limits than those of the CompanyGLYPH<213>s subsidiaries and may offer services that the CompanyGLYPH<213>s subsidiaries do not or cannot provide. Our long-term success depends on the ability of the CompanyGLYPH<213>s subsidiaries to compete successfully with other financial institutions in their service areas. Because the Company maintains a smaller staff and has fewer financial  and other resources than larger institutions with which the Company competes, it may be limited in its ability to attract customers. If the Company is unable to attract and retain customers, the Company may be unable to continue the loan growth and the CompanyGLYPH<213>s results of operations and financial condition may otherwise be negatively impacted. Our Cost of Funds for Banking Operations may increase as a result of general economic conditions, interest rates and competitive pressures. The CompanyGLYPH<213>s banking subsidiaries have traditionally obtained funds principally through deposits and borrowings.  As a general matter, deposits are a cheaper source of funds than borrowings, because interest rates paid for deposits are typically less than interest rates charged for borrowings. If, as  a result of general economic conditions, market interest rates, competitive pressures or otherwise, the value of deposits at  the CompanyGLYPH<213>s banking subsidiaries decreases relative to the CompanyGLYPH<213>s overall banking operations, the Company may have to rely more heavily on borrowings as a source of funds in  the future. Our banking business is highly regulated.  Bank holding companies, national banking associations and state-chartered banks operate in a highly regulated environment and are subject to supervision, regulation and examination by various federal and state bank regulatory agencies, as well as other governmental agencies in the states in which they operate. Federal and state laws and regulations govern numerous matters including changes in the ownership or control of banks and BHCs, maintenance of adequate capital and the financial condition of a financial institution, permissible types, amounts and terms of extensions of credit and investments, permissible non-banking activities, the level  of reserves against deposits and restrictions on dividend payments. The OCC, the FDIC and the Superintendent possess cease and desist powers to prevent or remedy unsafe or unsound practices or violations of law by banks subject to  their regulation, and the FRB possesses similar powers with respect to BHCs. These and other restrictions limit the manner in which the Company and its subsidiaries may conduct business and obtain financing.  Furthermore, the CompanyGLYPH<213>s business is affected not only by general economic conditions, but also by the economic, fiscal and monetary policies of the United States and its agencies and regulatory authorities, particularly the FRB. The economic and fiscal policies of various governmental entities and the monetary policies of the FRB may affect the interest rates the CompanyGLYPH<213>s bank subsidiaries must offer to attract deposits and the interest rates they must charge on loans,  as well as the manner in which they offer deposits and make loans. These economic, fiscal and monetary policies have had, and are expected to continue to have, significant effects on the operating results of depository institutions generally including the CompanyGLYPH<213>s bank subsidiaries. We could be held responsible for environmental liabilities  of properties we acquire through foreclosure. If the Company is forced to foreclose on a defaulted mortgage loan to recover the CompanyGLYPH<213>s investment the Company may be subject to environmental liabilities related  to the underlying real property. Hazardous substances or wastes, contaminants, pollutants or sources thereof may be discovered on properties during the CompanyGLYPH<213>s ownership  or after a sale to a third party. The amount of environmental liability could exceed the value of the real property. There can be no assurance that the Company would not be fully liable  for the entire cost of any removal and clean-up on an acquired property, that the cost of removal and clean-up would not exceed the value of the property or that the Company could recoup any of the costs from any third party. To the extent that we acquire other companies in the future,  our business may be negatively impacted by certain risks inherent with such acquisitions  Although the Company does not have an aggressive acquisition strategy, the Company has acquired, and in the future will continue to consider the acquisition of, other banking companies. To the extent that the Company acquires other companies in the future, the CompanyGLYPH<213>s business  may be negatively impacted by certain risks inherent with  such acquisitions.  These risks include the following:  Due to the nature of our business, we may be subject to  litigation from time to time, some of which may not be  covered by insurance. The Company, through its bank subsidiaries, operates in a highly regulated industry, and as a result, is subject to various regulations related to disclosures to our customers, our lending practices, and other fiduciary responsibilities. From time to time, the Company has been, and may become, subject to legal actions relating to our operations that have had, or could, involve claims for substantial monetary damages. Although the Company maintains insurance, the scope of this coverage may not provide the Company with full, or even partial, coverage in any particular case. As a result, a judgment against the Company in any such litigation could have a material adverse effect on the CompanyGLYPH<213>s financial condition and results of operation. 36 Camden National Corporation and Subsidiaries ¥ the risk that the acquired business will not perform in accordance with managementGLYPH<213>s expectations;  ¥ the risk that difficulties will arise in connection with the integration of the operations of the acquired business  with the operations of our businesses; ¥ the risk that management will divert its attention from other aspects of our business;  ¥ the risk that we may lose key employees of the acquired business; and  ¥ the risks associated with entering into geographic and product markets in which we have limited or no direct prior experience. Camden National Corporation and Subsidiaries 37