SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934.
For the Quarter ended: June 30, 2000 Commission File No. 0-18096
MID-COAST BANCORP, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 01-0454232
- ---------------------------------------------------------------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.)
1768 Atlantic Highway, PO Box 589
Waldoboro, Maine 04572
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 832-7521
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
The number of shares outstanding of each of the registrant's classes of
common stock, as of June 30, 2000, is 753,727.
Transitional Small Business Disclosure Format: Yes No X
---- ----
MID-COAST BANCORP, INC.,
Index
PART I FINANCIAL INFORMATION Page
Item 1: Consolidated Balance Sheets of Mid-Coast
Bancorp, Inc. (Unaudited) at
June 30, 2000 and March 31, 2000 3
Consolidated Statements of Income of Mid-Coast
Bancorp, Inc. (Unaudited), Three Months Ended
June 30, 2000 and 1999 5
Consolidated Statement of Changes in Stockholders'
Equity of Mid-Coast Bancorp, Inc. (Unaudited) for
the period April 1, 1999 to June 30, 2000 6
Consolidated Statements of Cash Flows of Mid-Coast
Bancorp, Inc. (Unaudited), for the Three Months
Ended June 30, 2000 and 1999 7
Notes to the Consolidated Financial Statements (Unaudited) 8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION 16
SIGNATURES 17
MID-COAST BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, March 31,
----------------------
2000 2000
----------------------
Cash and due from banks $ 1,602,066 $ 2,131,302
Interest bearing deposits 123,775 97,426
Federal funds sold 4,200,000 5,385,000
--------------------------
Cash and cash equivalents 5,925,841 7,613,728
Time deposits 1,882,000 2,081,000
Investment securities available for sale 7,337,984 7,138,482
Held to maturity investment securities
(market value of $283,618 and $185,445 at March 31) 300,000 200,000
Investment in Federal Home Loan Bank stock 910,800 910,800
Loans held for sale 93,000 0
Loans 64,578,081 62,360,994
Less: Allowance for loan losses 507,024 482,359
Deferred loan fees 89,580 94,964
--------------------------
63,981,477 61,783,671
Bank premises and equipment, net 1,545,168 1,576,500
Other assets:
Accrued interest receivable- loans 349,104 324,328
Accrued interest receivable- time deposits 16,957 15,626
Accrued interest receivable- investment and
Mortgage-backed securities 88,571 96,284
Deferred income taxes 167,266 176,948
Prepaid expenses and other assets 656,042 366,655
Real estate owned\other repo assets 4,805 180,000
--------------------------
Total other assets 1,282,745 1,159,841
--------------------------
Total assets $83,259,015 $82,464,022
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
June 30, March 31,
--------------------------
2000 2000
--------------------------
Liabilities:
Deposits:
Demand deposits $ 4,014,585 $ 4,033,535
NOW Accounts 11,426,744 11,378,571
Savings 7,618,403 7,779,961
Money Market deposit accounts 3,926,265 4,592,682
Certificates of deposit 34,203,321 31,848,684
--------------------------
Total deposits 61,189,318 59,633,433
Advances from the Federal Home Loan Bank 15,965,000 16,715,000
Accrued expenses and other liabilities 404,645 488,926
--------------------------
Total liabilities 77,558,963 76,837,359
Stockholders' equity
Common stock, $1 par value, 1,500,000
shares authorized; 753,727 shares
issued and outstanding (753,570
shares at March 31) 753,727 753,570
Paid-in capital 1,761,424 1,754,980
Retained earnings 3,496,137 3,437,526
Accumulated other comprehensive income(loss) (139,662) (139,039)
Unearned compensation (171,574) (180,374)
--------------------------
Total stockholders' equity 5,700,052 5,626,663
--------------------------
Total liabilities and stockholders'
equity $83,259,015 $82,464,022
==========================
MID-COAST BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended Three months ended
June 30, 2000 June 30, 1999
----------------------------------------
Interest income:
Interest on loans $1,347,709 $1,187,729
Interest on investment securities 90,038 61,456
Interest on mortgage-backed securities 34,877 23,701
Interest on overnight funds and other deposits 108,334 66,650
--------------------------------
Total interest income 1,580,958 1,339,536
Interest expense:
Interest on deposits 649,245 518,203
Interest on borrowings 222,099 170,871
--------------------------------
Total interest expense 871,344 689,074
--------------------------------
Net interest income 709,614 650,462
Provision for loan losses 22,000 19,000
--------------------------------
Net interest income after
provision for loan losses 687,614 631,462
Other income:
Loan servicing and other loan fees 17,742 15,245
Gain on sale of loans 10,915 33,061
Deposit account fees 69,661 60,833
Miscellaneous 11,416 3,525
--------------------------------
109,734 112,664
Other expenses:
Compensation & benefits 268,254 259,468
Building occupancy 26,110 24,547
Repairs and maintenance 17,521 16,284
Depreciation, amortization and software expense 64,143 71,451
Advertising 9,000 11,818
Insurance expense 23,644 22,516
Professional fees & shareholder services 55,104 47,082
Real estate owned 1,534 156
Other 120,183 106,603
--------------------------------
585,493 559,925
--------------------------------
Income before income taxes 211,855 184,201
Income tax expense 78,835 59,748
--------------------------------
Net income $ 133,020 $ 124,453
--------------------------------
Weighted average common shares outstanding
Basic 743,782 742,972
Fully-diluted 748,095 747,189
Earnings per share - basic $ 0.18 $ 0.17
===============================
Earnings per share - diluted $ 0.18 $ 0.17
===============================
MID-COAST BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the Period April 1, 1999 to June 30, 2000
Accumulated
Other
Comprehensive Total
Common Paid-In Retained Income Unearned Stockholders
Stock Capital Earnings (Loss) Compensation Equity
-------------------------------------------------------------------------------
Balance March 31, 1999 $715,457 $1,535,412 $3,371,524 $ (25,500) $(223,273) $5,373,620
Net income 0 0 124,453 0 0 124,453
Net change in market value of
investments available for sale,
net of taxes 0 0 0 (55,267) 0 (55,267)
----------
Total comprehensive income 69,186
Amortization of unearned compensation 0 0 0 0 9,566 9,566
Issuance of 175 shares
of common stock upon
exercise of options 175 480 0 0 0 655
Cash dividends declared
($.10 per share) 0 0 (70,611) 0 0 (70,611)
Other activity related to Recognition
and Retention Plan 0 (4,814) 0 0 4,637 (177)
------------------------------------------------------------------------------
Balance June 30, 1999 715,632 1,531,078 3,425,366 (80,767) (209,070) 5,382,239
Net income 0 0 338,735 0 0 338,735
Net change in market value of
Investments available for sale,
net of taxes 0 0 0 (58,272) 0 (58,272)
----------
Total comprehensive income 280,463
Amortization of unearned compensation 0 0 0 0 28,696 28,696
Issuance of 2,209 shares
of common stock upon
exercise of options 2,209 5,052 0 0 0 7,261
Cash dividends declared
($.20 per share to Recognition and
Retention Plan 0 6,042 0 0 0 6,042
5 % stock dividend issued 35,729 218,850 (255,749) 0 0 (1,170)
-----------------------------------------------------------------------------
Balance March 31, 2000 753,570 1,754,980 3,437,526 (139,039) (180,374) 5,626,663
Net income 0 0 133,020 0 0 133,020
Net change in market value
Investments available for sale,
net of taxes 0 0 0 (623) 0 (623)
----------
Total comprehensive income 132,397
Amortization of unearned compensation 0 0 0 0 8,800 8,800
Issuance of 157 shares
of common stock upon
exercise of options 157 402 0 0 0 559
Cash dividends declared
($.10 per share) 0 0 (74,409) 0 0 (74,409)
Other activity related to Recognition
and Retention Plan 0 6,042 0 0 0 6,042
------------------------------------------------------------------------------
Balance June 30, 2000 $753,727 $1,761,424 $3,496,137 $(139,662) $(171,574) $5,700,052
==============================================================================
MID-COAST BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months Ended Three months Ended
June 30, June 30,
2000 1999
----------------------------------------
Cash flows from operating activities:
Net income $ 133,020 $ 124,453
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation, amortization, and accretion 43,489 51,885
Provision for losses on loans 22,000 19,000
Gain on sale of loans (10,915) (33,061)
Net change in deferred loan fees (5,384) 13,385
Loss on sale of Real Estate Owned 1,016 0
Loans originated for sale (406,000) (1,279,561)
Proceeds from sales of loans 323,915 1,088,222
(Increase) decrease in other assets (291,726) 2,486
Increase (decrease) in other liabilities (84,281) 26,508
--------------------------------
Net cash provided (used) by operating activities (274,866) 13,317
Cash flows from investing activities:
Loan originations and repayments, net (2,219,226) (1,344,549)
Net change in time deposits 199,000 (298,000)
Investment and mortgage-backed securities:
available for sale:
Purchases (260,617) (958,720)
Proceeds from sales, maturities and repayments 59,924 66,868
Purchase of held to maturity securities (100,000) 0
Purchases of property and equipment (3,121) (15,394)
Proceeds from sale of real estate owned 178,984 0
--------------------------------
Net cash used by investing activities (2,145,056) (2,549,795)
Cash flows from financing activities:
Net increase (decrease) in certificates
of deposits 2,354,637 (201,199)
Net increase (decrease) in demand, NOW, savings
and money market deposit accounts (798,752) 1,820,482
FHLB Advances 3,000,000 750,000
FHLB Advances paid (3,750,000) (1,000,000)
Dividends paid in cash (74,409) (70,611)
Sale of common stock 559 655
--------------------------------
Net cash provided by financing activities 732,035 1,299,327
--------------------------------
Net decrease in cash and cash equivalents (1,687,887) (1,237,151)
Cash and cash equivalents, at beginning of period 7,613,728 3,796,788
--------------------------------
Cash and cash equivalents, at end of period $5,925,841 $2,559,637
================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2000
1. Financial Statements
- --------------------------
The accompanying consolidated financial statements include the accounts
of Mid-Coast Bancorp, Inc. (the "Company") and its wholly-owned
subsidiary, The Waldoboro Bank, F.S.B. (the "Bank"). The accounts of
the Bank include its wholly-owned subsidiary, The First Waldoboro
Corporation. Such consolidated financial statements are unaudited.
However, in the opinion of management, all adjustments necessary for a
fair presentation of the consolidated financial statements have been
included, and all such adjustments are of a normal and recurring
nature.
Amounts presented in the consolidated financial statements as of March
31, 2000 were derived from audited consolidated financial statements.
2. Dividends Paid
- --------------------
The Board of Directors of the Company declared a cash dividend of $.10
for each share of common stock, which was payable on June 30, 2000 to
shareholders of record on June 1, 2000.
3. Investments Available for Sale
- ------------------------------------
Unrealized gains and losses, net of tax, on securities available for
sale are reported as a component of accumulated other comprehensive
income until realized. If a decline in market value is considered other
than temporary, the loss is charged to net securities gains (losses).
4. Stock Award Plan
- ----------------------
The Company maintains a Recognition and Retention Plan for officers
and directors. The cost of this stock is recorded in unearned
compensation as a component of stockholders' equity. Once awarded, the
unearned compensation is amortized as compensation expense during the
vesting period.
5. Prepaid expenses and other assets
- ---------------------------------------
Prepaid expenses and other assets includes $220,000 associated with the
planned merger with Union Bankshares. These costs will be expensed when
the merger is consummated, or when it is probable that the merger will
not occur.
6. Pending merger agreement
- ------------------------------
On March 27, 2000 the Company entered into an Agreement and Plan of
Merger with Union Bankshares Company (Union) whereby Union will acquire
all the Company's common stock to Union for $15.875 per share and the
Company will be merged with and into a newly created merger subsidiary
of Union. Union will be the surviving Company in the merger. The
merger is subject to the approval of various state and federal
banking regulatory authorities. The merger is expected to occur in the
third quarter of 2000. The agreement stipulates that the Bank will,
shortly after consummation the transaction, be merged with and into
Union Trust Company, a subsidiary of Union.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Certain statements contained herein are not based on historical facts and
are "forward-looking statements" within the meaning of Section 21A of the
Securities Exchange Act of 1934. Forward-looking statements which are based on
various assumptions (some of which are beyond the Company's control), may be
identified by reference to a future period or periods, or by the use of
forward-looking terminology, such as "may," "will," "believe," "expect,"
"estimate," "anticipate," "continue," or similar terms or variations on those
terms, or the negative of these terms. Actual results could differ materially
from those set forth in forward looking statements due to a variety of factors,
including, but not limited to, those related to the economic environment,
particularly in the market areas in which the company operates, competitive
products and pricing, fiscal and monetary policies of the U.S. Government,
changes in government regulations affecting financial institutions, including
regulatory fees and capital requirements, changes in prevailing interest rates,
acquisitions and the integration of acquired businesses, credit risk
management, asset-liability management, the financial and securities markets
and the availability of and costs associated with sources of liquidity.
The Company does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
General
Mid-Coast Bancorp, Inc. (the "Company" or "Bancorp") was incorporated for
the purpose of becoming the holding company for The Waldoboro Bank, F.S.B. (the
"Bank") a federally-chartered savings association. The results of the Company
essentially represent the operations of the Bank. The Bank converted to stock
form in 1989, and issued 237,500 shares of common stock at $8.00 per share. On
March 31, 1998 the Company completed a three-for-one stock split, and on
December 31, 1999 issued a 5 % stock dividend. As of June 30, 2000 the Company
had 753,727 shares outstanding.
The Bank had total assets of $83.3 million as of June 30, 2000. The Bank
conducts its business through an office located in Waldoboro, Maine, where it
was originally founded in 1891 as a Maine building and loan association, and
three branches located in Belfast, Jefferson and Rockland, Maine. The Bank
received its federal charter on August 9, 1983 and its deposits are currently
insured up to applicable limits by the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation.
The Bank considers its primary market area to be located in Waldoboro,
Rockland, Belfast and Jefferson including the surrounding communities in Waldo,
Knox and Lincoln counties, Maine.
The Bank's business strategy is to operate as a well-capitalized and
profitable community bank dedicated to financing loans secured by residential
and commercial real estate, enabling borrowers to refinance, construct or
improve property. The Bank has implemented this strategy by: (i) closely
monitoring the needs of customers and providing quality service; (ii)
originating residential mortgage loans, construction loans, commercial real
estate loans, consumer loans, and by offering checking accounts and other
financial services and products; (iii) focusing on expanding the volume of the
Bank's commercial real estate and commercial lending activities to serve the
needs of the small business community; and (iv) focusing on expanding the
volume of the Bank's mortgage loan servicing portfolio.
The Company's results of operations reflects the Bank's efforts to
structure its balance sheet to expand its commercial loans, commercial real
estate loans and commercial transactional deposit relationships. From this
strategy, the Bank anticipates its non-interest income will increase.
Waldoboro's earnings are primarily dependent upon its net interest income,
which is determined by (i) the difference between yields on interest-earning
assets and rates paid on interest-bearing liabilities (known as the interest
rate spread) and (ii) the relative amounts of interest-earning assets and
interest-bearing liabilities outstanding.
The Bank and the entire financial services industry are significantly
affected by prevailing economic conditions as well as government policies and
regulations concerning, among other things, monetary and fiscal affairs,
housing and financial institutions. Deposit flows are influenced by a number
of factors including interest rates on money market funds and other competing
investments, account maturities and levels of personal income and savings.
Lending activities are influenced by, among other things, the demand for and
supply of housing, conditions in the construction industry and the availability
and cost of funds, and loan refinancing in response to declining interest
rates. Sources of funds for lending activities include deposits, loan
payments, proceeds from sales of loans and investments, investment returns and
borrowings.
Mid-Coast Bancorp, Inc. is headquartered at 1768 Atlantic Highway in
Waldoboro, Maine, (207) 832-7521. The Company's stock trades on the Nasdaq
SmallCap Market under the symbol "MCBN."
Comparison of Financial Condition at June 30, 2000 and March 31, 2000
Total assets increased $794,992 or 1.0% to $83.3 million at June 30,
2000 from $82.5 million at March 31, 2000. The growth in assets is primarily
due to an increase in deposits, which were used to fund the purchase of
investments, originate loans and reduce Advances from the FHLB.
Total loans, including loans held for sale, increased $2.3 million, or
3.7%, from $62.4 million to $64.7 million at June 30, 2000.
The following table shows loans held for sale and loans at June 30, 2000
and March 31, 2000, the net change and the percentage of change:
June 30, 2000 March 31, 2000 Change % change
---------------------------------------------------------
Loans held for sale $ 93,000 $ - $ 93,000 100.0%
Real estate mortgages-residential 41,201,957 39,890.731 1,311,226 3.3
Real estate mortgages-commercial 10,441,462 10,341,277 100,185 1.0
Construction, net of undisbursed 1,774,195 2,131,063 (356,868) (16.8)
Other commercial 3,838,805 3,444,558 394,247 11.5
Home equity 1,904,264 1,783,823 120,441 6.8
Installment and other 5,417,398 4,769,542 647,856 13.6
------------------------------------------------------
Total $64,671,081 $62,360,994 $2,310,087 3.7%
=======================================================
The growth in Real estate mortgage loans has been primarily a result of
a positive economic climate in the Bank's market area and active solicitation
of the business by the Bank's lending team.
Cash and cash equivalents decreased $1.7 million or 22.2%. The decrease
was primarily due to a $1.2 million decrease in Federal funds sold which was
used to fund loan originations. Investments, including Time deposits,
increased $100,502 or 1.0% to $10.4 million at June 30, 2000.
Total other assets increased $122,904 or 10.6%. The increase is net of
a $175,195 decrease in Real estate owned/other repo assets due to a sale of
an OREO property, and a $298,099 increase in other assets due primarily to
$220,000 of prepaid expenses relating to the pending merger ( see note 6 to
the financial statements).
At June 30, 2000, total liabilities increased $721,604 or 0.9% to $77.6
million. Demand deposits (non-interest bearing deposits) decreased $18,950 or
0.5%, NOW, Savings and Money Market accounts decreased $779,802 or 3.3%, and
Certificates of Deposit increased $2.4 million or 7.4%. The increase in
Certificates of deposit resulted from a special CD offering during the quarter.
Total Stockholders' Equity increased $73,389 to $5.7 million at June 30,
2000. The increase in equity is primarily attributable to net income of
$133,020 which is partially offset by the payment of cash dividends of
$74,409.
Asset Quality and Allowance for Loan Losses
At June 30, 2000 and March 31, 2000 total loans contractually past due
90 days or more amounted to $558,637 or 0.87% of loans and $131,587 or 0.21%,
respectively. This increase is related to five loans. One loan with an
outstanding balance of approximately $250,000 is 75% guaranteed by the Small
Business Administration and the four loans amounting to approximately $271,000
are secured by residential real estate. At June 30, 2000, the Bank had $27,232
of accruing loans which were 90 days or more delinquent as compared to $13,222
at March 31, 2000.
The accrual of interest income is discontinued when a loan becomes
delinquent and in management's opinion is deemed uncollectible in whole or in
part as to principal and/or interest. In these cases, interest on such loans
is recognized only when received. It is the policy of the Bank to generally
place all loans that are 90 days or more past due on nonaccrual status, unless
in management's judgment the loan is well secured and in the process of
collection.
Total non-performing assets, including real estate owned/other repossed
assets, totaled $563,442 or 0.68% of total assets at June 30, 2000 compared to
$311,587 or 0.38% at March 31, 2000.
The allowance for loan losses amounted to $507,024 at June 30, 2000
compared to $482,359 at March 31, 2000. The increase in allowance for loan
losses is primarily due to the current periodic provision for loan losses of
$22,000 and net recoveries of $2,665. The Bank's allowance for loan losses as
a percentage of total loans was 0.79% at June 30, 2000.
Asset/Liability Management
The goal of the Bank's asset/liability policy is to manage its exposure
to interest rate risk. The principal focus of the Bank's strategy has been
to reduce its exposure to interest rate fluctuations by matching more closely
the effective maturities and repricing dates of its assets and liabilities.
Currently the Bank's liabilities are more rate sensitive than its assets. As
such, the Bank has concentrated on maintaining a high percentage of
adjustable rate loans in its residential, commercial, and commercial real
estate portfolios. In addition, the Bank utilizes Federal Home Loan Bank
advances to control the repricing of a segment of its liabilities.
At June 30, 2000, the adjustable rate loans in the residential mortgage
loan portfolio totaled $30.1 million or 71.6% and adjustable rate loans in
the commercial loan portfolio totaled $11.1 million or 81.1%. The Bank's
strategy regarding liabilities is to attempt to restructure its deposits by
increasing NOW and savings accounts and decreasing certificates of deposit.
Certificates of deposit represent $34.2 million or 55.9% of the Bank's
deposits at June 30, 2000 as compared to $31.8 million or 53.4% at March 31,
2000
Typically, in a rising interest rate environment, the Bank's interest
rate spread would decrease because liabilities would be repricing faster than
assets for the same period. In contrast, in a declining rate environment,
the spread would increase resulting in a positive affect on the Bank's net
interest income. However, many of the Bank's interest bearing liabilities
have no stated maturity date and therefore interest rate changes on such
deposit products are more subject to control by management. With this in
mind, management allows for an asset/liability position in which liabilities
are more rate sensitive than the assets, within limits established by the
Bank's Asset/Liability Committee.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 2000 and 1999
Net Income
Mid-Coast recorded net income of $133,020 or $0.18 per share for the
three months ended June 30, 2000 compared to $124,453 or $0.17 per share for
the three months ended June 30, 1999.
The 6.9% increase in net income has resulted from increases to net
interest income, increases in fee income, a modest increase in provision for
loan losses and increases in other expenses and income taxes. Discussion of all
of these components follows.
Interest Income
Total interest income amounted to $1,580,958 an increase of $241,422 or
18.0%. The increases in total interest income are attributable to the growth in
interest earning assets, primarily loans.
Interest income on Investments and mortgage backed securities increased
$81,442 or 53.7% primarily due to a $3.3 million increase in the average
balance outstanding.
Interest income on loans increased $159,980 or 13.5% primarily due to a
$6.2 million or 10.8% increase in the average balance outstanding. The average
yield on loans increased to 8.51% from 8.31%, a result of the Bank's emphasis
on adjustable rate loans.
The following table shows total interest earning assets, and the
percentage of total interest earning assets to total assets at the dates
indicated:
Total interest % of
earning assets total assets
-------------------------------
At:
June 30, 2000 $79,425,640 95.4%
March 31, 2000 78,173,702 94.8
December 31, 1999 72,565,470 94.9
September 30, 1999 72,186,155 95.3
June 30, 1999 68,216,254 94.5
Interest Expense
Total interest expense amounted to $871,344, an increase of $182,270 or
26.5%, due primarily to a $10.9 million or 16.6% increase in the average
outstanding balances of deposits and borrowings and an increase in the interest
rates paid on deposits and borrowings.
The following table shows balances of Certificates of deposit,
Transaction deposit accounts (Demand deposits, NOW accounts, savings accounts,
and money market accounts) and Advances from the Federal Home Loan Bank and
their respective percentage to total funding at the dates indicated:
June 30, 2000 March 31, 2000 December 31, 1999 June 30, 1999
---------------------------------------------------------------------
Certificates of deposit $34,203,321 $31,848,684 $33,127,164 $32,503,840
% of total funding 44.3% 41.7% 47.0% 48.9%
Transaction accounts 26,985,997 27,784,749 24,686,954 21,530,316
% of total funding 35.0% 36.4% 35.0% 32.4%
Total deposits 61,189,318 59,633,433 57,814,118 54,034,156
% of total funding 79.3% 78.1% 82.0% 81.3%
FHLB advances 15,965,000 16,715,000 12,715,000 12,465,000
% of total funding 20.7% 21.9% 18.0% 18.7%
Total funding $77,154,318 $76,348,433 $70,529,118 $66,499,156
% of total funding 100.00% 100.00% 100.00% 100.00%
Net Interest Income
As a result of increases in total interest income offset by a lesser
increase in total interest expense, net interest income amounted to $709,614,
an increase of $59,152 or 9.1%. As a percentage of average earning assets, net
interest income decreased to 3.58% from 3.82%, for the three months ended June
30, 2000 and 1999, respectively.
Changes in net interest income occur from volume changes in interest
earning assets and interest bearing liabilities, the mix of these components,
and changes in interest rates. Loans, the primary component of interest earning
assets, are comprised of products having fixed rates of interest over the life
of the loan and variable rates of interest that change periodically as changes
in the prime lending rate and other indices change. As of June 30, 2000,
approximately $44.2 million or 68.4% of total loans had adjustable rates of
interest.
Provisions for Loan Losses
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and the general economy. Such evaluation considers numerous factors
including general economic conditions, loan portfolio compositions, prior loss
experience, the estimated fair value of the underlying collateral and other
factors that warrant recognition in providing for an adequate loan loss
allowance. The Bank's provision for loan losses amounted to $22,000, an
increase of $3,000 or 15.8%. This increase is related to the growth in
commercial and commercial real estate loans.
Non Interest Income
Total non interest income amounted to $109,734, a decrease of $2,930 or
2.6%. This decrease is attributable to a $8,828 or 14.5% increase in deposit
account fees, due to an increase in the number of accounts,a $2,497 or 16.4%
increase in loan servicing related fees, and a $7,891 increase in other
noninterest income, offset by a $22,146 or 67.0% decrease in gain on sale of
loans due to lower loan sales volume.
Non Interest Expenses
Total non interest expenses amounted to $585,493, an increase of $25,568
or 4.6%. This increase is the net effect of an $8,786 or 3.4% increase in
compensation related expenses (including benefits), a $8,022 or 17.0% increase
in professional fees, primarily for corporate planning relating to the pending
merger, and an $8,760 or 3.5% increase in all other operating expenses.
Income Tax Expense
Income tax expense increased $19,087 or 31.9% primarily as a result of
the increase in pretax income from operations.
Liquidity and Capital Resources
On June 30, 2000, the Holding Company's stockholders' equity was
$5,700,052 or 6.85% of total assets compared to $5,626,663 or 6.82% at March
31, 2000.
The Office of Thrift Supervision ("OTS") requires savings institutions
such as Waldoboro to maintain a specified ratio of cash and short-term
investment securities to new withdrawal deposits and borrowings with maturities
of one year or less. This minimum OTS required liquidity ratio is currently
4%. This rate may vary from time to time, depending upon general economic
conditions and deposit flows. As a part of its asset/liability management
program, Waldoboro has historically maintained liquidity in excess of
regulatory requirements to better match its short-term liabilities. At June
30, 2000, Waldoboro's liquid assets amounted to $11,479,546, resulting in a
liquidity ratio of 17.28%, compared to 11.94%. Historically, the bank maintains
a liquidity ratio of approximately 15%.
The minimum capital standards set by the OTS have three components: (1)
tangible capital; (2) leverage ratio or "core" capital; and (3) risk-based
capital. The tangible capital requirement is 1.5% and the leverage ratio or
"core" capital requirement is 3% of an institution's adjusted total assets.
The risk-based capital requirement is 8% of risk-weighted assets. The
institution is also subject to the capital requirements outlined under the FDIC
Improvement Act that requires Tier 1 (Core) Capital of 4.0%. The amount of an
institution's risk-weighted assets is determined by assigning a "risk-weighted"
value to each of the institution's assets. Under the regulations, the "risk-
weighting" of a particular type of assets depends upon the degree of credit
risk that is deemed to be associated with that type of asset.
At June 30, 2000, Waldoboro had tangible capital of $5,763,000 or 6.9% of
adjusted total assets, which exceeds the minimum required tangible capital and
leverage ratio or "core" capital requirements. At March 31, 2000 tangible
capital amounted to $5,624,000 which was 6.8% of adjusted total assets.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
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There was no material litigation pending to which the Registrant was a
party or to which the property of the Registrant was subject during the quarter
ended June 30, 2000.
Item 2. Changes in Securities and Use of Proceeds.
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None.
Item 3. Defaults Upon Senior Securities.
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None.
Item 4. Submission of Matters to a Vote of Security Holders.
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None
Item 5. Other Information.
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None.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits required by Item 601 of Regulation S-B.
(10) Termination Agreement with Wesley E. Richardson
(27) Financial Data Schedule*
*Submitted only with filing in electronic format.
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with the requirements of The Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MID-COAST BANCORP, INC.
Date August 10, 2000 /s/ Wesley E. Richardson
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(Signature)
Wesley E. Richardson
President and Treasurer