Dear Shareholders,

      As we approach our 10th anniversary as a public company, I believe, now,
more than ever all our goals cannot be achieved in months, quarters or years.
Rather, we must be diligent and steadfast for the long term in reaching our
goals.  The number one goal remains... VALUE TO OUR SHAREHOLDERS. Over the past
years we have strived to create franchise value.  We have accomplished that
goal by opening three branches; Rockland, Belfast and Jefferson, with Belfast
and Jefferson opening during the year ending March 31st 1999.  While this
expansion has had a negative impact on fiscal year earnings, we believe our
franchise to be more valuable, therefore, ultimately providing more value to
our shareholders.

      With the rapid approach of the new millennium, we must now focus on
earnings.  The completion of this goal will simply add more value to the
company.  In addition to earnings, the bank, along with the entire financial
services industry, has been preparing for the year 2000.  We believe that
because of our conversion to new software in fiscal 1997, the year 2000 will
not pose a significant problem for the bank. In addition, the company has
developed a contingency plan in case any systems or key vendors are not
operational.  This plan is under continuous review addressing all critical
systems.  Additionally, our regulatory agency, The Office of Thrift
Supervision (OTS), continues to monitor the Bank's process in addressing Year
2000 issues.

      The company is pleased to be paying our 18th consecutive dividend.  The
$0.10 dividend is payable on June 30th to shareholders of record on June 1st.

      Financial highlights for fiscal 1999 include:

            *   Assets increases of $7.8 million
            *   Deposit increases of $7.2 million
            *   Net loan increases of $5.8 million
            *   Interest income increasing $312,000
            *   Interest expense increasing $191,000
            *   Operating expenses increasing $598,000
            *   Fiscal year earnings $257,786
            *   Earnings per share (diluted) $0.36

      We firmly believe that the initial expenses related to the expansion
were necessary in order for future growth and anticipate earnings growth to
begin showing significant improvement in fiscal 2000.

      I would like to express my sincere thanks to the employees of the Bank
for their continued effort toward the fulfillment of our goals.  I truly
appreciate their support and commitment to you, our shareholders.  The entire
staff and I truly appreciate your support of the Company.

                                       Sincerely,

                                       Mid-Coast Bancorp, Inc.


                                       /s/ Wesley E. Richardson
                                       ------------------------------
                                       Wesley E. Richardson
                                       President and Chief Executive Officer


                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                INTRODUCTION

      Management is pleased to present the following discussion and analysis
of the financial condition and results of operations of Mid-Coast Bancorp,
Inc. (the "Holding Company").

               SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

      The following tables set forth selected consolidated financial and other
data of the Holding Company at the dates and for the years indicated and
should be read in conjunction with the Holding Company's Consolidated
Financial Statements and accompanying notes thereto and other financial
information included elsewhere herein.

<TABLE>
<CAPTION>

                                                               At March 31,
                                 -----------------------------------------------------------------------
                                    1999           1998           1997           1996           1995
                                    ----           ----           ----           ----           ----
<S>                              <C>            <C>            <C>            <C>            <C>
Financial condition data:
  Loans, net                     $55,964,548    $50,213,531    $48,979,032    $42,465,559    $43,358,622
  Other interest-
   earning assets                 10,622,276      9,362,898      6,523,454      9,422,891      7,125,838
  Total assets                    70,770,863     63,015,163     58,925,368     54,362,066     52,749,000
  Deposits                        52,414,873     45,171,416     42,180,698     41,816,902     37,121,110
  Borrowings                      12,715,000     12,190,000     11,440,000      7,465,000     10,715,000
  Stockholders' equity           $ 5,373,620    $ 5,340,735    $ 5,075,545    $ 4,926,077    $ 4,722,596

<CAPTION>

                                                      For the Years Ended March 31,
                                 -----------------------------------------------------------------------
                                    1999           1998           1997           1996           1995
                                    ----           ----           ----           ----           ----

<S>                              <C>            <C>            <C>            <C>            <C>
Operating data:
  Interest income                $ 5,229,465    $ 4,917,589    $ 4,588,646    $ 4,389,689    $ 3,939,940
  Interest expense                 2,814,771      2,623,506      2,436,580      2,485,256      2,007,051
                                 -----------------------------------------------------------------------
  Net interest income              2,414,694      2,294,083      2,152,066      1,904,433      1,932,889
  Provision for loan
   losses                             68,000         73,000         87,000         62,010         81,000
  Other income                       460,938        303,286        235,021        183,277        157,268
  Other expense                    2,408,014      1,809,874      1,913,379      1,565,259      1,293,308
                                 -----------------------------------------------------------------------
  Income before
   income taxes                      399,618        714,495        386,708        460,441        715,849
  Income tax expense                 141,832        238,879        143,933        156,994        248,474
                                 -----------------------------------------------------------------------
  Net income                     $   257,786    $   475,616    $   242,775    $   303,447    $   467,375
                                 -----------------------------------------------------------------------

  Basic earnings per share(1)    $      0.37    $      0.68    $      0.35    $      0.44    $      0.69
                                 =======================================================================
  Diluted earnings per
   share(1)                      $      0.36    $      0.67    $      0.34    $      0.43    $      0.67
                                 =======================================================================

<CAPTION>

                                                         For the Years Ended March 31,
                                        ----------------------------------------------------------------
                                        1999           1998           1997           1996           1995
                                        ----           ----           ----           ----           ----

<S>                                    <C>            <C>            <C>            <C>            <C>
Statistical data (2):
  Interest rate spread                  3.39%          3.63%          3.67%          3.30%          3.56%
  Net yield on average
   earning assets                       3.76           3.99           4.07           3.68           3.88
  Return on average assets              0.38           0.78           0.43           0.56           0.90
  Return on average equity              4.96           9.06           4.74           6.28          10.38
  Average equity to
   average assets                       7.65           8.62           9.12           8.92           8.67
  Dividend payout ratio                54.22          25.61          48.27          35.30          18.50

<F1>  All years restated to reflect 3 for 1 stock split in 1998 and 5% stock
      dividend in 1996.
<F2>  Average balances were computed using month end amounts.

</TABLE>

GENERAL

      The following discussion should be read in conjunction with the
consolidated financial statements and related notes included in this report.
The financial condition and results of operations of the Holding Company
reflect the operations of its subsidiary, The Waldoboro Bank, F.S.B. (the
"Bank").

      The Bank's business strategy is to operate as a well-capitalized and
profitable community bank dedicated to financing loans secured by residential
and commercial real estate, enabling borrowers to refinance, construct or
improve property.  The Bank has implemented this strategy by; (i) closely
monitoring the needs of customers and providing quality service; (ii)
originating residential mortgage loans, construction loans, commercial real
estate loans, consumer loans, and by offering checking accounts and other
financial services and products; (iii) focusing on expanding the volume of the
Bank's commercial real estate and commercial lending activities to serve the
needs of the small business community; and (iv) focusing on expanding the
volume of the Bank's mortgage loan servicing portfolio.

      From this strategy, the Bank anticipates its interest and non-interest
income will increase.  Like most financial institutions, Waldoboro's earnings
are primarily dependent upon its net interest income, which is determined by
(i) the difference between yields on interest-earning assets and rates paid on
interest bearing liabilities (known as the interest rate spread) and (ii) the
relative amounts of interest earning assets and interest bearing liabilities
outstanding.

      The Bank and the entire financial services industry are significantly
affected by prevailing economic conditions as well as government policies and
regulations concerning, among other things, monetary and fiscal affairs,
housing and financial institutions.  Deposit flows are influenced by a number
of factors including interest rates on money market funds, the stock market,
other competing investments, account maturities and levels of personal income
and savings.  Lending activities are influenced by, among other things, the
demand for and supply of housing, conditions in the construction industry, and
loan refinancing in response to declining interest rates.  Sources of funds
for lending activities include deposits, loan payments, proceeds from sales of
loans and investments, investment returns and borrowings.

FINANCIAL CONDITION

      Total assets at March 31, 1999 were $70,770,863, an increase of
$7,755,700 from March 31, 1998 primarily derived from deposit growth at
existing and new branches.  The Bank has restructured its investment portfolio
to maximize yield and flexibility for the Bank.  To that end, the Bank has
increased its investment securities available for sale, while decreasing time
deposits and investments held to maturity.  The net effect is an increase in
the investment portfolio of $1,925,968.  Net loans also increased $5,751,017.

      The Bank had, as of March 31, 1999, a net loan portfolio of $55,964,548,
representing 79% of total assets.  Stockholders' equity at year end was
$5,373,620, an increase of $32,885 from March 31, 1998, as a result of 1999
net income after dividends, options exercised, and effects of stock award
program.  As discussed under "Liquidity and Capital Resources," the Bank's
capital is substantially in excess of all applicable regulatory requirements.

ASSET/LIABILITY MANAGEMENT

      The goal of the Bank's asset/liability policy is to manage its exposure
to interest rate risk.  The principal focus of the Bank's strategy has been to
reduce its exposure to interest rate fluctuations by matching more closely the
effective maturities and repricing dates of its assets and liabilities.
Currently the Bank's liabilities are more rate sensitive than its assets.  As
such, the Bank has concentrated on maintaining a high percentage of adjustable
rate loans in its residential, commercial, and commercial real estate
portfolios.  In addition, the Bank utilizes Federal Home Loan Bank advances to
control the repricing of a segment of its liabilities.

      At March 31, 1999, the adjustable rate loans in the residential mortgage
loan portfolio amounted to $25.9 million or 72.0% and adjustable rate loans in
the commercial loan portfolio amounted to $8.9 million or 72.3%.  The Bank's
strategy regarding liabilities is to attempt to restructure its deposits by
increasing NOW and savings accounts and decreasing certificates of deposit.
Currently, certificates of deposit represent $32.7 million or 62.4% of the
Bank's deposits.

      The current interest rate environment is relatively stable with a flat
yield curve. However, in a sustained flat yield curve, some of the Bank's
adjustable rate mortgages may reprice more dramatically than some of the
Bank's liabilities. Typically, in a declining interest rate environment, the
Bank's interest rate spread would increase because liabilities would be
repricing faster than assets for the same period.  In contrast, in a rising
rate environment, the spread would decrease resulting in an adverse affect on
the Bank's net interest income.

NONPERFORMING ASSETS

      A summary of nonperforming assets for the last three years is shown
below.

<TABLE>
<CAPTION>

                                                                   At March 31,
                                                         --------------------------------
                                                           1999        1998        1997
                                                           ----        ----        ----

<S>                                                      <C>         <C>         <C>
Nonperforming loans:
  Mortgage loans in process of foreclosure               $    ---    $    ---    $    ---
  Loans more than 90 days past due and still accruing      69,580      69,570         ---
  Nonaccrual loans                                         73,551     225,056     145,466
                                                         --------------------------------

Total nonperforming loans                                 143,131     294,626     145,466

Real estate owned, net                                        ---      70,383      91,823
                                                         --------------------------------

Total nonperforming assets                               $143,131    $365,009    $237,289
                                                         ================================

Ratio of nonperforming loans to total loans                  0.25%      0.58%        0.29%
Ratio of nonperforming assets to total assets                0.20%      0.58%        0.40%

</TABLE>

      The accrual of interest income is discontinued when a loan becomes
delinquent and in management's opinion is deemed uncollectible in whole or in
part as to principal and/or interest. In these cases, interest on such loans
is recognized only when received.  It is the policy of the company to
generally place all loans which are 90 days or more past due on nonaccrual
status, unless in management's judgement the loan is well secured and in the
process of collection.

      At March 31, 1999, the Bank had $69,580 of accruing loans which were 90
days or more delinquent as compared to $69,570 at March 31, 1998 and no such
loans at March 31, 1997.  Unrecognized interest income on all loans on non-
accrual status at March 31, 1999 totaled $7,253.

      Management is not aware of any loans other than those represented in the
table above which are potential problem loans at present.

AVERAGE BALANCE, INTEREST AND YIELD/RATES

      The following table presents average balances, yields and rates for
major classes of interest-earning assets and interest-bearing liabilities for
the periods indicated.  Additionally, the table presents interest rate spreads
and ratios of net interest income to average interest-earning assets.  All
average balances have been computed using month-end amounts.  Non-performing
loan amounts have been included in average balances.  Since the Holding
Company has had no significant investments or loans for which interest was
exempt from income taxes, no tax equivalent adjustments have been reflected.

<TABLE>
<CAPTION>

                                      Year Ended March 31, 1999              Year Ended March 31, 1998
                                 -----------------------------------   -----------------------------------
                                   Average                    Yield/     Average                     Yield/
                                   Balance       Interest      Rate      Balance        Interest      Rate
                                   -------       --------      ----      -------        --------      ----

<S>                              <C>            <C>            <C>     <C>             <C>           <C>
Interest-earning assets:
  Loans                          $52,902,202    $4,588,941     8.67%   $49,601,915     $4,464,822    9.00%
  Interest bearing &
   time deposits                   3,655,632       207,952     5.69%     1,559,093         87,522    5.61%
  Federal funds sold               3,829,465       196,752     5.14%     2,806,836        155,004    5.52%
  Investments & mortgage-
   backed securities               3,877,991       235,820     6.08%     3,487,291        210,241    6.03%
                                 -----------    ----------             -----------     ----------
Total interest-earning
 assets                           64,265,290     5,229,465     8.14%    57,455,135      4,917,589    8.56%
Other assets:
  Allowance for loan losses         (367,609)                             (318,443)
  Cash and due from banks          1,418,678                             1,158,854
  Fixed assets                     1,696,547                             1,539,018
  Other assets                       985,600                             1,093,918
                                 -----------                           -----------
Total assets                     $67,998,506                           $60,928,482
                                 ===========                           ===========

Interest-bearing liabilities:
  NOW, savings & money
   market accounts                16,460,915       423,854     2.57%    14,626,501         19,661    2.87%
  Certificates of deposit         30,216,858     1,670,643     5.53%    27,352,018      1,544,788    5.65%
  Borrowings                      12,547,603       720,274     5.74%    11,185,205        659,057    5.89%
                                 -----------    ----------             -----------     ----------
Total interest-bearing
 liabilities                      59,225,376     2,814,771     4.75%    53,163,724      2,623,506    4.93%

Other liabilities:
  Demand deposits                  3,142,831                             2,187,357
  Other liabilities                  431,470                               325,651
                                 -----------                           -----------
Total liabilities                 62,799,677                            55,676,732
Stockholders' equity               5,198,829                             5,251,750
                                 -----------                           -----------

Total liabilities and
 stockholders' equity            $67,998,506                           $60,928,482
                                 ===========                           ===========

Net interest income                             $2,414,694                              $2,294,083
                                                ==========                              ==========
Interest rate spread                                           3.39%                                 3.63%
Net interest income as a
 percentage of average
 interest-earning assets                                       3.76%                                 3.99%

</TABLE>

Rate/Volume Analysis

      A significant contributor to the Holding Company's level of
profitability over the long term is its net interest income, which is a
function of both the interest rates it earns or pays and of the amount, or
volume, of its interest-earning assets and interest-bearing liabilities.  The
relative significance that rate and volume have had in various periods on the
Holding Company's results of operations can be observed by measuring the
extent to which the change in each has been responsible for increases or
decreases in net interest income.

      The table below sets forth certain information regarding the changes in
the components of net interest income for the periods indicated.  For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by old volume) and (2) changes in volume (change in volume
multiplied by old rate).  The net change attributable to both volume and rate
has been allocated proportionately.

<TABLE>
<CAPTION>

                                            Year Ended March 31, 1999             Year Ended March 31, 1998
                                              Compared to 1998                        Compared to 1997
                                               Increase (Decrease)                   Increase (Decrease)
                                        ----------------------------------    ---------------------------------
                                         Volume        Rate          Net        Volume       Rate         Net
                                         ------        ----          ---        ------       ----         ---

<S>                                     <C>         <C>           <C>         <C>         <C>          <C>
Interest on interest-earning assets:
  Loans                                 $273,311    $(149,192)    $124,119    $364,619    $(55,248)    $309,371
  Interest-bearing
   & time deposits                       119,247        1,183      120,430      19,384       1,831       21,215
  Federal funds sold                      51,612       (9,864)      41,748      74,079       4,490       78,569
  Investments &
   mortgage-backed
   securities                             23,744        1,835       25,579     (72,562)     (7,650)     (80,212)
                                        -----------------------------------------------------------------------
  Total Interest Income                 $467,914    $(156,038)    $311,876    $385,520    $(56,577)    $328,943
                                        -----------------------------------------------------------------------
Interest on interest-bearing
 liabilities:
  Savings, NOW, & money
   market deposit accounts                23,010      (18,817)       4,193      39,448     (14,495)      24,953
  Certificates of deposit                157,535      (31,680)     125,855      60,554     (30,714)      29,840
  Borrowings                              77,651      (16,434)      61,217     114,963      17,170      132,133
                                        -----------------------------------------------------------------------
  Total Interest Expense                 258,196      (66,931)     191,265     214,965     (28,039)     186,926
                                        -----------------------------------------------------------------------

NET INTEREST INCOME                     $209,718    $ (89,107)    $120,611    $170,555    $(28,538)    $142,017
                                        =======================================================================

</TABLE>

                            RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED MARCH 31, 1999 AND 1998

NET INCOME

      Net income for the year ended March 31, 1999 amounted to $257,786,
compared to $475,616 for the year ended March 31, 1998.  This decrease is
primarily related to the increased expenses caused by the Bank's decision to
expand its branch system from two locations for four by establishing new
locations.  Net income was $0.37 basic earnings per share of common stock or
$0.36 diluted earnings per share.  This compares to $0.68 basic earnings per
share of common stock and $0.67 diluted earnings per share for the previous
fiscal year.

      Changes from March 31, 1998 to March 31, 1999, include an increase in
total interest income of $311,876 or 6.34%, an increase in total interest
expense of $191,265 or 7.29%, an increase in net interest income of $120,611
or 5.26%, an increase in other income of $157,652 or 51.98%, and in increase
in other expenses of $598,140 or 33.05%.  The details of these changes will be
discussed throughout the remainder of this section.

INTEREST INCOME

      Total interest income for the year ended March 31, 1999 increased
$311,876 or 6.34% compared to the previous fiscal year.  The increase is
partially related to an increase of $3.3 million or 6.65% in the average
balances of mortgage, consumer and commercial loans compared to the previous
fiscal year, which is partially off set by declining yields.  The increase in
average balances of all loan types is primarily related to the new branches in
Belfast and Jefferson, and continued growth in Rockland.  Primarily growth has
been in mortgages and consumer loans at the branches, while in Waldoboro the
primary growth is in commercial loans.  Additional interest income is
comprised of interest on mortgage-backed securities of $35,557, and other
interest income of $404,704, which is comprised of other interest bearing
deposits and federal funds sold.

      The increase in interest on mortgage-backed securities is related to the
Bank's strategy to improve interest yields by increasing the average balances
of investments.  Other interest income which is comprised of Federal Funds
sold and interest bearing time deposits increased due to an increase in the
volume of those assets.

INTEREST EXPENSE

      Total interest expense for the year ended March 31, 1999, increased
$191,265 or 7.29% compared to the same period last year.  This increase is
primarily related to increases in the average balances of NOW accounts,
savings, certificates of deposit and borrowings.  These increases in deposit
accounts are primarily related to certificate of deposit growth at the Bank's
three branches, coupled with lesser increases in NOW accounts and savings.
These increases are partially offset by an overall reduction in the average
rate equal to 12 basis points on certificates of deposit and 30 basis points
on NOW accounts and savings.

PROVISION FOR LOAN LOSSES

      The Bank's provision for loan losses was $68,000 for the year ended
March 31, 1999, compared to $73,000 for the previous year.  Combined with net
charge-offs of $10,511, this resulted in an allowance for loan losses of
$404,385 or a 16.57% increase over the previous fiscal year.   The increase
corresponds to the growth in residential mortgages and commercial loans.

      The allowance for loan losses to non-performing loans was 282% at March
31, 1999, compared to 118% a year ago.  The allowance to total loans is 0.72%
at March 31, 1999 compared to 0.68% at March 31, 1998.  Management believes
that the allowance is sufficient given the commensurate risk associated with
the loan portfolio.

OTHER INCOME

      Other income for the year ended March 31, 1999 was primarily generated
from three areas; loan servicing and other loan fees, gain on sale of loans
and deposit account fees.  The increase in other income totaled $157,652 or
51.98% compared to a year ago.  The increases in loan servicing and gain on
sale of loans is primarily related to the Bank's continued effort to increase
loan sales to the secondary market.  Proceeds from loan sales were $6.1
million in fiscal 1999 compared to $3.4 million in 1998.  Increases in deposit
account fees are consistent with the accounts that generate fee income,
primarily relating to overdraft fees.

OTHER EXPENSES

      The increase in other expenses is primarily related to the Bank's
decision to expand its branch network.  The areas primarily affected include:
compensation, employee benefits, occupancy and equipment and other expenses
including data processing, advertising, telephone and ATM processing.

      The increase in compensation amounted to $196,846 or 28.32%.  This
increase consists of various promotions and salary increases to current staff,
the addition of four full-time tellers and a branch manager in Belfast, the
promotion of a current staff member to branch manager in Jefferson, and the
hiring of one teller for the  Jefferson branch.

      The increase in employee benefits amounted to $74,458 or 46.86%.  This
increase consists of increases in FICA expense, life and medical insurance,
unemployment taxes, bonus payments and accrued vacation expense.

      Occupancy and equipment increased $149,141 or 76.19% due to depreciation
of leasehold improvements made in Belfast and Jefferson, depreciation and
maintenance of related banking and computer equipment for each location and
the rent in Belfast.

      Miscellaneous other expenses increased $165,309 or 24.56% consisting
primarily of increases in advertising relating to the new branches and the use
of an ad agency, ATM processing due to the addition of the Belfast ATM and
increased use of the Rockland and Jefferson ATMs telephone expense due to
additional phone lines and service to Belfast and Jefferson branches and
upgrading of the communications network between Waldoboro and Rockland, and
data processing related to increased total transaction volume.

INCOME TAX EXPENSE

      The provision for income tax for the year ended March 31, 1999, was
$141,832 a decrease of $97,047 from the previous year due to lower income
before income taxes.  See note 6 to the consolidated financial statements for
further information regarding income taxes.

COMPARISON OF YEARS ENDED MARCH 31, 1998 AND 1997

NET INCOME

      Net income for the year ended March 31, 1998 amounted to $475,616.  This
represents a 96% increase compared to fiscal 1997 income of $242,775.  It
should be noted that fiscal 1997 income was effected by the one-time
assessment of $241,299 paid to recapitalize Savings Association Insurance Fund
(SAIF).  Without the SAIF assessment, fiscal 1998 earnings would have
increased 19% over the previous fiscal year.

      Highlights comparing fiscal 1998 to 1997 include: an increase in total
interest income of $328,943 or 7.2%, an increase in total interest expense of
$186,926 or 7.7%, an increase in net interest income of $142,017 or 6.6%, an
increase in other income of $68,265 or 29.1% and a decrease in other expenses
of $103,505 or 5.4%.  These highlights will be explained in greater detail
throughout the remainder of the results of operations.

INTEREST INCOME

      Total interest income for the year ended March 31, 1998 increased
$328,943 or 7.2% compared to the previous fiscal year.  The increase is
partially related to an increase of $4.1 million or 8.9% in the average
balances of mortgage, consumer and commercial loans compared to the previous
fiscal year.  Additionally, other interest income which is comprised of
interest on Federal funds sold and interest-bearing time deposits, increased
due to an increase in the volume on those assets; however, offsetting this was
a decrease in interest on investments due to a decrease in the average balance
of investments.

INTEREST EXPENSE

      Total interest expense for the year ended March 31, 1998, increased
$186,926 or 7.7% from March 31, 1997.  This increase is primarily due to
increases in the average balances in certificates of deposit and borrowings,
which is partially offset by a reduction in rates.

PROVISION  FOR LOAN LOSSES

      The Bank's provision for loan losses was $73,000 for the year ended
March 31, 1998, compared to $87,000 for the previous year.  Combined with net
charge-offs, this resulted in an allowance for loan losses of $346,896 or a
17.4% increase over the previous fiscal year. Management has increased the
allowance for loan losses to account for the growth in the commercial loan
portfolio.

      The allowance for loan losses to non-performing loans was 118% at March
31, 1998 compared with 203% a year ago.

OTHER INCOME

      Other income for the year ended March 31, 1998 was derived primarily
from gains on sales of loans and fee income.  Other income increased $68,265
or 29.1% compared to the same period last year.  The increase in gain on sales
of loans consisted primarily of loans sold to secondary market sources. The
increase in fee income was primarily generated by the growth of checking
accounts which generated fee income, primarily relating to the collection of
overdraft fees.

OTHER EXPENSES

      Other expenses consist primarily of the Bank's general and
administrative expenses.  Other expenses decreased $103,505 or 5.4% compared
to March 31, 1997.  This decrease is due primarily to the one-time assessment
the Bank paid in fiscal 1997.  Without the assessment other expenses would
have increased $137,894 or 8.25%.  The increase is primarily related to
compensation of directors, officers and staff, due to an additional staff
person, regular scheduled salary increases, and expenses related to the
Recognition and Retention Plan.  In addition, occupancy and equipment expenses
increased due to depreciation on new equipment and other expenses increased
due to added telephone, office supplies, postage, and real estate taxes.
Other expenses are likely to increase during fiscal year 1999 due to the
additional expenses associated with the new branches.

INCOME TAX EXPENSE

      The provision for income tax for the year ended March 31, 1998, was
$238,879 an increase of $94,946 or 66.0% from the previous year.  See note 6
to the consolidated financial statements for further information regarding
income taxes.

LIQUIDITY AND CAPITAL RESOURCES

      Liquidity is a measure of the Bank's ability to fund loans, provide a
source for withdrawal of deposits and allow for the payment of normal cash
expenses.  The Bank's primary sources of funds are deposits, borrowings,
regular payments of loan principal and interest and prepayments of loan
principal.  To a lesser extent, the Bank obtains funds from maturities of
investment securities, and funds provided by operations.

      During the past several years, the Bank has used funds primarily to meet
its ongoing commitments to fund maturing time deposits and savings
withdrawals, to fund existing and continuing loan commitments and to maintain
liquidity.  The Bank has periodically supplemented its liquidity needs with
advances from the FHLB.  The Bank's current borrowing capacity exceeds
$34,000,000.  At March 31, 1999, the Bank's borrowings from the FHLB were
$12.7 million.

      At year end March 31, 1999, stockholders' equity was $5,373,620 or 7.59%
of assets compared to $5,340,735 or 8.48% at March 31,1998.  The reduced
percentage reflects the increase in assets during the period.  The Bank is
required to maintain specified amounts of capital pursuant to federal
regulations.  At yearend March 31, 1999, the Bank's capital substantially
exceeded core capital, tangible capital and risk based capital regulatory
requirements.  See note 11 of the consolidated financial statements for
further information.

YEAR 2000

      The Holding Company has conducted a review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed a plan to resolve the issue.  The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define
the applicable year.  Any of the Holding Company's programs that have time-
sensitive software may recognize a date using "00" as year 1900 rather than
the year 2000. This could result in a major system failure or miscalculations.
The Holding Company has adopted the regulatory plan to address this issue
which has five phases.  The Company has substantially completed the first four
phases and is currently working on the implementation phase.  The following is
a brief synopsis of each phase:

1)    Awareness Phase - This phase consists of defining the Year 2000 problem
      and developing a strategy that encompasses all of the Bank' and Holding
      Company's vendor systems.  This phase has been completed by the
      institution

2)    Assessment Phase - This phase consists of assessing the Year 2000
      problem and detailing the steps necessary to address the issue.  This
      phase must identify all software, hardware, other miscellaneous items,
      and customer and vendor interdependencies affected by the Year 2000
      issue.  While this phase is complete, management recognizes that other
      issues could arise that would need to be assessed.

3)    Renovation Phase - This phase includes upgrades to hardware and
      software, system upgrades, vendor certifications, and other associated
      changes.  For those applications handled by an outside vendor,
      management  has had ongoing discussions about how they are addressing
      this issue, and we will continue to monitor their progress.

4)    Validation Phase - This phase consists of testing all hardware and
      software to ensure that it is compatible with our system.  In addition
      to testing components, connections with other systems must be verified,
      and all changes should be accepted by internal and external users.
      Management has established controls to assure the effective and timely
      completion of all hardware and software testing prior to final
      implementation.

      As with the renovation phase, the Company will be in ongoing discussions
      with its vendors on the success of their validation efforts.  The
      Company has completed the testing all of its critical systems and has
      completed this phase.

5)    Implementation Phase - During the final phase, all systems should be
      certified as Year 2000 compliant.  Any systems that fail certification
      must be addressed and contingency plans must be implemented to ensure
      continuity.  In addition, all new systems and changes to existing
      systems must be verified as Year 2000 compliant.  The Holding Company
      anticipates completion of this phase by June 30, 1999.

      The Holding Company presently believes that because of the conversion to
new software in fiscal 1997, the Year 2000 will not pose significant
operational problems for the Holding Company's and the Bank's computer system
and it does not anticipate any further material costs to be incurred.  Also,
the Bank's loan portfolio is not significantly concentrated with any single
borrower (at March 31, 1999, the largest commercial loan relationship
approximated $749,000) and consists largely of loans secured by real estate.
These factors help mitigate Year 2000 risks pertaining to the valuation of the
loan portfolio, however, the Bank is currently contacting its significant loan
customers regarding their Year 2000 efforts.  In addition, the Company has
developed a contingency plan in case any systems or key vendors are not
operational after the year 2000.  This plan will be continually reviewed and
revised to address all critical systems.  It should also be noted that the
Bank's regulatory agency, the Office of Thrift Supervision, has been
monitoring, and plans to continue monitoring, the Bank's progress in
addressing Year 2000 matters.  To date the Bank has spent approximately
$27,000 on the Year 2000 issue primarily due to the purchase of computer
hardware, related installation cost and overtime for key employees and
anticipates that it may spend $15,000 additional in the future.

IMPACT OF INFLATION AND CHANGING INTEREST RATES

      The Holding Company's consolidated financial statements and related
notes presented elsewhere herein have been prepared in accordance with
generally accepted accounting principles ("GAAP"), which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.  Unlike many industrial companies, substantially
all of the assets and virtually all of the liabilities of the Holding Company
are monetary in nature.  As a result, interest rates have a more significant
impact on the Holding Company's performance than the general level of
inflation.  Over short periods of time, interest rates may not necessarily
move in the same direction or in the same magnitude as the prices of goods and
services.  Management believes that, through the implementation of its
strategic plan (see "Financial Condition - Asset/Liability Management"), it
has taken important steps to maintain positive interest rate spreads, and to
control the potential effects of interest rate fluctuations on the Holding
Company's earnings.

PART II

MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

      On March 31, 1999, there were 715,457 shares of the Holding Company's
Common Stock outstanding held by approximately 395 holders of record.  Also at
such date, the Holding Company had granted options to purchase shares of the
Holding Company's Common Stock.

      The following table shows market price information for the Holding
Company's Common Stock.  The prices set forth below represent the high and low
bid prices of the Holding Company's stock during the periods indicated.  Such
over the counter market quotations reflect inter-dealer prices, without retail
markup, mark-down or commission and may not necessarily represent actual
transactions.  The Holding Company's common stock is traded on the Nasdaq
SmallCap Market under the symbol "MCBN."

<TABLE>
<CAPTION>

                                                       Cash
                                                     Dividends
                                                      Paid per
Quarter Ended                   High(1)    Low(1)     Share(1)
--------------------------------------------------------------

<S>                             <C>        <C>         <C>
March 31, 1997                  $ 6.33     $ 6.33      $  ---
June 30, 1997                     6.50       6.17       0.086
September 30, 1997                9.33       7.00         ---
December 31, 1997                10.83       8.83       0.086

March 31, 1998                  $14.00     $12.83         ---
June 30, 1998                    12.25      11.50        0.10
September 30, 1998                9.75       8.50         ---
December 31, 1998                 9.75       7.00        0.10

March 31, 1999                   10.00       7.00         ---

<F1>  All figures adjusted to reflect 3 for 1 stock split that took effect in
      1998.

</TABLE>

      On April 14, 1999 the Holding Company declared a dividend of $.10 per
share to Stockholders of record on June 1, 1999 and payable June 30, 1999.


                           Mid-Coast Bancorp, Inc.

                        Audited Financial Statements

                  Years Ended March 31, 1999, 1998 and 1997
                      With Independent Auditors' Report


                           MID-COAST BANCORP, INC.

                        INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                Page
                                                                ----

<S>                                                              <C>
Independent Auditors' Report                                     F-1

Consolidated Balance Sheets as of March 31, 1999 and 1998        F-2

Consolidated Statements of Income for each of the Three Years
 Ended March 31, 1999                                            F-4

Consolidated Statements of Changes in Stockholders' Equity
 for each of the Three Years Ended March 31, 1999                F-5

Consolidated Statements of Cash Flows for each of the Three
 Years Ended March 31, 1999                                      F-6

Notes to Consolidated Financial Statements                       F-8
</TABLE>


                        INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Mid-Coast Bancorp, Inc.


We have audited the accompanying consolidated balance sheets of Mid-Coast
Bancorp, Inc. and Subsidiary as of March 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended March 31, 1999.  These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Mid-Coast
Bancorp, Inc. and Subsidiary at March 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended March 31, 1999, in conformity with
generally accepted accounting principles.




                                       /s/ Baker Newman & Noyes
                                       ------------------------------
April 30, 1999                         Limited Liability Company
Portland, Maine

                           MID-COAST BANCORP, INC.

                         CONSOLIDATED BALANCE SHEETS

                           March 31, 1999 and 1998


<TABLE>
<CAPTION>
                                   ASSETS
                                   ------
                                                                          1999           1998
                                                                          ----           ----

<S>                                                                    <C>            <C>
Cash and due from banks                                                $ 1,583,693    $ 1,149,870
Interest bearing deposits                                                   93,095         98,160
Federal funds sold                                                       2,120,000      2,720,000
                                                                       --------------------------

    Cash and cash equivalents                                            3,796,788      3,968,030

Time deposits                                                            2,079,000      2,476,000
Investment securities available for sale, at market (notes 2 and 9)      5,216,681      2,144,041
Held to maturity investment securities (market value of
 $186,415 in 1999 and $922,351 in 1998) (notes 2 and 9)                    200,000        949,672
Investment in Federal Home Loan Bank stock (note 9)                        734,500        622,000
Loans held for sale                                                        179,000        353,025


Loans (notes 3 and 9):                                                  56,429,522     50,624,539
  Less:  Allowance for loan losses (note 4)                                404,385        346,896
         Net deferred loan fees                                             60,589         64,112
                                                                       --------------------------

                                                                        55,964,548     50,213,531

Bank premises and equipment, net (note 5)                                1,734,619      1,490,827

Other assets:
  Accrued interest receivable - loans                                      288,413        239,689
  Accrued interest receivable - time deposits                               18,328         12,445
  Accrued interest receivable - investment and
   mortgage-backed securities                                               70,213         46,494
  Deferred income taxes (note 6)                                           113,137        100,000
  Prepaid expenses and other assets                                        375,636        329,026
  Real estate owned (note 7)                                                     -         70,383
                                                                       --------------------------

      Total other assets                                                   865,727        798,037
                                                                       --------------------------

      Total assets                                                     $70,770,863    $63,015,163
                                                                       ==========================

                    LIABILITIES AND STOCKHOLDERS' EQUITY
                    ------------------------------------

Liabilities:
  Deposits (note 8):
    Demand deposits                                                    $ 3,106,977    $ 2,297,644
    NOW accounts                                                         5,309,433      4,018,629
    Savings                                                              6,582,120      5,686,227
    Money market deposit accounts                                        4,711,304      5,134,082
    Certificates of deposit                                             32,705,039     28,034,834
                                                                       --------------------------

    Total deposits                                                      52,414,873     45,171,416

  Advances from the Federal Home Loan Bank (note 9)                     12,715,000     12,190,000
  Accrued expenses and other liabilities                                   267,370        313,012
                                                                       --------------------------

    Total liabilities                                                   65,397,243     57,674,428

Commitments and contingencies (note 10)

Stockholders' equity (notes 11 and 12):
  Common stock, $1 par value, 1,500,000 shares authorized;
   715,457 shares issued and outstanding (711,960 shares in 1998)          715,457        711,960
  Paid-in capital                                                        1,535,412      1,521,041
  Retained earnings                                                      3,371,524      3,253,517
  Accumulated other comprehensive income (loss)                            (25,500)             -
  Unearned compensation                                                   (223,273)      (145,783)
                                                                       --------------------------

    Total stockholders' equity                                           5,373,620      5,340,735
                                                                       --------------------------

    Total liabilities and stockholders' equity                         $70,770,863    $63,015,163
                                                                       ==========================
</TABLE>


See accompanying notes.


                           MID-COAST BANCORP, INC.

                      CONSOLIDATED STATEMENTS OF INCOME

                  Years Ended March 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                      1999          1998          1997
                                                      ----          ----          ----

<S>                                                <C>           <C>           <C>
Interest income:
  Interest on loans                                $4,588,941    $4,464,822    $4,155,451
  Interest on investment securities                   200,263       210,241       257,426
  Interest on mortgage-backed securities               35,557             -        33,027
  Other                                               404,704       242,526       142,742
                                                   --------------------------------------
    Total interest income                           5,229,465     4,917,589     4,588,646

Interest expense:
  Interest on deposits (note 8)                     2,094,497     1,964,449     1,909,656
  Interest on borrowings                              720,274       659,057       526,924
                                                   --------------------------------------

    Total interest expense                          2,814,771     2,623,506     2,436,580
                                                   --------------------------------------

    Net interest income                             2,414,694     2,294,083     2,152,066

Provision for loan losses (note 4)                     68,000        73,000        87,000
                                                   --------------------------------------

                                                    2,346,694     2,221,083     2,065,066
Other income:
  Loan servicing and other loan fees                   58,628        52,089        46,335
  Gain on sale of loans                               183,102        54,785        31,436
  Deposit account fees                                210,793       188,619       140,654
  Gain (loss) on sale of investment securities
   available for sale (note 2)                         (3,012)            -         6,748
  Miscellaneous                                        11,427         7,793         9,848
                                                   --------------------------------------

                                                      460,938       303,286       235,021
Other expenses:
  Compensation of directors, officers and staff       891,976       695,130       652,237
  Employee benefits (notes 12 and 13)                 233,354       158,896       141,733
  Occupancy and equipment expense                     344,890       195,749       137,900
  Insurance expense (note 14)                          81,066        74,834       360,328
  Real estate owned (note 7)                           18,397        12,243        11,678
  Other (note 14)                                     838,331       673,022       609,503
                                                   --------------------------------------

                                                    2,408,014     1,809,874     1,913,379
                                                   --------------------------------------

  Income before income taxes                          399,618       714,495       386,708

  Income tax expense (note 6)                         141,832       238,879       143,933
                                                   --------------------------------------

  Net income                                       $  257,786    $  475,616    $  242,775
                                                   ======================================

  Earnings per share - basic                       $     0.37    $     0.68    $     0.35
                                                   ======================================

  Earnings per share - diluted                     $     0.36    $     0.67    $     0.34
                                                   ======================================
</TABLE>


See accompanying notes.


                           MID-COAST BANCORP, INC.

         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                    Years Ended March 31, 1999, 1998 and 1997
                                                 ---------------------------------------------------------------------------------
                                                                                   Accumulated Other                     Total
                                                  Common    Paid-in     Retained     Comprehensive       Unearned    Stockholders'
                                                  Stock     Capital     Earnings     Income (Loss)     Compensation     Equity
                                                  ------    -------     --------    -----------------  ------------  -------------

<S>                                              <C>       <C>         <C>             <C>              <C>           <C>
Balance at March 31, 1996                        $229,031  $1,448,282  $3,248,764             -                 -     $4,926,077
  Net income (and total comprehensive income)           -           -     242,775             -                 -        242,775
  Issuance of 2,408 shares of common stock
   upon exercise of options                         2,408      21,487           -             -                 -         23,895
  Dividends declared ($.17 per share)                   -           -    (117,202)            -                 -       (117,202)
                                                 -------------------------------------------------------------------------------
Balance at March 31, 1997                         231,439   1,469,769   3,374,337             -                 -      5,075,545
  Net income (and total comprehensive income)           -           -     475,616             -                 -        475,616
  Issuance of 5,881 shares of common stock
   upon exercise of options                         5,881      51,272           -             -                 -         57,153
  Dividends declared ($.17 per share)                   -           -    (121,796)            -                 -       (121,796)
  Stock split effected as dividend (note 11)      474,640           -    (474,640)            -                 -              -
  Acquisition of shares for stock award plan
   (note 12)                                            -           -           -             -          (177,925)      (177,925)
  Amortization of unearned compensation                 -           -           -             -            32,142         32,142
                                                 -------------------------------------------------------------------------------

Balance at March 31, 1998                         711,960   1,521,041   3,253,517             -          (145,783)     5,340,735
  Net income                                            -           -     257,786             -                 -        257,786
  Other comprehensive income net of tax:
    Net unrealized loss on investments
     available for sale, net of
     reclassification adjustment (note 15)              -           -           -       (25,500)                -        (25,500)
                                                                                                                      ----------
  Total comprehensive income                                                                                             232,286

  Issuance of 3,497 shares of common
   stock upon exercise of options                   3,497       9,305           -             -                 -         12,802
  Dividends declared ($.20 per share)                   -           -    (139,779)            -                 -       (139,779)
  Acquisition of shares for stock award plan
   (note 12)                                            -           -           -             -          (109,630)      (109,630)
  Amortization of unearned compensation                 -           -           -             -            32,140         32,140
  Net tax effect of stock award plan                    -       5,066           -             -                 -          5,066
                                                 -------------------------------------------------------------------------------

Balance at March 31, 1999                        $715,457  $1,535,412  $3,371,524      $(25,500)        $(223,273)    $5,373,620
                                                 ===============================================================================
</TABLE>


See accompanying notes.


                           MID-COAST BANCORP, INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years Ended March 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                               1999            1998            1997
                                                               ----            ----            ----

<S>                                                         <C>             <C>             <C>
Operating activities:
  Net income                                                $   257,786     $   475,616     $   242,775
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation                                                158,565         114,817          62,268
    Net accretion on investment securities                       (1,131)         (3,085)         (6,250)
    Loss (gain) on sale of investment securities
     available for sale                                           3,012               -          (6,748)
    Amortization of unearned compensation                        32,140          32,142               -
    Loss on disposal of bank premises and equipment                   -          10,252               -
    Provision for loan losses                                    68,000          73,000          87,000
    Net change in deferred loan fees                             (3,523)        (55,854)        (31,288)
    Proceeds from sales of loans                              6,130,644       3,447,347       2,248,585
    Loans originated for sale                                (5,830,700)     (3,680,587)     (1,723,070)
    Gain on sales of loans                                     (183,102)        (54,785)        (31,436)
    Loss on sale of real estate owned                            12,779           8,235               -
    Deferred income taxes                                       (10,928)         (2,000)         (4,000)
    Change in accrued interest receivable                       (78,326)          5,276          10,687
    Change in prepaid expenses and other assets                  10,573        (136,388)        (94,757)
    Change in income taxes receivable                                 -               -          60,220
    Change in accrued expenses and other liabilities            (29,648)         83,887          75,038
                                                            -------------------------------------------
  Net cash flows from operating activities                      536,141         317,873         889,024
Investing activities:
  Net change in time deposits                                   397,000      (1,387,000)        692,101
  Investment securities available for sale:
    Proceeds from sale of investment securities               1,496,988          10,000         508,942
    Proceeds from maturities, calls and principal
     pay downs                                                2,374,694         750,000         552,805
    Purchases                                                (6,985,168)     (1,082,857)     (2,405,881)
    Held to maturity investment securities:
      Proceeds from maturities, calls and principal
       pay downs                                                750,000               -       2,619,219
    Purchases of Federal Home Loan Bank stock                  (112,500)              -               -
    Net change in loans                                      (6,028,076)     (1,400,539)     (6,566,937)
    Proceeds from sale of real estate owned                     270,186         162,099         130,066
    Proceeds from sale of bank premises and equipment                 -               -           1,500
    Purchases of bank premises and equipment                   (402,357)        (35,606)       (257,469)
                                                            -------------------------------------------

    Net cash flows from investing activities                 (8,239,233)     (2,983,903)     (4,725,654)
</TABLE>


                           MID-COAST BANCORP, INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (CONTINUED)

                  Years Ended March 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                               1999            1998            1997
                                                               ----            ----            ----

<S>                                                         <C>             <C>             <C>
Financing activities:
  Net change in certificates of deposit                     $ 4,670,205     $ 2,475,002     $(1,957,322)
  Net change in other deposits                                2,573,252         515,716       2,321,118
  Maturities of advances from Federal Home Loan Bank         (7,475,000)     (8,250,000)     (4,525,000)
  Advances from Federal Home Loan Bank                        8,000,000       9,000,000       8,500,000
  Issuance of stock                                              12,802          57,153          23,895
  Dividends paid                                               (139,779)       (121,796)       (117,202)
  Acquisition of shares for stock award plan                   (109,630)       (177,925)              -
                                                            -------------------------------------------

  Net cash flows from financing activities                    7,531,850       3,498,150       4,245,489
                                                            -------------------------------------------

Net (decrease) increase in cash and cash equivalents           (171,242)        832,120         408,859

Cash and cash equivalents at beginning of year                3,968,030       3,135,910       2,727,051
                                                            -------------------------------------------

Cash and cash equivalents at end of year                    $ 3,796,788     $ 3,968,030     $ 3,135,910
                                                            ===========================================

Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Interest (including $2,607,554, $2,380,566
     and $1,655,818, credited to deposit accounts
     in 1999, 1998 and 1997, respectively)                  $ 2,798,829     $ 2,595,603     $ 2,411,059
    Income taxes                                                288,639         162,084          55,174

Supplemental disclosure of noncash transactions:
  Net transfer of real estate owned and similar
   assets to (from) loans                                      (212,582)       (148,894)          2,248

  Entries required to recognize net unrealized gain
   or loss on investment securities available for sale:
    Unrealized loss on investment securities
     available for sale                                         (38,637)              -               -
    Deferred tax asset                                           13,137               -               -
    Stockholders' equity                                        (25,500)              -               -

  Net tax effect of stock award plan:
    Deferred tax asset                                          (10,928)              -               -
    Additional paid in capital                                   (5,066)              -               -
    Other liabilities                                            15,994               -               -
</TABLE>

See accompanying notes.


                           MID-COAST BANCORP, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        March 31, 1999, 1998 and 1997

1.    Accounting Policies
      -------------------

      Consolidation
      -------------

      The accompanying consolidated financial statements include the
      accounts of Mid-Coast Bancorp, Inc. ("the Company"), its wholly-owned
      subsidiary, The Waldoboro Bank, F.S.B. (the "Bank") and the Bank's
      wholly-owned subsidiary, First Waldoboro Corporation.  First Waldoboro
      Corporation has no significant activity.  All significant intercompany
      balances and transactions have been eliminated.

      Business
      --------

      The Company, through the Bank, provides a full range of banking
      services to individuals and corporate customers located in the mid-
      coast area of Maine.  The Bank is subject to competition from other
      financial institutions.  The Company and the Bank also are subject to
      the regulations of certain federal regulatory agencies and undergo
      periodic examinations by those regulatory authorities.

      Financial Statement Presentation
      --------------------------------

      The accompanying consolidated financial statements have been prepared
      in conformity with generally accepted accounting principles.  In
      preparing the financial statements, management is required to make
      estimates and assumptions that affect the reported amounts of assets
      and liabilities at the balance sheet dates and income and expenses for
      the periods presented.  Actual results could differ significantly from
      these estimates.  The principal areas requiring use of estimates are
      establishment of allowances for losses on loans and real estate owned,
      which are further discussed below.

      Restrictions on Cash Availability
      ---------------------------------

      The Company is required to maintain certain amounts of cash on deposit
      at the Federal Reserve Bank and is restricted from investing these
      amounts.  At March 31, 1999, this required balance was $150,000.

      Investments
      -----------

      The Company's investments in securities are classified and accounted
      for as follows:

          Held to Maturity Investment Securities
          --------------------------------------

          Debt securities for which management has the positive intent and
          ability to hold to maturity are reported at cost, adjusted for
          amortization of premiums and accretion of discounts which are
          recognized in interest income using the interest method over the
          period to maturity.

          Investment Securities Available for Sale
          ----------------------------------------

          Investment securities available for sale consist of investments to
          be held for indefinite periods of time and are carried at market
          value. Net unrealized gains or losses (net of tax effect) are
          reflected as a separate component of accumulated other
          comprehensive income.

      Realized gains and losses on the sale of securities are determined
      using the specific-identification method and are shown separately in
      the consolidated statement of income.  If a decline in market value is
      considered other than temporary, the loss is charged to net securities
      gains (losses).

      It is not management's policy to acquire securities for purposes of
      trading.  For this reason, the Company has not classified any of its
      securities as trading.

      The Bank's required investment in Federal Home Loan Bank stock is
      accounted for at cost.

      Allowance for Loan Losses
      -------------------------

      The allowance for loan losses is established by management to absorb
      future charge-offs of loans deemed uncollectible.  This allowance is
      increased by provisions charged to operating expense and by recoveries
      on loans previously charged off.  Management, after reviewing current
      information and events regarding the borrowers' ability to repay their
      obligations, considers residential mortgage and commercial loans to be
      impaired when it is probable that the Company will be unable to
      collect all amounts due according to the contractual terms of the note
      agreement (generally when loans are ninety days past due); other loans
      (primarily installment loans) are evaluated collectively for
      valuation.  When a loan is considered to be impaired, the amount of
      the impairment is measured based on the fair value of the underlying
      collateral, where applicable, or on the present value of expected
      future cash flows discounted at the note's effective interest rate.
      Impairment losses are included in the allowance for loan losses
      through a charge to provision for loan losses.

      Management believes that the allowance for loan losses is adequate.
      Arriving at an appropriate level of allowance for loan loss involves
      judgment.  The primary considerations are the level of delinquencies,
      the nature of the loan portfolio, prior loan loss experience, the
      local economic conditions, and current real estate market trends.
      While management uses available information to recognize losses on
      loans, future additions to the allowance may be necessary.  In
      addition, various regulatory agencies, as an integral part of their
      examination process, periodically review the Company's allowance for
      loan losses.  Such agencies may require the Company to recognize
      additions to the allowance based on judgments different from those of
      management.

      A substantial portion (89% and 88% at March 31, 1999 and 1998,
      respectively) of the Company's loans are collateralized by real estate
      (primarily residential) in Maine.  Accordingly, the ultimate
      collectibility of a substantial portion of the Company's loan
      portfolio is particularly susceptible to changes in market conditions
      for residential real estate in the Company's market area.

      Loans Held for Sale and Loans Sold
      ----------------------------------

      Loans held for sale are carried at the lower of aggregate cost or fair
      value.

      Gains and losses on sales of loans are determined using the specific
      identification method.  The gains and losses resulting from the sales
      of loans with servicing retained are adjusted to recognize the present
      value of future servicing fee income over the estimated lives of the
      related loans and are capitalized as mortgage servicing rights as
      required by Statement of Financial Accounting Standards No. 125.
      Mortgage servicing rights are included with prepaid expenses and other
      assets in the consolidated balance sheets.

      Mortgage servicing rights are amortized over the estimated weighted
      average life of the serviced loans.  Amortization is recorded as a
      charge against loan servicing fees.  The Company's assumptions with
      respect to prepayments, which affect the estimated average life of the
      loans, are adjusted periodically to reflect current circumstances.  To
      measure possible impairment, the rights are stratified based on yields
      and terms of the underlying loans.  Impairment losses are recognized
      if the amounts of capitalized rights for a stratum exceeds their fair
      value.

      Interest Income on Loans
      ------------------------

      Interest on loans is accrued and credited to income based on the
      principal amount outstanding.  The accrual of interest income is
      discontinued when a loan becomes impaired and in management's opinion
      is deemed uncollectible in whole or in part as to principal or
      interest.  In these cases, interest is recognized only when received.
      Loan origination fees and certain direct loan origination costs are
      deferred and the net amount is amortized as an adjustment to the
      related loan yield, generally over the contractual life of the loan,
      or until the loan is sold or repaid.

      Bank Premises and Equipment
      ---------------------------

      Bank premises and equipment are stated at cost, less accumulated
      provisions for depreciation computed on the straight-line method over
      the estimated lives of the related assets.

      Income Taxes
      ------------

      Deferred income taxes are provided for the effect of items recognized
      in different periods for financial statement and income tax reporting
      purposes using the asset and liability method.

      Real Estate Owned
      -----------------

      Real estate owned (REO), other than bank premises, consists of
      properties acquired through mortgage loan foreclosure proceedings.
      REO is initially recorded at the lower of cost or fair value, less
      estimated selling costs, at the date of foreclosure and any losses
      recognized at that time are charged to the allowance for loan losses.
      Subsequent to this date, additional losses incurred resulting from
      further decreases in the fair value (net of estimated selling costs)
      of the property are recognized by a charge to operations.  Costs
      relating to the development and improvement of property are
      capitalized; holding costs are charged to expense.

      Statement of Cash Flows
      -----------------------

      The Company considers cash and due from banks, interest-bearing
      deposits and federal funds sold as cash and cash equivalents on the
      consolidated statements of cash flows.

      Advertising Costs
      -----------------

      Advertising costs are expensed as incurred (see note 14).

      Stock-based Compensation
      ------------------------

      Compensation expense for the Stock Option Plan and the Recognition and
      Retention Plan is accounted for in accordance with Accounting
      Principles Board Opinion No. 25, Accounting for Stock Issued to
      Employees.  The Stock Option Plan is a noncompensatory plan and no
      expense is recognized.  The Recognition and Retention Plan is a
      compensatory plan and expense is recognized as employee benefits
      expense based on the fair value of the Company's shares awarded to
      participants as the shares vest.  Shares not yet awarded are not
      considered outstanding for purposes of computing earnings per share.

      Comprehensive Income
      --------------------

      In 1999, the Company adopted the provisions of Statement of Financial
      Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income.
      Accumulated other comprehensive income consists solely of net
      unrealized gains or losses on investment securities available for
      sale.

      Earnings Per Share
      ------------------

      Earnings per share (EPS) are computed by dividing net income by the
      weighted average number of shares outstanding.  The following table
      shows the weighted average number of shares outstanding for each of
      the last three years.  1998 and 1997 amounts have been restated to
      reflect the three-for-one stock split effective on March 31, 1998.
      Shares issuable relative to stock options granted have been reflected
      as an increase in the shares outstanding used to calculate diluted
      EPS, after applying the treasury stock method.  The number of shares
      outstanding for basic and diluted EPS are presented as follows:

<TABLE>
<CAPTION>
                                                         1999        1998        1997
                                                         ----        ----        ----

<S>                                                     <C>         <C>         <C>
      Average shares outstanding                        714,074     704,042     689,925

      Less average unawarded shares in Recognition
       and Retention Plan                                (9,359)     (1,350)          -
                                                        -------------------------------

      Average shares outstanding, used in computing
       basic EPS                                        704,715     702,692     689,925

      Additional shares due to stock options              6,032       8,282      15,102
                                                        -------------------------------

      Average equivalent shares outstanding, used
       in computing diluted EPS                         710,747     710,974     705,027
                                                        ===============================
</TABLE>


      There is no difference between net income and net income available to
      common stockholders.

      New Accounting Pronouncements Not Yet Implemented
      -------------------------------------------------

      SFAS No. 133, Accounting for Derivative Instruments and Hedging
      Activities, is not expected to have a significant effect on the
      Company's financial position or results of operations based on the
      Company's current activities.  SFAS No. 133 is scheduled to be
      effective in fiscal 2001, although the Financial Accounting Standards
      Board may delay the effective date until fiscal 2002.

      Reclassification
      ----------------

      Certain 1998 and 1997 amounts have been reclassified to conform with
      current year presentation.

2.    Investment Securities
      ---------------------

      Investment Securities Available for Sale
      ----------------------------------------

      The amortized cost and market values of available for sale investment
      securities at March 31, 1999 is presented below:

<TABLE>
<CAPTION>
                                                       Gross          Gross
                                      Amortized      Unrealized     Unrealized       Market
                                         Cost          Gains          Losses         Value
                                      ---------      ----------     ----------       ------

      <S>                             <C>              <C>          <C>            <C>
      U.S. Agency Obligations         $3,099,567       $1,482       $(27,577)      $3,073,472

      Mortgage-backed securities       1,498,574            -        (11,219)       1,487,355

      Mutual fund                        657,177            -         (1,323)         655,854
                                      -------------------------------------------------------

                                      $5,255,318       $1,482       $(40,119)      $5,216,681
                                      =======================================================
</TABLE>

      The amortized cost and market values of available for sale investment
      securities at March 31, 1998 is presented below:

<TABLE>
<CAPTION>
                                                       Gross          Gross
                                      Amortized      Unrealized     Unrealized       Market
                                         Cost          Gains          Losses         Value
                                      ---------      ----------     ----------       ------

      <S>                             <C>              <C>          <C>            <C>
      Debt securities:
        U.S. Treasury Obligations     $  499,329       $1,138       $      -       $  500,467
        U.S. Agency Obligations        1,048,980          700              -        1,049,680
                                      -------------------------------------------------------

                                       1,548,309        1,838              -        1,550,147

      Mutual fund                        595,732            -         (1,838)         593,894
                                      -------------------------------------------------------

                                      $2,144,041       $1,838       $ (1,838)      $2,144,041
                                      =======================================================
</TABLE>


      The March 31, 1999 amortized cost and estimated market value of debt
      securities by contractual maturity (without giving effect to earlier
      call dates in certain instances) are as follows:

<TABLE>
<CAPTION>
                                                  Amortized        Market
                                                     Cost          Value
                                                  ---------        ------

        <S>                                       <C>            <C>
        Due in one year or less                   $        -     $        -
        Due after one year through five years      3,099,567      3,073,472
        Mortgage-backed securities                 1,498,574      1,487,355
                                                  -------------------------
                                                  $4,598,141     $4,560,827
                                                  =========================
</TABLE>


      For purposes of the maturity table, mortgage-backed securities have
      not been allocated.

      Gross gains and losses on sales of investment securities available for
      sale for 1999, 1998 and 1997 are summarized below:

<TABLE>
<CAPTION>
                              1999         1998       1997
                              ----         ----       ----

        <S>                  <C>          <C>        <C>
        Gross gains          $     -      $    -     $6,748
        Gross losses           3,012           -          -
                             ------------------------------

        Net gain or loss     $(3,012)     $    -     $6,748
                             ==============================
</TABLE>


      At March 31, 1999 and 1998, investment securities with carrying values
      of $186,405 and $299,672, respectively, were pledged to secure
      deposits.

      Held to Maturity Investment Securities
      --------------------------------------

      The amortized cost and market values of held to maturity investment
      securities at March 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                         March 31, 1999
                                      ----------------------------------------------------
                                                      Gross          Gross
                                      Amortized     Unrealized     Unrealized      Market
                                        Cost          Gains          Losses        Value
                                      ---------     ----------     ----------      ------

      <S>                             <C>              <C>          <C>           <C>
      U.S. Agency Obligations         $200,000         $  -         $13,585       $186,415
                                      ====================================================

<CAPTION>
                                                         March 31, 1998
                                      ----------------------------------------------------
                                                      Gross          Gross
                                      Amortized     Unrealized     Unrealized      Market
                                        Cost          Gains          Losses        Value
                                      ---------     ----------     ----------      ------

      <S>                             <C>              <C>          <C>           <C>
      Debt Securities:
        U.S. Treasury Obligations     $299,672         $  -         $ 1,055       $298,617
        U.S. Agency Obligations        650,000            -          26,266        623,734
                                      ----------------------------------------------------
                                      $949,672         $  -         $27,321       $922,351
                                      ====================================================
</TABLE>


      The U.S. Agency Obligation at March 31, 1999 is an inverse floater
      structured note maturing in 2003, with an amortized cost of $200,000
      and market value of $186,415.

3.    Loans
      -----

      Loans at March 31, 1999 and 1998 consisted of the following:

<TABLE>
<CAPTION>
                                                      1999            1998
                                                      ----            ----

        <S>                                        <C>             <C>
        Real estate mortgage - residential         $35,973,168     $33,971,535
        Real estate mortgage - commercial            9,699,298       7,464,541
        Construction, net of undisbursed funds       2,824,413       2,189,613
        Other commercial                             2,618,523       2,071,625
        Home equity                                  1,467,125       1,092,794
        Passbook loans                                 317,548         261,888
        Installment and other                        3,529,447       3,572,543
                                                   ---------------------------
                                                   $56,429,522     $50,624,539
                                                   ===========================
</TABLE>


      Loans serviced for others at March 31, 1999, 1998 and 1997 totaled
      $11,687,993, $7,546,489 and $7,269,828, respectively.  Mortgage
      servicing rights (included in prepaid expenses and other assets) at
      March 31, 1999 (net of amortization) totaled $61,729; mortgage
      servicing rights at March 31, 1998 and 1997 were immaterial.

      Loans contractually past due and nonaccruing as to interest income
      totaled $73,551 and $225,056 at March 31, 1999 and 1998, respectively.
      Unrecognized accrued interest on such loans totaled $7,253 and $17,089
      at March 31, 1999 and 1998, respectively.

      Information with respect to impaired loans is presented below:

<TABLE>
<CAPTION>
                                                                              March 31,
                                                                        ---------------------
                                                                          1999         1998
                                                                          ----         ----

      <S>                                                               <C>          <C>
      Year-end recorded investment in impaired loans                    $114,181     $266,146
      Approximate average investment in impaired loans for the year      268,000      345,000
</TABLE>


      Approximately $4,000 and $3,000 of interest income was recognized on
      impaired loans during 1999 and 1998.  No interest income was
      recognized on impaired loans during 1997.  There was no valuation
      allowance directly allocated to impaired loans at March 31, 1999 or
      1998.

      Activity in loans to directors and officers (and their affiliates) who
      had outstanding balances greater than $60,000 during the year ended
      March 31, 1999 is shown below.

<TABLE>
<CAPTION>
         Balance                                        Balance
      April 1, 1998     Additions     Reductions     March 31, 1999
      -------------     ---------     ----------     --------------

        <S>              <C>           <C>              <C>
        $575,179         $82,101       $331,697         $325,583
        ========         =======       ========         ========
</TABLE>


4.    Allowance for Loan Losses
      -------------------------

<TABLE>
<CAPTION>
                                             Years Ended March 31,
                                       ----------------------------------
                                         1999         1998         1997
                                         ----         ----         ----

        <S>                            <C>          <C>          <C>
        Balance, beginning of year     $346,896     $295,457     $221,356

          Charge-offs                   (11,657)     (22,429)     (20,810)
          Recoveries                      1,146          868        7,911
          Provisions for losses          68,000       73,000       87,000
                                       ----------------------------------

        Balance, end of year           $404,385     $346,896     $295,457
                                       ==================================
</TABLE>


5.    Bank Premises and Equipment
      ---------------------------

      Bank premises and equipment at March 31, 1999 and 1998 consisted of
      the following:

<TABLE>
<CAPTION>
                                              1999          1998
                                              ----          ----

      <S>                                  <C>           <C>
      Building and improvements            $1,473,405    $1,320,928
      Land and land improvements              200,059       198,060
      Furniture, fixtures and equipment       756,051       508,170
                                           ------------------------
                                            2,429,515     2,027,158
      Less accumulated depreciation           694,896       536,331
                                           ------------------------
      Net bank premises and equipment      $1,734,619    $1,490,827
                                           ========================
</TABLE>

6.    Income Taxes
      ------------

      Income tax expense (benefit) for the years ended March 31, 1999, 1998
      and 1997 consisted of the following:

<TABLE>
<CAPTION>
                                                   1999        1998        1997
                                                   ----        ----        ----

        <S>                                      <C>         <C>         <C>
        Currently payable:
          Federal                                $143,182    $232,072    $140,933
          State                                     9,578       8,807       7,000
                                                 --------------------------------

                                                  152,760     240,879     147,933
        Deferred federal                          (10,928)     (2,000)     (4,000)
                                                 --------------------------------
                                                 $141,832    $238,879    $143,933
                                                 ================================
</TABLE>

      Income taxes were computed as follows:

<TABLE>
<CAPTION>
                                                       Year Ended March 31,
                                                 --------------------------------
                                                   1999        1998        1997
                                                   ----        ----        ----

      <S>                                        <C>         <C>         <C>
      At federal statutory rates                 $135,870    $242,928    $131,481
      State taxes, net of federal tax effect        6,321       5,812       4,620
      Other, net                                     (359)     (9,861)      7,832
                                                 --------------------------------
                                                 $141,832    $238,879    $143,933
                                                 ================================
</TABLE>


      At March 31, 1999 and 1998, the net deferred tax asset consisted of:

<TABLE>
<CAPTION>
                                                                        1999         1998
                                                                        ----         ----

      <S>                                                             <C>          <C>
      Deferred tax assets, primarily related to
       the allowance for loan losses                                  $183,169     $142,000
      Deferred tax liabilities, primarily related to depreciation      (70,032)     (42,000)
                                                                      ---------------------
                                                                      $113,137     $100,000
                                                                      =====================
</TABLE>

      The net deferred tax asset at March 31, 1999 and 1998 is recoverable
      through income taxes paid in the carry-back period.

      Retained earnings at March 31, 1999 included approximately $590,000
      representing bad debt deductions allowed for tax purposes for which no
      provisions for income taxes has been made.  If this portion of
      retained earnings is reduced for any other purpose other than to
      absorb losses, income taxes would be imposed at the then applicable
      rates.

7.    Real Estate Owned
      -----------------

      Activity in the allowance for losses on real estate owned and similar
      assets for the year ended March 31, 1997 is shown below.  There was no
      activity in 1999 or 1998.

<TABLE>
<CAPTION>
                                                            1997
                                                            ----

      <S>                                                 <C>
      Balance, beginning of year                          $ 23,000

        Provision for losses, included in real estate
         owned expense                                           -
        Charge-downs                                       (23,000)
                                                          --------
      Balance, end of year                                $      -
                                                          ========
</TABLE>

8.    Deposits
      --------

      Demand deposits include $303,149 and $459,116 of official and other
      outstanding checks drawn on the Bank at March 31, 1999 and 1998,
      respectively.

      Certificates of deposit over $100,000 totaled $3,819,492 at March 31,
      1999 and $2,451,162 at March 31, 1998.

      Scheduled maturities for certificates of deposit at March 31, 1999 are
      as follows:

<TABLE>
<CAPTION>
           Year Ending
           -----------

          <S>                       <C>
          March 31, 2000            $28,225,483
          March 31, 2001              3,465,243
          March 31, 2002                905,223
          March 31, 2003                109,090
                                    -----------
                                    $32,705,039
                                    ===========
</TABLE>


      Interest expense by type of deposit is shown below.

<TABLE>
<CAPTION>
                                         1999          1998          1997
                                         ----          ----          ----

      <S>                             <C>           <C>           <C>
      NOW accounts                    $   75,973    $   63,365    $   70,486
      Savings                            179,002       160,408       135,482
      Money market deposit accounts      168,879       191,859       188,740
      Certificates of deposit          1,670,643     1,548,817     1,514,948
                                      --------------------------------------
                                      $2,094,497    $1,964,449    $1,909,656
                                      ======================================
</TABLE>


9.    Advances From Federal Home Loan Bank
      ------------------------------------

      Advances from the Federal Home Loan Bank (FHLB) at March 31, 1999 and
      1998 consisted of the following:

<TABLE>
<CAPTION>
                                                  1999                              1998
                                      -----------------------------     -----------------------------
                                        Interest                          Interest
                                          Rates           Balance           Rates           Balance
                                        --------          -------         --------          -------

        <S>                           <C>               <C>             <C>               <C>
        Advances maturing within:
          One year                    4.93% - 4.99%     $ 1,500,000     5.56% - 7.12%     $ 7,475,000
          Two years                   5.05% - 6.15%       2,500,000           -                     -
          Three years                       -                     -     5.56% - 6.15%       2,000,000
          Four years                     4.99%            1,000,000           -                     -
          After five years            2.00% - 5.88%       7,715,000     2.00% - 5.76%       2,715,000
                                                        -----------                       -----------
                                                        $12,715,000                       $12,190,000
                                                        ===========                       ===========
</TABLE>

      The FHLB advances are generally secured by a blanket lien on
      investments and mortgage loans and not by any specific collateral.
      However, the Company is required to maintain an amount of qualified
      collateral at least sufficient to satisfy the regulatory collateral
      maintenance level.  At March 31, 1999, the Bank's limitation on
      advances from the FHLB approximated $34,000,000.

      Additionally, the Bank has available a line of credit for short-term
      borrowings under the FHLB "Ideal Way" program totaling approximately
      $1,157,000.  There were no borrowings under this line at March 31,
      1999 or 1998.

10.   Commitments and Contingencies
      -----------------------------

      Unfunded loan commitments expose the Company to credit risk in excess
      of amounts recognized in the accompanying consolidated balance sheets.
      Total credit exposure related to these items is summarized below.

<TABLE>
<CAPTION>
                                                               March 31,
                                                       -------------------------
                                                          1999           1998
                                                          ----           ----

      <S>                                              <C>            <C>
      Commitments for new loans                        $1,950,000     $2,411,500
      Unused home equity and other lines of credit      3,914,714      2,551,374
                                                       -------------------------

                                                       $5,864,714     $4,962,874
                                                       =========================
</TABLE>


      Loan commitments include unfunded portions of real estate construction
      and other loans, and unused lines of credit.  Loan commitments are
      subject to the same credit policies as loans and generally have
      expiration dates and termination clauses.  The Company obtains
      collateral to secure loans based upon management's credit assessment
      of the counterparty.  Collateral is usually in the form of real
      estate.

      The Bank and the Company have entered into an employment contract with
      the President of the Bank and the Company that provides for
      employment, compensation and benefits; it also provides for severance
      upon change in control of the Company.

      At March 31, 1999 and 1998, the Bank is contingently liable for
      reimbursement of a governmental grant to a not-for-profit agency
      should that agency fail to comply with the provisions of that grant.
      The amount of the grant is $118,000 and the Bank has obtained a
      mortgage on the property owned by the agency to secure its contingent
      liability.

      Leases
      ------

      The Company leases two branch facilities under noncancellable
      operating leases.  These leases contain renewal clauses.  Rent expense
      was $49,969 and $3,230 for 1999 and 1998.  The following is a schedule
      by years of future minimum rental payments required under operating
      leases that have initial or remaining noncancellable lease terms in
      excess of one year at March 31, 1999:

<TABLE>

          <S>                      <C>
          2000                     $ 47,178
          2001                       45,000
          2002                       45,550
          2003                       51,600
          2004                       51,600
          Thereafter                154,800
                                   --------
                                   $395,728
                                   ========
</TABLE>


11.   Capital and Other Regulatory Limitations
      ----------------------------------------

      The Bank is subject to various regulatory capital requirements
      administered by the federal banking agencies.  The Bank's failure to
      meet minimum capital requirements can initiate certain mandatory and
      possibly additional discretionary actions by regulators that, if
      undertaken, could have a direct material effect on the Company's
      financial statements.  Under capital adequacy guidelines and the
      regulatory framework for prompt corrective action, the Bank must meet
      specific capital guidelines that involve quantitative measures of the
      Bank's assets, liabilities and certain off-balance sheet items as
      calculated under regulatory accounting practices.  The Bank's capital
      amounts and classification are also subject to qualitative judgments
      by the regulators about components, risk weightings and other factors.

      As of March 31, 1999 and 1998, the most recent notification from the
      Office of Thrift Supervision (OTS) categorized the Bank as "well
      capitalized" under the regulatory framework for prompt corrective
      action.  To be categorized as "well capitalized" the Bank must
      maintain minimum total risk-based, Tier 1 risk-based and Tier 1
      capital as set forth in the table below.  There are no conditions or
      events since that notification that management believes have changed
      the institution's category.

      Quantitative measures established by regulation to ensure capital
      adequacy require the Bank to maintain minimum amounts and ratios
      established the Federal Deposit Insurance Corporation as set forth in
      the table below.  The Bank is also subject to certain capital
      requirements established by the OTS.  At March 31, 1999 and 1998, the
      Bank ratios exceeded the OTS regulatory requirements.  Management
      believes that the Bank meets all capital adequacy requirements to
      which it is subject as of March 31, 1999 and 1998.

      The Bank's actual capital amounts and ratios are also presented in the
      table.  Since the Company is a one-bank holding company, its ratios
      are not significantly different from the Bank's.

<TABLE>
<CAPTION>
                                                                                        To Be "Well
                                                                                     Capitalized" Under
                                                              For Capital            Prompt Corrective
                                         Actual            Adequacy Purposes         Action Provisions
                                    ----------------     ---------------------     ----------------------
                                    Amount     Ratio      Amount        Ratio       Amount        Ratio
                                    ------     -----      ------        -----       ------        -----

      (Dollars in thousands)

      <S>                           <C>        <C>       <C>           <C>         <C>           <C>
      As of March 31, 1999:
        Total capital (to risk
         weighted assets)           $5,674     13.5%     >/=$3,361     >/=8.0%     >/=$4,202     >/=10.0%
        Tier 1 Capital (to risk
         weighted assets)            5,270     12.5%     >/= 1,681     >/=4.0%     >/= 2,521     >/= 6.0%
        Tier 1 Capital (to
         total assets)               5,270      7.4%     >/= 2,838     >/=4.0%     >/= 3,547     >/= 5.0%

      As of March 31, 1998:
        Total capital (to risk
         weighted assets)           $5,474     14.8%     >/=$2,953     >/=8.0%     >/=$3,691     >/=10.0%
        Tier 1 Capital (to risk
         weighted assets)            5,127     13.9%     >/= 1,476     >/=4.0%     >/= 2,214     >/= 6.0%
        Tier 1 Capital (to
         total assets)               5,127      8.1%     >/= 2,517     >/=4.0%     >/= 3,147     >/= 5.0%
</TABLE>


      In connection with the conversion of the Bank from a mutual to a stock
      institution in 1989, the Company was required by OTS regulations to
      establish a liquidation account in the amount of the Bank's retained
      earnings at the date of conversion, which totaled approximately
      $1,918,000.  In the event of liquidation of the Company (and only in
      such event), an eligible account holder, as defined, would be entitled
      to receive a proportionate share of this account.  The total amount of
      this liquidation account is decreased as the balances of eligible
      account holders are reduced.  Such account will never be increased
      despite any increase in balances of eligible account holders.  The
      Company has not computed the amount of decrease in the liquidation
      account since the conversion date.

      In addition to the dividend restriction caused by the liquidation
      account discussed above, the Bank may not, without prior approval of
      OTS, declare or pay a dividend on or repurchase any of its common
      stock in excess of OTS-stipulated amounts (generally current year net
      income plus 50% of the Bank's excess of capital over required amounts
      as of the beginning of the year).  At March 31, 1999, unrestricted
      retained earnings of the Bank under such OTS limitations approximated
      $1,410,000.

      The following table reconciles core capital per the Waldoboro Bank's
      reports to OTS at March 31, 1999 to the total of stockholders' equity
      shown on the accompanying consolidated financial statements.

<TABLE>
<CAPTION>
                                                                       In Thousands
                                                                       ------------

        <S>                                                               <C>
        Capital per the OTS Report                                        $5,284
        Impact of Mid-Coast Bancorp                                           90
                                                                          ------
        Stockholders' equity per consolidated financial statements        $5,374
                                                                          ======
</TABLE>


      The Company's Board of Directors declared a three-for-one stock split
      on March 31, 1998 to stockholders of record on March 2, 1998; per
      share data for all prior periods has been restated to reflect this
      stock split.

12.   Stock Compensation Plans
      ------------------------

      Recognition and Retention Plan
      ------------------------------

      In 1998, the Company adopted its Recognition and Retention Plan which
      authorizes the Company to make discretionary awards of up to 27,621
      shares of common stock to directors and management at no cost to the
      recipients.  The shares awarded will vest over a five-year period.
      Until vested, the shares are held in trust by a trustee.  The
      recipients have voting and dividend rights based on shares awarded,
      regardless of the amount vested.

      At March 31, 1999, 27,621 shares have been acquired at a cost of
      $287,555 for the Plan and are held by the trustee.  Dividends paid
      during 1999 on shares held in trust were not material.  Of the total
      shares held at March 31, 1999, 16,800 shares were awarded and 10,821
      shares were unawarded.  The expense associated with the Plan was
      $32,140 for 1999 and $32,142 for 1998; this expense is not materially
      different from the expense that would be computed under Statement of
      Financial Accounting Standards No. 123, Accounting for Stock-Based
      Compensation.

      At March 31, 1998, 18,600 shares had been acquired at a cost of
      $177,925; 16,800 shares were awarded and 1,800 shares were unawarded.

      Stock Option Plan
      -----------------

      The Company has a stock option plan under which an amount equal to 10%
      of the common stock of the Company is reserved for future issuance
      upon exercise of stock options granted to certain members of the Board
      of Directors, senior management and employees.  A summary of options
      granted (all of which were granted at market price on the date of
      grant), exercised during 1999, 1998 and 1997 appears below.  The
      number of shares has been retroactively restated for the stock split
      in 1998.

<TABLE>
<CAPTION>
                                                       Per Share Option Price
                                  (Adjusted for 1994 and 1996 Stock Dividends and 1998 Stock Split)
                                  -----------------------------------------------------------------      Total
      Exercise Price:               $ 2.47     $ 3.16     $ 3.31     $ 3.74     $ 4.07     $ 4.68       Options
                                    ------     ------     ------     ------     ------     ------       -------

      <S>                           <S>        <C>        <C>        <C>           <C>     <C>          <C>
      Outstanding option
       shares, March 31,
       1996 (all exercisable)       10,578      5,094      1,944     13,668        -        5,829        37,113

      Exercised - 1997              (1,305)    (1,194)    (1,944)    (2,631)       -         (150)       (7,224)
                                    ---------------------------------------------------------------------------

      Outstanding option
       shares, March 31,
       1997 (all exercisable)        9,273      3,900          -     11,037        -        5,679        29,889

      Exercised - 1998              (7,323)    (3,396)         -     (4,374)       -       (2,550)      (17,643)
                                    ---------------------------------------------------------------------------

      Outstanding option
       shares, March 31,
       1998 (all exercisable)        1,950        504          -      6,663        -        3,129        12,246

      Exercised - 1999               1,224          -          -        923        -        1,350         3,497
                                    ---------------------------------------------------------------------------

      Outstanding option
       shares, March 31,
       1999                            726        504          -      5,740        -        1,779         8,749
                                    ===========================================================================

      Options expire in
       fiscal year                    2000       2002                  2003                  2005
</TABLE>


13.   Retirement Plans
      ----------------

      Pension Plan
      ------------

      The Company participates in an industry-sponsored defined benefit
      pension plan.  This noncontributory plan includes all employees who
      meet age and years of service requirements.  The net pension expense
      was $975 for the year ended March 31, 1999.  Pension expense/(benefit)
      totaled $(1,802) and $34,968 for the years ended March 31, 1998 and
      1997, respectively.

      The plan's assets are invested in fixed income securities and common
      stocks.  Information relative to the Company's portion of accumulated
      plan benefits and assets available for benefits is not available.
      However, the latest annual report for the entire plan indicates that,
      as of June 30, 1998, net assets available for benefits (approximately
      $1,878 million) exceeded the actuarial present value of accumulated
      plan benefits by approximately $680 million.  The actuarial present
      value of accumulated plan benefits for June 30, 1998 and 1997 is based
      upon a discount rate of 8%.

      401(k) Plan
      -----------

      The Company offers a 401(k) plan to its employees and contributes a
      matching amount to participants; this matching amount is a portion of
      the employees' contribution.  The Company's contributions in 1999,
      1998 and 1997 were $15,975, $16,433 and $11,106, respectively.

14.   Insurance and Other Expenses
      ----------------------------

      Insurance expense in 1997 included $241,299 related to the
      recapitalization of the Savings Association Insurance Fund.

      Included in other expenses for the years ended March 31, 1999, 1998
      and 1997 are:

<TABLE>
<CAPTION>
                                 1999        1998        1997
                                 ----        ----        ----

      <S>                      <C>         <C>         <C>
      Advertising              $ 93,546    $ 33,131    $ 25,678
      Telephone                  75,896      46,577      51,164
      Data processing           164,734     136,640     200,351
      Stockholder expenses       67,030      81,842      58,456
      Audit and examination      61,681      55,327      41,225
      Legal expense              15,043      37,414      17,912
      Other                     360,401     282,091     214,717
                               --------------------------------
                               $838,331    $673,022    $609,503
                               ================================
</TABLE>


15.   Other Comprehensive Income
      --------------------------

      Beginning in 1999, Statement of Financial Accounting Standards
      No. 130, Reporting Comprehensive Income, requires display on financial
      statements of amounts of total comprehensive income and accumulated
      other comprehensive income.  There was no net accumulated other
      comprehensive income in 1998 or 1997.  The components of other
      comprehensive income for 1999 are as follows:

<TABLE>

        <S>                                              <C>
        Unrealized losses arising during the year,
         net of tax effect $14,158                       $(28,356)
        Less:  reclassification adjustment for losses
         included in net income, net of tax effect
         of $1,471                                          2,856
                                                         --------
        Other comprehensive income                       $(25,500)
                                                         ========
</TABLE>


16.   Fair Value of Financial Instruments
      -----------------------------------

      As required by Statement of Financial Accounting Standards No. 107,
      fair value estimates, methods and assumptions are set forth below for
      the Company's estimated fair values of its financial instruments.
      Fair values have been calculated based on the value of one unit
      without regard to any premium or discount that may result from
      concentrations of ownership of a financial instrument, possible tax
      ramifications, or estimated transaction costs. If these considerations
      had been incorporated into the fair value estimates, the aggregate
      fair value amount could have changed.

      Management has made estimates of fair value discount rates that it
      believes to be reasonable.  However, because there is no market for
      many of these financial instruments, management has no basis to
      determine whether the fair value presented below would be indicative
      of the value negotiated in the actual sale.

      Cash, Due from Banks and Federal Funds Sold
      -------------------------------------------

      The fair value of cash, due from banks and federal funds sold
      approximates their relative book values at March 31, 1999 and 1998, as
      these financial instruments have short maturities.

      Time Deposits
      -------------

      The fair value of time deposits is based on the discounted cash flows
      of the deposits using estimated market discount rates that reflect the
      interest rate risk inherent in the time deposit.

      Investment Securities
      ---------------------

      The fair value of investment securities is estimated based on bid
      prices published in financial newspapers or bid quotations received
      from securities dealers at or near March 31, 1999 and 1998, except for
      the Bank's required investment in FHLB stock which is valued at its
      cost since there is no market.

      Loans
      -----

      Fair values are estimated for portfolios of loans with similar
      financial characteristics.  The fair values of performing loans are
      calculated by discounting scheduled cash flows through the estimated
      maturity using estimated market discount rates that reflect the credit
      and interest rate risk inherent in the loan.  The estimates of
      maturity are based on the Company's historical experience with
      repayments for each loan classification, modified, as required, by an
      estimate of the effect of current economic, lending conditions and the
      effects of estimated prepayments.

      Fair values of any significant nonperforming loans are based on
      estimated cash flows discounted using a rate commensurate with the
      risk associated with the estimated cash flows.  Assumptions regarding
      credit risk, cash flows and discount rates are judgmentally determined
      using available market information and historical information.

      Accrued Interest Receivable
      ---------------------------

      The fair market value of this financial instrument approximates the
      book value as this financial instrument has a short maturity.

      Deposit Liabilities
      -------------------

      The fair value of deposits with no stated maturity, such as non-
      interest-bearing demand deposits, savings and NOW accounts, and money
      market and checking accounts, is equal to the amount payable on demand
      as of March 31, 1999 and 1998.  The fair values of certificates of
      deposit are based on the discounted value of contractual cash flows.
      The discount rate is estimated using the rates currently offered for
      deposits of similar remaining maturities.

      The fair value estimates do not include the benefit that results from
      the low-cost funding provided by the deposit liabilities compared to
      the cost of borrowing funds in the market.  If that value was
      considered at March 31, 1999 and 1998, the fair value of the Company's
      net assets would increase.

      Advances from the Federal Home Loan Bank
      ----------------------------------------

      The fair value of advances from the Federal Home Loan Bank is based
      upon the discounted value of contractual cash flows, with a discount
      rate based upon rates currently offered for similar remaining
      maturities.

      Commitments to Extend Credit
      ----------------------------

      The fair value of commitments to extend credit cannot be reasonably
      estimated without incurring excessive costs as the Company does not
      charge fees for such commitments and there is no ready market for this
      financial instrument.

      Limitations
      -----------

      Fair value estimates are made at a specific point in time, based on
      relevant market information and information about the financial
      instrument.  These values do not reflect any premium or discount that
      could result from offering for sale at one time the Company's entire
      holdings of a particular financial instrument.  Because no market
      exists for a significant portion of the Company's financial
      instruments, fair value estimates are based on judgments regarding
      future expected loss experience, current economic conditions, risk
      characteristics of various financial instruments and other factors.
      These estimates are subjective in nature and involve uncertainties and
      matters of significant judgment and therefore cannot be determined
      with precision.  Changes in assumptions could significantly affect the
      estimates.

      Fair value estimates are based on existing on and off balance sheet
      financial instruments without attempting to estimate the value of
      anticipated future business and the value of assets and liabilities
      that are not considered financial instruments.  Other significant
      assets and liabilities that are not considered financial instruments
      include the deferred tax assets, bank premises and equipment and other
      real estate owned.  In addition, the tax ramifications related to the
      realization of the unrealized gains and losses can have a significant
      effect on fair value estimates and have not been considered in any of
      the estimates.

      The carrying and estimated fair values of financial instruments at
      March 31, 1999 and 1998 are summarized below, in thousands of dollars:

<TABLE>
<CAPTION>
                                                  1999                     1998
                                          --------------------     --------------------
                                          Carrying      Fair       Carrying      Fair
                                           Value        Value       Value        Value
                                          --------      -----      --------      -----

      <S>                                 <C>          <C>         <C>          <C>
      Assets:
        Cash and cash equivalents         $ 3,797      $ 3,797     $ 3,968      $ 3,968
        Time deposits                       2,079        2,089       2,476        2,484
        Investments                         6,151        6,138       3,716        3,688
        Loans and loans held for sale      56,144       56,846      50,567       51,338
        Accrued interest receivable           377          377         299          299

      Liabilities:
        Deposit liabilities                52,415       52,561      45,171       45,294
        Borrowed funds                     12,715       12,719      12,190       12,131
</TABLE>


17.   Mid-Coast Bancorp, Inc.
      -----------------------

      Condensed financial statements for Mid-Coast Bancorp, Inc. at
      March 31, 1999 and 1998 and for the years ended March 31, 1999, 1998
      and 1997 are presented below.

                               Balance Sheets
                               --------------

<TABLE>
<CAPTION>
                                                            1999           1998
                                                            ----           ----

      <S>                                                <C>            <C>
      Assets:
        Cash and due from the Bank                       $  104,106     $  202,673
        Investment in the Bank                            5,242,591      5,127,134
        Other assets                                         26,923         10,928
                                                         -------------------------

          Total assets                                   $5,373,620     $5,340,735
                                                         =========================

      Liabilities and stockholders' equity:
        Liabilities                                      $        -     $        -
        Stockholders' equity                              5,373,620      5,340,735
                                                         -------------------------
          Total liabilities and stockholders' equity     $5,373,620     $5,340,735
                                                         =========================

<CAPTION>
                            Statements of Income
                            --------------------

                                                                  1999          1998          1997
                                                                  ----          ----          ----

      <S>                                                       <C>           <C>           <C>
      Investment income                                         $       -     $   2,290     $       -
      Operating expenses                                           44,100        39,108         9,900
                                                                -------------------------------------

      Loss before income taxes and equity in
       earnings of subsidiary                                     (44,100)      (36,818)       (9,900)

      Income tax benefit                                           10,928        10,928             -
                                                                -------------------------------------

      Loss before equity in earnings of the Bank                  (33,172)      (25,890)       (9,900)

      Equity in earnings of the Bank:
        Remitted                                                  150,000       400,000       150,000
        Unremitted                                                140,958       101,506       102,675
                                                                -------------------------------------

                                                                  290,958       501,506       252,675
                                                                -------------------------------------

      Net income                                                $ 257,786     $ 475,616     $ 242,775
                                                                =====================================

<CAPTION>
                          Statements of Cash Flows
                          ------------------------

                                                                  1999          1998          1997
                                                                  ----          ----          ----

      <S>                                                       <C>           <C>           <C>
      Cash flows from operating activities:
        Net income                                              $ 257,786     $ 475,616     $ 242,775
        Adjustments to reconcile net income to net
         cash used by operating activities:
          Equity in unremitted earnings of the Bank              (140,958)     (101,506)     (102,675)
          Income tax benefit                                      (10,928)      (10,928)            -
          Amortization of unearned compensation                    32,140        32,142             -
                                                                -------------------------------------

        Net cash provided by operating activities                 138,040       395,324       140,100
      Cash flows from financing activities:
        Issuance of common stock                                   12,802        57,153        23,895
        Increase in due to the Bank                                     -        (1,651)        1,651
        Dividends paid                                           (139,779)     (121,796)     (117,202)
        Acquisition of shares for stock award plan               (109,630)     (177,925)            -
                                                                -------------------------------------

        Net cash used by financing activities                    (236,607)     (244,219)      (91,656)
                                                                -------------------------------------

      Net increase (decrease) in cash and due from the Bank       (98,567)      151,105        48,444

      Cash and due from the Bank at beginning of year             202,673        51,568         3,124
                                                                -------------------------------------

      Cash and due from the Bank at end of year                 $ 104,106     $ 202,673     $  51,568
                                                                =====================================
</TABLE>


Stockholders' Information

Directors                              Transfer Agent and Registrar
                                       Inquiries regarding stockholder
                                       administration and services should
Waite W. Weston                        be directed to:
Chairman of the Board
Owner, Weston's Hardware               American Stock Transfer and Trust
                                       Company
Robert W. Spear                        40 Wall Street
Vice Chairman of the Board             New York, New York 10005
Owner, Spear Farm, Inc.                (800) 937-5449

Wesley E. Richardson                   Independent Auditors
President, Chief Executive Officer     Baker Newman & Noyes,
and Treasurer of the Bank              Limited Liability Company
                                       100 Middle Street
Samuel Cohen                           Portland, Maine 04101
Attorney at Law                        (207) 879-2100

Ronald E. Dolloff                      Legal Counsel
Retired Principal                      Thacher Proffitt & Wood
                                       1700 Pennsylvania Avenue NW
Sharon E. Crowe                        Washington, D.C. 20006
Public Relations, Sebasticook County   (202) 347-8400
Hospital
                                       Stock Information
Lincoln O. Orff                        The Bank's Common Stock trades on
Real Estate Broker                     the Nasdaq SmallCap System under the
                                       symbol "MCBN."
Executive Officers
                                       Investor Relations
Wesley E. Richardson                   Inquiries regarding Mid-Coast
President, Chief Executive Officer     Bancorp Inc. should be directed to:
and Treasurer
                                           Robert E. Carter, Jr.
Robert E. Carter, Jr.                      Mid-Coast Bancorp, Inc.
Vice President                             c/o The Waldoboro Bank, F.S.B.
                                           1768 Atlantic Highway
                                           P.O. Box 589
                                           Waldoboro, Maine 04572

Annual Meeting of Stockholders
The Bank's Annual Meeting of Stockholders will be held at 3:00 p.m. Eastern
Standard time on Wednesday, July 28, 1999, at the Samoset Resort, Rockport,
Maine.  Holders of common stock as of the close of business on June 1, 1999
will be eligible to vote.