8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 29, 2003

CAMDEN NATIONAL CORPORATION

(Exact name of Registrant as specified in charter)

MAINE

(State or other jurisdiction of incorporation)

01-28190	01-0413282
(Commission file number)	(IRS employer identification no.)
Two Elm Street, Camden, Maine	04843
(Address of principal executive offices)	(Zip Code)

(207) 236-8821

(Registrant’s telephone number, including area code)

Item 12

Camden National Corporation releases quarterly shareholder letter and financial summary for the second quarter of 2003.

(c) Exhibits.

99.1    Quarterly shareholder letter and financial summary

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be filed on its behalf by the undersigned thereunto duly authorized.

CAMDEN NATIONAL CORPORATION

Date: July 29, 2003

By:/s/    Gregory A. Dufour                            

        Gregory A. Dufour

        Senior Vice President – Finance,

        Operations & Technology and

        Principal Financial Officer

EX-99.1

Exhibit 99.1

Dear Shareholders:

Last quarter, I presented the theme of preparedness at Camden National Corporation and highlighted some of the strategies that are in place as part of our effort to achieve long-term sustainable growth in a challenging economic environment. In the three-month period that followed, we experienced a pick-up in the stock market, talk of deflation, and the 13^th consecutive reduction in interest rates by the Federal Reserve since January 2001. Each of these events presented challenges and opportunities for your Company.

Second quarter results demonstrated our Company’s ability to maintain desired earnings momentum. Net income was $4.5 million for the quarter ending June 30, 2003, which was, compared to $4.2 million during the second quarter of 2002, an increase of 6.82%. Diluted earnings per share were $0.56 during the second quarter of 2003 versus $0.52 reported for the second quarter of 2002, an increase of 7.69%. Net income for the first six months of 2003 was $8.8 million or $1.0 million greater that the $7.8 million posted during the first six months of 2002, which included a $449,000 after-tax write-down of goodwill related to the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” (the “goodwill write-down”). Excluding the goodwill write-down, earnings for the first six months of 2002 would have been $8.3 million.

Benchmark indicators confirm that we are achieving our planned growth objectives. Annualized return on assets of 1.41% and return on equity of 14.80% for the first six months of 2003 compared favorably to 1.42% and 14.66% reported during the same period in 2002. Meanwhile, the Company’s efficiency ratio (non-interest expense/net interest income and non-interest income), which indicates how much we spend to generate a dollar of revenue, stood at 52.03%, an improvement from 52.75% reported for the first half of 2002.

Previously, I discussed three uncertainties facing financial services companies in today’s economy: asset quality, interest rate and capital. An update on their current status and the strategies your Company is employing to mitigate each of these uncertainties is in order.

First, asset quality risk is deserving of our greatest attention at this time. Although non-performing loans to total loans decreased from 1.00% at June 30, 2002 to 0.74% at June 30, 2003, net charge-offs, through the first six months of 2003, were $2.0 million, compared to $1.2 million for the same period in 2002. The increase in net charge-offs reflects the effect of a softening economy within the UnitedKingfield Bank service area. The Corporate Risk Management Group has been monitoring this situation closely and has set aside reserves to address this developing economic trend. As of June 30, 2003, our Allowance for Loan and Lease Losses (ALLL) was $14.1 million, or 1.57% of total loans and leases. This provides the Company with an ALLL that management believes is reasonable and reflective of the overall risk of loss inherent in our loan and lease portfolios. We use various analytical tools and methodologies to ensure the ALLL remains at an acceptable level. We will continue to monitor asset quality and modify the ALLL as conditions dictate.

Second, interest rate risk continues to be a major focus for all banking companies given the Federal Reserve Bank’s decision to reduce the Fed Funds rate by a quarter of a percent or 25 basis points during the second quarter. Over the past two years, our Finance Group working with the Management Asset and Liability Committee have continued to enhance the ongoing monitoring and management of interest rate risk. Initiatives including the use of derivatives instruments, residential mortgage loan sales and securitizations, and ongoing monitoring of the impact on net interest income arising from balance sheet changes through the use of simulation models have allowed us to employ strategies to help maintain our revenue stream, as well as to mitigate the long-term effects of prospective interest rate dynamics.

Lastly, we view the Company’s capital position as an ongoing source of strength for our shareholders and customers. At June 30, 2003, our total risk-based capital ratio was 13.58% and our Tier 1 capital ratio was 12.33%. Both compare favorably to the 10.0% and 6.0% minimums required by the Federal Reserve for a bank holding company to be considered “well capitalized.” Management and the Board of Directors continue to work together to balance the call for capital preservation with effective capital deployment.

During the second quarter, we announced several initiatives for the benefit of our shareholders. We declared a dividend of $0.19 per share, representing a $0.02 or 12% increase over the first quarter dividend distribution. The Board of Directors voted to extend our successful stock repurchase program. Since the program’s inception in 2001, the Company has repurchased 231,140 shares at an average cost of $21.48 per share. Finally, in response to shareholder sentiment and research of various alternatives, the Board authorized the establishment of a dividend reinvestment plan and direct stock purchase plan. I believe these actions provide a balance for investors who look to dividends as a source of personal income, those seeking greater liquidity for their shares, and those who want a convenient and cost effective way to increase their holdings in the Company.

Finally, we are pleased to confirm that, based on market capitalization at June 30, 2003, Camden National Corporation remains a component of the Russell 2000 Stock Index. Being part of the Russell 2000 provides for recognition as a small-cap investment opportunity to a broad base of investors. At the end of the second quarter, your Company’s stock price was $27.50 per share, an increase of 13.6% from the closing price on December 31, 2002.

Your commitment to Camden National Corporation as a shareholder and, hopefully, as a customer, is greatly appreciated. I encourage each of you to visit an office of Camden National Bank, UnitedKingfield Bank or Acadia Trust, N.A. and experience firsthand the service excellence factor, which serves as a permanent platform for your Company’s future operating success.

Sincerely,

Robert W. Daigle

President and Chief Executive Officer

Consolidated Statements of Income (unaudited)

	Six Months Ended June 30,					Three Months Ended June 30,
(In thousands, except number of shares & per share data)	2003		2002			2003		2002
Interest Income
Interest and fees on loans	$	27,824	$	27,618		$	14,049	$	13,918
Interest on securities		7,973		8,667			3,773		4,216
Other interest income		297		364			136		167
Total interest income		36,094		36,649			17,958		18,301
Interest Expense
Interest on deposits		7,307		8,509			3,611		4,252
Interest on borrowings		4,783		4,703			2,433		2,415
Total interest expense		12,090		13,212			6,044		6,667
Net interest income		24,004		23,437			11,914		11,634
Provision for Loan Losses		865		1,950			445		1,303
Net interest income after provision for loan losses		23,139		21,487			11,469		10,331
Other Income
Service charges on deposit accounts		1,882		1,860			999		1,018
Merchant assessments		—		869			—		518
Trust fees		1,093		1,225			578		615
Life insurance earnings		368		433			212		216
Other income		1,675		2,284			840		1,372
Total other income		5,018		6,671			2,629		3,739
Operating Expenses
Salaries and employee benefits		8,202		8,014			4,143		4,013
Premises and fixed assets		2,197		2,329			1,055		1,168
Merchant program		—		836			—		489
Amortization of core deposit intangible		471		487			236		235
Other expenses		4,230		4,217			2,064		1,954
Total operating expenses		15,100		15,883			7,498		7,859
Income before income taxes and cumulative effect of accounting change		13,057		12,275			6,600		6,211
Income Taxes		4,237		4,007			2,105		2,003
Income before cumulative effect of accounting change		8,820		8,268			4,495		4,208
Cumulative effect of change in accounting for goodwill, net of tax benefit of $241		—		(449	)		—		—
Net Income	$	8,820	$	7,819		$	4,495	$	4,208
Per Share Data
Basic earnings per share before cumulative effect of accounting change	$	1.10	$	1.03		$	0.56	$	0.53
Cumulative effect of change in accounting for goodwill, net		—		(0.06	)		—		—
Basic earnings per share	$	1.10	$	0.97		$	0.56	$	0.53
Diluted earnings per share before cumulative effect of accounting change	$	1.10	$	1.02		$	0.56	$	0.52
Cumulative effect of change in accounting for goodwill, net		—		(0.06	)		—		—
Diluted earnings per share	$	1.10	$	0.96		$	0.56	$	0.52
Cash dividends per share		0.34		0.34			0.17		0.17
Weighted average number of shares outstanding		8,005,919		8,057,781			7,985,028		8,057,781

	2002	2003
1st Qtr	0.44	0.54	A complete set of financial statements for Camden National Corporation may be obtained upon written request to Gregory A. Dufour, Senior Vice President of Finance, Camden National Corporation, P.O. Box 310, Camden, Maine 04843.
2nd Qtr	0.52	0.56
3rd Qtr	0.57
4th Qtr	0.58

Consolidated Statements of Condition (unaudited)

	June 30,				December 31,
(In thousands, except number of shares & per share data)	2003		2002		2002
Assets
Cash and due from banks	$	32,723	$	30,561	$	33,523
Federal funds sold		—		45,835		—
Securities available for sale, at market value		282,924		259,674		313,780
Securities held to maturity		—		1,042		995
Residential mortgages held for sale		337		207		—
Loans, less allowance for loan losses of $14,117, $14,235 and $15,242 at June 30, 2003 and 2002 and December 31, 2002, respectively		885,519		740,032		793,640
Premises and equipment, net		16,275		17,523		16,710
Goodwill		3,518		3,518		3,518
Other assets		57,977		55,896		56,253
Total assets	$	1,279,273	$	1,154,288	$	1,218,419
Liabilities
Deposits:
Demand	$	104,613	$	89,560	$	105,091
NOW		102,408		91,902		107,383
Money market		160,516		161,059		169,457
Savings		104,716		91,178		98,197
Certificates of deposit		372,888		374,820		370,006
Total deposits		845,141		808,519		850,134
Borrowings from Federal Home Loan Bank		250,374		172,547		191,901
Other borrowed funds		51,015		50,551		46,960
Accrued interest and other liabilities		11,168		11,563		10,596
Total liabilities		1,157,698		1,043,180		1,099,591
Shareholders’ Equity
Common stock, no par value; authorized 20,000,000 shares, issued 8,609,898 shares		2,450		2,450		2,450
Surplus		5,556		5,775		5,719
Retained earnings		120,175		107,666		114,128
Accumulated other comprehensive income
Net unrealized gains on securities available for sale, net of tax		5,743		5,546		6,800
Net unrealized gains on derivative instruments marked to market, net of tax		884		78		914
		134,808		121,515		130,011
Less cost of 658,930, 552,117 and 582,524 shares of treasury stock on June 30, 2003 and 2002 and December 31, 2002, respectively		13,233		10,407		11,183
Total shareholders’ equity		121,575		111,108		118,828
Total liabilities and shareholders’ equity	$	1,279,273	$	1,154,288	$	1,218,419

	2002	2003
Jan	18.20	23.10	Camden National Corporation stock is listed on the American Stock Exchange under the ticker symbol “CAC”. Stock prices shown in chart are as of close of trading on the last business day of the month.
Feb	19.50	22.30
Mar	23.50	25.15
Apr	24.73	25.35
May	25.50	24.79
Jun	27.85	27.50
Jul	24.25
Aug	24.75
Sep	26.00
Oct	24.90
Nov	25.55
Dec	24.20