UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one): [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-14087
FIRST COASTAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1177661
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
36 THOMAS DRIVE, WESTBROOK, MAINE 04092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 774-5000
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 the latest practicable date, is:
Class: COMMON STOCK, PAR VALUE $1.00 PER SHARE
Outstanding at August 12, 1996: 1,357,861 shares
INDEX
FIRST COASTAL CORPORATION AND SUBSIDIARY
PART I- FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations
(Unaudited) for the three and six months ended
June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the six months ended June 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements
(Unaudited), June 30, 1996 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II- OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Ex hibits and Reports on Form 8-K 21
SIGNATURES 23
2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
FIRST COASTAL CORPORATION AND SUBSIDIARY
- ------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) June 30, 1996 December 31,1995
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Noninterest earning deposits and cash $ 3,747 $ 4,466
Interest earning deposits 4,314 4,375
-------- --------
Cash and cash equivalents 8,061 8,841
Federal funds sold - 10,000
Investment securities:
Held-to-maturity 11,801 11,786
Available-for-sale (at market value) 15,435 7,926
-------- --------
27,236 19,712
Federal Home Loan Bank stock-at cost 1,315 1,315
Loans held for sale 1,104 281
Loans 95,966 100,550
Less:Deferred loan fees, net (12) (22)
Allowance for loan losses (2,697) (2,659)
-------- --------
93,257 97,869
Premises and equipment 3,238 3,073
Real estate owned and repossessions 1,231 1,973
Other assets 2,568 2,389
-------- --------
TOTAL ASSETS $138,010 $145,453
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $117,260 $125,665
Advances from Federal Home Loan Bank 6,000 6,000
FDIC Note 9,000 9,000
Accrued interest on FDIC Note 714 419
Accrued expenses and other liabilities 321 372
-------- --------
TOTAL LIABILITIES 133,295 141,456
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value; Authorized 1,000,000 shares; none outstanding
Common Stock, $1.00 par value; Authorized 6,700,000 shares; issued and
outstanding as of June 30, 1996 and December 31, 1995 - 600,361 600 600
Paid-in Capital 29,375 29,375
Retained earnings deficit (25,122) (26,016)
Unrealized gain (loss) on available for sale securities (138) 38
-------- --------
TOTAL STOCKHOLDERS' EQUITY 4,715 3,997
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $138,010 $145,453
-------- --------
-------- --------
See Notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
First Coastal Corporation and Subsidiary
- ------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Three Months Ended June 30,
- ------------------------------------------------------------------------------------------------
1996 1995
------ ------
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $2,256 $2,468
Interest and dividends on investment securities 433 240
Other interest income 103 227
------ ------
TOTAL INTEREST AND DIVIDEND INCOME 2,792 2,935
------ ------
INTEREST EXPENSE
Deposits 1,182 1,243
Borrowings
Advances from Federal Home Loan Bank 87 102
FDIC Note 155 113
------ ------
Total Interest Expense 1,424 1,458
------ ------
Net Interest Income Before Provision for Loan Losses 1,368 1,477
Provision for Loan Losses - 75
------ ------
Net Interest Income After Provision for Loan Losses 1,368 1,402
OTHER INCOME
Service charges on deposit accounts 85 73
Gain (loss) on investment securities transactions 17 (12)
Gain (loss) on sales of mortgage loans (2) 14
Other 413 64
------ ------
513 139
------ ------
OTHER EXPENSES
Salaries and employee benefits 523 513
Occupancy 97 110
Net cost of operation or real estate owned and repossessions 13 58
Other 692 646
------ ------
1,325 1,327
------ ------
Income Before Income Taxes 556 214
Income Tax - -
------ ------
NET INCOME $ 556 $ 214
------ ------
------ ------
PER SHARE AMOUNTS
Weighted Average Shares Outstanding 600,361 600,361
Income Per Share $ .93 $ .36
------ ------
------ ------
See Notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
First Coastal Corporation and Subsidiary
- ------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Six Months Ended June 30,
- ------------------------------------------------------------------------------------------------
1996 1995
------- -------
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $4,682 $4,898
Interest and dividends on investment securities 758 509
Other interest income 355 445
------- -------
TOTAL INTEREST AND DIVIDEND INCOME 5,795 5,852
------- -------
INTEREST EXPENSE
Deposits 2,445 2,397
Borrowings
Advances from Federal Home Loan Bank 175 274
FDIC Note 296 186
------- -------
Total Interest Expense 2,916 2,857
------- -------
Net Interest Income Before Provision for Loan Losses 2,879 2,995
Provision for Loan Losses - 175
------- -------
Net Interest Income After Provision for Loan Losses 2,879 2,820
OTHER INCOME
Service charges on deposit accounts 155 131
Gain (loss) on investment securities transactions 24 (12)
Gain (loss) on sales of mortgage loans (10) 14
Other 475 174
------- -------
644 307
------- -------
OTHER EXPENSES
Salaries and employee benefits 1,036 1,055
Occupancy 227 222
Net cost of operation or real estate owned and repossessions 69 51
Other 1,298 1,360
------- -------
2,630 2,688
------- -------
Income Before Income Taxes 893 439
Income Tax - -
------- -------
NET INCOME $ 893 $ 439
------- -------
------- -------
PER SHARE AMOUNTS
Weighted Average Shares Outstanding 600,361 600,361
Income Per Share $ 1.49 $ .73
------- -------
------- -------
See Notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
First Coastal Corporation and Subsidiary
Six Months Ended June 30,
-----------------------------
(IN THOUSANDS) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 893 $ 439
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses - 175
Writedowns of REO 44 48
Provision for depreciation and amortization 142 145
Amortization of investment security (discounts) (18) (174)
Realized investment securities (gains) (24) -
(Gains) from assets held in trading accounts - (33)
Realized losses on assets held for sale 10 -
Decrease in trading account securities - 948
Loans originated and acquired for resale (3,140) (707)
Sales of loans originated and acquired for sale 2,307 483
Increase in interest receivable (79) (43)
Increase in interest payable 297 177
Net change in other assets 246 1,290
Net change in other liabilities (53) (153)
--------- ---------
Net cash provided by operating activities 625 2,595
--------- ---------
INVESTING ACTIVITIES
Decrease in federal funds sold 10,000 -
Proceeds from sales and maturities of investment securities available for sale 2,284 2,193
Maturities of securities held to maturity 5,000 4,069
Purchases of investment securities available for sale (9,939) -
Purchases of investment securities held to maturity (5,003) (936)
Net change in loans 4,965 1,853
Net purchases of premises and equipment (307) (71)
--------- ---------
Net cash provided (used) by investing activities 7,000 7,108
--------- ---------
FINANCING ACTIVITIES
Net change in deposits (8,405) (4,418)
Payments on borrowings - (6,462)
--------- ---------
Net cash used by financing activities (8,405) (10,880)
--------- ---------
Decrease in cash and cash equivalents (780) (1,177)
Cash and cash equivalents at beginning of period 8,841 11,337
--------- ---------
Cash and cash equivalents (interest and noninterest bearing) at end of period $ 8,061 $10,160
--------- ---------
--------- ---------
NONCASH INVESTING ACTIVITIES
Change in unrealized holding losses on investment securities available for sale $ 176 $ 300
Securities available for sale collateralized by portfolio mortgage loans -
Transfer of loans to real estate owned and repossessions 353 917
See Notes to consolidated financial statements.
FIRST COASTAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A - CERTAIN REGULATORY MATTERS
RECEIVERSHIP OF SUFFIELD BANK
On September 6, 1991, First Coastal Corporation (the "Company") announced that
Suffield Bank was placed into receivership by the Connecticut Banking Department
and the Federal Deposit Insurance Corporation ("FDIC") was appointed as the
receiver. Following the receivership of Suffield Bank, management's efforts
were focused for an extended period of time on resolving the cross guaranty
claim, as described below, and improving operations of the Company's subsidiary,
Coastal Savings Bank ("Coastal" or the "Bank").
SETTLEMENT OF FDIC CROSS GUARANTY CLAIM
On January 31, 1995, the Company and the Bank consummated a settlement with the
FDIC in accordance with the terms and conditions of the Amended and Restated
Settlement Agreement, dated as of November 23, 1994 (the "Amended and Restated
Settlement Agreement"), pursuant to which the FDIC waived and released its cross
guaranty claim against the Bank. The cross guaranty claim was the result of the
September 1991 failure of Suffield Bank. As part of the settlement, the Company
issued to the FDIC a non-recourse promissory note in the principal amount of
$9.0 million (the "FDIC Note"), secured by the Company's pledge of the
outstanding stock of the Bank. In 1994, the Company incurred an extraordinary
charge to earnings resulting from the issuance of the FDIC Note. Principal and
interest under the FDIC Note are deferred until its maturity date, which is
January 31, 1997, subject to extension under certain circumstances.
The Company announced on January 31, 1996 that it intended to pursue a
recapitalization of the Company as the means to facilitate the satisfaction of
the FDIC Note. On June 13, 1996 the Securities and Exchange Commission declared
effective the Company's registration statement for the offering of 750,000
shares of the Company's Common Stock at a price of $5.00 per share. On July 24,
1996, the Company completed its recapitalization plan, whereby the Company
repaid in full its obligation to the FDIC in the amount of $9.75 million ($9.0
million loan principal amount plus accrued interest). The funds utilized to
repay the obligation came from (i) the sale of 750,000 shares of the Company's
common stock at $5.00 per share by means of a registered public offering; (ii) a
dividend of $3.2 million from the Bank to the Company; and (iii) the borrowing
of $4.0 million from a group of four Maine savings banks, secured by the pledge
by the Company of 100% of the outstanding common stock of the Bank.
MEMORANDUM OF UNDERSTANDING
Effective as of November 22, 1994 the Bank entered into a Memorandum of
Understanding ("Memorandum") with the FDIC and the Maine Bureau of Banking. The
Memorandum provides, among other things, that (i) the Bank continue to maintain
its allowance for loan and lease losses in accordance with applicable regulatory
requirements, (ii) the Board of Directors of the Bank continue to review the
adequacy of the Bank's loan and lease loss reserves and provide for adequate
reserves, (iii) the Bank continue to have a Tier 1 capital to total assets ratio
at or in excess of 6.0%, (iv) the Bank continue to comply with the FDIC's
Statement of Policy on Risk-Based Capital, (v) the Bank provide monthly progress
reports regarding substandard or doubtful assets, (vi) the Bank agree not to
extend or renew credit to, or for the benefit of, any borrower who or which has
a loan or other extension of credit with the Bank that has been charged-off or
classified in whole or in part, loss, doubtful or substandard and is uncollected
unless certain conditions are met, (vii) the Bank not declare or pay any
dividends
7
without the prior written consent of the FDIC and the Maine Bureau of Banking,
and (viii) the Bank continue to furnish written progress reports detailing the
form and manner of any action taken to seek to secure compliance with the
Memorandum. In addition, the Board of Directors is required to develop a
written plan of action to reduce the Bank's risk position with respect to each
borrower who had outstanding principal debt owing to the Bank in excess of
$500,000 which was classified substandard, in whole or in part, and other real
estate owned with a book value in excess of $500,000, as well as the formulation
of a strategic plan and policies covering investments, funds management and
various lending policies. At June 30, 1996, the Bank had a Tier 1 capital to
total assets ratio of 10.34%. The Bank's Tier 1 capital to total assets ratio
on a proforma basis assuming the $3.2 million dividend was paid to the Company
occurred at June 30, 1996 would be 8.04%.
REGULATORY CAPITAL REQUIREMENTS
Under applicable federal regulations, the Company and Coastal are each required
to maintain minimum levels of regulatory capital. The Federal Reserve has
adopted a leverage-based capital requirement for bank holding companies with a
composite rating of 1 under the bank holding company rating system of a minimum
level of tier 1 capital to total assets of 3.0%. All other bank holding
companies or bank subsidiaries of bank holding companies are required to
maintain a minimum ratio of tier 1 capital to total assets of 4.0% to 5.0%.
Under the Federal Reserve's risk-based capital guidelines, bank holding
companies or banks also are required to maintain a minimum ratio of qualifying
total capital to risk-weighted assets of 8.0%. The guidelines apply on a
consolidated basis to bank holding companies with consolidated assets of $150
million or more. For bank holding companies which have less than $150 million in
consolidated assets, as did the Company for each of the quarters ended June 30,
1995, September 30, 1995, December 31, 1995, March 31, 1996 and June 30, 1996,
the guidelines are applied on a bank-only basis (as opposed to a consolidated
basis) unless (i) the parent bank holding company is engaged in nonbank activity
involving significant leverage or (ii) the parent company has a significant
amount of debt that is held by the general public. The Federal Reserve capital
adequacy guidelines provide that "debt held by the general public" is debt held
by parties other than financial institutions, officers, directors, and
controlling stockholders of the banking organization or their related interests.
The FDIC Note is not considered to be "debt held by the general public" for
purposes of such capital guidelines. As a result, applied on a bank-only basis,
the Company's ratios of tier 1 capital to total assets, tier 1 capital to
risk-weighted assets, qualifying total capital to risk-weighted assets of
10.34%, 16.60%, and 17.87%, respectively, at June 30, 1996 were in compliance
with such guidelines.
The FDIC has also adopted minimum capital requirements as regulations for state
non-member banks such as the Bank. Under the minimum leverage capital
requirement, insured state non-member banks must maintain a Tier 1 capital to
total assets ratio of at least 3% to 5% depending on the CAMEL rating of the
bank. The Memorandum requires that the Bank continue to maintain a Tier 1
capital to total assets ratio at or in excess of 6.0%. At June 30, 1996, the
Bank had a Tier 1 capital to total assets ratio of 10.34%.
In addition, under such regulations insured non-member banks must maintain a
minimum ratio of qualifying total capital to risk-weighted assets of 8.0%,
including a minimum ratio of Tier 1 capital to risk-weighted assets of 4.0%. At
June 30, 1996, the Bank had a ratio of Tier 1 capital to risk-weighted assets of
16.60% and a ratio of qualifying total capital to risk-weighted assets of
17.87%.
8
NOTE B - ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in conformity with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles ("GAAP") for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K/A-3 for the year
ended December 31, 1995.
Most of the Company's commercial real estate loans as of June 30, 1996 are
collateralized by real estate in Maine which has experienced a significant
decline in value since the market peak in the late 1980's. In addition, all of
the real estate owned ("REO") are located in this same market. Accordingly, the
ultimate collectibility of a substantial portion of the Company's loan portfolio
and the recovery of a substantial portion of the carrying amount of REO have
been impacted by this real estate market decline and are particularly
susceptible to changes in market conditions in Maine.
While management uses available information to recognize losses on loans and
REO, future additions to the allowance for loan losses ("Allowance") or
writedowns may be necessary based on changes in economic conditions. In
addition, various regulatory authorities, as an integral part of their
examination process, periodically review the Company's Allowance and the
carrying value of REO. Such authorities may require the Company to recognize
additions to the Allowance and/or write down the carrying value of REO based on
their judgments of information available to them at the time of their
examination.
NEW ACCOUNTING STANDARDS
In May 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard (SFAS) No. 122, MORTGAGE SERVICING RIGHTS,
which amends FASB Statement No. 65, ACCOUNTING FOR CERTAIN MORTGAGE BANKING
ACTIVITIES. This standard eliminates the distinction between purchased and
originated mortgage servicing rights and establishes the use of a valuation
allowance to recognize any impairment in the fair value of mortgage servicing
rights. There was no effect to the Company's financial statements or results of
operations on January 1 and June 30, 1996 as a result of implementing FASB
Statement No. 122.
In addition, during October 1995, FASB issued SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, which establishes fair-value based accounting to
recognize compensation expense related to stock-based transactions. For
employers, the fair-value based recognition provisions are not mandatory;
however, certain disclosure requirements are provided. The Company intends to
comply with the disclosure requirements when required in 1996.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
9
INVESTMENT SECURITIES
Effective January 1, 1994 with the implementation of FASB Statement No. 115,
investment securities classified as available for sale are reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity. Investment securities held to
maturity are stated at cost adjusted for amortization of bond premiums and
accretion of bond discounts. There was no effect to the Company's financial
statements or results of operations on January 1, 1994 as a result of
implementing FASB Statement No. 115. For the six months ended June 30, 1996,
investment securities classified as available for sale reflected an unrealized
loss of $138,000.
As of June 30, 1996, the Company's investment accounting policy states that all
securities purchased with an original maturity of over one year, other than
mortgage backed securities originated by the Bank with current loan production,
will be classified as available for sale. Securities purchased with an original
maturity of one year or less, or callable U.S. government agency notes, will be
considered held-to-maturity. Mortgage backed securities originated by the Bank
with current loan productions, will be classified as trading securities.
ASSETS HELD FOR SALE STATED AT MARKET VALUE
Assets held for sale, consisting primarily of residential mortgages originated
for the purpose of potential sale, are valued at the lower of cost or market.
LOANS
Interest on loans is accrued and credited to operations based on the principal
amount outstanding. The accrual of interest income is discontinued when a loan
becomes delinquent and, in management's opinion, borrowers may be unable to meet
contractual obligations. Such accrual is discontinued where interest or
principal is 90 days or more past due, unless the loans are deemed to be
adequately secured and in the process of collection. In these instances,
interest is recognized only when received. When interest accruals are
discontinued, unpaid interest credited to income in the current year is reversed
and interest accrued in prior years is charged to the Allowance.
Loan origination fees and certain direct loan origination costs are deferred and
the new amount amortized as an adjustment to the related loan yield over the
estimated contractual life of the loan.
ALLOWANCE FOR LOAN LOSSES
The Allowance is maintained at a level believed adequate by management to absorb
potential losses inherent in the current loan portfolio. Management's
determination of the adequacy of the Allowance is based on an evaluation of the
portfolio, past and expected loan loss experience, current economic conditions,
growth and diversification of the loan portfolio, the results of the most recent
regulatory examinations, the nature and level of nonperforming assets, impaired
loans and loans that have been identified as potential problems, the adequacy of
collateral and other relevant factors. The Allowance is increased by provisions
for loan losses charged against income and recoveries on loans previously
charged off.
The Company adopted FASB Statement No. 114, ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN, on January 1, 1995. Under such standard, a loan is
considered impaired, based on current information and events, if it is probable
that the Company will be unable to collect the scheduled payments of principal
or interest when due according to the contractual terms of the loan agreement.
Management identifies impaired loans on a loan-by-loan basis. The measurement
of impaired loans is generally based on the present value of expected future
cash flows discounted at the historical effective interest rate, with the
exception of all collateral-dependent loans,
10
which are measured for impairment based on the fair value of the collateral.
The adoption of FASB Statement No. 114 resulted in no additional provision for
loan losses as determined at January 1, 1995 and June 30, 1996.
REAL ESTATE OWNED ("REO")
REO, other than bank premises, consists of properties acquired through mortgage
loan foreclosure proceedings or in satisfaction of loans. REO is initially
recorded at the lower of cost or fair value (minus estimated costs to sell) at
the date of foreclosure and any difference is charged to the Allowance at the
time of reclassification. Subsequently, the values of such properties are
reviewed by management and writedowns, if any, are charged to expense.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated provisions for
depreciation and amortization, computed using the straight-line method over
estimated useful lives.
REVERSE STOCK SPLIT
On May 31, 1995, the Company effected a one-for-ten reverse stock split with
respect to the issued and outstanding shares of the Company's common stock,
which was approved by the Company's stockholders on January 31, 1995. As a
result of the reverse stock split, the number of outstanding shares of common
stock of the Company was reduced from 6,006,745 shares (determined at the close
of business on May 31, 1995) to 600,361 shares. As a result, $5,407,000 was
transferred from the Company's common stock account to paid-in capital. All
applicable share and per share data appearing in the consolidated financial
statements and notes thereto have been retroactively adjusted for the reverse
stock split.
INCOME TAXES
The Company adopted FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES, in 1993
which requires a change from the deferred method of accounting for income taxes
of APB Opinion 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of Statement No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. At December 31,
1995, the Company estimated that net operating loss ("NOL") carryforwards for
federal income tax return purposes of $6.8 million were available to offset
future taxable income. Due to the uncertainty that the benefit of net deferred
tax assets will be realized, a full valuation allowance has been recorded at
March 31, 1996 and December 31, 1995.
11
PART I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
TOTAL ASSETS
At June 30, 1996, total assets were $138.0 million, representing a decrease of
$7.5 million (or 5.2%) from total assets of $145.5 million at December 31, 1995.
This decrease was primarily attributable to the sale of the Bank's Kezar Falls
branch to Maine Bank & Trust Company on April 26, 1996 and which resulted in a
decrease in deposits and overall total assets of approximately $9.9 million. See
"Financial Condition - Liquidity - Coastal" for more information concerning the
branch sale.
INVESTMENTS
The Company's investment portfolio is comprised primarily of U.S. government and
agency obligations and also contains miscellaneous equity securities. Total
investment securities at June 30, 1996 were $27.2 million compared to $19.7
million at December 31, 1995. This increase is attributable to the purchase of
$5.0 million in U.S. government agency callable notes, $4.0 million in GNMA
mortgage-backed securities and $6.0 million in U.S. treasury securities,
partially offset by maturities of U.S. treasury securities totaling $3.0 million
and $4.0 million of U.S. government agency callable notes which were called
during the first quarter of 1996. Investment securities classified as available
for sale are reported at fair value, with unrealized gains and losses excluded
from earnings and reported in a separate component of stockholders' equity.
Investment securities held to maturity are stated at cost, adjusted for
amortization of bond premiums and accretion of bond discounts.
The following table sets forth the amortized cost and fair value of investment
securities for each major security type at June 30, 1996.
June 30, 1996
------------------------------------------------------
Fair Gross Gross
Amortized Market Unrealized Unrealized
(IN THOUSANDS) Cost Value Gain Losses
- ---------------------------------------------------------------------------------------------------------------
Available for sale:
U.S. government obligations $8,927 $8,899 $ 44 $ (72)
Mortgage backed securities 4,547 4,447 - (100)
Equity/mutual fund 2,000 1,990 - (10)
Other 99 99 - -
------- ------- ------ ------
$15,573 $15,435 $ 44 $(182)
------- ------- ------ ------
------- ------- ------ ------
Held to maturity:
U.S. government callable notes 11,801 11,607 - (194)
------- ------- ------ ------
$11,801 $11,607 $ - $(194)
------- ------- ------ ------
------- ------- ------ ------
The net unrealized loss on investment securities classified as available for
sale was $138,000 at June 30, 1996, versus a net unrealized gain of $38,000 at
December 31, 1995. The net unrealized loss on securities available for sale is
attributable to an increase in interest rates during the first six months of
1996. The Company will continue to give consideration to further investments in
U.S. government agency, U.S. government obligations
12
and mortgage backed securities, after giving consideration to the potential
impact on the fair value of these securities that may result from interest rate
fluctuations in comparison to alternative investment securities.
The following table represents the contractual maturities for investments in
debt securities for each major security type at June 30, 1996.
June 30, 1996
-----------------------------------------------------
Maturing
-----------------------------------------------------
After One
Within But Within After
(IN THOUSANDS) One Year Five Years Five Years Total
- ---------------------------------------------------------------------------------------------------------------
Available for sale:
U.S. government obligations $3,001 $5,898 - $8,899
Mortgage backed securities - - 4,447 4,447
------- ------- ------ --------
$3,001 $5,898 $4,447 $13,346
------- ------- ------ --------
------- ------- ------ --------
Held to maturity:
U.S. government agency callable
notes (final maturity) - 6,998 4,803 11,801
------- ------- ------ --------
$ - $6,998 $4,803 $11,801
------- ------- ------ --------
------- ------- ------ --------
LOANS
Loans consisted of the following:
June 30, March 31, December 31,
(IN THOUSANDS) 1996 1996 1995
- --------------------------------------------------------------------------------------------------------------
Real estate mortgage loans:
Residential $29,355 $28,724 $ 30,966
Commercial 48,966 49,258 50,797
Commercial and industrial loans 2,170 2,264 2,524
Consumer and other loans 15,475 15,778 16,263
------- ------- --------
$95,966 $96,024 $100,550
------- ------- --------
------- ------- --------
Loans decreased $4.6 million (or 4.6%) at June 30, 1996 as compared to December
31, 1995. The most significant reason for the decrease was the prepayment of
loans in advance of their scheduled maturity dates during the first quarter of
1996, as borrowers refinanced at lower interest rates.
ALLOWANCE FOR LOAN LOSSES
The Company's allowance for loan losses ("Allowance") was $2.7 million at June
30, 1996 and December 31, 1995. The Allowance represented 2.81% and 2.65% of
total loans, and 151.35% and 47.96% of nonperforming loans, at June 30, 1996 and
December 31, 1995, respectively.
Although the balance of the Allowance remained relatively unchanged at June 30,
1996 as compared to December 31, 1995, the level is still expected to trend
moderately downwards for the remainder of 1996. This is anticipated to occur as
previously identified loan loss exposure is quantified and recognized
(charged-off), either through
13
negotiations and work out efforts, or through the commencement of collateral
liquidations. Management believes there will not be a dramatic decline in the
Allowance such as was experienced at the end of 1995.
In determining reserve adequacy, management places a high reliance upon the
review of individual commercial loan assets to determine whether or not loss
exposure exists. All such loans classified substandard or worse are assigned
individual allocated loan loss reserves, where appropriate. Consistent with
current guidelines, a five percent reserve is also established against loans
graded special mention and various reserve percentages are established against
the non-classified balance of the commercial portfolio, as well as residential
loans, construction loans and consumer loans. This methodology relies upon a
combination of current and anticipated trends, along with historical trends, in
establishing the appropriate reserve percentages for the different portfolios.
While the current level of the Allowance is believed to be adequate, the Company
continues to hold a large concentration of commercial real estate loans that
remain vulnerable to loan default. Deterioration in the local economy or real
estate market, or upward movements in interest rates, could have an adverse
effect on the performance of the loan portfolio that could result in the need
for an increased allowance for loan losses. Conversely, further improvement in
overall asset quality, favorable local economic conditions or a favorable local
real estate market, could positively effect the Allowance.
NONPERFORMING ASSETS
Information with respect to nonperforming assets is set forth below:
June 30, March 31, December 31,
(IN THOUSANDS) 1996 1996 1995
- --------------------------------------------------------------------------------
Nonaccrual loans $1,633 $ 736 $1,948
Accruing loans past due 90 days or more 137 89 169
Restructured loans - 625 3,427
Real estate owned and repossessions 1,231 2,164 1,973
------ ------ ------
Total $3,001 $3,614 $7,517
------ ------ ------
------ ------ ------
Nonaccrual loans of $1,633,000 increased by $897,000 as of June 30, 1996
compared to the March 31, 1996 total of $736,000. This increase is primarily
attributable to two commercial loan relationships: (i) one loan relationship of
$625,000, previously classified as a restructured loan at March 31, 1996, moved
to nonaccrual as a result of nonperformance with the terms of the restructure,
and (ii) the second relationship equaling $230,000 was reclassified from
performing to nonaccrual status (in July, 1996 this loan was paid down $48,000
by the borrowers and the remaining balance was transferred to REO). REO and
repossessions declined $933,000 at June 30, 1996 compared to March 31, 1996
primarily as a result of the sale of two properties totaling $796,000 and
writedowns of existing REO property totaling $122,000.
The level of nonperforming assets declined 60.08% from December 31, 1995 to June
30, 1996, from $7.5 million to $3.0 million, respectively. The current level of
nonperforming assets represents an 89.01% decline from the level established at
December 31, 1991 of $27.3 million. While the downward trend in nonperforming
assets that has developed since 1991 is significant, the Company continues to
hold a large concentration of commercial real estate loans that remain
vulnerable to default. Many of these loans were made at or near the peak in the
commercial real estate market in the late 1980's and the collateral coverage for
many loans may not be adequate to protect the Bank from potential losses in the
event such loans become nonperforming. Deterioration in the local economy or
real estate market, or upward movements in interest rates, could have an adverse
impact on
14
currently performing commercial real estate loan relationships. These factors
could result in an increased incidence of loan defaults and, as a result, an
increased level of nonperforming loans.
IMPAIRED LOANS
Management reviews loans on a case by case basis to determine which loans should
be classified as impaired. If management believes there is a high probability
of a loss of principal or interest, then such loans are determined to be
impaired. At June 30, 1996, the recorded investment in loans for which
impairment has been recognized in accordance with FASB Statement No. 114 totaled
$1,514,000 compared to $3,728,000 at December 31, 1995. The corresponding
allocated reserves for these loans was $326,000 for the period ended June 30,
1996. Of the $1,514,000 of impaired loans, $1,300,000 was classified as
nonaccrual at June 30, 1996. All impaired loans were secured by real estate at
June 30, 1996 and accounted for by the lower of the fair value of the collateral
or amortized loan value.
Impaired loans consisted of the following:
June 30, March 31, December 31,
(IN THOUSANDS) 1996 1996 1995
- --------------------------------------------------------------------------------
Real estate mortgage loans:
Residential $ 70 $ 70 $ 301
Commercial 1,345 1,181 3,427
Real estate construction loans - - -
Commercial and industrial loans - - -
Consumer and other loans 99 - -
------ ------ ------
$1,514 $1,251 $3,728
------ ------ ------
------ ------ ------
REAL ESTATE OWNED ("REO")
At June 30, 1996, REO consisted of 7 commercial and residential real estate
properties equaling $1,163,000 and 4 repossessed assets equaling $68,000.
REO is initially recorded at the lower of cost or fair value (minus estimated
costs to sell) at the date the Bank acquires title to the property and any
difference is charged to the Allowance at the time the property is classified as
REO. Subsequently, the values of such properties are reviewed by management and
writedowns, if any, are charged to expense. Costs relating to the development
and improvement of properties are capitalized; holding costs are charged to
expense.
LIQUIDITY - COASTAL
Deposits totaled $117.3 million at June 30, 1996, a decrease of $8.4 million (or
6.7%) from the level of $125.7 million at December 31, 1995.
On April 26, 1996, the Bank consummated its sale of the Kezar Falls branch to
Maine Bank & Trust Company. Included in the sale were all of the branch
deposits totaling $9.9 million and certain of the furniture, fixtures and
equipment of the branch. The Bank recognized a premium paid on the deposits of
$403,000, which was offset by expenses relating to the sale of $37,000.
15
On April 20, 1996, the Bank implemented a new deposit program featuring seven
new checking account products. The new program will entail increased
expenditures in marketing and a new mix of deposit products, which the Bank
believes will help to facilitate its efforts to increase its market share and
its non-interest income and to decrease its cost of funds.
Coastal has the capability of borrowing additional funds from the Federal Home
Loan Bank ("FHLB") of Boston with three-day advance notice when adequately
secured by qualified collateral. Effective as of June 8, 1993, the FHLB of
Boston restricted new advances to maturities of six months or less as a result
of the cross guaranty claim. On May 1, 1995, the Bank received a letter from
the FHLB of Boston stating that it would lengthen the maturity restriction on
new fixed term and fixed rate advances from six months to one year. Coastal is
also approved by the Federal Reserve Bank of Boston to obtain liquidity from its
"Discount Window" provided that assets are pledged to the Federal Reserve Bank's
satisfaction.
LIQUIDITY - PARENT
On a parent company only ("parent") basis, the Company conducts no separate
operations. Its business consists of the business of its banking subsidiary.
In addition to debt service relating to the Note in the principal amount of $4.0
million issued by the Company to a group of four Maine savings banks on July 24,
1996 as part of the Company's recapitalization plan, the Company's expenses
consist primarily of Delaware franchise taxes associated with the Company's
authorized capital stock, and certain legal and various other expenses.
Expenses, including certain audit and professional fees, insurance and other
expenses, are allocated between Coastal and the Company based upon the relative
benefits derived. At July 31, 1996 the parent's assets (other than its
investment in its subsidiary) consisted of $621,000 in cash.
Payment of dividends by the Company on its stock is subject to various
restrictions. Among these restrictions is a requirement under Delaware
corporate law that dividends may be paid by the Company out of its surplus or,
in the event there is no surplus, out of its net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year.
The principal source of cash for the parent company would normally be a dividend
from Coastal; however, certain restrictions also exist regarding the ability of
Coastal to transfer funds to the Company in the form of cash dividends, loans or
advances. The most significant of these are described below.
Maine corporate law generally provides that dividends may only be paid out of
unreserved and unrestricted earned surplus or unreserved and unrestricted net
earnings of the current fiscal year and the next preceding fiscal year taken as
a single period. Maine banking law also imposes certain restrictions, including
the requirement that the Bank establish and maintain adequate levels of capital
as set forth in rules adopted by the Maine Bureau of Banking.
Additionally, as a condition to the approval by the Maine Bureau of Banking of
the payment of the dividend in the amount of $3.2 million which was paid on July
24, 1996 by the Bank to the Company, the Maine Bureau of Banking required that
the Company commit to the Maine Bureau of Banking that it would not pay cash
dividends to its stockholders as long as the Company's debt to equity ratio is
above 25% (on a parent company only basis) without the prior approval of the
Maine Bureau of Banking. The Company's proforma debt to equity ratio (on a
parent company only basis) at June 30, 1996, assuming the recapitalization was
consummated in the second quarter, would be approximately 50.80%.
The Memorandum (effective November 22, 1994) provides that the Bank may not pay
or declare any dividends without the prior written consent of the FDIC and the
Maine Bureau of Banking.
16
On July 24, 1996, May 3, 1996, November 13, 1995 and November 30, 1994,
following the receipt of appropriate regulatory approvals, Coastal paid the
Company cash dividends of $3.2 million, $200,000, $200,000 and $175,000,
respectively, for certain current and anticipated operating expenses of the
Company and certain expenses related to the Company's recapitalization.
CAPITAL - COASTAL
The table below sets forth the regulatory capital requirements and capital
ratios for Coastal at June 30, 1996:
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
TIER 1 CAPITAL (LEVERAGE) TO TOTAL ASSETS RATIO (1)
Qualifying capital $14,386
Actual % 10.34%
Minimum requirement % 6.00%
Average assets for second quarter $139,157
TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS
Qualifying capital $14,386
Actual % 16.60%
Minimum requirement % 4.00%
Total capital to risk-weighted assets
(TIER 1 AND TIER 2)
Qualifying capital $15,489
Actual % 17.87%
Minimum requirement % 8.00%
Gross risk-weighted assets $86,673
- ----------------------------
(1) Calculated on an average quarterly basis
Note: As described in Note A to the Consolidated Financial Statements, the
Memorandum (effective November 22, 1994) among Coastal, the FDIC and the Maine
Bureau of Banking requires Coastal to maintain a Tier 1 capital to total assets
ratio of 6.0% or greater. Coastal's Tier 1 capital to total assets ratio at
June 30, 1996 was 10.34% and 8.04% on a proforma basis assuming the $3.2 million
dividend was paid to the Company at June 30, 1996.
CAPITAL - COMPANY
The Federal Reserve capital adequacy guidelines apply on a consolidated basis to
bank holding companies with consolidated assets of $150 million or more (See
"Note A"). For bank holding companies which have less than $150 million in
consolidated assets, as did the Company for each of the quarters ended June 30,
1995, September 30, 1995, December 31, 1995, March 31, 1996 and June 30, 1996,
the guidelines are applied on a bank-only basis (as opposed to a consolidated
basis) unless (i) the parent bank holding company is engaged in nonbank activity
involving significant leverage or (ii) the parent company has a significant
amount of debt that is held by the general public. The Federal Reserve capital
adequacy guidelines provide that "debt held by the general public" is debt held
by parties other than financial institutions, officers, directors, and
controlling stockholders
17
of the banking organization or their related interests. The FDIC Note is not
considered to be "debt held by the general public" for purposes of such capital
guidelines. As a result, applied on a bank-only basis, the Company's ratios of
tier 1 capital to total assets, tier 1 capital to risk-weighted assets, and
qualifying total capital to risk-weighted assets of 10.34%, 16.60%, and 17.87%,
respectively, at June 30, 1996 were in compliance with such guidelines. If the
Company were required to calculate its ratios of tier 1 capital to total assets,
tier 1 capital to risk-weighted assets, and qualifying total capital to
risk-weighted assets on a consolidated basis, such ratios would be 3.43%, 5.51%
and 6.78%, respectively, at June 30, 1996.
The Company suspended the payment of cash dividends to its stockholders in the
fourth quarter of 1989 and has not paid any cash dividends to its stockholders
since that time. See "Liquidity - Parent" for restrictions on dividends.
RESULTS OF OPERATIONS
- ---------------------
NET INCOME(LOSS)
The net income for the three and six months ended June 30, 1996 was $556,000 and
$893,000, respectively, compared with net income of $214,000 and $439,000 for
the same respective periods last year. The improvement in earnings for 1996 is
primarily attributable the consummation of the sale of the Company's Kezar Falls
branch to Maine Bank & Trust Company, resulting in a net gain of $366,000,
calculated by deducting $37,000 in expenses associated with the closing from the
gross deposit premium received of $403,000. In addition, earnings were
positively impacted by no provision for loan loss expense for the six months
ended June 30, 1996, as compared to $175,000 of provision expense for the same
period last year. Earnings for the six months ended June 30, 1996 were reduced
by a decline in net interest income of $87,000 compared to the six months ended
June 30, 1995.
NET INTEREST INCOME
Net interest income for the three and six months ended June 30, 1996 was $1.4
million and $2.9 million, respectively, compared to $1.5 million and $3.0
million, respectively for the six months ended June 30, 1995. The modest
decrease is primarily attributable to the increase in interest expense on the
FDIC note of $0.1 million for the six months ended June 30, 1996 compared to the
same respective period last year. The Company's net interest margin remained
relatively unchanged, 4.26% at June 30, 1996 and June 30, 1995.
PROVISION FOR LOAN LOSSES
There was no provision for loan loss expense for the six months ended June 30,
1996, versus $175,000 provision expense for the six months ended June 30, 1995.
This is attributable to several factors, including the essentially unchanged
level of the Allowance, both in dollars ($2.7 million at June 30, 1996 and
December 31, 1995) and as a percentage of total loans (2.81% at June 30, 1996
versus 2.65% at December 31, 1995), the decline in nonperforming loans, and
management's review of the portfolio and its determination of the adequacy of
the Allowance as of June 30, 1996.
The Company's policy is to fund the Allowance by charging operations in the form
of provision for loan loss expense which represents estimated loss exposure
based on periodic evaluations of the loan portfolio and current economic trends.
The Company continues to hold a large concentration of commercial real estate
loans. The ultimate collectibility of the Company's commercial real estate loan
portfolio is particularly susceptible to changes in local real estate market
conditions. Deterioration in the local economy or real estate market, or upward
18
movement in interest rates, could have an adverse impact on the loan portfolio
that could result in the need for increased provision for loan loss expense.
Management believes that the Allowance is adequate at June 30, 1996. However,
future additions to the Allowance may be necessary based on changes in the
financial condition of various borrowers, new information that becomes available
relative to various borrowers and loan real estate collateral, as well as
changes in local, regional or national economic conditions. In addition,
various regulatory authorities, as an integral part of their examination
process, periodically review the Company's Allowance. Such authorities may
require the Company to recognize additions to the Allowance based upon
information available to them and their judgments at the time of their
examination.
OTHER OPERATING INCOME
Other operating income for the three and six months ended June 30, 1996 was
$513,000 and $644,000, respectively, as compared to $139,000 and $307,000 for
the same respective periods in 1995. In the second quarter of 1996 the Company
realized a net gain of $366,000 from the sale of its Kezar Falls branch.
Additionally, other income for the six months ended June 30, 1995 includes a
realized gain on trading accounts of $33,000.
OTHER OPERATING EXPENSES
Other operating expenses for the three and six months ended June 30, 1996 was
$1.3 million and $2.6 million, respectively, as compared to $1.3 million and
$2.7 million for the same respective periods in 1995. Although other operating
expenses remained relatively unchanged for the three and six months ended June
30, 1996 compared to the same respective periods last year, the Company incurred
approximately $77,000 in marketing expenses associated with its new deposit
program which was implemented in April, 1996. Management believes that this new
deposit program will increase its other operating expense category, mainly in
the marketing area, in order for the Bank to facilitate its efforts to increase
the Bank's market share of deposits. Additionally, the Company expects overall
expenses to decline by approximately $224,000 on an annualized basis resulting
from two items: (i) the sale of the Kezar Falls branch in April of 1996 is
expected to reduce occupancy and other expenses by approximately $74,000
annualized, and (ii) the computer conversion scheduled to occur in August, 1996
will reduce overall expense by approximately $150,000.
19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As of June 30, 1996, there were various claims and lawsuits pending against
the Company incidental to the ordinary course of business. In the opinion
of management, after consultation with legal counsel, resolution of these
matters is not expected to have a material effect on the consolidated
financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES.
On June 11, 1996 the Company filed an amendment to its Restated Certificate
of Incorporation, to provide for a three-year restriction on certain
acquisitions and offers to acquire 5% or more voting stock of the Company
in order to reduce the likelihood that there will be a reduction in the
amount of the Company's net operating loss carryforward for federal tax
purposes by reason of an "ownership change" (as defined in Section 382 of
the Internal Revenue Code of 1986, as amended).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The 1996 Annual Meeting of Stockholders of the Company was held on June 11,
1996.
(b) Nominee: Roger E. Klein was elected for a three-year term to expire in
1999. The continuing directors are Normand E. Simard, Edward K. Simensky
and Charles A. Stewart III.
(c) The results of the voting at the 1996 Annual Meeting of Stockholders
(pursuant to a record date of May 2, 1996) were as follows:
(i) Election of Directors. 508,667 shares were voted to elect nominee
Roger E. Klein as a director of the Company for a three year term
and 20,559 shares were voted to withhold authority.
(ii) First Coastal Corporation 1996 Stock Option and Equity Incentive
Plan. For: 350,997; Against: 63,378; Abstain: 3,363.
(iii) Amendment to the Restated Certificate of Incorporation. For:
432,765; Against: 7,042; Abstain: 1,913.
(iv) Ratification of Coopers & Lybrand as Independent Public Accountants
for the year ending December 31, 1996. For: 527,270; Against:
1,262; Abstain: 694.
(d) Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits that are filed with this Form 10-Q, or that are incorporated
herein by reference, are set forth below:
3.1(i)(a) Restated Certificate of Incorporation (filed as Exhibit 3.1(i)
to Annual Report on Form 10-K for the year ended December 31, 1995, File
No. 0-14087 ("1995 Form 10-K"), and incorporated herein by reference).
3.1(i)(b) Certificate of Amendment of Restated Certificate of
Incorporation (filed as Exhibit 3.1(i)(b) to Amendment No. 3 to Form 10-K
for the year ended December 31, 1995, File No. 0-14087 ("1995 Form
10-K/A"), and incorporated herein by reference).
3.1(ii) Amended and Restated Bylaws (filed as Exhibit 3.1(ii) to 1995
Form 10-K, and incorporated herein by reference).
10.1 Suffield Financial Corporation Stock Option Plan and Suffield
Bank Stock Option Plan (filed as Exhibits 4.5 and 4.6, respectively, to
the Company's Registration Statement on Form S-8, File No. 33-11400, and
incorporated herein by reference).
10.2 Coastal Savings Bank Stock Option Plan (filed as Exhibit 4.7
to Post-Effective Amendment No. 1 on Form S-8 to Form S-4, File No.
33-10189, and incorporated herein by reference).
10.3 First Coastal Corporation Director's Deferred Compensation Plan
(filed as Exhibit 10.13 to Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 0-14087, and incorporated herein by reference).
10.4 Memorandum of Understanding, among Coastal Savings Bank, the
Federal Deposit Insurance Corporation and the Maine Bureau of Banking,
effective as of November 22, 1994 (filed as Exhibit 10.16 to Annual Report
on Form 10-K for the year ended December 31, 1994, File No. 0-14087 ("1994
Form 10-K"), and incorporated herein by reference).
10.5 Employment Agreement, dated December 21, 1994, between Coastal
Savings Bank and James H. Whittaker (filed as Exhibit 10.17 to 1994 Form
10-K, and incorporated herein by reference).
10.6 Purchase and Assumption Agreement, dated February 22, 1996,
between Coastal Savings Bank and Maine Bank & Trust Company (filed as
Exhibit 10.11 to 1995 Form 10-K, and incorporated herein by reference).
10.7 Agreement for Data Processing Services, dated February 28,
1996, between Coastal Savings Bank and Data Dimensions Inc. (filed as
Exhibit 10.12 to 1995 Form 10-K, and incorporated herein by reference).
10.8 First Coastal Corporation 1996 Stock Option and Equity
Incentive Plan (filed as Exhibit 10.13 to 1995 Form 10-K/A, and
incorporated herein by reference).
10.9 Loan Agreement, dated as of July 24, 1996, among First Coastal
Corporation and Androscoggin Savings Bank, Bangor Savings Bank, Machias
Savings Bank and Norway Savings Bank (collectively, the "Lenders") and
Machias Savings Bank, as agent.
21
10.10 Stock Pledge Agreement, dated as of July 24, 1996, between
First Coastal Corporation and Machias Savings Bank, for itself and as agent
for the Lenders.
10.11 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Androscoggin Savings Bank.
10.12 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Bangor Savings Bank.
10.13 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Machias Savings Bank.
10.14 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Norway Savings Bank.
10.15 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Dennis D. Byrd.
10.16 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Gregory T. Caswell.
27 Financial Data Schedule
(b) No Form 8-K was filed by the Company during the second quarter of 1996.
22
FIRST COASTAL CORPORATION
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FIRST COASTAL CORPORATION
Date: August 13, 1996 By: /s/ Gregory T. Caswell
------------------------------
Gregory T. Caswell
President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: August 13, 1996 By: /s/ Gregory T. Caswell
------------------------------
Gregory T. Caswell
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1996 By: /s/ Dennis D. Byrd
------------------------------
Dennis D. Byrd
Treasurer
(Principal Financial and Accounting
Officer)
23
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ---------- ----------------------
10.9 Loan Agreement, dated as of July 24, 1996, among First Coastal
Corporation and Androscoggin Savings Bank, Bangor Savings Bank,
Machias Savings Bank and Norway Savings Bank (collectively, the
"Lenders") and Machias Savings Bank, as agent.
10.10 Stock Pledge Agreement, dated as of July 24, 1996, between First
Coastal Corporation and Machias Savings Bank, for itself and as
agent for the Lenders.
10.11 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Androscoggin Savings Bank.
10.12 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Bangor Savings Bank.
10.13 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Machias Savings Bank.
10.14 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Norway Savings Bank.
10.15 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Dennis D. Byrd.
10.16 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Gregory T. Caswell.
27 Financial Data Schedule