FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: Commission File No. 2-96573
June 30, 1998
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 June 30, 1998
Common Stock, Par One Cent 2,475,873
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FIRST NATIONAL LINCOLN CORPORATION
INDEX
PART 1 Financial Information
Page No.
Item 1: Financial Statements
Consolidated Balance Sheets - 1 - 2
June 30, 1998, June 30, 1997, and December 31, 1997.
Consolidated Statements of Income - 3 - 4
Six months ended June 30, 1998 and June 30, 1997.
Consolidated Statements of Income - 5 - 6
Quarter ended June 30, 1998 and June 30, 1997.
Consolidated Statements of Cash Flows - 7 - 8
Six months ended June 30, 1998 and June 30, 1997.
Footnotes to Financial Statements - 9
Six months ended June 30, 1998 and June 30, 1997.
Item 2: Management's discussion and analysis of 10 - 15
financial condition and results of operations.
PART II Other Information
Item 1: Legal Proceedings 16
Item 2: Changes in Securities 17
Item 3: Defaults Upon Senior Securities 18
Item 4: Submission of Matters to a Vote of Security Holders 19 - 21
Item 5: Other Information 22
Item 6: Exhibits and reports on Form 8-K. 23
Signatures 24
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
6/30/98 6/30/97 12/31/97
(000 OMITTED) (Unaudited) (Unaudited) (Unaudited)
Assets
Cash and due from banks $6,494 $6,833 $5,683
Interest bearing deposits in other banks 0 0 0
Investments:
Available for sale 14,686 15,161 16,463
Held to maturity (market values $50,024
at 6/30/98, $53,827 at 6/30/97 and
$52,610 at 12/31/97) 49,980 54,086 52,282
Loans held for sale (market value $100
at 12/31/97) 0 0 100
Loans 203,245 169,190 181,510
Less allowance for loan losses 1,712 1,823 1,800
Net loans 201,533 167,367 179,710
Accrued interest receivable 2,180 2,111 1,961
Bank premises and equipment 4,644 4,188 4,871
Other real estate owned 329 416 184
Other assets 5,937 1,495 5,025
Total Assets $285,783 $251,657 $266,279
Page1
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BALANCE SHEETS CONT.
6/30/98 6/30/97 12/31/97
(Unaudited) (Unaudited) (Unaudited)
Liabilities & Stockholders' Equity
Demand deposits $14,766 12,973 $14,109
NOW deposits 29,261 26,852 29,213
Money market deposits 9,974 4,156 6,238
Savings deposits 35,382 33,328 34,104
Certificates of deposit 72,425 64,149 68,970
Certificates $100M and over 19,752 15,216 17,246
Total deposits $181,560 156,674 $169,880
Borrowed funds 75,052 69,115 69,037
Other liabilities 1,676 1,747 1,477
Total Liabilities 258,288 227,536 240,394
Shareholders' Equity:
Common stock 25 25 25
Additional paid-in capital 4,686 4,467 4,595
Retained earnings 22,793 19,612 21,172
Net unrealized gains (losses) on available-
for-sale securities 110 21 93
Treasury stock (119) (4) 0
Total Stockholders' Equity 27,495 24,121 25,885
Total Liabilities & Stockholders'
Equity $285,783 251,657 $266,279
Page 2
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
AND NON-OWNER CHANGES IN EQUITY
For the six months ended June 30,
1998 1997
(000 OMITTED) (Unaudited) (Unaudited)
Interest Income:
Interest and fees on loans $8,372 7,227
Interest on deposits with other banks 10 24
Interest and dividends on investments 2,145 2,291
Total interest income 10,527 9,542
Interest expense:
Interest on deposits 3,191 2,818
Interest on borrowed funds 2,000 1,711
Total interest expense 5,191 4,529
Net interest income 5,336 5,013
Provision for loan losses 105 0
Net interest income after provision
for loan losses 5,231 5,013
Other operating income:
Trust department income 188 170
Service charges on deposit accounts 301 275
Net securities gains (losses) (25) 0
Other operating income 416 246
Total other operating income 880 691
Other operating expenses:
Salaries and employee benefits 1,799 1,601
Occupancy expense 214 169
Furniture and equipment expense 311 292
Other 939 860
Total other operating expenses 3,263 2,922
Income before income taxes 2,848 2,782
Applicable income taxes 856 876
NET INCOME $1,992 $1,906
Page 3
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STATEMENTS OF INCOME CONT.
1998 1997
(Unaudited) (Unaudited)
Non-owner changes in equity, net of tax:
Unrealized gains (losses)
arising during period 17 7
Less: reclassification adjustment
for accumulated gains (losses)
included in net-income (17) 0
Total non-owner changes in equity,
net of tax 0 7
INCOME AND NON-OWNER CHANGES IN EQUITY $1,992 $1,913
Earnings per common share:
Basic earnings per share $0.80 $0.77
Diluted earnings per share $0.78 $0.76
Cash dividends declared per share $0.15 $0.11
Weighted average number of shares
outstanding 2,478,999 2,462,740
Page 4
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CONSOLIDATED STATEMENTS OF INCOME
AND NON-OWNER CHANGES IN EQUITY
For the quarter ended June 30,
1998 1997
(000 OMITTED) (Unaudited) (Unaudited)
Interest Income:
Interest and fees on loans $4,273 3,714
Interest on deposits with other banks 5 11
Interest and dividends on investments 1,045 1,204
Total interest income 5,323 4,929
Interest expense:
Interest on deposits 1,616 1,440
Interest on borrowed funds 1,037 931
Total interest expense 2,653 2,371
Net interest income 2,670 2,558
Provision for loan losses 60 0
Net interest income after provision
for loan losses 2,610 2,558
Other operating income:
Trust department income 97 89
Service charges on deposit accounts 154 145
Net securities gains (losses) 0 0
Other operating income 214 141
Total other operating income 465 375
Other operating expenses:
Salaries and employee benefits 906 792
Occupancy expense 110 82
Furniture and equipment expense 156 151
Other 475 457
Total other operating expenses 1,647 1,482
Income before income taxes 1,428 1,451
Applicable income taxes 428 458
NET INCOME $1,000 $993
Page 5
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STATEMENTS OF INCOME CONT.
1998 1997
(Unaudited) (Unaudited)
Non-owner changes in equity, net of tax:
Unrealized gains (losses)
arising during period (12) 11
Less: reclassification adjustment
for accumulated gains (losses)
included in net-income 0 0
Total non-owner changes in equity,
net of tax (12) 11
INCOME AND NON-OWNER CHANGES IN EQUITY $988 $1,004
Earnings per common share
Basic earnings per share $0.40 $0.40
Diluted earnings per share $0.39 $0.40
Cash dividends declared per share $0.08 $0.06
Weighted average number of shares
outstanding 2,479,362 2,464,452
Page 6
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
1998 1997
(000 OMITTED) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $1,992 1,906
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 293 272
Provision for loan losses 105 0
Loans originated for resale (8,714) (782)
Proceeds from sales and transfers of loans 8,814 1,084
Net (gain) loss on sale of investments 25 0
Provision for losses on other real estate owned 0 0
Losses related to other real estate owned 0 20
Net change in other assets (1,131) (1,052)
Net change in other liabilities 189 389
Net amortization of premium on investments 75 15
Net cash provided by operating activities 1,648 2,052
Cash flows from investing activities:
Proceeds from sales of investments 5,474 0
Proceeds from maturities of investments 15,845 8,958
Maturities of interest-bearing deposits 0 975
Proceeds from sales of other real estate 0 429
Additional investment in other real estate owned 0 (1)
Purchase of investments (17,313) (17,645)
Net decrease (increase) in loans (22,073) (12,222)
Capital expenditures (66) (123)
Net cash used in investing activities (18,133) (19,829)
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
savings, money market and club accounts 5,719 (4,828)
Net increase (decrease) in certificates of deposit 5,961 5,828
Net increase (decrease) in other borrowings 6,015 17,967
Payment to repurchase common stock (139) (49)
Proceeds from sale of Treasury stock 20 45
Net proceeds from stock issuance 91 0
Dividends paid (371) (376)
Net cash provided by financing activities 17,296 18,587
Page 7
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STATEMENTS OF CASH FLOWS CONT.
1998 1997
(Unaudited) (Unaudited)
Net increase (decrease) in cash and
cash equivalents 811 810
Cash and cash equivalents at beginning
of period 5,683 6,023
Cash and cash equivalents at end of
period $6,494 $6,833
Interest paid $5,191 $4,427
Income taxes paid 877 819
Non-cash transactions:
Loans transferred to other real estate
owned (net) 145 50
Net change in unrealized gain (loss) on
available for sale securities 17 11
Page 8
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FOOTNOTES TO FINANCIAL STATEMENTS
1. The quarterly financial statements in the opinion of Management fairly
represent all adjustments made to reflect the current financial condition of
the Company for this interim period just ended. All such adjustments were of a
normal recurring nature.
Page 9
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Item 2 - MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income for the six months ended June 30, 1998 was $1,992,000, an
increase of 4.5% over 1997's net income of $1,906,000. Net income for the
quarter ended June 30, 1998 was $1,000,000. This is a 0.7% increase over
1997's net income of $845,000.
Earnings growth for the first six months of 1998 has been at a lower rate
than in the past three years due to several factors. The Bank's operating
expenses have increased as a result of opening two new branches in Rockport,
Maine and Camden, Maine. At the same time, the Bank's operating margins have
been compressed as a result of increased competition and the current interest
rate environment with an extremely flat yield curve. It is Management's opinion
that neither of these factors will have a significant negative impact on the
long-term operating results of the Company.
NET INTEREST INCOME
Net interest income for the six months ended June 30, 1998 was $5,336,000,
an 6.4% increase over 1997's net interest income of $5,013,000. Total interest
income of $10,527,000 is a 10.3% increase over 1997's total interest income of
$9,542,000. Total interest expense of $5,191,000 is a 14.6% increase over
1997's total interest expense of $4,529,000.
Net interest income for the quarter ended June 30, 1998 was $2,670,000.
This is an 4.4% increase over 1997's net interest income of $2,558,000. Total
interest income was $5,323,000, a 8.0% increase over 1997's total interest
income of $4,929,000. Total interest expense of $2,653,000 is a 11.9% increase
over 1997's total interest expense of $2,371,000.
PROVISION FOR LOAN LOSSES
A $105,000 provision to the allowance for loan losses was made during the
first six months of 1998. 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
$221,000 at June 30, 1998. The portion of the allowance for loan losses
allocated to impaired loans at June 30, 1998 was $109,000.
NON-INTEREST INCOME
Non-interest income of $880,000 for the six months ended June 30, 1998.
This is an increase of 27.4% from 1997's non-interest income of $691,000. Non-
interest income for the quarter ended June 30, 1998 was $465,000, a 24.0%
increase over the same period a year ago.
NON-INTEREST EXPENSE
Non-interest expense of $3,263,000 for the six months ended June 30, 1998
is an increase of 11.7% from 1997's non-interest expense of $2,922,000. Non-
interest expense for the quarter ended June 30, 1998 was $1,647,000, an 11.1%
increase over the same period a year ago.
Page 10
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MANAGEMENT'S DISCUSSION CONT.
INCOME TAXES
Income taxes on operating earnings decreased to $856,000 for the first six
months of 1998 from $876,000 for the same period a year ago. The level of
income taxes declined slightly as a result of the Company's increased holdings
of tax-exempt securities.
DEPOSITS AND BORROWED FUNDS
Deposits as of June 30, 1998 increased by 15.9% or $24,886,000 from
June 30, 1997. Demand deposits decreased by 13.8% or $1,793,000, NOW deposits
increased by 9.0% or $2,409,000, savings deposits increased by 6.2% or
$2,054,000, money market deposits increased by 140.0% or $5,818,000 and
certificates of deposit increased by 16.1% or $12,812,000. This is the most
substantial deposit growth that the Bank has seen in several years and is a
direct result of the opening of two new branches.
Deposits were supplemented by borrowings from the Federal Home Loan Bank
and repurchase agreements. Total borrowed funds increased by 8.6% or
$5,937,000 from the same period a year ago.
STOCKHOLDERS' INVESTMENT AND CAPITAL RESOURCES
Stockholders' investment as of June 30, 1998 was $27,495,000 compared to
$24,121,000 for the same period in 1997. The reason for this increase was the
strong earnings performance in the year 1997 and the first six months of 1998.
During 1997, the Company increased its dividend one cent each quarter to
end the year at a dividend rate of 6 cents per share. In addition, a special
cash dividend of 6 cents per share was declared in the fourth quarter of 1997.
In the first quarter of 1998, dividends were increased one cent again to
7 cents per share. (Dividend information for prior periods has been restated
to reflect the 300% stock dividend issued on December 1, 1997.)
Leverage capital ratios for the Company were 9.58% and 9.58%,
respectively, at June 30, 1998 and June 30, 1997. The Bank had a tier one
risk-based capital ratio of 14.23% and tier two risk-based capital ratio of
15.16% at June 30, 1998, compared to 15.29% and 16.49%, respectively, at June
30, 1997. These were comfortably above the standards to be rated "well-
capitalized" by the regulatory authorities.
LIQUIDITY MANAGEMENT
As of June 30, 1998 the Bank had primary sources of liquidity of
$39,346,000, or 13.8% 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.
Page 11
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MANAGEMENT'S DISCUSSION CONT.
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 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. 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. A certified or licensed
appraiser is used for all appraisals.
At June 30, 1998 and 1997, loans on a non-accrual status totaled $636,000
and $646,000, respectively. In addition to loans on a non-accrual status at
June 30, 1998 and 1997, loans past due greater than 90 days totaled $204,000
and $141,000 respectively. The Company continues to accrue interest on these
loans because it believes collection of the interest is reasonably assured.
INVESTMENTS
As of June 30, 1998 stockholders' equity was increased by $110,000 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
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.
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MANAGEMENT'S DISCUSSION CONT.
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 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 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.
ACCOUNTING PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income", was adopted on January 1,
1998. This standard requires that financial statements report comprehensive
income in addition to net income. Comprehensive income is all changes in
equity except investments by owners and distributions by owners. For the
Company, this includes unrealized appreciation or depreciation on securities
available for sale.
Page 13
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MANAGEMENT'S DISCUSSION CONT.
YEAR 2000 READINESS
With the year 2000 approaching, all businesses and governments are facing the
challenge of assessing and preparing their computer systems to handle dates
beyond 1999. First National Lincoln Corporation and its subsidiary, The First
National Bank of Damariscotta, are taking steps to address the many issues
related to the transition to the next century. The Bank's actions with regard
to Year 2000 compliance are reviewed by the Board of Directors, its internal
audit department, and its Federal Regulators. These include the following:
* The Bank has formulated a Year 2000 Plan to direct and coordinate
activities related to Year 2000 preparedness. All systems and business
relationships have been assessed to determine the scope of the project and
target dates have been set for any necessary systems changes. A test plan is
also in place to test all critical systems.
* A Year 2000 Task Force, overseen by the Board of Directors, has been
created and includes top management and staff from each division. It has been
working since the Summer of 1997 towards full Year 2000 compliance.
* A new core banking system has been purchased and is planned to be
operational by the fourth quarter of 1998. The system has been certified by
the vendor as Year 2000 compliant and offers many features which will enhance
customer service.
* The Bank is seeking to verify that all vendors, suppliers and other
business partners will be ready for Year 2000, and has created a team to work
with bank customers to assess their Year 2000 awareness and readiness.
The estimated cost to address Year 2000 issues is approximately $1
million. This includes $400,000 for the purchase of hardware and software for
the new core banking system, $250,000 for new PCs and networking hardware,
$50,000 for new telephone equipment, and a human-resources allocation of
$300,000. Most of these expenditures have already been incurred and will be
amortized over a three-to-five year period.
The purchase of new hardware and PCs, although required for operation of
the new core banking system, is part of the Bank's planned upgrade of
computers. The phone system is a more modern system that is being installed
irrespective of Year 2000 issues. Of the $300,000 human resource allocation, it
is estimated that only $25,000 will be an incremental expense to cover summer
college students, overtime for existing personnel, and outside support. The
remaining $275,000 is an allocation of existing human resources to effectively
implement and bring to a successful conclusion the Year 2000 Plan
It is Management's opinion that the Company's major Year 2000 risks are
primarily related to problems experienced by key counterparties which are
beyond the Company's control. The two most significant counterparties are U.S.
Government Agencies: the Federal Reserve Bank and the Federal Home Loan Bank.
The Company will closely monitor the Year 2000 preparation and readiness of
both agencies. An additional Year 2000 risk involves the Bank's new core
banking system, if the installation is delayed or unsuccessful. In Management's
opinion, this is not a significant risk at this time.
The Company has developed contingency plans with for all mission critical
systems. These plans include identification of alternative resources and/or
vendors as well as specific trigger dates for action and implementation.
Page 14
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MANAGEMENT'S DISCUSSION CONT.
FORWARD-LOOKING STATEMENTS
Certain disclosures in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain certain forward-looking statements
(as defined in the Private Securities Litigation Reform Act of 1995). In
preparing these disclosures, Management must make assumptions, including, but
not limited to, the level of future interest rates, prepayments on loans and
investment securities, required levels of capital, needs for liquidity, and the
adequacy of the allowance for loan losses. These forward-looking statements may
be subject to significant known and unknown risks uncertainties, and other
factors, including, but not limited to, those matters referred to in the
preceding sentence.
Although First National Lincoln Corporation believes that the expectations
reflected in such forward-looking statements are reasonable, actual results may
differ materially from the results discussed in these forward-looking
statements. Readers are cautioned not to place undue reliance on these forward
looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to republish revised forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. Readers are also urged to carefully review
and consider the various disclosures made by the Company which attempt to
advise interested parties of the facts which affect the Company's business.
Page 15
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PART II
ITEM 1. LEGAL PROCEEDINGS
The Company was not involved in any legal proceedings requiring disclosure
under Item 103 of Regulation S-K during the reporting period.
Page 16
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ITEM 2. CHANGES IN SECURITIES
None
Page 17
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ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
Page 18
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Three proposals were submitted to a vote of security holders at the
Company's Annual Meeting of Shareholders, held on Tuesday, April 28, 1998, at
11:00 a.m. Eastern Daylight Time. Only shareholders of record as of the close
of business on March 12, 1998 (the "Voting Record Date") were entitled to vote
at the Annual Meeting. On the Voting Record Date, there were 2,479,917 shares
of Common Stock of the Company, one cent par value, issued and outstanding, and
the Company had no other class of equity securities outstanding. Each share of
Common Stock was entitled to one vote at the Annual Meeting on all matters
properly presented thereat.
PROPOSAL 1: To ratify the Board of Directors' vote to fix the number of
Directors at ten.
The Articles of Incorporation of the Company provide that the Board of
Directors shall consist of not fewer than five nor more than twenty-five
persons as determined by the Board prior to each Annual Meeting, with Directors
serving for "staggered terms" of three years. A resolution of the Board of
Directors adopted pursuant to the Company's Articles of Incorporation has
established the number of Directors at ten.
The results of the shareholder voting had 2,075,103 shares in favor, 2,324
shares against, 1,076 shares withheld voting, and 401,414 shares not voting.
PROPOSAL 2: Election of Directors
The following were nominees for three-year terms as Director:
M. Robert Barter has been a Director of the Company since its organization
in 1985 and has served as a Director of the Bank since 1982, and Chairman of
both the Company and the Bank since April, 1989. Mr. Barter has owned and
operated Bob's Photo-TV Store in Boothbay Harbor, Maine since 1953. Mr. Barter
is also serving as Town Clerk for the Town of Boothbay Harbor and is County
Commissioner for Lincoln County, Maine. Representing Maine, Mr. Barter is a
Director of The National Association of Counties in Washington, DC.
Bruce A. Bartlett has been a member of the Board of Directors since the
Company's organization in 1985. Mr. Bartlett served as President and Chief
Executive Officer of the Company until his retirement on April 26, 1994 and as
President and Chief Executive Officer of the Bank until his retirement on March
7, 1994. He has served as a Director of the Bank since 1981.
Malcolm E. Blanchard has been a Director of the Company since its
organization in 1985, has served as a Director of the Bank since 1976, and is
Chairman of the Executive Committee of the Bank. Mr. Blanchard has been
actively involved, either as sole proprietor or as a partner, in real estate
development since 1970.
Stuart G. Smith was selected as a Director of the Company and the Bank in
July 1997. A resident of Camden, he owns with his wife, Maine Sport Outfitters
in Rockport, and Lord Camden Inn and Bayview Landing in Camden, Maine. Mr.
Smith is Chairman of the Five Town CSD School Board and Chairman of the
Facilities Planning Committee for the new high school.
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VOTE OF SECURITY HOLDERS, Cont.
The following Directors' terms will expire in 1999:
Katherine M. Boyd was elected a Director of the Company and Bank in 1993.
A resident of Boothbay Harbor, she owns Boothbay Region Greenhouses with her
husband. Ms. Boyd is a director of the Boothbay Region YMCA, Chairperson of
the YMCA Annual Fund Drive, and past chairperson of the YMCA Camp Committee.
Carl S. Poole has been a Director of the Company since its organization in
1985 and has served as a Director of the Bank since 1984. Mr. Poole is
President, Secretary and Treasurer of Poole Brothers Lumber, a lumber and
building supply company with locations in Damariscotta, Pemaquid and Boothbay
Harbor, Maine.
David B. Soule, Jr. was elected a Director of the Company and the Bank in
June, 1989. Mr. Soule has been practicing law in Wiscasset since 1971. He
spent two terms in the Maine House of Representatives and is a past President
of the Lincoln County Bar Association and is a former Public Administrator,
Lincoln County. He has served on the Board of Directors of Bath area YMCA and
of the Coastal Economic Development Corporation and as a Trustee of the
Wiscasset Library. He was Selectman, Town of Westport from 1975 to 1976 and
served as Chairman of the Board of Selectman from 1993 to 1995.
The following Directors' terms will expire in 2000:
Daniel R. Daigneault has served as President and Chief Executive Officer
of the Company since April 26, 1994, and has served as President and Chief
Executive Officer of the Bank since March 7, 1994 and as a member of the Board
of Directors of both the Company and the Bank since March 1994. Prior to being
employed by the Bank, Mr. Daigneault was Vice President, Senior Commercial Loan
Officer at Camden National Bank, Camden, Maine. Mr. Daigneault is Vice
President of the Boothbay Region YMCA Board of Trustees and a director of Maine
Bankers Association.
Robert B. Gregory was elected a Director of the Company and the Bank in
October, 1987. Mr. Gregory has been a practicing attorney since 1980, first in
Lewiston, Maine and since 1984 in Damariscotta, Maine. Mr. Gregory is a member
of several legal societies and associations.
Parker L. Spofford has been a Director of the Company since its
organization in 1985 and has served as a Director of the Bank since 1979. Mr.
Spofford is a Realtor in Waldoboro, Maine. He has been active in that capacity
since 1955 and is a Past President of the Maine Association of Realtors as well
as a former director of the National Association of Realtors. He began his
banking affiliation with the Provident Institution for Savings in Boston and
has served in an advisory capacity for the former Depositors Trust Company and
the former Heritage Savings Bank.
Page 20
<PAGE>
VOTE OF SECURITY HOLDERS, Cont.
There are no family relationships among any of the Directors of the
Company, and there are no arrangements or understandings between any Director
and any other person pursuant to which that Director has been or is to be
elected. No Director of the Bank or the Company serves as a Director on the
board of any other corporation with a class of securities registered pursuant
to Section 12 of the Securities Exchange Act or subject to the reporting
requirements of Section 15(d) of the Securities Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940,
as amended.
The results of the shareholder voting had 2,076,267 shares in favor, 2,236
withheld voting, and 401,414 shares not voting.
PROPOSAL 3: Appointment of Auditors
The Board of Directors appointed Berry, Dunn, McNeil & Parker as
independent auditors of the Company and its subsidiary for the year ended
December 31, 1997. In the opinion of the Board of Directors, the reputation,
qualifications and experience of the firm make its reappointment appropriate
for 1998. It was the desire of the Board of Directors that the selection of
Berry, Dunn, McNeil & Parker as independent auditors be ratified by
shareholders at the annual meeting.
The results of the shareholder voting had 2,076,287 shares in favor, 2,000
shares against, 216 withheld voting, and 401,414 not voting.
Page 21
<PAGE>
ITEM 5: Other Information
In the first quarter of 1998, the Bank entered into an agreement to lease
a former bank branch in Camden, Maine, that had been vacated by its previous
tenant. The Bank filed and received approval from its principal regulator,
the Office of the Comptroller of the Currency, to establish a branch office in
this location. No loans or deposits were acquired from the previous tenant.
After modest renovation, the facility was opened in May of 1998.
Page 22
<PAGE>
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 six months ended June 30, 1998 the
registrant was not required to and did not file any reports on Form 8-K.
Page 23
<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
August 13, 1998 Daniel R. Daigneault
Date Daniel R. Daigneault
President and CEO
August 13, 1998 F. Stephen Ward
Date F. Stephen Ward
Treasurer
Page 24
<PAGE>
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