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. 0-26589
June 30, 1999
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, 1999
Common Stock, Par One Cent 2,406,786
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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, 1999, June 30, 1998, and December 31, 1998.
Consolidated Statements of Income - 3 - 4
For the six months ended June 30, 1999 and June 30, 1998.
Consolidated Statements of Income - 5 - 6
For the quarters ended June 30, 1999 and June 30, 1998.
Consolidated Statements of Cash Flows - 7 - 8
For the six months ended June 30, 1999 and June 30, 1998.
Footnotes to Financial Statements - 9
Three months ended June 30, 1999 and June 30, 1998.
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
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
6/30/99 6/30/98 12/31/98
(000 OMITTED) (Unaudited) (Unaudited) (Unaudited)
Assets
Cash and due from banks $ 6,548 $6,494 $6,338
Interest bearing deposits in other banks 0 0 0
Investments:
Available for sale 35,864 14,686 18,858
Held to maturity (market values $46,773
at 6/30/99, $50,024 at 6/30/98 and
$40,702 at 12/31/98) 48,061 49,980 40,484
Loans held for sale (market value $209
At 12/31/98 0 0 209
Loans 225,699 203,245 209,224
Less allowance for loan losses 2,043 1,712 1,822
Net loans 223,656 201,533 207,402
Accrued interest receivable 2,557 2,180 1,770
Bank premises and equipment 5,650 4,644 5,866
Other real estate owned 231 329 303
Other assets 5,586 5,937 5,576
Total Assets $328,153 $285,783 $286,806
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BALANCE SHEETS CONT.
6/30/99 6/30/98 12/31/98
(Unaudited) (Unaudited) (Unaudited)
Liabilities & Stockholders' Equity
Demand deposits $16,353 14,766 $17,649
NOW deposits 32,921 29,261 33,710
Money market deposits 7,996 9,974 9,793
Savings deposits 39,570 35,382 39,226
Certificates of deposit 77,182 72,425 72,294
Certificates $100M and over 27,764 19,752 29,131
Total deposits $201,786 181,560 $201,803
Borrowed funds 96,520 75,052 54,460
Other liabilities 1,535 1,676 1,767
Total Liabilities 299,841 258,288 258,030
Shareholders' Equity:
Common stock 25 25 25
Additional paid-in capital 4,686 4,686 4,687
Retained earnings 25,791 22,793 24,218
Net unrealized gains (losses) on available-
for-sale securities (667) 110 63
Treasury stock (1,523) (119) (217)
Total Stockholders' Equity 28,312 27,495 28,776
Total Liabilities & Stockholders'
Equity $328,153 285,783 $286,806
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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,
1999 1998
(000 OMITTED) (Unaudited) (Unaudited)
Interest Income:
Interest and fees on loans $ 8,909 8,372
Interest on deposits with other banks 11 10
Interest and dividends on investments 2,282 2,145
Total interest income 11,202 10,527
Interest expense:
Interest on deposits 3,570 3,191
Interest on borrowed funds 1,930 2,000
Total interest expense 5,500 5,191
Net interest income 5,702 5,336
Provision for loan losses 375 105
Net interest income after provision
for loan losses 5,327 5,231
Other operating income:
Fiduciary income 270 188
Service charges on deposit accounts 327 301
Net securities gains (losses) 0 (25)
Other operating income 722 416
Total other operating income 1,319 880
Other operating expenses:
Salaries and employee benefits 1,912 1,799
Occupancy expense 231 214
Furniture and equipment expense 348 311
Other 1,117 939
Total other operating expenses 3,608 3,263
Income before income taxes 3,038 2,848
Applicable income taxes 904 856
NET INCOME $2,134 $1,992
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STATEMENTS OF INCOME CONT.
1999 1998
(Unaudited) (Unaudited)
Non-owner changes in equity, net of tax:
Unrealized gains (losses)
arising during period (730) 17
Less: reclassification adjustment
for accumulated gains (losses)
included in net-income 0 (17)
Total non-owner changes in equity,
net of tax (730) 0
INCOME AND NON-OWNER CHANGES IN EQUITY $1,404 $1,992
Earnings per common share:
Basic earnings per share $0.87 $0.80
Diluted earnings per share $0.83 $0.78
Cash dividends declared per share $0.23 $0.15
Weighted average number of shares
outstanding 2,462,502 2,478,999
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
AND NON-OWNER CHANGES IN EQUITY
For the quarters ended June 30,
1999 1998
(000 OMITTED) (Unaudited) (Unaudited)
Interest Income:
Interest and fees on loans $ 4,530 4,273
Interest on deposits with other banks 6 5
Interest and dividends on investments 1,256 1,045
Total interest income 5,792 5,323
Interest expense:
Interest on deposits 1,795 1,616
Interest on borrowed funds 1,081 1,037
Total interest expense 2,876 2,653
Net interest income 2,916 2,670
Provision for loan losses 285 60
Net interest income after provision
for loan losses 2,631 2,610
Other operating income:
Fiduciary income 132 97
Service charges on deposit accounts 179 154
Net securities gains (losses) 0 0
Other operating income 469 214
Total other operating income 780 465
Other operating expenses:
Salaries and employee benefits 953 906
Occupancy expense 112 110
Furniture and equipment expense 182 156
Other 593 475
Total other operating expenses 1,840 1,647
Income before income taxes 1,571 1,428
Applicable income taxes 465 428
NET INCOME $1,106 $1,000
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STATEMENTS OF INCOME CONT.
1999 1998
(Unaudited) (Unaudited)
Non-owner changes in equity, net of tax:
Unrealized gains (losses)
arising during period (576) (12)
Less: reclassification adjustment
for accumulated gains (losses)
included in net-income 0 0
Total non-owner changes in equity,
net of tax (576) (12)
INCOME AND NON-OWNER CHANGES IN EQUITY $530 $988
Earnings per common share:
Basic earnings per share $0.45 $0.40
Diluted earnings per share $0.44 $0.39
Cash dividends declared per share $0.12 $0.08
Weighted average number of shares
outstanding 2,434,821 2,479,362
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FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
1999 1998
(000 OMITTED) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $2,134 1,992
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 262 293
Provision for loan losses 375 105
Provision for losses on other real estate owned 0 0
Loans originated for resale (7,267) (8,714)
Proceeds from sales and transfers of loans 7,476 8,814
Net (gain) loss on sale or call of
securities held for sale 0 25
Net (gain) loss on sale of securities
to be held to maturity 0 0
Losses related to other real estate owned 6 0
Net change in other assets and accrued interest (797) (1,131)
Net change in other liabilities 226 189
Net amortization of premium on investments 11 75
Net cash provided by operating activities 2,426 1,648
Cash flows from investing activities:
Proceeds from sales, maturities and calls of
securities available for sale 2,307 6,515
Proceeds from sales, maturities and calls of
securities to be held to maturity 10,400 14,804
Proceeds from sales of other real estate owned 212 0
Additional investment in other real estate owned 0 0
Purchases of securities available for sale (20,408) (4,747)
Purchases of securities to be held to maturity (18,000) (12,566)
Purchase of interest-bearing deposits 0 0
Maturities of interest-bearing deposits 0 0
Net decrease (increase) in loans (16,775) (22,073)
Capital expenditures (46) (66)
Net cash used in investing activities (42,310) (18,133)
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
savings, money market and club accounts (3,538) 5,719
Net increase (decrease) in certificates of deposit 3,521 5,961
Net increase (decrease) in other borrowings 42,060 6,015
Payment to repurchase common stock (1,396) (139)
Proceeds from sale of Treasury stock 89 20
Net proceeds from stock issuance 0 91
Dividends paid (642) (371)
Net cash provided by financing activities 40,094 17,296
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STATEMENTS OF CASH FLOWS CONT.
1999 1998
(Unaudited) (Unaudited)
Net increase (decrease) in cash and
cash equivalents 210 811
Cash and cash equivalents at beginning
of period 6,338 5,683
Cash and cash equivalents at end of
period $ 6,548 $6,484
Interest paid $5,499 $5,191
Income taxes paid 871 877
Non-cash transactions:
Loans transferred to other real estate
owned (net) 146 145
Net change in unrealized gain (loss) on
available for sale securities (1,107) 17
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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.
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EARNINGS SUMMARY
Net income for the six months ended June 30, 1999 was $2,134,000, an
increase of 7.1% over 1998's net income of $1,922,000. Net income for the
quarter ended June 30, 1999 was $1,106,000. This is a 10.6% increase over
1998's net income of $1,000,000.
Earnings growth for the first six months of 1999 has been at a higher rate
than in 1998 due to several factors. Net interest income has benefited from
strong growth in both the loan and investment portfolios as well as from the
current interest rate environment with a yield curve that has been steepened.
At the same time, the increased operating expense base that resulted from
opening two new branches in Rockport, Maine and Camden, Maine has been fully
absorbed.
NET INTEREST INCOME
Net interest income for the six months ended June 30, 1999 was $5,702,000,
a 6.9% increase over 1998's net interest income of $5,336,000. Total interest
income of $11,202,000 is a 6.4% increase over 1998's total interest income of
$10,527,000. Total interest expense of $5,500,000 is a 6.0% increase over
1998's total interest expense of $5,191,000.
Net interest income for the quarter ended June 30, 1999 was $2,916,000.
This is a 9.2% increase over 1998's net interest income of $2,670,000. Total
interest income was $5,792,000, an 8.8% increase over 1998's total interest
income of $5,323,000. Total interest expense of $2,876,000 is an 8.4% increase
over 1998's total interest expense of $2,653,000.
PROVISION FOR LOAN LOSSES
A $375,000 provision to the allowance for loan losses was made during the
first six months of 1999. The allowance for loan losses is deemed adequate as
calculated in accordance with Banking Circular #201 and with respect to SFAS
114/118. In addition to a planned provision to the allowance for loan losses
of $105,000 in the second quarter of 1999, the Bank made an additional
provision of $180,000. This additional provision was due to unexpected and
rapid deterioration in the quality of one commercial credit relationship. In
Management's opinion, this was an isolated circumstance and is not indicative
of a general decline in the credit quality of the entire loan portfolio.
Loans considered to be impaired according to SFAS 114/118 totaled $843,000
at June 30, 1999. The portion of the allowance for loan losses allocated to
impaired loans at June 30, 1999 was $446,000.
NON-INTEREST INCOME
Non-interest income was $1,319,000 for the six months ended June 30,
1999. This is an increase of 49.9% from 1998's non-interest income of
$880,000, due to strong mortgage origination and merchant credit card income.
Non-interest income for the quarter ended June 30, 1999 was $780,000, a 67.7%
increase over the same period a year ago.
In the second quarter of 1999, the Company adopted FAS 125 which governs
the accounting treatment for mortgage servicing rights. As a result of this
action, the Company recognized a net one-time gain of $189,000, before taxes. A
20% valuation allowance was also established to compensate for unexpected
mortgage prepayments.
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MANAGEMENT'S DISCUSSION CONT.
NON-INTEREST EXPENSE
Non-interest expense of $3,608,000 for the six months ended June 30, 1999
is an increase of 10.6% from 1998's non-interest expense of $3,263,000. Non-
interest expense for the quarter ended June 30, 1999 was $1,840,000, an 11.7%
increase over the same period a year ago.
INCOME TAXES
Income taxes on operating earnings increased to $904,000 for the first six
months of 1999 from $856,000 for the same period a year ago. The level of
income taxes increase slightly as a result of the Company's higher net income.
ASSETS
Investments as of June 30, 1999 were $24.6 million or 41.4% above December
31, 1998. Additions to the investment portfolio were made as a result of
favorable investment opportunities and a positively sloped yield curve. Loans
as of June 30, 1999, totaled $16.5 million or 7.9% above December 31, 1998.
Loan growth was seen in all categories, with the largest growth coming in
commercial and mortgage loans. Total assets as of June 30, 1999 were $328.2
million, an increase of $41.3 million or 14.4% over December 31, 1998.
LIABILITIES
Deposits as of June 30, 1999 were $17,000 below December 31, 1999. Demand
deposits decreased by 7.3% or $1.3 million, NOW accounts decreased by 2.3% or
$0.8 million, savings deposits decreased by 0.9% or $0.3 million, money market
deposits decreased by 18.3% or $1.8 million and certificates of deposit
increased by 3.5% or $3.5 million. These variances are normal for the seasonal
deposit flow that Management anticipates in the first half of the year.
Deposits were supplemented by borrowings from the Federal Home Loan Bank
and repurchase agreements. Due to strong asset growth, total borrowed funds
increased by 77.2% or $42.1 million from December 31, 1998.
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
Shareholders' equity as of June 30, 1999 was $28,312,000 compared to
$27,495,000 at June 30, 1998. While the Company has had strong earnings
performance in the 12-month period, it repurchased common shares which reduced
shareholder's equity. The Company has increased its dividend by 1 cent each
quarter during the past four quarters, with a dividend of 12 cents per share
declared in the second quarter of 1999. In addition, a special cash dividend of
5 cents per share was declared in the fourth quarter of 1998.
Leverage capital ratios for the Company were 9.14% and 9.62%,
respectively, at June 30, 1999 and June 30, 1998. This decline was due to
repurchase of shares into treasury. The Bank had a tier one risk-based capital
ratio of 14.15% and tier two risk-based capital ratio of 15.15% at June 30,
1999, compared to 14.23% and 15.16%, respectively, at June 30, 1998. These
were comfortably above the standards to be rated "well-capitalized" by the
regulatory authorities. As of June 30, 1999 stockholders' equity was decreased
by $667,000 due to a net unrealized loss in the available-for-sale portfolio.
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MANAGEMENT'S DISCUSSION CONT.
LIQUIDITY MANAGEMENT
As of June 30, 1999 the Bank had primary sources of liquidity of $55.8
million, or 17.1% of its assets. It is Management's opinion that this is
adequate. In its Asset/Liability policy, the Bank has adopted guidelines for
liquidity.
The Company is 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 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, 1999 and 1998, loans on a non-accrual status totaled
$1,247,000 and $636,000, respectively. In addition to loans on a non-accrual
status at June 30, 1999 and 1998, loans past due greater than 90 days totaled
$255,000 and $204,000 respectively. The Company continues to accrue interest
on these loans because it believes collection of the interest is reasonably
assured.
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.
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MANAGEMENT'S DISCUSSION CONT.
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 classified commercial loans
greater than $100,000, and semi-annually on all criticized 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
The Financial Accounting Standards Board has issued SFAS No. 133, Accounting
For Derivative Instruments and Hedging Activities and is effective for fiscal
years beginning after June 15, 1999. Management has not determined the impact
of SFAS No. 133 on the financial statements.
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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, have taken steps to address the many issues
related to the transition to the next century. The Bank's actions with regard
to Year 2000 compliance have been reviewed by the Board of Directors, its
internal audit department, and its Federal Regulators.
The awareness phase of the Company's Year 2000 readiness began with the
creation of a Year 2000 Task Force, overseen by the Board of Directors, which
includes top management and staff from each division. It has been working since
the summer of 1997 towards full Year 2000 compliance.
From this, the Company began its assessment phase, during which a Year
2000 Plan was formulated to direct and coordinate activities related to Year
2000 preparedness. Development of this plan began with an examination of all
internal systems and identification of those which are considered "mission-
critical" and requiring the highest priority in evaluation and remediation.
This process included not only computer hardware and software, but also non-
information-technology systems, such as alarms and heating control systems.
From this evaluation, the scope of the Year 2000 remediation project was
developed and target dates were set for any necessary systems changes. A test
plan was also developed for the testing of all mission-critical systems. The
assessment phase of the project was complete in the first quarter of 1998.
The major project in the remediation phase was the acquisition of a new
core banking system which became operational in the third quarter of 1998. The
system has been certified by the vendor as Year 2000 compliant and offers many
features which Management believes will enhance customer service. In addition,
several stand-alone hardware and software systems have been upgraded or
replaced.
At June 30, 1999, the Company had, in Management's opinion, completed all
phases of its Year 2000 plan. At that point all hardware and software changes
required in the remediation phase were complete and operational, and the
testing required in the validation phase of the plan was complete. The Bank
also has received a "satisfactory" rating from its primary regulator.
The estimated cost to address Year 2000 issues was approximately $1
million. This includes $400,000 for the purchase of hardware and software for
the new core banking system, $250,000 for new personal computers and networking
hardware, and $50,000 for new telephone equipment. The purchase of new hardware
and personal computers, 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,
but has been certified by the vendor as Year 2000 compliant. All of these
expenditures have been incurred and will be amortized over a three-to-five year
period.
In addition to hardware and software, the above-mentioned estimated total
cost includes a human-resources allocation of $300,000 which has been or will
be expensed as incurred. Of this, it is estimated that only $25,000 was an
incremental expense, which included summer college students, overtime for
existing personnel, and outside support. The remaining $275,000 was an
allocation of existing human resources to effectively implement and bring to a
successful conclusion the Year 2000 Plan.
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MANAGEMENT'S DISCUSSION CONT.
Externally, both business relationships and significant counterparties
have been evaluated for their state of Year 2000 preparedness. The Company has
verified that all key 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.
At this time, it is Management's opinion that the Company's major Year
2000 risks are primarily related to 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 -- upon
which the Company is dependent for liquidity and funds transfer needs. The
Company continues to closely monitor the Year 2000 preparation and readiness of
both agencies.
The Company has developed contingency plans for all mission critical
systems. Since the Company's primary business is providing traditional banking
services, the creation of additional liquidity capacity to meet the potential
needs of its customers and communities is a key part of contingency planning. A
separate liquidity contingency plan was finalized during the second quarter of
1999.
With Year 2000 assessment, remediation and validation now complete, in
Management's opinion the worst-case scenario the Company envisions involves
electric power and telecommunication interruptions. For electric power, the
Company is currently installing a back-up generator for its operations
facility. While no formal plans are in place to address telecommunication
disruptions, in Management's opinion this is not a significant issue due to the
general state of preparedness of the telecommunications industry.
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.
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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.
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ITEM 2. CHANGES IN SECURITIES
None
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ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
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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 27, 1999, at
11:00 a.m. Eastern Daylight Time. Only shareholders of record as of the close
of business on March 9, 1999 (the "Voting Record Date") were entitled to vote
at the Annual Meeting. On the Voting Record Date, there were 2,470,157 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 2,116,247 shares in favor, 4,660
shares against, 3,336 shares withheld voting, and 345,914 shares not voting.
PROPOSAL 2: Election of Directors
The following were nominees for three-year terms as Director:
Katherine M. Boyd has been a Director of the Company since 1993. A
resident of Boothbay Harbor, she owns Boothbay Region Greenhouses with her
husband. Ms. Boyd serves on the Boothbay Region YMCA Camp Committee and is
Secretary for the local chapter of AFS. Ms. Boyd previously served as trustee
of the YMCA, and past chairperson of the YMCA Annual Fund Drive.
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. has been a Director of the Company and the Bank since
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.
Bruce B. Tindal was elected as a Director of the Company and the Bank in
January 1999. Mr. Tindal formed and is co-owner of Tindal & Callahan Real
Estate in Boothbay Harbor, which has been in operation since 1985. Mr. Tindal
is a Trustee at St. Andrews Hospital and serves on the Board of Directors of
the Boothbay Region Land Trust and the Boothbay Region Economic Development
Corp. Mr. Tindal is also a member of the National Association of REALTORS.
Page 19
<PAGE>
VOTE OF SECURITY HOLDERS, Cont.
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 has been a Director of the Company and the Bank since
September, 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.
Dana L. Dow was elected as a Director of the Company and the Bank in
January 1999. Mr. Dow is President of Dow Furniture, Inc., which he purchased
from his father in 1977. Prior to purchasing Dow Furniture, Mr. Dow taught
chemistry and physics at Medomak Valley High School.
The following Directors' terms will expire in 2001:
Bruce A. Bartlett has been a Director of the Company since its
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 has been a Director of the Company and the Bank since July
1997. A resident of Camden, he and his wife own and operate 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.
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 2,122,643 shares in favor, 1,600
withheld voting, and 345,914 shares not voting.
Page 20
<PAGE>
VOTE OF SECURITY HOLDERS, Cont.
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, 1998. In the opinion of the Board of Directors, the reputation,
qualifications and experience of the firm make its reappointment appropriate
for 1999. 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 2,124,047 shares in favor, 196
withheld voting, and 345,914 not voting.
Page 21
<PAGE>
ITEM 5: Other Information
None.
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 three months ended June 30, 1999 the registrant filed one
report on Form 8-K. This filing was made on April 16, 1999 in conjunction with
the Company's public announcement that the Board of Directors had voted to file
an application with the NASDAQ Stock Market, Inc., to list the shares of the
Company's common stock on the NASDAQ National Market. It noted that the Company
will also file a revised registration statement with the Securities and
Exchange Commission after NASDAQ has acted on the Company's application for
listing. No financial statement were filed with this report.
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
July 13, 1999 Daniel R. Daigneault
Date Daniel R. Daigneault
President and CEO
July 13, 1999 F. Stephen Ward
Date F. Stephen Ward
Treasurer
Page 24
<PAGE>
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