STOCK-BASED COMPENSATION PLANS

6 Months Ended

Jun. 30, 2012

STOCK-BASED COMPENSATION PLANS

NOTE 7 – STOCK-BASED COMPENSATION PLANS

On January 31, 2012, the Company awarded options to purchase 2,000 shares of common stock from the Camden National Corporation 2003 Stock Option and Incentive Plan (the “2003 Plan”) to certain officers of the Company and/or Camden National Bank (the “Bank”). The expected volatility, expected life, expected dividend yield, and expected risk free interest rate for this grant used to determine the fair value of the options on January 31, 2012 were 53.34%, 5 years, 3.00%, and 0.89%, respectively. The options have been determined to have a fair value of $12.68 per share. The options vest over a five year period and have a contractual life of ten years from the date of grant.

On February 28, 2012, the Company granted 7,050 restricted stock awards to certain officers of the Company and/or the Bank under the 2003 Plan. The holders of these awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. The restricted stock awards have been determined to have a fair value of $35.76, based on the market price of the Company’s common stock on the date of grant. The restricted stock awards vest over a three-year period.

Under the Long-term Performance Share Plan, 13,969 shares vested upon the achievement of certain revenue and expense goals under the 2009-2011 Long-term Performance Share Plan metrics. Under the Management Stock Purchase Plan, 7,195 shares were granted in lieu of the management employees’ annual incentive bonus during the first three months of 2012.  During the first quarter of 2012, the Company granted 2,322 deferred stock awards under the Defined Contribution Retirement Plan.

On March 27, 2012, the Company approved the Amended and Restated Long-Term Performance Share Plan for the 2012 – 2014 performance period (the “2012 – 2014 LTIP”). Pursuant to the 2012 – 2014 LTIP, certain executive officers of the Company are eligible to receive equity compensation based on the attainment of certain performance goals set forth in the 2012 – 2014 LTIP. Performance goals under the 2012-2014 LTIP include specific revenue growth and efficiency ratio goals for threshold, target and superior levels of performance, and a minimum level of performance for the Company’s non-performing asset to total asset ratio at December 31, 2014 and a minimum level of net income growth for the three-year period ending December 31, 2014.

On May 1, 2012, the 2012 Camden National Corporation Equity and Incentive Plan (the “2012 Plan”) was approved by the shareholders of the Company. The 2012 Plan replaced the 2003 Plan, which has been terminated and no further awards will be granted thereunder. The 2012 Plan is administered by the Compensation Committee of the Company’s Board of Directors. The Committee, in its discretion, may grant stock-based awards, including incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, restricted stock, unrestricted stock, cash-based awards, performance shares and dividend equivalent rights, to officers, employees and other key persons under the 2012 Plan. Independent directors are also eligible to receive awards under the 2012 Plan on a limited basis.

During the second quarter of 2012, the Company awarded options to purchase 3,000 shares of common stock from the 2003 and 2012 Plans to certain officers of the Company and/or the Bank. The options have been determined to have fair values ranging from $12.07 to $12.67 per share. The options vest over a five year period and have a contractual life of ten years from the date of grant.