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, 1996 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 Identification No)
incorporation or organization)
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, 1996
(Common Stock, No par) 610,744
<PAGE>
FIRST NATIONAL LINCOLN CORPORATION
INDEX
PART 1 Financial Information Page No.
Item 1: Financial Statements
Consolidated Balance Sheets - 1 & 2
March 31, 1996, March 31, 1995,
and December 31, 1995.
Consolidated Statements of Income - 3 & 4
Three months ended March 31, 1996
and March 31, 1995.
Consolidated Statements of Cash Flows - 5 & 6
Three months ended March 31, 1996
and March 31, 1995.
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
<PAGE>
FIRST NATIONAL LINCOLN CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(000 OMITTED)
3/31/96 3/31/95 12/31/95
(Unaudited) (Unaudited) (Unaudited)
Assets
Cash and due from banks $4,044 $4,427 $5,404
Interest bearing deposits in other banks 0 0 2,700
Investments:
Available for sale 29,672 16,425 34,236
Held to maturity (market values $35,729
at 3/31/96, $49,103 at 3/31/95 and
$27,473 at 12/31/95) 36,351 50,386 27,334
Loans held for sale (market value $4,127 0 0 4,066
at 12/31/95)
Loans 140,705 124,920 133,245
Less allowance for loan losses 1,961 2,340 2,059
Net loans 138,744 122,580 131,186
Accrued interest receivable 1,788 1,674 1,708
Bank premises and equipment 4,057 4,378 4,146
Other real estate owned 889 581 648
Other assets 914 1,457 854
Total Assets $216,459 $201,908 $212,282
Liabilities & Stockholders' Equity
Demand deposits $12,820 $10,004 $12,989
NOW deposits 25,830 26,257 27,064
Money market deposits 5,771 7,694 7,179
Savings deposits 33,733 34,519 32,943
Certificates of deposit 58,883 49,152 57,535
Certificates $100M and over 13,015 12,492 12,758
Total deposits $150,052 $140,118 $150,468
Borrowed funds 44,692 42,676 41,225
Other liabilities 1,617 1,554 1,024
Total Liabilities 196,361 184,348 192,717
<PAGE>
(BALANCE SHEETS CONTINUED)
3/31/96 3/31/95 12/31/95
(Unaudited) (Unaudited) (Unaudited)
Shareholders' Equity:
Common stock 1,527 1,520 1,524
Additional paid-in capital 2,753 2,685 2,719
Retained earnings 15,765 13,367 15,123
Net unrealized gains (losses) on available-
for-sale securities 53 (12) 202
Treasury stock 0 0 (3)
Total Stockholders' Equity 20,098 17,560 19,565
Total Liabilities & Stockholders' $216,459 $201,908 $212,282
<PAGE>
FIRST NATIONAL LINCOLN CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(000 OMITTED)
For the three months ended March 31,
1996 1995
(Unaudited) (Unaudited)
Interest Income:
Interest and fees on loans $3,130 $2,819
Interest on deposits with other banks 4 0
Interest and dividends on investments 1,091 1,106
Total interest income 4,225 3,925
Interest expense:
Interest on deposits 1,440 1,121
Interest on borrowed funds 587 616
Total interest expense 2,027 1,737
Net interest income 2,198 2,188
Provision for loan losses 0 0
Net interest income after provision
for loan losses 2,198 2,188
Other operating income:
Trust department income 80 53
Service charges on deposit accounts 119 114
Net securities gains (losses) 6 (58)
Other operating income 95 50
Total other operating income 300 159
Other operating expenses:
Salaries and employee benefits 758 768
Occupancy expense 86 81
Furniture and equipment expense 145 150
Other 411 435
Total other operating expenses 1,400 1,434
Income before income taxes 1,098 913
Applicable income taxes 353 290
NET INCOME $745 $623
<PAGE>
STATEMENTS OF INCOME CONT.
For the three months ended March 31,
1996 1995
(Unaudited) (Unaudited)
Earnings per common share:
Net income $1.22 $1.02
Dividends declared $0.17 $0.14
<PAGE>
FIRST NATIONAL LINCOLN CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31,
1996 1995
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $745 $623
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 132 120
Provision for loan losses 0 0
Net (gain) loss on sale of investments (6) 58
Write down of other real estate owned 0 0
Losses related to other real estate owned 11 0
Net change in other assets 64 (388)
Net change in other liabilities 141 970
Net amortization of premium on investments 17 8
Net cash provided by operating activities 1,104 1,391
Cash flows from investing activities:
Proceeds from sales of investments 3,500 2,000
Proceeds from maturities of investments 4,370 1,500
Proceeds from maturities of deposits in
other banks 2,700 0
Proceeds from sales of other real estate owned 170 0
Additional investment in other real estate owned 0 0
Purchase of investments (12,319) (4,658)
Net decrease (increase) in loans (3,831) (4,686)
Capital expenditures (42) (13)
Net cash used in investing activities (5,452) (5,857)
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
savings, money market and club accounts (2,021) (10,222)
Net increase (decrease) in certificates
of deposit 1,605 7,895
Net increase (decrease) in other borrowings 3,467 6,066
Proceeds from sale of Treasury stock 3 0
Proceeds from stock issuance 38 9
Dividends paid (104) (85)
Net cash provided by financing activities 2,988 3,663)
<PAGE>
(STATEMENTS OF CASH FLOWS CONTINTUED)
For the three months ended March 31,
1996 1995
(Unaudited) (Unaudited)
Net increase (decrease) in cash and
cash equivalents (1,360) (803)
Cash and cash equivalents at beginning
of period 5,404 5,230
Cash and cash equivalents at end of
period $4,044 $4,427
Interest paid $1,947 $1,705
Income taxes paid 8 40
Non-cash transactions:
Loans transferred to other real estate
owned (net) 423 28
Loans held for sale transferred to loan po 4,066 0
Net change in unrealized gain (loss) on
available for sale securities (226) 184
<PAGE>
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income for the three months ended March 31, 1996 was $745,000, an
increase of 19.6% over 1995's net income of $623,000.
NET INTEREST INCOME
Net interest income for the three months ended March 31, 1996 was
$2,198,000, a 0.5% increase over 1995's net interest income of $2,188,000.
Total interest income of $4,225,000 is a 7.6% increase over 1995's total
interest income of $3,925,000. Total interest expense of $2,027,000 is a 16.7%
increase over 1995's total interest expense of $1,737,000.
PROVISION FOR LOAN LOSSES
No provision to the allowance for loan losses was made during the first
three months of 1996. The allowance for loan losses is deemed adequate as
calculated in accordance with Banking Circular #201 and with respect to SFAS
114/118. Loans considered to be impaired according to SFAS 114/118 totalled
$327,000 at March 31, 1996. The portion of the allowance for loan losses
allocated to impaired loans at March 31, 1996 was $66,000.
NON-INTEREST INCOME
Non-interest income of $300,000 for the three months ended March 31, 1996
was an increase of 88.7% from 1995's non-interest income of $159,000. This
increase can be attributed to a net securities loss of $58,000 during the first
quarter of 1995 combined with an overall increase in non-interest income in the
first quarter of 1996, especially in fiduciary income.
NON-INTEREST EXPENSE
Non-interest expense of $1,400,000 for the three months ended March 31,
1996 is a decrease of 2.4% from 1995's non-interest expense of $1,434,000. A
significant reduction in FDIC insurance premiums was the principal cause for
the decrease.
INCOME TAXES
Income taxes on operating earnings increased to $353,000 for the first
three months in 1995 from $290,000 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, 1996 increased by 7.1% or $9,934,000 from March
31, 1995. Demand deposits increased by 28.1% or $2,816,000, NOW deposits
decreased by 1.6% or $427,000, savings deposits decreased by 2.3% or $786,000,
money market deposits decreased by 25.0% or $1,923,000 and certificates of
deposit increased by 16.6% or $10,254,000.
Deposits were supplemented by borrowings from the Federal Home Loan Bank
and repurchase agreements. Total borrowed funds increased by 4.7% or
$2,016,000 from the same period a year ago.
STOCKHOLDERS' INVESTMENT AND CAPITAL RESOURCES
Stockholders' investment as of March 31, 1996 was $20,098,000 compared to
$17,560,000 for the same period in 1995. The reason for this increase was the
strong earnings performance in the year 1995 and the first three months of
1996.
During 1995, the Company declared cash dividends of 14 cents per share for
the first quarter and 15 cents per share for the second and third quarters.
Dividends were increased by one cent again in the fourth quarter to 16 cents
per share. In addition, the Company declared a one-time special cash dividend
of 10 cents per share in the fourth quarter of 1995. Dividends were increased
one cent in the first quarter of 1996 to the current level of 17 cents per
share.
Leverage capital ratios were 9.28% and 8.70%, respectively, at March 31,
1996 and March 31, 1995. The Bank had a tier one risk-based capital ratio of
13.94% and tier two risk-based capital ratio of 15.19% at March 31, 1996,
compared to 13.02% and 14.27%, respectively, at March 31, 1995. These were
comfortably above the standards to be rated "well-capitalized" by the
regulatory authorities.
LIQUIDITY MANAGEMENT
As of March 31, 1996 the Bank had primary sources of liquidity of
$38,893,000, or 18.05% of its assets. It is Management's opinion that this is
adequate. In its Asset/Liability policy, 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 properties without mortgage insurance and up to 95%of
the appraised value of properties with mortgage insurance. No
further appraisals are done 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 re-appraisal 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.
They are handled the same way as above from booking date on.
C. Commercial properties We loan up to 75% of the appraised
value, and once the loan is closed, the decision to re-
appraise a property is subjective and depends on a variety of
factors, such as: the payment status of the loan, the risk
rating of the loan, the amount of time that has passed since
the last appraisal, changes in the real estate market,
availability of financing, inventory of competing properties,
and changes in condition of the property i.e. zoning changes,
environmental contamination, etc.
Note: A certified or licensed appraiser is used for all
appraisals.
At March 31, 1996 and 1995, loans on a non-accrual status totaled $526,000
and $1,463,000, respectively. In addition to loans on a non-accrual status at
March 31, 1996 and 1995, loans past due greater than 90 days totaled $111,000
and $93,000 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 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS 115 requires that
all debt securities be classified into one of three categories: trading
securities, securities available for sale and securities held to maturity. As
of March 31, 1996 stockholders' equity was increased by $53,000 due to a net
unrealized gain 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
In the first quarter of 1996, the Company adopted SFAS 122, "Accounting
for Mortgage Servicing Rights". This statement requires mortgage servicing
rights, whether purchased or originated, to be capitalized and subsequently
considerd for impairment. As of March 31, 1996, the Bank had not acquired any
servicing rights through loan origination or purchase transactions.
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 commercial
loans greater than $100,000.
C. Delinquent loans are reviewed weekly by the Bank's Collections
Officer and Senior Loan Officer.
D. A tickler system is utilized to insure timely receipt of 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
loansare reviewed periodically, usually around a delinquency.
Procedures for monitoring Bank Other Real Estate Owned:
The O.R.E.O. portfolio is handled by the 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 provision is made to the allowance for O.R.E.O. losses
if the estimated market value after selling costs is lower than the
carrying value of the property.
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.
<PAGE>
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, 1996
the registrant was not required to and did not file any reports
on Form 8-K.
<PAGE>
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 13, 1996 Daniel R. Daigneault
Date Daniel R. Daigneault
President and CEO
May 13, 1996 F. Stephen Ward
Date F. Stephen Ward
Treasurer
8
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