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 MARCH 31, 1998
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 May 11, 1998: 1,359,194 shares
INDEX
FIRST COASTAL CORPORATION AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
---------------------
Page
----
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) as of March 31, 1998 and
December 31, 1997 3
Consolidated Statements of Operations (Unaudited) for the three months
ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows (Unaudited) for the three months
ended March 31, 1998 and 1997 5
Consolidated Statements of Comprehensive Income (Unaudited) for the
three months ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements (Unaudited), March 31, 1998 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II - OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 21
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
First Coastal Corporation and Subsidiary
March 31, December 31,
----------------------------
(in thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Noninterest earning deposits and cash $ 3,678 $ 3,615
Interest earning deposits 7,565 3,939
-------- --------
Cash and cash equivalents 11,243 7,554
Investment securities:
Available for sale (at market value) 18,832 15,887
Held to maturity (at cost) (fair value of $3,178 and $6,973 at
March 31, 1998 and December 31, 1997, respectively) 3,197 7,000
-------- --------
22,029 22,887
Federal Home Loan Bank stock (at cost) 1,315 1,315
Loans held for sale (at market value) 3,893 3,565
Loans 104,789 104,304
Less: Deferred loan fees, net (177) (139)
Allowance for loan losses (2,696) (2,665)
-------- --------
101,916 101,500
Premises and equipment 3,758 3,554
Accrued income receivable 926 970
Real estate owned and repossessions 121 65
Deferred tax asset 3,972 4,095
Other assets 849 895
-------- --------
TOTAL ASSETS $150,022 $146,400
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $118,517 $114,991
Advances from Federal Home Loan Bank 13,111 13,294
Savings Bank Notes 3,000 3,000
Accrued expenses and other liabilities 305 307
-------- --------
TOTAL LIABILITIES 134,933 131,592
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 March 31, 1998 and December 31, 1997 - 1,359,194 shares 1,359 1,359
Paid-in Capital 31,746 31,746
Retained earnings (deficit) (18,084) (18,369)
Unrealized gain on available for sale securities, net 68 72
-------- --------
TOTAL STOCKHOLDERS' EQUITY 15,089 14,808
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $150,022 $146,400
======== ========
See Notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
First Coastal Corporation and Subsidiary
Three Months Ended March 31,
----------------------------
(in thousands, except share and per share amounts) 1998 1997
- -----------------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $ 2,477 $ 2,240
Interest and dividends on investment securities 394 462
Other interest income 107 142
---------- ----------
TOTAL INTEREST AND DIVIDEND INCOME 2,978 2,844
INTEREST EXPENSE
Deposits 1,079 1,101
Borrowings
Advances from Federal Home Loan Bank 213 245
Savings Bank Notes 83 109
---------- ----------
Total Interest Expense 1,375 1,455
---------- ----------
Net Interest Income Before Provision for Loan Losses 1,603 1,389
Provision for Loan Losses - -
---------- ----------
Net Interest Income After Provision for Loan Losses 1,603 1,389
NONINTEREST INCOME
Service charges on deposit accounts 116 100
Gain on investment securities transactions - 130
Gain (loss) on sales of mortgage loans 6 (4)
Other 22 35
---------- ----------
144 261
---------- ----------
OPERATING EXPENSES
Salaries and employee benefits 637 538
Occupancy 131 113
Net cost of operation of real estate owned and repossessions (3) 33
Other 537 560
---------- ----------
1,302 1,244
---------- ----------
INCOME BEFORE INCOME TAXES 445 406
Income Taxes 160 139
---------- ----------
NET INCOME $ 285 $ 267
========== ==========
PER SHARE AMOUNTS
Basic earnings per share:
Weighted average shares outstanding 1,359,194 1,357,861
Net income per share $.21 $.20
========== ==========
Diluted earnings per share:
Weighted average shares outstanding 1,381,130 1,370,414
Net income per share $.21 $.19
========== ==========
See Notes to condensed consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
First Coastal Corporation and Subsidiary
Three Months Ended March 31,
----------------------------
(in thousands) 1998 1997
- ------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 285 $ 267
Adjustments to reconcile net income to net cash provided by operating activities:
Writedowns of REO - 20
Gain on sales of REO (5) -
Depreciation and amortization 90 78
Amortization of investment security premium 27 15
Realized investment securities gains - (130)
Realized losses on assets held for sale 6 4
Loans originated and acquired for resale (2,146) (719)
Sales of loans originated and acquired for sale 1,812 1,699
(Increase) decrease in interest receivable 44 (148)
(Decrease) increase in interest payable (70) 12
Net change in other assets 239 614
Net change in other liabilities 68 3
------- -------
Net cash provided by operating activities 350 1,715
------- -------
INVESTING ACTIVITIES
Sales of securities available for sale 953 2,318
Maturities of securities held to maturity 6,000 2,000
Purchases of investment securities available for sale (3,933) (7,029)
Purchases of investment securities held to maturity (2,193) -
Net change in loans (537) (2,563)
Net purchases of premises and equipment (294) (52)
------- -------
Net cash used by investing activities (4) (5,326)
------- -------
FINANCING ACTIVITIES
Net change in deposits 3,526 1,527
Proceeds from borrowings 4,000 2,000
Payments on borrowings (4,183) (172)
------- -------
Net cash provided by financing activities 3,343 3,355
------- -------
Increase (decrease) in cash and cash equivalents 3,689 (256)
Cash and cash equivalents at beginning of period 7,554 11,453
------- -------
Cash and cash equivalents (interest and noninterest bearing) at end of period $11,243 $11,197
======= =======
NONCASH INVESTING ACTIVITIES
Change in unrealized holding gains and losses on investment securities
available for sale $ (4) $ (228)
Transfer of loans to real estate owned and repossessions 121 -
See Notes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
First Coastal Corporation and Subsidiary
Three Months Ended March 31,
----------------------------
(dollars in thousands) 1998 1997
- ----------------------------------------------------------------------------
Net income $ 285 $ 267
Other comprehensive income:
Unrealized holding gains (losses) arising during
the period (net of income taxes; 1998 - $(1); 1997 - $0) (4) (143)
Reclassification adjustment for realized gains included
in net income (net of income taxes: 1997 $(45)) - (85)
----- -----
(4) (228)
----- -----
Comprehensive income $ 281 $ 39
===== =====
See Notes to consolidated financial statements.
6
FIRST COASTAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1998
NOTE A BASIS OF PRESENTATION
---------------------
The accompanying unaudited condensed consolidated financial statements of First
Coastal Corporation (the "Company") and its subsidiary, Coastal Bank (the
"Bank"), 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 of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles 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 and other data for the three months ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standard ("SFAS") No. 130,
Reporting Comprehensive Income. SFAS No. 130 requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The requirements of the
pronouncement do not have a material effect on the Company's financial
statements.
Effective January 1, 1998, the Company adopted FASB SFAS No. 131 Financial
Reporting for Segments of a Business Enterprise. SFAS No. 131 requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. The requirements of this pronouncement do
not have a material effect on the Company's financial statements.
In February 1998, FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. SFAS No. 132 will revise employers'
disclosures about pension and other postretirement benefit plans. The
requirements of this pronouncement will be adopted for the Company's financial
statements for the year ending December 31, 1998. The requirements of this
pronouncement are not expected to have a material effect on the Company's
financial statements.
COMPUTATION OF EARNINGS PER SHARE
In February 1997, FASB issued SFAS No. 128, Earnings Per Share. SFAS 128
provides reporting standards for basic and diluted earnings per share and is
effective for financial statement periods ending after December 15, 1997. Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period, which for the three months ended March 31, 1998 and 1997 were 1,359,194
and 1,357,861, respectively. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. The diluted
weighted average number of common shares outstanding for the three months ended
7
March 31, 1998 and 1997 were 1,381,130 and 1,370,414, respectively. All prior
period earnings per share data has been restated to conform to the provisions of
this statement.
SATISFACTION OF CROSS GUARANTY SETTLEMENT OBLIGATION TO FDIC; RECAPITALIZATION
AND ISSUANCE OF COMMON STOCK
On July 24, 1996, the Company completed its recapitalization plan, whereby the
Company repaid in full its promissory note obligation (the "FDIC Note") to the
Federal Deposit Insurance Corporation ("FDIC") incurred as a result of the
settlement of the cross guaranty claim against the Bank. The cross guaranty
claim was the result of the September 1991 failure of Suffield Bank. The funds
utilized to repay the FDIC Note 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
(the "Savings Banks") pursuant to which the Company issued promissory notes in
the aggregate principal amount of $4.0 million (the "Savings Bank Notes") which
mature on December 31, 2001, secured by the pledge by the Company of 100% of the
outstanding common stock of the Bank.
RETIREMENT BENEFITS
The Board of Directors of the Bank terminated the Bank's defined benefit plan
and implemented a 401(k) defined contribution plan during 1997. The defined
benefit plan was frozen effective July 31, 1997 and terminated September 30,
1997 pending the receipt of a termination letter from the Internal Revenue
Service. The termination of the defined benefit plan is not expected to have a
material effect on the Company's financial statements. Effective August 1,
1997, the Bank began to incur pension expense in the form of matching 401(k)
contributions.
INCOME TAXES
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. Due to the uncertainty that the benefit of net deferred tax assets would
be realized, a full valuation allowance was recorded at December 31, 1995.
Effective December 31, 1996 management concluded that the completion of the July
1996 recapitalization, the payoff of the FDIC Note in the principal amount of
$9.0 million incurred as a result of the January 1995 settlement of the cross
guaranty claim, and the improved financial condition of the Company reduced the
uncertainties relating to the prospective utilization of the net operating loss
carryforwards. As a result, in accordance with SFAS No. 109, in the fourth
quarter of 1996 the valuation allowance against the deferred tax asset was
reduced and the $4.8 million income tax benefit was recognized. Accordingly, for
financial reporting purposes subsequent to January 1, 1997, earnings are
reported on a tax effected basis as though income tax expense had been incurred.
In order to help maintain the benefit of the deferred tax asset, the Company
amended its Restated Certificate of Incorporation in June 1996 to provide that
absent approval by the Company's Board of Directors no person shall become or
make an offer to become a beneficial owner of five percent or more of the
Company's voting stock for a three year period, which provision expires June 11,
1999. This amendment is intended to help to reduce the likelihood that there
will be an "ownership change" as defined in Section 382 of the Internal Revenue
Code, which could result in a reduction in the amount of net operating loss
carryforwards for tax purposes.
8
YEAR 2000 ISSUE
The Company is aware of potential problems that may be experienced with
computerized and other electronic systems at the turn of the millennium. These
problems exist because many systems rely on two digit fields instead of four
digit fields to store the year of date sensitive information. The result will be
that some systems will interpret the 00 in its year field to mean 1900 instead
of 2000. This problem will not only affect software programs but hardware as
well, and could result in a system failure or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions or engage in similar normal business activities.
In response, the Company has formed a Year 2000 Action Committee which is
comprised of various members of the Bank's senior and middle management. The
Bank has implemented a detailed process for ensuring the Bank's systems are Year
2000 compliant, which includes systems assessment, systems renovation, systems
testing and systems implementation phases. The Committee has already completed
the awareness and assessment phases, which includes assessing computer software,
hardware, third party vendors and other electronic devices for compliance with
the year 2000. Since a majority of the Bank's processing systems are provided
by third party vendors, management is working to receive on-going assurances
that these systems will be Year 2000 compliant. Management does not expect the
costs associated with the year 2000 issues to have a material effect on the
Company's financial statements.
Though the Company is diligently working to ensure that there is no disruption
in its operations due to Year 2000 systems problems, and believes it will be
successful in this regard, there can be no guarantee that all of the systems
critical to the operational performance of the Bank will be Year 2000 compliant
and fully functional at the turn of the millennium. While management is working
diligently to protect the Company against such an occurrence, it is possible
that a vendor upon whom the Bank is reliant could, despite possible assurances
to the contrary, ultimately fail to provide Year 2000 compliant services to the
Company, or said services could prove incompatible with the Company's systems.
A significant systems failure could have a material adverse impact on the
financial condition of the Company.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BUSINESS
First Coastal Corporation (the "Company"), a Delaware corporation, is a bank
holding company whose sole operating subsidiary is Coastal Bank (the "Bank"), a
Maine chartered savings bank headquartered in Westbrook, Maine. The Bank was
formed in 1981 through the consolidation of Brunswick Savings Institution and
York County Savings Bank, which were organized in 1858 and 1860, respectively.
The Company has no separate operations and its business consists of the business
of the Bank. The Bank is engaged in customary banking activities, including
attracting deposits and various lending activities, and conducts its business
from eight offices in the counties of Cumberland, Sagadahoc and York. The
Bank's deposits are insured by the FDIC up to the limits provided by law.
This Quarterly Report on Form 10-Q, including statements made in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations, may include "forward-looking statements" within
9
the meaning of the Private Securities Litigation Reform Act of 1995. Any
statements with regard to the Company's expectations as to its financial results
and other aspects of its business, as well as general economic conditions, may
constitute forward-looking statements. Although the Company makes such
statements based on assumptions which it believes to be reasonable, there can be
no assurance that actual results will not differ materially from the Company's
expectations. Accordingly, the Company hereby identifies the following important
factors, among others, which could cause results to differ from any results
which might be projected, forecasted or estimated based on such forward-looking
statements: (i) general economic and competitive conditions in the markets in
which the Company operates, and the risks inherent in its operations, (ii) the
Company's ability to continue to control its provision for loan losses,
noninterest expense, increase earning assets and noninterest income, and
maintain its margin, and (iii) the level of demand for new and existing
products. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described in the forward-looking statements. The Company
does not intend to update forward-looking statements.
RESULTS OF OPERATIONS
OVERVIEW
The Company reported net income of $285,000 (or $.21 diluted earnings per share)
for the three months ended March 31, 1998, compared to net income of $267,000
(or $.19 diluted earnings per share) for the same period in 1997. Net interest
income increased $214,000 for the three months ended March 31, 1998 as compared
to the same respective period in 1997, primarily as a result of increased loan
balances and lower borrowing balances. The results for the three months ended
March 31, 1998 reflect a gain on sales of securities/loans of $6,000 as compared
to $126,000 for the same period in 1997. No provision for loan losses was
recognized for the first quarter of 1998, as was the case for the first quarter
of 1997.
NET INTEREST INCOME
Net interest income equaled $1,603,000 and $1,389,000 for the three months ended
March 31, 1998 and 1997, respectively (an increase of $214,000). The increase
in net interest income is due primarily to a $134,000 increase in interest
income resulting from a $3.6 million increase in loan outstandings, and a
$80,000 decline in interest expense attributable to a decline in borrowings
outstandings, which declined $4.7 million. Changes in net interest income are
caused by changes in the amount and composition of interest earning assets and
interest bearing liabilities, interest rate movements and the repricing of
assets and liabilities as a result of these movements, changes in the level of
noninterest earning assets and noninterest bearing liabilities and income
recognition and income reversals related to interest earning assets which
become noninterest earning assets.
10
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income from
interest-earning assets and the resultant average yields, (ii) the
total dollar amount of interest expense on interest-bearing
liabilities and the resultant average cost, (iii) net interest income,
(iv) interest rate spread, and (v) net interest margin.
Quarter Ended March 31,
------------------------------------------------------------------
1998 1997
------------------------------- --------------------------------
Average Average
(in thousands) Balance Interest Yield /(1)/ Balance Interest Yield /(1)/
- -----------------------------------------------------------------------------------------------------------------
ASSETS:
Cash $ 7,646 $ 107 5.67% $ 10,731 $ 142 5.37%
Investments 23,354 394 6.84 28,444 462 6.59
Loans /(2)/
Residential real estate mortgages 37,244 790 8.48 33,500 704 8.53
Commercial real estate mortgages 49,579 1,199 9.81 48,936 1,117 9.26
Commercial and industrial loans 5,622 136 9.83 2,529 55 8.74
Consumer loans 14,978 352 9.53 15,259 364 9.66
-------- ------ -------- ------
Total loans 107,423 2,477 9.35 100,224 2,240 9.06
Total interest earning assets 138,423 2,978 8.72 139,399 2,844 8.27
Noninterest earning assets 9,760 11,282
-------- --------
Total assets $148,183 $150,681
======== ========
LIABILITIES:
Deposits
Savings $ 34,872 $ 235 2.73% $ 34,828 $ 235 2.74%
NOW and money market accounts 17,664 103 2.37 19,040 105 2.24
Certificates of deposits 55,679 741 5.40 57,357 761 5.38
-------- ------ -------- ------
Total interest bearing deposits 108,215 1,079 4.04 111,225 1,101 4.01
Borrowings 17,695 296 6.78 20,409 354 7.05
-------- ------ -------- ------
Total interest bearing liabilities 125,910 1,375 4.43% 131,634 1,455 4.48%
Noninterest bearing deposits 6,964 5,480
Noninterest bearing liabilities 107 177
Stockholders' equity 15,202 13,390
-------- --------
Total liabilities and stockholders' equity $148,183 $150,681
======== ========
Net interest income $1,603 $1,389
====== ======
Net interest rate spread /(3)/ 4.30% 3.79%
Net interest margin /(4)/ 4.70% 4.04%
/(1)/ Annualized.
/(2)/ For purposes of these computations, loans held for sale and nonaccrual
loans are included in the average loan amounts outstanding.
/(3)/ Return on interest earning assets less cost of interest bearing
liabilities.
/(4)/ Net interest income divided by average earning assets.
Interest income for the three months ended March 31, 1998 increased
$134,000 as compared to the three months ended March 31, 1997. The
increase for the three months ended March 31, 1998 is primarily
attributable to a $237,000 increase in interest and fees on loans, due
to a $3.6 million increase in loan outstandings and an increase in
loan yields, from 9.06% at March 31, 1997 to 9.35% at March 31, 1998.
The loan interest income increase was offset in part by a $103,000
decline in income on investment securities and other interest income,
resulting from reduced balances. The increase in loan yields for the
three months ended
11
March 31, 1998 as compared to March 31, 1997 is largely the result of a $1.8
million reduction in the level of nonaccrual loans for the quarter just
completed and $18,000 in interest reversals related to nonaccrual loans during
the quarter ended March 31, 1997.
Competition with regard to loan originations, particularly commercial real
estate and commercial and industrial loans, has become more intense. As a
result, the yields on new loan originations, particularly in these two
categories, has declined relative to interest rates in general. Competitive
factors have also resulted in, and are expected to continue to result in, an
increase in loan prepayments as compared to that which might ordinarily have
been expected, as well as some reductions in contract interest rates for
existing customers. As a result, there is some likelihood that loan yields will
decline in the foreseeable future.
Interest expense for the three months ended March 31, 1998 declined $80,000 as
compared to the same quarter in 1997. The overall decrease is primarily
attributable to a decrease in interest expense paid on borrowings, as overall
borrowings declined $4.7 million. Borrowings declined as a result of maturities
and a $1.0 million unscheduled principal payment on the Savings Bank Notes made
during the third quarter of 1997, reducing the balance from $4.0 million to $3.0
million.
Although interest expense and the deposit yields declined for the three months
ended March 31, 1998 as compared to the same respective period in 1997, this
trend is not expected to continue. On March 23, 1998, the Company introduced a
new savings deposit product called High Rise Savings. The introductory interest
rate paid on this product for accounts opened during the introductory period is
tiered and ranges from 4.64% to 5.59%, with these rates guaranteed through
December 31, 1998, after which it is anticipated the product's rates will
decline somewhat in relation to overall interest rates. It is also expected
that some portion of the Bank's deposit customers will convert their pre-
existing accounts to High Rise Savings accounts at higher yields. As a result
of this program, management anticipates increases in savings deposit
balances, thereby increasing the overall cost of funds to the Bank.
PROVISION FOR LOAN LOSSES
There was no provision for loan losses expense for the three months ended March
31, 1998 and 1997. The absence of provision for loan losses is attributable to
(i) the essentially unchanged level of the allowance for loan losses (the
"Allowance"), both in dollars ($2.7 million at March 31, 1998 and 1997) and as a
percentage of total loans (2.58% at March 31, 1998 versus 2.67% at March 31,
1997), and (ii) management's review of the portfolio and its determination of
the adequacy of the Allowance as of March 31, 1998.
Management believes that in accordance with the Bank's Allowance for Loan Loss
Policy, the Allowance is adequate at March 31, 1998. 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 collateral, growth in the size or changes in the mix or
concentration risk of the loan portfolio, 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 Bank's
Allowance. Such authorities may require the Bank to recognize additional
provision for loan losses based upon information available to them and their
judgments at the time of their examination.
NONINTEREST INCOME
Noninterest income declined $117,000, from $261,000 for the three months ended
March 31, 1997 to $144,000 for the three months ended March 31, 1998. This
decline was primary attributable to a $130,000
12
decline in gains on securities for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997. This decline was partially
offset by a $16,000 increase in deposit fee income.
OPERATING EXPENSES
The $58,000 increase in operating expenses for the three months ended March 31,
1998 as compared to the same respective period in 1997 was primarily
attributable to additional costs associated with several business strategies the
Bank implemented during the quarter ended March 31, 1998. The increase in
salaries and benefits expense was primarily attributable to changes in staffing
levels, annual salary increases and a $24,000 increase in pension expense in the
form of 401(k) matching contributions attributable to the implementation of the
401(k) defined contribution plan in August 1997. Other Expenses declined
primarily as a result of a $79,000 decline in REO costs and collection expenses
for the three months ended March 31, 1998 as compared to the same respective
period in 1997.
FINANCIAL CONDITION
- -------------------
TOTAL ASSETS
At March 31, 1998, total assets were $150.0 million, representing an increase of
$3.6 million (or 2.5%) from total assets of $146.4 million at December 31, 1997.
This increase was primarily attributable to a $3.7 million increase in cash and
cash equivalents resulting from a $3.5 million increase in deposit balances
primarily attributable to the introduction of the Bank's new High Rise Savings
program.
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 March 31, 1998 were $22.0 million compared to $22.9
million at December 31, 1997. This decrease is attributable to $5.8 million in
U.S. government agency callable notes which were called during the first quarter
of 1998 and $1.0 million in prepayments and amortization on mortgage-backed
securities, partially offset by the purchase of $3.9 million in mortgage-backed
securities and $2.0 million in U.S. government agency callable notes.
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 March 31, 1998.
March 31, 1998
--------------------------------------------
Gross Gross Fair
Amortized Unrealized Unrealized Market
(in thousands) Cost Gain Loss Value
- -------------------------------------------------------------------------------
Available for sale:
Mortgage backed securities $18,640 $124 $ (21) $18,743
Other 89 - - 89
------- ---- ------- -------
$18,729 $124 $ (21) $18,832
======= ==== ======= =======
Held to maturity:
U.S. government obligations $ 197 $ 3 - $ 200
U.S. government callable notes 3,000 - $ (22) 2,978
------- ---- ------- -------
$ 3,197 $ 3 $ (22) $ 3,178
======= ==== ======= =======
13
The tax effected net unrealized gain on investment securities classified as
available for sale was $68,000 at March 31, 1998, versus a net unrealized gain
of $72,000 at December 31, 1997.
The following table represents the contractual maturities for investments in
debt securities for each major security type at March 31, 1998.
March 31, 1998
-----------------------------------------
Maturing
-----------------------------------------
After One
Within But Within After
(in thousands) One Year Five Years Five Years Total
- -----------------------------------------------------------------------------
Available for sale:
Mortgage backed securities - - $18,743 $18,743
-------- ---------- ------- -------
- - $18,743 $18,743
======== ========== ======= =======
Held to maturity:
U.S. government obligations $197 - - $ 197
U.S. government agency callable
notes (final maturity) - $2,000 $ 1,000 3,000
-------- ---------- ------- -------
$197 $2,000 $ 1,000 $ 3,197
======== ========== ======= =======
LOANS HELD FOR SALE
Loans held for sale (all of which were residential mortgages carried at market
value) equaled $3.9 million at March 31, 1998 as compared to $3.6 million at
December 31, 1997, an increase of $0.3 million. The outstanding dollar amount
of loans held for sale can vary greatly from period to period, affected by such
factors as mortgage origination levels, the timing and delivery of loan sales,
changes in market interest rates and asset/liability management strategies. At
March 31, 1998 the Bank had binding commitments for the sale of mortgage loans
held for sale totaling $3.0 million.
LOANS
Loans consisted of the following:
March 31, December 31,
--------------------------
(in thousands) 1998 1997
- -----------------------------------------------------------------------------
Real estate mortgage loans:
Residential $ 33,061 $ 33,251
Commercial 49,043 48,705
Real estate construction loans 2,206 1,955
Commercial and industrial loans 5,709 5,166
Consumer and other loans 14,770 15,227
-------- --------
$104,789 $104,304
======== ========
Loans increased $485,000 (or 0.5%) at March 31, 1998 as compared to
December 31, 1997. The increase was attributable to new originations by the
Bank.
14
ALLOWANCE FOR LOAN LOSSES ("ALLOWANCE")
The Company's Allowance was $2.7 million at March 31, 1998 and December 31,
1997. The Allowance represented 2.58% and 2.56% of total loans, and 427.3% and
353.9% of nonperforming loans, at March 31, 1998 and December 31, 1997,
respectively.
The Allowance is maintained at a level believed adequate by management to absorb
potential losses inherent in the current loan portfolio in accordance with the
Bank's Allowance for Loan Loss Policy. 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, trends in loan
outstandings and diversification of the loan portfolio, the results of the most
recent regulatory examinations, the results of loan portfolio reviews completed
by outside consultants, the nature and level of nonperforming assets, impaired
loans and loans that have been identified as potential problems, financial
condition of its borrowers, the adequacy of loan collateral and other relevant
factors. The Allowance is increased by provisions for loan losses charged
against income and recoveries on loans previously charged off. In evaluating
reserve adequacy, management places a high reliance upon the review of
individual commercial loan assets to determine whether or not loss exposure
exists. 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,
deterioration in the local economy or real estate market, upward movements in
interest rates, the Company's large concentration in commercial real estate
loans or other factors 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.
NONPERFORMING ASSETS
Information with respect to nonperforming assets is set forth below:
March 31, December 31,
--------------------------
(in thousands) 1998 1997
- -----------------------------------------------------------------------------
Nonaccrual loans $ 261 $ 387
Accruing loans past due 90 days or more 106 101
Restructured loans 264 265
Real estate owned and repossessions 121 65
----- -----
Total $ 752 $ 818
===== =====
The level of nonperforming assets declined $66,000 from December 31, 1997 to
March 31, 1998. The decline in nonaccrual loans was offset by an increase in
real estate owned and repossessions.
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, a portion of which 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
15
losses in the event such loans become nonperforming. Deterioration in the local
economy or real estate market, upward movements in interest rates, or other
factors could have an adverse impact on currently performing loans. 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 that it is probable that there
will be a loss of scheduled principal or interest, then such loans are
determined to be impaired. At March 31, 1998, the recorded investment in loans
for which impairment has been recognized in accordance with SFAS No. 114 totaled
$589,000, as compared to $717,000 at December 31, 1997. The corresponding
portion of the Allowance allocated as reserves ("Allocated Reserves") against
the total recorded investment in loans was $66,000 as of March 31, 1998 and
$91,000 as of December 31, 1997. An amount equal to $525,000 of the $589,000
total impaired loans was classified as either nonaccrual or troubled debt
restructures and the remaining $64,000 was classified as potential problem loans
at March 31, 1998. The income recorded on a cash basis relating to impaired
loans equaled $10,000 and $39,000 for the three months ended March 31, 1998 and
1997, respectively. The average balance of outstanding impaired loans was
$590,000 and $3.4 million at March 31, 1998 and March 31, 1997, respectively,
and an effective annualized yield of 6.8% and 4.6%, respectively. All of the
impaired loans were collateralized by real estate at March 31, 1998 and
accounted for by the lower of the fair value of the collateral (net of the
$66,000 Allocated Reserves) or amortized loan value.
REAL ESTATE OWNED ("REO")
REO consists of properties acquired through mortgage loan foreclosure
proceedings, repossessions or in full or partial satisfaction of outstanding
loan obligations. At March 31, 1998, REO totaled approximately $121,000,
consisting of $107,000 in 1-4 family residential real estate, and $14,000 in
other repossessed assets.
LIQUIDITY - BANK
Deposits totaled $118.5 million at March 31, 1998, an increase of $3.5 million
(or 3.1%) from the level of $115.0 million at December 31, 1997.
Deposit balances were as follows:
March 31, December 31,
--------------------------
(in thousands) 1998 1997
- -----------------------------------------------------------------------------
Noninterest bearing demand deposits $ 7,046 $ 7,599
Interest bearing demand deposits 18,109 17,117
Savings and escrow deposits 37,653 34,465
Time deposits 55,709 55,810
-------- --------
Total $118,517 $114,991
======== ========
The increase in deposit levels is primarily attributable to a new savings
deposit program, High Rise Savings, implemented in the first quarter of 1998,
which increased savings deposits by $3.2 million.
16
LIQUIDITY - COMPANY
On a parent company only basis ("parent"), the Company conducts no separate
operations. Its business consists of the operations of its banking subsidiary.
In addition to debt service relating to the Savings Bank Notes in the aggregate
principal amount of $3.0 million, 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 the
Bank and the Company based upon the relative benefits derived. At March 31,
1998, the parent's assets consisted of $488,000 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 Company would normally be a dividend from
the Bank; however, certain restrictions also exist regarding the ability of the
Bank to transfer funds to the Company in the form of cash dividends, loans or
advances. 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.
The Loan Agreement, dated July 24, 1996, between the Company and the Savings
Banks contains certain terms, restrictions and covenants, including covenants
restricting the amount of borrowings that may be incurred by the Company and the
Bank, restrictions regarding the conditions under which cash dividends may be
paid by the Company (including a prohibition of the payment of cash dividends to
its stockholders as long as the Company's debt-to-equity ratio on a parent-only
basis exceeds 30%), and a requirement that the Company and the Bank maintain
certain minimum capital ratios.
On March 25, 1998, September 25, 1997, March 26, 1997, July 24, 1996 and May 3,
1996, the Bank paid the Company cash dividends of $500,000, $1.0 million,
$500,000, $3.2 million and $200,000, respectively.
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.
17
CAPITAL - BANK
The table below sets forth the regulatory capital requirements and capital
ratios for the Bank at March 31, 1998 and December 31, 1997:
March 31, December 31,
---------------------------------
(dollars in thousands) 1998 1997
- ---------------------------------------------------------------------------------------------
Tier 1 capital (Leverage) to total assets /(1)/ratio
- ----------------------------------------------------
Qualifying capital $ 13,974 $ 13,877
Actual % 9.65% 9.63%
Minimum requirement for capital adequacy % 4.00% 4.00%
Average quarterly assets $144,820 $144,138
Tier 1 capital to risk-weighted assets
- --------------------------------------
Qualifying capital $ 13,974 $ 13,877
Actual % 15.16% 15.03%
Minimum requirement for capital adequacy % 4.00% 4.00%
Total capital to risk-weighted assets
(Tier 1 and Tier 2)
- -------------------------------------
Qualifying capital $ 15,145 $ 15,050
Actual % 16.43% 16.30%
Minimum requirement for capital adequacy % 8.00% 8.00%
Risk-weighted assets $ 92,172 $ 92,335
/(1)/ Calculated on an average quarterly basis.
CAPITAL - COMPANY
The table below sets forth the regulatory capital requirements and capital
ratios for the Company at March 31, 1998 and December 31, 1997:
March 31, December 31,
--------------------------------
(dollars in thousands) 1998 1997
- --------------------------------------------------------------------------------------------
Tier 1 capital (Leverage) to total assets /(1)/ratio
- ----------------------------------------------------
Qualifying capital $ 11,543 $ 11,106
Actual % 7.96% 7.71%
Minimum requirement for capital adequacy % 4.00-5.00% 4.00-5.00%
Average quarterly assets $ 144,683 $ 144,004
Tier 1 capital to risk-weighted assets
- --------------------------------------
Qualifying capital $ 11,523 $ 11,106
Actual % 12.50% 12.02%
Minimum requirement for capital adequacy % 4.00% 4.00%
Total capital to risk-weighted assets
(Tier 1 and Tier 2)
- --------------------------------------
Qualifying capital $ 12,695 $ 12,279
Actual % 13.77% 13.29%
Minimum requirement for capital adequacy % 8.00% 8.00%
Risk-weighted assets $ 92,205 $ 92,378
/(1)/ Calculated on an average quarterly basis.
18
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
Not applicable.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
As of March 31, 1998, 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 Company's consolidated
financial position or results of operations.
Item 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
Not applicable.
Item 5. Other Information
- -------------------------
Not applicable.
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) Restated Certificate of Incorporation (filed as Exhibit 3.1(i) to
Annual Report on Form 10-K for the year ended December 31, 1997, File No.
0-14087 ("1997 Form 10-K"), and incorporated herein by reference).
3.1(ii) Amended and Restated Bylaws (filed as Exhibit 3.1(ii) to 1997
Form 10-K, and incorporated herein by reference).
10.1 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).
10.2 Agreement for Data Processing Services, dated February 28, 1996,
between Coastal Savings Bank and Data Dimensions Inc. (filed as Exhibit
10.12 to Annual Report on Form 10-K for the year ended December 31, 1995,
File No. 0-14087, and incorporated herein by reference).
19
10.3 First Coastal Corporation 1996 Stock Option and Equity Incentive
Plan (filed as Exhibit 10.13 to Amendment No. 3 to Annual Report on Form
10-K on Form 10-K/A for the year ended December 31, 1995, File No. 0-14087,
and incorporated herein by reference).
10.4 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 (filed as Exhibit 10.9 to Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 1996 ("June 1996 Form 10-Q"),
and incorporated herein by reference).
10.5 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 (filed as Exhibit 10.10 to June 1996 Form 10-Q, and
incorporated herein by reference).
10.6 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Androscoggin Savings Bank (filed as Exhibit
10.11 to June 1996 Form 10-Q, and incorporated herein by reference).
10.7 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Bangor Savings Bank (filed as Exhibit 10.12
to June 1996 Form 10-Q, and incorporated herein by reference).
10.8 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Machias Savings Bank (filed as Exhibit 10.13
to June 1996 Form 10-Q, and incorporated herein by reference).
10.9 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Norway Savings Bank (filed as Exhibit 10.14
to June 1996 Form 10-Q, and incorporated herein by reference).
10.10 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Dennis D. Byrd (filed as
Exhibit 10.15 to June 1996 Form 10-Q, and incorporated herein by
reference).
10.11 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Gregory T. Caswell (filed as
Exhibit 10.16 to June 1996 Form 10-Q, and incorporated herein by
reference).
10.12 Rights Agreement, dated as of February 25, 1998, between First
Coastal Corporation and ChaseMellon Shareholder Services, L.L.C. (filed as
Exhibit No. 1 to Current Report on Form 8-K, filed March 3, 1998, and
incorporated herein by reference).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K on March 3, 1998 with respect to the
Company's adoption of a Stockholder Rights Plan.
20
FIRST COASTAL CORPORATION
SIGNATURES
Pursuant to the requirements 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: May 15, 1998 By: /s/ Gregory T. Caswell
---------------------------------------------
Gregory T. Caswell
President and Chief Executive Officer
Pursuant to the requirements of 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: May 15, 1998 By: /s/ Gregory T. Caswell
---------------------------------------------
Gregory T. Caswell
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1998 By: /s/ Dennis D. Byrd
---------------------------------------------
Dennis D. Byrd
Treasurer
(Principal Financial and Accounting Officer)
21
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
3.1(i) Restated Certificate of Incorporation (filed as Exhibit 3.1(i) to
Annual Report on Form 10-K for the year ended December 31, 1997,
File No. 0-14087 ("1997 Form 10-K"), and incorporated herein by
reference).
3.1(ii) Amended and Restated Bylaws (filed as Exhibit 3.1(ii) to 1997
Form 10-K, and incorporated herein by reference).
10.1 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).
10.2 Agreement for Data Processing Services, dated February 28, 1996,
between Coastal Savings Bank and Data Dimensions Inc. (filed as
Exhibit 10.12 to Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 0-14087, and incorporated herein by
reference).
10.3 First Coastal Corporation 1996 Stock Option and Equity Incentive
Plan (filed as Exhibit 10.13 to Amendment No. 3 to Annual Report
on Form 10-K on Form 10-K/A for the year ended December 31, 1995,
File No. 0-14087, and incorporated herein by reference).
10.4 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 (filed as Exhibit
10.9 to Quarterly Report on Form 10-Q for the Quarter Ended June
30, 1996 ("June 1996 Form 10-Q"), and incorporated herein by
reference).
10.5 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 (filed as Exhibit 10.10 to June 1996 Form
10-Q, and incorporated herein by reference).
10.6 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Androscoggin Savings Bank (filed
as Exhibit 10.11 to June 1996 Form 10-Q, and incorporated herein
by reference).
10.7 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Bangor Savings Bank (filed as
Exhibit 10.12 to June 1996 Form 10-Q, and incorporated herein by
reference).
10.8 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Machias Savings Bank (filed as
Exhibit 10.13 to June 1996 Form 10-Q, and incorporated herein by
reference).
10.9 Promissory Note, dated July 24, 1996, by First Coastal
Corporation for the benefit of Norway Savings Bank (filed as
Exhibit 10.14 to June 1996 Form 10-Q, and incorporated herein by
reference).
10.10 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Dennis D. Byrd (filed
as Exhibit 10.15 to June 1996 Form 10-Q, and incorporated herein
by reference).
10.11 Employment Agreement, dated as of July 31, 1996, among Coastal
Savings Bank, First Coastal Corporation and Gregory T. Caswell
(filed as Exhibit 10.16 to June 1996 Form 10-Q, and incorporated
herein by reference).
10.12 Rights Agreement, dated as of February 25, 1998, between First
Coastal Corporation and ChaseMellon Shareholder Services, L.L.C.
(filed as Exhibit No. 1 to Current Report on Form 8-K, filed
March 3, 1998, and incorporated herein by reference).
27 Financial Data Schedule (filed herewith).