          4.43 %
Junior subordinated
debentures                          43,449          2,136          6.57 %        43,342          2,195          6.76 %
Borrowings                         559,202         11,267          2.69 %       629,744         17,500          3.71 %
Total wholesale funding            683,624         14,886          2.91 %       740,539         21,934          3.96 %
Total interest-bearing
liabilities                      1,912,065         31,146          2.18 %     1,920,585         44,007          3.06 %
Demand deposits                    180,702                                      185,595
Other liabilities                   22,452                                       25,180
Shareholders' equity               174,027                                      169,633
Total liabilities and
shareholders' equity           $ 2,289,246                                  $ 2,300,993
Net interest income
(fully-taxable equivalent)                         56,354                                       53,851
Less: fully-taxable
equivalent adjustment                              (1,284 )                                     (1,323 )
                                                $  55,070                                    $  52,528
Net interest rate spread
(fully-taxable equivalent)                                         3.32 %                                       3.05 %
Net interest margin
(fully-taxable equivalent)                                         3.55 %                                       3.36 %

(1) Reported on tax-equivalent basis calculated using a rate of 35%.
(2) Loans held for sale and non-accrual loans are included in total average loans.

Provision and Allowance for Loan Losses

The ALL is our best estimate of inherent risk of loss in the loan portfolio as of the balance sheet date. The ALL was $19.4 million, or 1.28% of total loans, at September 30, 2009, compared to $17.7 million, or 1.18% of total loans, at December 31, 2008. For the nine months ended September 30, 2009, our provision for loan losses charged to earnings amounted to $6.5 million, compared to $2.1 . . .