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: September 30, 1997 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
- -------------------------------------------------------------------------------
(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 September 30, 1997, is 232,991.
Page 1 of 15.
MID-COAST BANCORP, INC.
Index
PART I FINANCIAL INFORMATION Page
----
Item 1: Consolidated Balance Sheets of Mid-Coast Bancorp, Inc.
(Unaudited) at September 30, 1997 and March 31, 1997 3
Consolidated Statements of Income of Mid-Coast Bancorp, Inc.
(Unaudited), Three Months and Six Months Ended September 30,
1997 and 1996 5
Consolidated Statement of Changes in Stockholders' Equity of
Mid-Coast Bancorp, Inc. (Unaudited) for the period April 1,
1996 to September 30, 1997 6
Consolidated Statements of Cash Flows of Mid-Coast Bancorp,
Inc. (Unaudited), for the Six Months Ended September 30,
1997 and 1996 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 14
SIGNATURES 15
MID-COAST BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
------
September 30, 1997 March 31, 1997
------------------ --------------
Cash and due from banks $ 1,117,193 $ 1,156,227
Interest bearing deposits 111,511 104,683
Federal funds sold 3,825,000 1,875,000
-------------------------------
Cash and cash equivalents 5,053,704 3,135,910
Time deposits 1,089,000 1,089,000
Investments available for sale, at market 2,458,718 2,440,662
Held to maturity investment securities
(Market value of $942,369 at September 30, 1997
and $911,125 at March 31, 1997) 949,391 949,109
Loans held for sale 0 65,000
Loans 50,223,342 49,394,455
Less: Allowance for loan losses 321,918 295,457
Deferred loan fees 103,335 119,966
-------------------------------
49,798,089 48,979,032
Bank premises and equipment, net 1,541,863 1,580,290
Other assets:
Accrued interest receivable:
Loans 240,042 244,474
Time deposits/investments 48,848 59,430
Deferred income taxes 94,100 98,000
Prepaid expenses and other assets 199,520 192,638
Real estate owned 0 91,823
-------------------------------
Total other assets 582,510 686,365
-------------------------------
Total assets $61,473,275 $58,925,368
===============================
See accompanying notes to unaudited consolidated financial statements.
MID-COAST BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, 1997 March 31, 1997
------------------ --------------
Liabilities:
Deposits:
Demand deposits $ 2,130,492 $ 2,346,730
NOW accounts 4,130,051 3,460,858
Savings 5,513,443 5,693,545
Money market deposit accounts 5,121,216 5,119,733
Certificates of deposit 27,609,389 25,559,832
-------------------------------
Total deposits 44,504,591 42,180,698
Advances from the Federal Home Loan Bank 11,440,000 11,440,000
Accrued expenses and other liabilities 251,335 229,125
-------------------------------
Total liabilities 56,195,926 53,849,823
Stockholders' equity:
Preferred stock, $1 par value, 500,000
shares authorized; none issued
or outstanding 0 0
Common stock, $1 par value, 1,500,000
shares authorized; 232,991
shares issued and outstanding, 232,991 231,439
(231,439 at March 31, 1997)
Paid-in capital 1,483,909 1,469,769
Unrealized gains on available for sale securities,
net of taxes 7,433 0
Retained earnings 3,553,016 3,374,337
-------------------------------
Total stockholders' equity 5,277,349 5,075,545
-------------------------------
Total liabilities and stockholders' equity $61,473,275 $58,925,368
===============================
See accompanying notes to unaudited consolidated financial statements.
MID-COAST BANCORP, INC
CONSOLIDATION STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ ------------------------
1997 1996 1997 1996
Interest income:
Interest on loans $1,120,283 $1,027,753 $2,213,600 $2,039,118
Interest on investment sec. 50,655 65,950 102,858 120,405
Interest on mortgage backed sec. 0 12,627 0 20,329
Other 51,518 30,729 85,769 81,647
-----------------------------------------------------
Total interest income 1,222,456 1,137,059 2,402,227 2,261,499
Interest expense:
Interest on deposits 482,762 485,647 954,006 976,936
Interest on borrowed money 170,718 117,938 332,124 222,485
-----------------------------------------------------
Total interest expense 653,480 603,585 1,286,130 1,199,421
-----------------------------------------------------
Net interest income 568,976 533,474 1,116,097 1,062,078
Provision for losses on loans 15,000 21,000 32,000 51,000
-----------------------------------------------------
Net interest income after
provision for loan losses 553,976 512,474 1,084,097 1,011,078
Other income:
Loan service and other loan fees 11,260 9,408 23,042 21,915
Gain on loans sold\held for sale 16,132 8,258 17,482 16,826
Other 50,592 34,600 103,309 77,429
-----------------------------------------------------
Total other income 77,984 52,266 143,833 116,170
Other expenses:
Compensation of directors, officers
and staff 189,762 155,762 363,597 322,528
Building occupancy 9,795 9,115 20,751 19,551
Repairs and maintenance 7,228 8,476 18,299 17,794
Depreciation and amortization 42,278 15,566 91,399 31,112
Advertising 10,296 10,288 20,791 19,275
Insurance and bonds 18,597 276,441 37,221 311,680
Legal, audit and examinations 16,042 15,655 33,313 29,383
Taxes (other than income) 12,292 11,487 25,491 24,803
Employee benefits 24,597 23,389 50,070 44,931
Data processing 16,284 41,049 27,247 69,081
Other 97,077 80,823 178,895 157,221
Real Estate Owned 0 7,990 2,776 9,041
-----------------------------------------------------
Total other expenses 444,248 656,041 869,850 1,056,400
Income\(loss) before income taxes 187,712 (91,301) 358,080 70,848
Income taxes 61,357 (16,917) 119,207 37,083
-----------------------------------------------------
Net income\(loss) $ 126,355 $ (74,384) $ 238,873 $ 33,765
=====================================================
Earnings per share $ 0.54 $ (0.32) $ 1.03 $ 0.15
=====================================================
See accompanying notes
MID-COAST BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the Period April 1, 1996 to September 30, 1997
Unrealized
gains/losses
on available for Total
Common Paid-in sale securities, Retained Stockholders'
stock capital net of taxes earnings equity
------ ------- ---------------- -------- -------------
Balance, April 1, 1996 $229,031 $1,448,282 0 $3,248,764 $4,926,077
Issuance of 1,055 shares
of common stock upon
exercise of options 1,055 9,173 0 0 10,228
Net income 0 0 0 33,765 33,765
Dividends declared
($.25 per share) 0 0 0 (57,365) (57,365)
-----------------------------------------------------------------------
Balance, September 30, 1996 230,086 1,457,455 0 3,225,164 4,912,705
Issuance of 1,353 shares
of common stock upon
exercise of options 1,353 12,314 0 0 13,667
Net Income 0 0 0 209,010 209,010
Dividends declared
($.26 per share) 0 0 0 (59,837) (59,837)
-----------------------------------------------------------------------
Balance, March 31, 1997 231,439 1,469,769 0 3,374,337 5,075,545
Issuance of 1,552 shares
of common stock upon
exercise of options 1,552 14,140 0 0 15,692
Net change in market value of
investments available for sale,
net of taxes 0 0 7,433 0 7,433
Net Income 0 0 0 238,873 238,873
Cash dividends declared
($.26 per share) 0 0 0 (60,194) (60,194)
-----------------------------------------------------------------------
Balance, September 30, 1997 $232,991 $1,483,909 $7,433 $3,553,016 $5,277,349
=======================================================================
See accompanying notes to unaudited consolidated financial statements.
MID-COAST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
September 30
--------------------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 238,873 $ 33,765
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation, amortization, and accretion 47,667 5,376
Provisions for losses on loans 32,000 51,000
Gain on sale of loans (17,482) (16,826)
Deferred fees 792 6,837
Loss on sale of real estate owned 2,151 (629)
Loans originated for sale (1,091,567) (681,790)
Proceeds from sales of loans 1,174,049 1,133,695
Increase/decrease in other assets 8,132 (41,631)
Change in income taxes payable 27,323 21,459
Increase/decrease in other liabilities (5,113) 297,315
--------------------------
Net cash provided by operating activities 416,825 808,571
Cash flows from investing activities:
Loan originations and repayments, net (834,426) (3,286,744)
Net decrease in time deposits 0 1,186,000
Investment and mortgage-backed securities:
Purchases (517,469) (2,070,948)
Proceeds from sales, maturities and repayments 510,000 1,579,966
Purchases of property and equipment (26,199) (111,488)
Proceeds from sale of real estate owned 89,672 81,525
--------------------------
Net cash used by investing activities (778,422) (2,621,689)
Cash flows from financing activities:
Net increase\(decrease) in certificates of deposit 2,049,557 (938,196)
Net increase\(decrease) in demand, NOW, savings
and money market deposit accounts 274,336 1,771,192
FHLB advances 2,000,000 4,050,000
FHLB advances paid (2,000,000) (3,575,000)
Dividends paid in cash (60,194) (57,365)
Sale of common stock 15,692 10,228
--------------------------
Net cash provided by financing activities 2,279,391 1,260,859
--------------------------
Net increase (decrease) in cash and cash equivalents 1,917,794 (552,259)
Cash and cash equivalents, at beginning of period 3,135,910 2,728,051
--------------------------
Cash and cash equivalents, at end of period $ 5,053,704 $ 2,175,792
==========================
See accompanying notes to unaudited consolidated financial statements.
MID-COAST BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
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, 1997 were derived from audited consolidated financial statements.
2. Insurance Fund Resolution
-------------------------
The disparity between the Savings Association Insurance Fund (SAIF)
and Bank Insurance Fund (BIF) was resolved by Congress, by requiring,
Banks insured by the SAIF to pay a one time assessment to recapitalize
SAIF, effective September 30, 1996. Accordingly a one-time charge of
$241,299 is reflected in the balance sheet and statement of operations
as of and for the period ended September 30,1996.
3. Dividends Paid
--------------
The Board of Directors of Mid-Coast Bancorp, Inc. declared a cash
dividend of $.26 for each share of common stock, which is payable on
December 31, 1997 to shareholders of record on December 1, 1997.
4. Investments Available For Sale
------------------------------
If significant, unrealized gains and losses, net of tax, on securities
available for sale are reported as a net amount in a separate
component of stockholders' equity until realized. If a decline in
market value is considered other than temporary, the loss is charged
to net securities gains (losses).
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
The financial condition and results of operations of Mid-Coast
Bancorp, Inc. (the "Holding Company") essentially reflect the operation of
its subsidiary The Waldoboro Bank, F.S.B. (the "Bank" or "Waldoboro"). The
Holding Company's results of operations in recent years reflect the Bank's
efforts to restructure its balance sheet in response to the fundamental
changes that have occurred in the regulatory, economic and competitive
environment in which savings institutions operate. Like most savings
institutions, Waldoboro's earnings are primarily dependent upon its net
interest income, which is determined by (i) the difference (known as the
interest rate spread) between yields on interest-earning assets and rates
paid on interest-bearing liabilities and (ii) the relative amounts of
interest-earning assets and interest-bearing liabilities outstanding.
The Bank and the entire savings institution 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.
Due to the relative interest rate sensitivity of the Bank's assets and
liabilities, the cost of funds to the Bank (principally interest on deposits
and borrowings) does not reprice as fast as the yield on its assets
(principally interest received on loans and investments). Accordingly,
sharp increases or decreases in the general level of interest rates will
have a significant impact on the Bank's interest rate spreads in the short
term.
Financial Condition
Total assets increased $2,547,907 or 4.32% between March 31, 1997 and
September 30, 1997. Of this amount Federal Funds sold increased $1,950,000
or 104%,primarily due to the banks cash needs in an unsuccessful bid attempt
to purchase branches within its market area. Time Deposits and investment
securities remained stable. Loans increased slightly to $50,223,342.
Total liabilities increased $2,346,103 or 4.36% between March 31,
1997, and September 30, 1997. Increases in NOW Accounts and Certificates of
Deposit of $669,193 or 19.34% and $2,049,557 or 8.02%, respectively, were
partially offset by decreases in Demand deposits of $216,238 or 9.21% and
Savings of $180,102 or 3.16%. Advances from the Federal Home Loan Bank
remained unchanged.
The allowance for loan losses amounted to $321,918 at September 30,
1997, compared to $295,457 at March 31, 1997. The increase in allowance for
loan losses is primarily due to the current periodic provision for loan
losses. At September 30, 1997 the Bank's allowance for loan losses as a
percentage of total loans and allowance for loan losses as a percentage of
non-performing loans was 0.64% and 95.44% respectively.
At September 30, 1997 and March 31, 1997 loans contractually past due
90 days or more amounted to $337,296 and $145,466 or 0.67% and 0.29 % of
loans outstanding, respectively at such dates. Non-accrual of interest on
these loans totaled $24,352 at September 30, 1997 as compared with $9,852 at
March 31, 1997. Since September 30, 1997 loans contractually past due 90
days or more has been reduced to $280,745. Non-accrual of interest since
September 30, 1997 has been reduced to $21,304. This total is represented
by six loans and management does not believe these loans materially affect
the overall quality of the Bank's loan portfolio.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 and 1996
Net Income
Mid-Coast recorded net income for the three months ended September 30,
1997 of $126,355 or 0.54 cents per share. This compares with a net loss of
$74,384 or $0.32 cents per share for the same period in the previous fiscal
year. The disparity between the Savings Association Insurance Fund (SAIF)
and Bank Insurance Fund (BIF) was resolved by Congress, by requiring banks
insured by the SAIF to pay a one time assessment to recapitalize SAIF,
effective September 30, 1996. Accordingly a one-time charge of $241,299 is
reflected in the balance sheet and statement of operations as of and for the
period ended September 30, 1996.
Interest Income
Interest income increased $85,397 or 7.51% for the three months ended
September 30, 1997, primarily due to increases in the average balances of
mortgage, commercial and consumer loans, of $2.4 million or 7.05%, $2.0
million or 27.91% and $160,386 or 3.61% respectively. The increase in
Commercial loans is primarily related to management's continued efforts to
increase its presence in the mid-coast market. Consumer loans consist of
home equity, installment loans, share loans and student loans.
Miscellaneous other interest income increased $20,789 or 67.65% primarily as
a result of an increase in the volume of Federal funds sold. These
increases were partially off set by decreases in balances of investment
securities and mortgage backed securities.
Interest Expense
Total interest expense for the three month period ended September 30,
1997 increased $49,895 or 8.27%, compared to the same period in the previous
fiscal year. This increase is primarily the result of an increase of $3.5
million in advances from the Federal Home Loan Bank used to partially fund
increased loan demand. This increase is partially offset by a decrease in
the average cost of funds on borrowings of 7 basis points for the current
period compared to the period ended September 30, 1996. The strategy of the
Bank regarding deposits continues to focus on reducing the average cost of
funds through a combination of Certificate of Deposit "specials" and
increasing transaction account deposits. This strategy has reduced the
average cost of funds on deposits by 16 basis points for the current period
as compared to the period ended September 30, 1996.
Net Interest Income
Net interest income, before provisions for loan losses, increased
$35,502 or 6.65% for the quarter ended September 30, 1997 as compared to the
same quarter in the previous fiscal year. This increase is primarily the
result of average balance increases in mortgage, commercial and consumer
loans.
Provisions for Losses on Loans
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 decrease in the Bank's provision for losses on loans is
based upon management's belief that the total provision for losses on loans
represents adequate reserves commensurate with moderate risks associated
with the loan portfolio.
Non Interest Income
Total non-interest income for the three month period ended September
30, 1997 increased $25,718 or 49.21% as a result of increased fees and
charges related to NOW accounts and overdraft fees and the sale of loans to
the secondary market.
Other Expenses
Total other expenses for the three month period ended September 30,
1997 decreased $211,793 or 32.28% compared to the previous fiscal year, the
decrease is primarily due to the one time assessment paid to recapitalize
the SAIF Fund. Other Expenses increased $29,506 or 7.11% without the
$241,299 SAIF assessment. The increase in other expenses resulted from
increases in compensation, the addition of an employee, depreciation and
amortization related to the Banks computer conversion and modest increases
in miscellaneous other expenses consisting of shareholder services,
utilities, postage, and office supplies, which are partially offset by
decreases in data processing.
Six Months Ended September 30, 1997 and 1996
Net Income
Mid-Coast reported net income of $238,873 or $1.03 cents per share for
the six months ended September 30, 1997, compared to $33,765 or $0.15 cents
per share for the six months ended September 30, 1996. During the period,
the Bank recorded an increase in net interest income, before provision for
losses on loans, of $54,019 or 5.09%,and an increase in total non interest
income of $27,663 or 23.81%. Total other expenses decreased $186,550 or
17.66% primarily due to the SAIF assessment. Total other expenses would have
increased $54,749 or 6.72%, compared to the period ended September 30, 1996,
without the SAIF assessment.
Interest Income
Total interest income for the six months ended September 30, 1997
increased $140,728 or 6.22% as compared to the same period in the previous
fiscal year. Interest on loans increased $174,482 or 8.56% primarily due to
increases in the average balances of mortgage, commercial and consumer
loans. Interest on investment securities and mortgage backed securities
decreased $37,876 or 26.91%, primarily due to the sale of securities, and
the resulting lower volume of interest earning investments.
Interest Expense
Total interest expense for the six month period ended September 30,
1997 increased $86,709 or 7.23%. Interest expense on borrowed money
increased $109,639 or 49.28% and interest on deposits decreased $22,930 or
2.35%. Interest expense on borrowed money increased primarily due to an
increase of $3.5 million in advances used to partially fund increased loan
demand. The Bank's strategy remains focused on reducing the average cost of
funds on deposits and borrowings. This is accomplished through a
combination of increased transaction account balances, Certificate of
Deposit "specials" and borrowings at rate more favorable than these
available in the market place. This strategy has reduced the average cost
of funds on borrowings and deposits by 7 basis points and 16 basis points,
respectively, compared to the same period in the previous fiscal year.
Net Interest Income
Total net interest income for the six months ended September 30, 1997
increased $54,019 or 5.09%. This increase is primarily the result of
increases in the average balances of mortgage, commercial and consumer loans
which is partially offset by increased interest expense resulting from
Federal Home Loan Bank advances.
Provisions for Losses on Loans
The Banks provision for losses on loans for the six month period ended
September 30, 1997 decreased to $32,000 as compared to $51,000 in the
previous fiscal year. The provision is deemed appropriate given the risks
associated with the Bank's loan portfolio.
Non-Interest Income
Non-interest income for the six months ended September 30, 1997
increased $27,663 or 23.81%, compared to the same period in the previous
fiscal year. Increases occurred in all categories of Non-Interest income,
with miscellaneous income increasing $25,880 or 33.42%. Miscellaneous
income is the result of increased fees and charges particularly related to
NOW accounts and overdraft fees.
Other Expenses
Other expenses for the six month period ended September 30, 1997
decreased $186,550 or 17.66% as compared to the same period in the previous
fiscal year. The decrease in other expenses is primarily related to the
payment of SAIF assessment. Other expenses increased $54,749 or 6.72%
without the SAIF assessment as compared to the previous year. This increase
in other expenses resulted from increases in compensation, the addition of
an employee, depreciation and amortization related to the computer
conversion and modest increases in other expenses consisting of shareholder
services, utilities, postage, and office supplies, which are partially
offset by decreases in data processing.
Insurance of Deposits
The Bank's deposits are insured up to applicable limits under the SAIF
as administered by the FDIC under the Federal Deposit Insurance Act
("FDIA"). The assessments paid by depository institutions for the insurance
of deposits are determined on a risk-based assessment system pursuant to
which each institution is assigned to one of nine categories. For the first
three quarters of 1996, SAIF-insured institutions paid deposit insurance
assessments at annual rates that ranged from 0.23% of deposits for the least
risky institutions to 0.315% of deposits for the most risky institutions.
In contrast, the least risky institutions insured under the Bank Insurance
Fund ("BIF") paid deposit insurance assessments at the annual minimum of
$2,000, and the other BIF-insured institutions paid assessments at rates
that ranged from 0.03% to 0.27% of deposits.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
"Funds Act") was enacted into law to address, among other things, the
disparity in the deposit insurance assessment rates imposed on BIF-insured
and on SAIF-insured institutions. The Funds Act amended the FDIA in several
ways to recapitalize the SAIF and to reduce the disparity to the assessment
rates for the BIF and the SAIF. To recapitalize the SAIF, the Funds Act
authorized the FDIC to impose a special assessment on all institutions with
SAIF-assessable deposits in the amount necessary to recapitalize the SAIF.
As implemented by the FDIC, the special assessment was fixed at 0.657% of an
institution's SAIF-assessable deposits, and the special assessment was paid
on November 27, 1996. The special assessment was based on the amount of
SAIF-assessable deposits held at March 31, 1995, as adjusted under the Funds
Act. For the Bank, the special assessment on the deposits held on March 31,
1995, was $241,299 (before giving effect to any tax benefits), and was
charged to expense in the quarter ended September 30, 1996.
The Funds Act also provides that the FDIC cannot assess regular
insurance assessments for an insurance fund unless required to maintain or
to achieve the designated reserve ratio of 1.25%, except on those of its
member institutions that are not classified as "well capitalized" or that
have been found to have "moderately severe" or "unsatisfactory" financial,
operation or compliance weaknesses. The Bank has not been so classified by
the FDIC or the OTS. In view of the recapitalization of the SAIF, the FDIC
reduced the annual assessment rates for SAIF-assessable deposits for periods
beginning on October 1, 1996. For the last quarter of 1996, the reduced
annual assessment rates ranged from 0.18% to 0.27% of deposits. Beginning
with January 1, 1997, the annual assessment rates are the same for both BIF-
insured and SAIF-insured institutions, with the annual assessment rates
ranging from 0.0% to 0.27% of deposits.
In addition, the Funds Act expanded the assessment base for the
payments on the bonds ("FICO bonds") issued in the late 1980s by the
Financing Corporation to recapitalize the now defunct Federal Savings and
Loan Insurance Corporation. Beginning January 1, 1997, the deposits of both
BIF-and SAIF-insured institutions will be assessed for the payments on the
FICO bonds. Until December 31, 1999, or such earlier date on which the last
savings association ceases to exist, the rate of assessment for BIF-
assessable deposits will be one-fifth of the rate imposed on SAIF-assessable
deposits. The FDIC has reported that, for the semiannual period beginning
on January 1, 1997, the rate of assessments for the payments on the FICO
bonds will be 0.013% for BIF-assessable deposits and 0.0648% for SAIF-
assessable deposits.
The Funds Act also provides for the merger of the BIF and SAIF on
January 1, 1999, with such merger being conditioned upon the prior
elimination of the thrift charter. The Funds Act required the Secretary of
the Treasury to conduct a study of relevant factors with respect to the
development of a common charter for all insured depository institutions and
the abolition of separate charters for banks and thrifts and to report the
Secretary's conclusions and the findings to the Congress. The Secretary of
the Treasury has recommended that the separate charter for thrifts be
eliminated only if other legislation is adopted that permits bank holding
companies to engage in certain non-financial activities. Absent legislation
permitting such non-financial activity, the Secretary of the Treasury
recommended retention of the thrift charter. The Secretary of the Treasury
also recommended the merger of the BIF and SAIF irrespective of whether the
thrift charter is eliminated. Other proposed legislation has been
introduced in Congress that would require thrift institutions to convert to
bank charters.
An insured institution is subject to periodic examination, and
regulators may revalue the assets of an institution, based upon appraisals,
and require establishment of specific reserves in amounts equal to the
difference between such revaluation and the book value of the assets. SAIF
insurance of deposits may be terminated by the FDIC, after notice and
hearing, upon a finding by the FDIC that a savings institution has engaged
in an unsafe or unsound practice, or is in unsafe or unsound condition to
continue operations, or has violated any applicable law, regulation, rule,
order or condition imposed by the OTS or the FDIC. Management of the Bank
is not aware of any practice, condition or violation that might lead to
termination of its deposit insurance.
Liquidity and Capital Resources
On September 30, 1997, the Holding Company's stockholders' equity was
$5,277,349 or 8.58% of total assets compared to $5,075,545 or 8.61% at March
31, 1997.
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 liquidity ratio, currently 5%,
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 September 30,
1997, Waldoboro's liquidity ratio was approximately 17.02% compared to
14.67% at September 30, 1996.
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 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-weighted" of a particular type of assets
depends upon the degree of credit risk which is deemed to be associated with
that type of asset.
At September 30, 1997, Waldoboro had tangible capital of $5,124,000 or
8.33% of adjusted total assets, which exceeds the minimum required tangible
capital and leverage ratio or "core" capital requirements. Waldoboro had
risk-based capital of $5,446,000 or 14.96% of risk-weighted assets at
September 30, 1997.
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 September 30, 1997.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities.
--------------------------------
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.
---------------------------------
(a) Exhibits required by Item 601 of Regulation S-K.
(10) Trust Agreement between Mid-Coast Bancorp, Inc. and
Merrill Merchants Bank for the Recognition and Retention Plan
of Mid-Coast Bancorp, Inc.
(b) Reports on Form 8-K.
(27) Financial Data Schedule*
* Submitted only with filing in electronic format.
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 /s/ Wesley E. Richardson
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(Signature)
Wesley E. Richardson
President and Treasurer