FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Three Months Ended: March 31, 1995 Commission File No. 2-96573
FIRST NATIONAL LINCOLN CORPORATION
(Exact name of registrant as specified in its charter)
MAINE 01-0404322
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
MAIN STREET, DAMARISCOTTA, MAINE 04543
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (207) 563 - 3195
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 twelve 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 XX No __
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
(Common Stock, No par) 608,118
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FIRST NATIONAL LINCOLN CORPORATION
INDEX
PART 1 Financial Information Page No.
Item 1: Financial Statements
Consolidated Balance Sheets - 1 & 2
March 31, 1995, March 31, 1994,
and December 31, 1994.
Consolidated Statements of Income - 3 & 4
Three months ended March 31, 1995
and March 31, 1994.
Consolidated Statements of Cash Flows - 5 & 6
Three months ended March 31, 1995
and March 31, 1994.
Management's discussion and analysis of 7 - 10
financial condition and results of operations.
PART II Other Information
Item 6: Exhibits and reports on Form 8-K. 11
Signatures 12
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, (000 OMITTED)
3/31/95 3/31/94 12/31/94
(Unaudited) (Unaudited) (Unaudited)
Assets
Cash and due from banks $4,427 $3,985 $5,230
Investments:
Available for sale (market values
$16,425 at 3/31/95, $19,584 at
3/31/94 and $16,533 at 12/31/94) 16,425 19,584 16,533
Held to maturity (market values
$49,103 at 3/31/95, $51,979 at
3/31/94 and $46,759 at 12/31/94) 50,386 51,662 49,121
Loans 124,920 116,027 120,294
Less allowance for loan losses 2,340 2,594 2,428
Net loans 122,580 113,433 117,866
Accrued interest receivable 1,674 1,541 1,678
Bank premises and equipment 4,378 4,108 4,485
Other real estate owned 581 764 553
Other assets 1,457 1,646 1,065
Total Assets $201,908 $196,723 $196,531
Liabilities & Stockholders' Equity
Demand deposits $10,004 $9,530 $12,140
NOW deposits 26,257 32,326 27,764
Savings deposits 34,519 40,652 39,906
Money market deposits 7,694 9,110 8,886
Certificates of deposit 49,152 48,192 45,462
Certificates 100M and over 12,492 17,304 8,287
Total deposits $140,118 $157,114 $142,445
Other liabilities 1,554 1,106 584
Borrowed funds 42,676 23,000 36,610
Total Liabilities 184,348 181,220 179,639
Stockholders' Equity:
Common stock 1,520 1,515 1,519
Additional paid-in capital 2,685 2,641 2,678
Retained earnings 13,367 11,326 12,829
Net unrealized gains (losses) on
available-for-sale securities (12) 21 (134)
Total Stockholders' Equity 17,560 15,503 16,892
Total Liabilities & Stockholders'
Equity $201,908 $196,723 $196,531
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (000 OMITTED)
For the three months ended March 31, 1995 1994
(Unaudited) (Unaudited)
Interest Income:
Interest and fees on loans $2,819 $2,121
Interest and dividends on investments 1,106 1,046
Total interest income 3,925 3,167
Interest expense:
Interest on deposits 1,121 1,079
Interest on borrowed funds 616 133
Total interest expense 1,737 1,212
Net interest income 2,188 1,955
Provision for loan losses 0 0
Net interest income after provision
for loan losses 2,188 1,955
Other operating income:
Trust department income 53 53
Service charges on deposit accounts 114 115
Net securities gains (losses) (58) (5)
Other operating income 50 58
Total other operating income 159 221
Other operating expenses:
Salaries and employee benefits 768 770
Occupancy expense 81 82
Premises and equipment expense 150 141
Other 435 562
Total other operating expenses 1,434 1,555
Income before income taxes 913 621
Applicable income taxes 290 205
NET INCOME $623 $416
Earnings per common share:
Net income $1.02 $0.69
Dividends declared $0.14 $0.13
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 1994
Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $623 $416
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 120 110
Provision for loan losses 0 0
Net (gain) loss on sale of investments 58 5
Write down of other real estate owned 0 98
Losses related to other real estate owned 0 5
Net change in other assets (388) (61)
Net change in other liabilities 970 292
Net amortization of premium on investments 8 (6)
Net cash provided by operating activities 1,391 859
Cash flows from investing activities:
Proceeds from sales of investments 2,000 5,200
Proceeds from maturities of investments 1,500 1,662
Proceeds from sales of other real estate owned 0 117
Purchase of investments (4,658) (10,500)
Net decrease (increase) in loans (4,686) (12,970)
Capital expenditures (13) (35)
Net cash used in investing activities (5,857) (16,526)
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
savings, money market and club accounts (10,222) (646)
Net increase (decrease) in cert. of deposit 7,895 1,050
Net increase (decrease) in other borrowings 6,066 14,602
Net proceeds from stock issuance 9 15
Dividends paid (85) (79)
Net cash provided by financing activities 3,663 14,942
Net increase (decrease) in cash and cash equivalents (803) (725)
Cash and cash equivalents at beginning of period 5,230 4,710
Cash and cash equivalents at end of period $4,427 $3,985
Interest paid $1,705 $1,216
Income taxes paid $40 $6
Non-cash transactions:
Loans transferred to Other Real Estate Owned $28 $0
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MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income for the three months ended March 31, 1995 was $623,000, an
increase of 49.8% over the same period a year ago.
NET INTEREST INCOME
Net interest income of $2,188,000 for the three months ended March 31,
1995 is a 11.9% increase over 1994's net interest income of $1,955,000.
Total interest income of $3,925,000 is a 23.9% increase over 1994's total
interest income of $3,167,000. Total interest expense of $1,737,000 is a
43.3% increase over 1994's total interest expense of $1,212,000.
PROVISION FOR LOAN LOSSES
No provision to the allowance for loan losses was made for the first
three months of 1995. The allowance for loan losses is deemed adequate as
calculated in accordance with Banking Circular #201.
NON-INTEREST INCOME
Non-interest income for the three months ended March 31, 1995 was
$159,000, a decrease of 28.1% from 1994's non-interest income of $221,000.
This decrease is due primarily to a net securities loss of $58,000 during
the first quarter of 1995.
NON-INTEREST EXPENSE
Non-interest expense of $1,434,000 for the three months ended March 31,
1995 is a decrease of 7.8% from 1994's non-interest expense of $1,555,000.
INCOME TAXES
Income taxes on operating earnings increased to $290,000 for the first
three months in 1995 from $205,000 for the same period a year ago. The
level of income taxes has increased as a result of the Company's increased
earnings.
DEPOSITS AND BORROWED FUNDS
Deposits as of March 31, 1995 decreased by 10.8% or $16,996,000 from
March 31, 1994. Demand deposits increased by 5.0% or $474,000, NOW deposits
decreased by 18.8% or $6,069,000, savings deposits decreased by 15.1% or
$6,133,000, money market deposits decreased by 15.5% or $1,416,000 and
certificates of deposit decreased by 5.9% or $3,852,000. The deposit
shortfall was supplemented by borrowings from the Federal Home Loan Bank.
STOCKHOLDERS' INVESTMENT AND CAPITAL RESOURCES
Stockholders' investment as of March 31, 1995 was $17,560,000 compared
to $15,503,000 for the same period in 1994. The major reason for this
increase was the earnings performance in the year 1994 and the first three
months of 1995.
Dividends declared, which had been reduced 25% in January 1991, were
increased by one cent beginning in the second quarter of 1993 through the
first quarter of 1994 to the current level of 14 cents per share per
quarter. Dividends declared were again increased by one cent in the second
quarter of 1994. Primary capital at March 31, 1995 was 9.46% versus 9.12%
<PAGE>
MANAGEMENT'S DISCUSSION CONT.
at March 31, 1994, both well above the 6.00% level mandated by the
regulatory authorities. Leverage capital ratios were 8.40% and 7.59%,
respectively, at March 31, 1995 and March 31, 1994.
At March 31, 1995 the Bank had a tier one risk-based capital ratio of
13.02% and tier two risk-based capital ratio of 14.27%, versus 11.91% and
13.16%, respectively, at March 31, 1994. These were comfortably above the
standards to be rated "well-capitalized" by the regulatory authorities.
LIQUIDITY MANAGEMENT
As of March 31, 1995 the Bank had primary sources of liquidity of
$27,595,000, or 13.70% of its assets. It is Management's opinion that this
is adequate. Through its Asset/Liability program, the Bank has adopted
guidelines for liquidity.
We are not aware of any current recommendations by the regulatory
authorities which, if they were to be implemented, would have a material
effect on the Corporation's liquidity, capital resources or results of
operations.
LOAN POLICIES
Real estate values:
A. Residential properties We loan up to 80% of the appraised value of
the property and do no further appraisals as long as the payment
history remains satisfactory. If a loan becomes delinquent, a
review might be done of the loan. When a loan becomes 90 or more
days past due, an in-depth review is made of the loan and a
determination made as to whether or not a reappraisal is required.
B. Land only properties We do not have many of these but we do loan
up to 65% of the appraised value of the property. Handled the same
way as above from booking date on.
C. Commercial properties We loan up to 70% of the appraised value, and
once the loan is closed, the loan policy requires the following:
Loan paying satisfactorily, a re-appraisal is required every five
years. Loans running 90 or more days past due steadily and graded
OAEM are appraised every 18 months. Loans graded substandard or
lower (including O.R.E.O. properties) are appraised as necessitated.
Note: A certified appraiser is used for all appraisals.
At March 31, 1995 and 1994, loans on a non-accrual status totaled
$1,463,000 and $2,665,000, respectively. In addition to loans on a non-
accrual status at March 31, 1995 and 1994, loans past due greater than 90
days totaled $93,000 and $36,000 respectively. The Company continues to
accrue interest on these loans because it believes collection of the
interest is reasonably assured.
INVESTMENTS
In the first quarter of 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". SFAS
No. 115 requires that all debt securities be classified into one of three
categories: trading securities, securities available for sale and
<PAGE>
MANAGEMENT'S DISCUSSION CONT.
securities held to maturity. As of March 31, 1995 stockholders' equity was
reduced by $12,000 due to a net unrealized loss in the available for sale
portfolio.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
No material off-balance sheet risk exists that requires a separate
liability presentation.
SALE OF LOANS
No recourse obligations have been incurred in connection with the sale
of loans.
RISK ELEMENTS
Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under Item III
of Industry Guide 3 do not represent or result from trends or uncertainties
which Management reasonably expects will materially impact future operating
results, liquidity or capital resources.
There are no known potential problem loans which are not now disclosed
pursuant to Item III. C. 1. of Industry Guide 3. Item III. C. 2. is not
applicable.
REGULATORY MATTERS
Procedures for monitoring Bank Loan Administration:
A. Loan reviews are done on a regular basis.
B. An action plan is prepared quarterly on all criticized loans.
C. Delinquent loans are reviewed monthly by the Problem Asset
Committee.
D. A tickler system has been prepared to follow for current
information (such as financial statements, appraisals and/or
credit memos to the credit file). Note: Most of the above
applies only to commercial loans, but retail loans are reviewed
periodically, usually around a delinquency.
Procedures for monitoring Bank Other Real Estate Owned:
The O.R.E.O. portfolio is handled by the Bank's Collections Officer, with
backup by the Senior Loan Officer. Most properties are listed with real
estate brokers for sale. All properties are appraised periodically for
market value and carried at market value with an O.R.E.O. reserve for
selling costs.
OTHER
The quarterly financial statements in the opinion of Management fairly
represent all adjustments made to reflect the current financial condition of
the Bank for this interim period just ended. All such adjustments were of a
normal recurring nature.
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PART II
ITEM 6: Exhibits, Financial Statement Schedules, and reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
During the registrant's first three months ended March 31,
1995 the registrant was not required to and did not file any
reports on Form 8-K.
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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 NATIONAL LINCOLN CORPORATION
May 10, 1995 Daneil R. Daigneault
Date Daniel R. Daigneault
President and CEO
May 10, 1995 F. Stephen Ward
Date F. Stephen Ward
Treasurer
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