<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File Number 1-13847
FIRST LINCOLN BANCSHARES INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 47-0221753
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
13TH AND "N" STREETS, LINCOLN, NEBRASKA 68508
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(Address of principal executive offices) (Zip Code)
(402) 475-0521
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes N/A No
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Yes No X
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APPLICABLE ONLY TO CORPORATE ISSUERS.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: No shares were outstanding
as of March 30, 1998.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
First Lincoln Bancshares Inc. (The "Company") is a recently formed holding
company, formed for the purpose of acquiring all of the common stock of First
Federal Lincoln Bank (the "Bank") concurrent with the Bank's conversion from
mutual to stock form of organization. At this time and until the conversion is
complete, First Lincoln Bancshares Inc. is a noncapitalized shell corporation
with no business activities. The financial statements of First Lincoln
Bancshares Inc., which are set forth after Item 3 below, reflect such status.
For a further discussion of First Lincoln Bancshares Inc.'s formation and
intended operations see "First Lincoln Bancshares Inc." in the Company's
Prospectus (the "Prospectus") dated March 13, 1998, which is a part of its
Registration Statement under the Securities Act of 1933 on Form S-1, initially
filed on December 12, 1997 and declared effective on February 11, 1998 and
supplemented on March 13, 1998. Such description of First Lincoln Bancshares
Inc. is incorporated herein by reference and attached hereto as Exhibit 99.1.
Additionally, "Recent Developments" on pages 13 through 15 of the Prospectus is
incorporated herein by reference and attached hereto as Exhibit 99.2. Such
Recent Developments presents financial information regarding the Bank for the
six months ended and at December 31, 1997, including a "Management's Discussion
and Analysis of Recent Developments." Upon completion of its conversion, the
Bank will become the wholly-owned subsidiary of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
---------------------
See Item 1.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
----------------------------------------------------------
See Item 1.
2
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<TABLE>
<CAPTION>
FIRST LINCOLN BANCSHARES INC.
STATEMENTS OF CONDITION
December 31, June 30,
1997 1997
---------------- ---------------
<S> <C> <C>
Assets............................... $ -- NA
Expenses............................. $ -- NA
See accompanying notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Three Months and Six Months
Ended December 31,
---------------------------------------
1997 1997
----------------- ---------------
<S> <C> <C>
Income............................... $ -- NA
Expenses............................. $ -- NA
Net income..................... $ -- NA
See accompanying notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended December 31, 1997
-------------------------------------------------------
Additional
Common Paid-in Retained
Stock Capital Earnings Total
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Balance June 30, 1997.... $ -- $ -- $ -- $ --
Balance December 31, 1997 $ -- $ -- $ -- $ --
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGE IN CASH FLOW
Six Months Ended December 31,
----------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Funds provided............................ $ -- NA
Funds used................................ $ -- NA
See accompanying notes to financial statements.
</TABLE>
3
<PAGE> 4
FIRST LINCOLN BANCSHARES INC.
NOTES TO FINANCIAL STATEMENTS
1. General
First Lincoln Bancshares Inc. is a recently formed holding company formed
for the purpose of acquiring all of the common stock of First Federal Lincoln
Bank concurrent with its conversion from mutual to stock form of organization.
At December 31, 1997, First Lincoln Bancshares Inc. was a shell corporation with
no business activities and no assets.
4
<PAGE> 5
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
None.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
None.
Item 3. Defaults Upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
None.
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K (Section 249.308 of this Chapter).
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(a) The following exhibits are filed as part of this report:
Exhibit 3.1 Certificate of Incorporation of First Lincoln
Bancshares Inc.*
Exhibit 3.2 Bylaws of First Lincoln Bancshares Inc.*
Exhibit 4.0 Draft Stock Certificate of First Lincoln Bancshares
Inc.*
Exhibit 99.1 First Lincoln Bancshares Inc.
Exhibit 99.2 Recent Developments
(b) No reports on Form 8-K were filed this quarter.
* Incorporated herein by reference in this document from the Exhibits to
the Form S-1 Registration Statement, filed on December 12, 1997, and any
amendments thereto (Registration Statement No. 333-42197).
5
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST LINCOLN BANCSHARES INC.
Date: March 30, 1998 By: /s/ Gilbert G. Lundstrom
------------------------ ------------------------------------
Gilbert G. Lundstrom
President and Chief Executive
Officer
Date: March 30, 1998 By: /s/ Eugene B. Witkowicz
------------------------ ------------------------------------
Eugene B. Witkowicz
Executive Vice President, Treasurer
and Chief Financial Officer
6
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001051001
<NAME> First Lincoln Bancshares Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-END> Dec-31-1997
<EXCHANGE-RATE> 1<F1>
<CASH> 0<F1>
<INT-BEARING-DEPOSITS> 0<F1>
<FED-FUNDS-SOLD> 0<F1>
<TRADING-ASSETS> 0<F1>
<INVESTMENTS-HELD-FOR-SALE> 0<F1>
<INVESTMENTS-CARRYING> 0<F1>
<INVESTMENTS-MARKET> 0<F1>
<LOANS> 0<F1>
<ALLOWANCE> 0<F1>
<TOTAL-ASSETS> 0<F1>
<DEPOSITS> 0<F1>
<SHORT-TERM> 0<F1>
<LIABILITIES-OTHER> 0<F1>
<LONG-TERM> 0<F1>
0<F1>
0<F1>
<COMMON> 0<F1>
<OTHER-SE> 0<F1>
<TOTAL-LIABILITIES-AND-EQUITY> 0<F1>
<INTEREST-LOAN> 0<F1>
<INTEREST-INVEST> 0<F1>
<INTEREST-OTHER> 0<F1>
<INTEREST-TOTAL> 0<F1>
<INTEREST-DEPOSIT> 0<F1>
<INTEREST-EXPENSE> 0<F1>
<INTEREST-INCOME-NET> 0<F1>
<LOAN-LOSSES> 0<F1>
<SECURITIES-GAINS> 0<F1>
<EXPENSE-OTHER> 0<F1>
<INCOME-PRETAX> 0<F1>
<INCOME-PRE-EXTRAORDINARY> 0<F1>
<EXTRAORDINARY> 0<F1>
<CHANGES> 0<F1>
<NET-INCOME> 0<F1>
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 0<F1>
<LOANS-PAST> 0<F1>
<LOANS-TROUBLED> 0<F1>
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 0<F1>
<CHARGE-OFFS> 0<F1>
<RECOVERIES> 0<F1>
<ALLOWANCE-CLOSE> 0<F1>
<ALLOWANCE-DOMESTIC> 0<F1>
<ALLOWANCE-FOREIGN> 0<F1>
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>First Lincoln Bancshares Inc. is a newly formed savings and loan holding
company formed for the purpose of acquiring all of the common stock of First
Federal Lincoln Bank, Lincoln, Nebraska, concurrent with the Bank's conversion
from mutual to stock form of organization. At December 31, 1997, First Lincoln
Bancshares Inc. was a shell corporation with no business activities or
operations and no assets.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
FIRST LINCOLN BANCSHARES INC.
The Company was organized in November 1997 at the direction of the Board
of Directors of the Bank for the purpose of acquiring all of the capital stock
to be issued by the Bank in the Conversion. The Company has received approval
from the OTS to become a savings and loan holding company and, as such, will be
subject to regulation by the OTS. See "The Conversion -- General." Upon
consummation of the Conversion, the Company will conduct business initially as a
multiple savings and loan holding company controlling both the Bank and the Iowa
Bank. As a multiple savings and loan holding company, the Company will be
subject to certain restrictions on activities in which it may engage in addition
to controlling the Bank and the Iowa Bank. See "Regulation -- Holding Company
Regulation." After completion of the Conversion, the Company's assets will
consist of all of the outstanding shares of the Bank's capital stock issued to
the Company in the Conversion, that portion of the net proceeds of the Offerings
retained by the Company and all of the outstanding shares of capital stock of
the Iowa Bank. The Company intends to use part of the net proceeds it retains to
loan funds to the ESOP to enable the ESOP to purchase 8% of the Common Stock
issued in the Conversion, including shares issued to the Foundation. The Company
intends to initially deposit the remaining proceeds with the Bank. See "Use of
Proceeds." The Company and Bank may, however, alternatively choose to fund the
ESOP through a loan to the ESOP trust by a third-party financial institution.
Immediately after the Conversion, the Company will have no significant
liabilities. The management of the Company is set forth under "Management of the
Company." Initially, the Company will neither own nor lease any property, but
will instead use the premises, equipment and furniture of the Bank. At the
present time, the Company does not intend to employ any persons other than
officers of the Company who are also officers of the Bank, but will utilize the
support staff of the Bank from time to time. Additional employees will be hired
as appropriate to the extent the Company expands its business in the future.
Management believes that the holding company structure will provide the
Company with additional flexibility to diversify, should it decide to do so, its
business activities through existing or newly-formed subsidiaries, or through
acquisitions of other financial institutions and financial services related
companies. In addition, management believes that the Company will be in a
position after the Conversion, subject to regulatory limitations and the
Company's financial position, to take advantage of any acquisition and expansion
opportunities that may arise. There are no current arrangements, understandings
or agreements, written or oral, regarding any such opportunities or
transactions. The initial activities of the Company are anticipated to be funded
by the net proceeds retained by the Company and earnings thereon or,
alternatively, through dividends from the Bank.
The Company's executive offices are located at 13th and "N" Streets,
Lincoln, Nebraska 68508, and its telephone number is (402) 475-0521.
<PAGE> 1
EXHIBIT 99.2
<PAGE> 2
RECENT DEVELOPMENTS
The selected financial and other data presented below at December 31, 1997
and September 30, 1997, and for the six-month periods ended December 31, 1997
and 1996 are derived from unaudited financial data, but, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
adjustments) which are necessary to present fairly the results for such interim
periods. The results of operations for the six months ended December 31, 1997
are not necessarily indicative of the results of operations that may be expected
for the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
AT AT
DECEMBER 31 SEPTEMBER 30,
1997 (1) 1997
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(IN THOUSANDS)
<S> <C> <C>
SELECTED CONSOLIDATED FINANCIAL DATA:
Total assets........................................ $1,062,114 $1,033,578
Loans receivable, net(2)............................ 826,110 818,460
Investment securities held-to-
maturity(3)....................................... 51,687 58,660
Investment securities available-for-sale(3)......... -- --
Federal funds sold.................................. 60,000 33,700
FHLB stock.......................................... 7,205 7,060
Mortgage-backed securities held-to-
maturity........................................... 77,647 80,413
Mortgage-backed securities
available-for-sale(3).............................. -- 747
Deposits............................................ 945,256 923,669
FHLB advances....................................... 10,549 10,565
Retained earnings................................... 82,844 80,562
Allowance for possible loan losses.................. 7,159 7,022
Non-performing loans................................ 1,084 1,112
Non-performing assets............................... 1,756 2,283
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
----------------------
1997 (1) 1996 (1)
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
SELECTED OPERATING DATA:
Interest income..................................... 40,144 38,703
Interest expense.................................... 24,115 23,666
------ ------
Net interest income................................ 16,029 15,037
Provision for loan losses........................... 958 286
------- -------
Net interest income after provision
for loan losses................................... 15,071 14,751
Total noninterest income............................ 2,364 2,261
Total noninterest expense........................... 11,148 16,699
------ ------
Income before provision for
income taxes and cumulative effect of
change in accounting principle and
extraordinary item................................. 6,287 313
Income tax expense.................................. 2,364 216
-------- --------
Net income......................................... $ 3,923 $ 97
======== ========
</TABLE>
1
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<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
----------------------
1997 (1) 1996 (1)
----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA(4):
PERFORMANCE RATIOS:
Return on average assets............................ 0.75% 0.02%
Return on average retained earnings................. 9.71 0.26
Average retained earnings to average assets......... 7.70 7.20
Retained earnings to total assets
at end of period.................................. 7.80 7.21
Net interest rate spread(5)......................... 2.78 2.65
Net interest margin (6)............................. 3.17 3.02
Average interest-earning assets to average
interest-bearing liabilities...................... 108.10 107.55
Total noninterest expense to average assets......... 2.12 3.23
Efficiency ratio(7)................................. 60.61 96.54
Net interest income to operating expenses........... 143.78 90.05
REGULATORY CAPITAL RATIOS(8):
Tangible capital.................................... 7.78 7.18
Leveraged capital................................... 7.78 7.18
Total risk-based capital............................ 13.96 14.26
ASSET QUALITY RATIOS:
Total non-performing loans(9)....................... $1,084 $1,629
Real estate owned, net.............................. 672 1,203
Total non-performing assets(10)..................... 1,756 2,832
Non-performing loans as a percent of
loans(9)(11)...................................... 0.13% 0.21%
Non-performing assets as a percent of total
assets(10)........................................ 0.17 0.27
Allowance for possible loan losses as
a percent of loans(2)(11)......................... 0.86 0.78
Allowance for possible loan losses as a percent of
total non-performing loans........................ 660.42 374.83
OTHER DATA:
Number of full service customer facilities............ 58 58
</TABLE>
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(1) The data presented for the six months ended December 31, 1997 and 1996 were
derived from unaudited consolidated financial statements and reflect, in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) which are necessary to present fairly the results for such
interim periods. Interim results at and for the six months ended December
31, 1997, are not necessarily indicative of the results that may be expected
for the fiscal year ending June 30, 1998.
(2) The allowance for loan losses at December 31, 1997 and 1996, and June 30,
1997, 1996, 1995, 1994 and 1993, was $7.16 million, $6.11 million, $6.33
million, $5.92 million, $5.64 million, $5.97 million and $7.58 million,
respectively.
(3) The Bank adopted Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities," as
of July 1, 1994. Prior to that date, investments in mortgage-backed
securities available-for-sale were recorded at the lower of amortized cost
or fair value.
(4) Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios.
With the exception of end of period ratios, all ratios are based on average
monthly balances during the indicated periods and are annualized where
appropriate.
2
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(5) The net interest rate spread represents the difference between the weighted
average yield on average interest-earning assets and the weighted average
cost of average interest-bearing liabilities.
(6) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(7) The efficiency ratio represents the ratio of non-interest expense divided by
the sum of net interest income and non-interest income. This ratio was
affected by the payment of the special SAIF assessment during the six months
ended December 31, 1996.
(8) For definitions and further information relating to the Bank's regulatory
capital requirements, see "Regulation and Supervision - Capital
Requirements." See "Regulatory Capital Compliance" for the Bank's pro forma
capital levels as a result of the Offerings.
(9) Non-performing loans consist of all loans 90 days or more past due. It is
the Bank's policy to cease accruing interest on all loans 90 days or
more past due. See "Business of the Bank - Delinquent Loans, Real Estate
Owned and Classified Assets."
(10)Non-performing assets consist of non-performing loans and REO.
(11)Loans include loans held for investment, net, excluding the allowance for
possible loan losses.
3
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RECENT DEVELOPMENTS
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
Total assets at December 31, 1997, were $1.06 billion, an increase of
$28.5 million, or 2.8%, compared to $1.03 billion at September 30, 1997. During
the quarter the Bank's holdings of federal funds increased by $26.3 million to
$60 million at December 31, 1997, compared to $33.7 million at September 30,
1997. This increase was primarily the result of the $21.6 million increase in
deposits during the quarter. Deposits increased to $945.3 million at December
31, 1997, compared to a balance of $923.7 million at September 30, 1997. Loans
receivable, net, increased by $7.6 million to $826.1 million at December 31,
1997, compared to $818.5 million at September 30, 1997. This loan growth was
primarily due to the $12.7 million increase in consumer loans offset by declines
in mortgage loans. Investment securities and mortgage-backed securities declined
$10.5 million, or 7.5%, from $139.8 million at September 30, 1997, to $129.3
million at December 31, 1997. Proceeds from their maturities and amortizations
were used to fund the increases in federal funds and loans receivable, net.
Retained earnings at December 31, 1997, were $82.8 million, an increase of $2.3
million, compared to $80.6 million at September 30, 1997.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND
DECEMBER 31, 1996.
GENERAL. Net income increased $3.8 million to $3.9 million for the six
months ended December 31, 1997, from $.1 million for the six months ended
December 31, 1996. The $.1 million income for the six months ending December 31,
1996, was the result of a one-time special assessment charge of $5.7 million to
fully capitalize the SAIF. Excluding the net of tax impact of the one-time
special assessment, net income was $3.9 million for both six months ended
December 31, 1997 and December 31, 1996. Net interest margin increased $1.0
million to $16.0 million for the six months ended December 31, 1997, from $15.0
million for the six months ended December 31, 1996. This increase in net
interest margin was offset by a higher provision for loan losses and a small
increase in noninterest expenses after excluding the one-time special
assessment.
INTEREST INCOME. Interest income for the six months ended December 31,
1997, was $40.1 million, compared to $38.7 million for the six months ended
December 31, 1996, an increase of $1.4 million or 3.6%. The increase in interest
income was the result of a shift in the asset composition from lower-yielding
investment securities to higher-yielding loans.
INTEREST EXPENSE. Interest expense for the six months ended December 31,
1997, was $24.1 million, compared to $23.7 million for the six months ended
December 31, 1996, an increase of $449,000 or 1.9%. The increase in interest
expense was the result of an increase in the average balance of deposits
partially offset by the decrease in the average cost of FHLB advances.
PROVISION FOR LOAN LOSSES. During the six months ended December 31, 1997,
the Bank's provision for loan losses was $958,000 compared to $286,000 for the
six months ended December 31, 1996, an increase of $672,000. The increase in the
provision was due primarily as a result of an increase in consumer loans of
$42.4 million to $103.3 million at December 31, 1997, from $60.9 million at
December 31, 1996.
4
<PAGE> 6
NON-INTEREST INCOME. Non-interest income increased by $103,000 to $2.4
million for the six months ended December 31, 1997, from $2.3 million for the
six months ended December 31, 1996.
NON-INTEREST EXPENSE. Non-interest expense decreased by $5.6 million to
$11.1 million for the six months ended December 31, 1997, from $16.7 million for
the six months ended December 31, 1996. The decrease was attributable to a
significant reduction of premium assessments on savings deposits by the FDIC and
the one-time special assessment charged in September 1996. Excluding federal
insurance premiums, aggregate non-interest expense items increased $843,000 or
8.4%, to $10.8 million for the six months ended December 31, 1997, from $10.0
million for the six months ended December 31, 1996. The increase was
attributable to higher compensation and employee benefits, due to annual salary
increases and increased employee staff, along with an increase in advertising
expenses, related to deposit generation and marketing of mortgage loans.
5
