U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549

                                  FORM 10-KSB

                 Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the Twelve Months Ended: March 31, 1997

                          Commission File No.: 0-18096


                            MID-COAST BANCORP, INC.
       (Exact name of small business issuer as specified in its charter)


               Delaware                               01-0454232
        State of Incorporation                     IRS Employer No.


                             1768 Atlantic Highway
                                 P. O. Box 589
                             Waldoboro, Maine 04572
                    (Address of Principal Executive Offices)


Registrant's telephone number, including area code:  (207) 832-7521

Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock ($1.00 par value)
                         ------------------------------
                                (Title of Class)

      Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

      Indicate by check mark if there is no disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B contained herein, and no disclosure will
be contained, to the best of issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

      The Net Income for the issuer's fiscal year ended March 31, 1997 are
$242,775.

      The number of shares outstanding as of March 31, 1997 is 231,439.

      Aggregate market value of common stock held by non-affiliates, based on
the last reported sale price on May 16, 1997: $3,414,820.



                      DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the definitive proxy statement pursuant to Regulation 14A,
which was delivered to the Commission for filing on June 6, 1997, and the
Annual Report for the fiscal year ended March 31, 1997, which was delivered to
the Commission on June 27, 1997, are incorporated by reference into Part II and
III of this report.



                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>          <C>                                                             <C>
PART I

   Item 1.   Description of Business......................................    1
   Item 2.   Description of Property......................................   25
   Item 3.   Legal Proceedings............................................   26
   Item 4.   Submission of Matters to a Vote of Security Holders..........   26

PART II

   Item 5.   Market for Common Equity and Related Stockholder
              Matters.....................................................   27
   Item 6.   Management's Discussion and Analysis.........................   28
   Item 7.   Financial Statements.........................................   28
   Item 8.   Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure.........................   28

PART III

   Item 9.   Directors, Executive Officers, Promoters and Control Persons;
              Compliance with Section 16(a) of the Exchange Act...........   28
   Item 10.  Executive Compensation.......................................   28
   Item 11.  Security Ownership of Certain Beneficial Owners and
              Management..................................................   28
   Item 12.  Certain Relationships and Related Transactions...............   28
   Item 13.  Exhibits.....................................................   29


SIGNATURES................................................................   31
</TABLE>


PART I

Item 1.  Description of Business

                      Business of Mid-Coast Bancorp, Inc.

      Mid-Coast Bancorp, Inc. ("Bancorp" or the "Holding Company") was
organized in 1989 for the purpose of becoming a holding company and owning all
of the outstanding capital stock of The Waldoboro Bank, F.S.B. ("Waldoboro" or
the "Bank"). The Holding Company is engaged primarily in the business of
directing, planning and coordinating the business activities of the Bank. In
the future, Bancorp may acquire or organize other operating subsidiaries,
including other financial institutions, although it presently has no definitive
plans for any specific acquisitions or new subsidiaries. Bancorp does not
currently own any real estate. Instead, Bancorp uses the premises, equipment
and furniture of the Bank without the payment of any rental fees. At the
present time, Bancorp does not employ any persons other than its officers, but
utilizes the support staff of the Bank from time to time without the payment of
any fees. Additional employees may be hired as appropriate to the extent
Bancorp expands its business.

                     Business of The Waldoboro Bank, F.S.B.

General

      The Bank was formed as a Maine building and loan association, the
Waldoboro Building and Loan Association, on March 18, 1891 and received a
federal charter on August 9, 1983. The Bank's operations are headquartered in
Waldoboro, Maine. The deposits of the Bank are insured by the Savings
Association Insurance Fund (the "SAIF"), which is administered by the Federal
Deposit Insurance Corporation ("FDIC"). The Bank has a strong community
orientation, with most of its customers located in Waldoboro, Rockland and
surrounding communities in Knox and Lincoln counties, Maine. As of March 31,
1997, the Bank had total assets of $58,925,368, total deposits of $42,180,698,
total borrowings of $11,440,000 and stockholders' equity of $5,075,545. The
Bank has never been involved in any mergers or acquisitions. In 1995 the Bank
opened a new, full-service branch facility in Rockland, Maine, and currently
has two full-service offices.

      The Bank's executive offices are located at 1768 Atlantic Highway,
Waldoboro, Maine and its telephone number is (207) 832-7521.

      The principal business of the Bank is to attract deposits from the
general public and to make loans secured by residential and commercial real
estate, enabling borrowers to purchase, refinance, construct or improve
property. In addition, the Bank makes various types of secured and unsecured
consumer and passbook loans, such as home equity, commercial and automobile
loans, and holds investment securities. See "Lending Activities" and
"Investments."

Market Area

      The Bank's market area is Knox and Lincoln counties, Maine, and includes
the towns of Waldoboro, Damariscotta, Friendship, Warren, Nobleboro, Thomaston
and Rockland, as well as other communities in Maine's mid-coast region. The
Bank's market area is located on the coast of Maine, approximately 60 miles
northeast of Portland and 78 miles southwest of Bangor.

      The economic base of the Bank's market area is diverse, with
manufacturing, services and commercial fishing as the most significant
categories of business activity. The mid-coast region of Maine has also long
been popular as a summer resort area, thus leading to a substantial amount of
seasonal business activity.

Lending Activities

      The Bank's loan portfolio totaled $49,394,455 at March 31, 1997,
representing approximately 83.8% of its total assets. At that date,
approximately 71.5% of the Bank's loan portfolio consisted of permanent
mortgage loans secured by residential properties. In addition, approximately
12.8% of the Bank's loan portfolio consisted of permanent mortgage loans
secured by commercial real estate, while secured and unsecured consumer and
passbook loans represented 13.1% of the Bank's loan portfolio. Finally,
construction loans represented 2.6% of the Bank's loan portfolio. Substantially
all of the residential and commercial properties securing the Bank's loans are
located within its market area as discussed above.

      The following tables set forth detailed information concerning the
composition of the Bank's loan portfolio by type of loan at the dates
indicated.

<TABLE>
<CAPTION>
                                                                  At March 31,
                                                  ----------------------------------------------
                                                          1997                     1996
                                                  ---------------------    ---------------------
                                                    Amount         %         Amount         %
                                                  -----------    ------    -----------    ------
<S>                                               <C>            <C>       <C>            <C>
Mortgage loans:
  Residential                                     $35,300,010     71.5%    $33,125,498     77.3%
  Commercial                                        6,314,688     12.8       4,509,243     10.6
  Construction, net of undisbursed funds            1,262,210      2.6          12,049       --
                                                  ---------------------------------------------
  Total mortgage loans                            $42,876,908     86.9%    $37,646,790     87.9%

Other loans:
  Home equity                                       1,300,254      2.6       1,372,391      3.2
  Other commercial                                  1,406,317      2.8         838,425      2.0
  Passbook loans                                      281,967      0.6         309,842      0.7
  Installment and other                             3,529,009      7.1       2,670,721      6.2
                                                  ---------------------------------------------
    Total other loans                               6,517,547     13.1       5,191,379     12.1%
                                                  ---------------------------------------------
    Total loans                                   $49,394,455    100.0%    $42,838,169    100.0%
                                                  =============================================
</TABLE>

      Residential Mortgage Loans. A substantial portion of the Bank's lending
activity is comprised of residential mortgage loans, which, at March 31, 1997,
represented 71.5% of the Bank's loan portfolio. Residential mortgage loan
originations are derived from a number of sources, including the existing
customers of the Bank, realtors, referrals and "walk-in" customers. The Bank's
active solicitation of residential mortgage loans through real estate brokers
has historically been its primary source of residential mortgage loan
originations.

      The main focus of the Bank's residential lending activity is the
origination of conventional mortgage loans on one- to four-family dwellings.
Generally, these loans are conventional first mortgage loans of 80% of value or
less that are neither insured nor partially guaranteed by government agencies.
The Bank also makes residential loans up to 95% of the appraised value if the
top 15% of the loan is covered by private mortgage insurance.

      Currently, the Bank offers a variety of adjustable-rate mortgage loans
with terms of up to 30 years. These mortgages have rates which are generally
3.0% above the U. S. Treasury Index and have adjustment periods of up to 7
years based on changes in the interest rate on U.S. Treasury obligations.
Typically, such loans have a 2% maximum rate change in any one adjustment
period and a maximum possible rate change of 6% during the term of the loan.
Most of the adjustable-rate mortgage loans originated by the Bank are held in
the Bank's portfolio. The primary reason for the Bank to retain these loans is
to manage the interest rate sensitivity of the Bank's loan portfolio. See
"Asset/Liability Management" located in the Management's Discussion and
Analysis portion of the Annual Report, commencing on page 3.

      In addition to adjustable-rate residential mortgage loans, the Bank also
offers fixed-rate residential mortgage loans with terms typically ranging from
15 to 30 years. During the fiscal year ended March 31, 1997, the Bank
originated $5,188,420 in fixed-rate loans, representing 48.12% of the total
mortgage loans originated during that period. These loans are typically sold to
the secondary mortgage market.

      Borrowers may prepay loans at their option or refinance their loans with
the Bank on terms agreeable to the Bank. The terms of conventional residential
mortgage loans granted by the Bank contain a "due-on-sale" clause, which
permits the Bank to accelerate the indebtedness of a loan upon the sale or
other disposition of the mortgaged property. Due-on-sale clauses are an
important means of increasing the turnover of real estate loans in the Bank's
portfolio. Waldoboro's management believes that due to prepayments in
connection with refinancings and sales of property, the average length of the
Bank's long-term residential loans is substantially shorter than the weighted
average contractual maturity.

      The Bank also makes construction loans to fund the construction of new
buildings or the renovation of existing buildings and finances the construction
of individual, owner-occupied houses by professional contractors and by
individual owners only on the basis of stringent underwriting and construction
loan management guidelines. Net construction loans comprised $1,262,210, or
2.6% of the Bank's loan portfolio at March 31, 1997.

      Commercial Real Estate and Other Commercial Loans. In addition to
residential real estate loans, the Bank also originates loans secured by
commercial real estate. At March 31, 1997, $6,314,688 or 12.8% of the Bank's
loan portfolio was secured by commercial properties. Many of Waldoboro's
commercial real estate loans are secured by improved property such as retail
outlets and service establishments. Substantially all of the Bank's commercial
real estate loan portfolio is secured by properties located in the Bank's
primary market area.

      For a variety of reasons, loans secured by commercial properties
generally involve greater credit risks than one- to four-family residential
real estate loans. Repayment of such loans generally depends on the cash flow
generated by the security property. Because the payment experience on loans
secured by such property is often dependent on successful operation or
management of the security property, repayment of the loan may be more subject
to adverse conditions in the real estate market or the economy generally than
is the case with one- to four-family residential real estate loans. The
commercial real estate business is cyclical and subject to downturns,
overbuilding and local economic conditions. Although commercial real estate
loans generally involve a higher risk of credit loss than loans secured by
residential real estate, Waldoboro has not experienced any significant problems
with its commercial mortgage loans.

      In addition, the Bank has begun to increase its commercial business loan
portfolio. At March 31, 1997, such loans amounted to $1,406,317 or 2.8% of the
Bank's loan portfolio. Commercial business loans are generally secured by
equipment, machinery or other corporate assets. The Bank either requires
principals of corporate borrowers to become co-borrowers or the Bank obtains
personal guarantees from the principals of the borrower with respect to all
commercial business loans.

      Commercial business lending generally entails significantly greater
credit risk than residential real estate lending. The repayment of commercial
business loans typically is dependent on the successful operation and income of
the borrower. Such risks can be significantly affected by economic conditions.
In addition, commercial business lending generally requires substantially
greater oversight efforts by the Bank than does residential real estate
lending.

      Consumer Loans. At March 31, 1997, Waldoboro had secured and unsecured
consumer loans, including loans on deposit accounts, of approximately $3.8
million or 7.7% of the Banks's loan portfolio. Waldoboro's consumer loans have
interest rates which are generally higher than residential mortgage rates. The
average life of the Bank's consumer loans is typically less than five years. By
maintaining its consumer lending, Waldoboro enhances its ability to maintain a
profitable spread between its average loan yield and its cost of funds while at
the same time managing its sensitivity to interest rates.

      Loans to One Borrower. Regulations promulgated by the Office of Thrift
Supervision (the "OTS") generally limit the permissible amount of loans to one
borrower to the greater of 15% of unimpaired capital and surplus or $500,000.
The maximum amount which Waldoboro could have loaned to one borrower and the
borrower's related entities at March 31, 1997, was $761,332. At March 31, 1997,
the three largest outstanding balances of loans by Waldoboro to any one
borrower and related entities approximated $610,580, $440,182 and $387,154.

Scheduled Loan Repayments

      The following table presents information regarding contractual maturities
of Waldoboro's loan portfolio at March 31, 1997. Demand loans are reported as
due in one year or less. No prepayment assumptions are utilized for purposes of
this table.

<TABLE>
<CAPTION>
                                                       Payment Due in Year Ended March 31,
                                         Balance at    -----------------------------------
                                         March 31,                                 2000-
                                            1997          1998          1999       2003+
                                         ----------    ----------     --------    --------

<S>                                      <C>           <C>            <C>         <C>
Mortgages - construction                 $1,262,211    $  171,983     $385,716    $704,512
Commercial loans - non real estate        1,406,317     1,006,522      346,810      52,985
</TABLE>

      The following table shows information concerning the type and amount of
fixed-rate and adjustable-rate loans in Waldoboro's portfolio that come due
after one year.

<TABLE>
<CAPTION>
                                           Loans Due After March 31, 1998
                                        ------------------------------------
                                          With         With
                                         Fixed      Adjustable
                                         Rates        Rates         Total
                                        --------    ----------    ----------

<S>                                     <C>         <C>           <C>
Mortgages - construction                $204,197    $886,031      $1,090,228
Commercial loans - non real estate       148,513     251,282         399,795
</TABLE>

Origination, Purchase and Sale of Loans

      The primary lending activity of Waldoboro is the origination of
conventional loans (i.e., loans that are neither insured nor guaranteed in
whole or in part by governmental agencies) secured by first mortgage liens on
residential properties, principally single family residences, substantially all
of which are located in Lincoln and Knox counties, Maine. During the year ended
March 31, 1997, substantially all of the real estate loans originated by
Waldoboro were secured by properties in Lincoln and Knox counties.

      Waldoboro appraises the security for each new loan. Such appraisals are
performed for the Bank by qualified appraisers in accordance with standards set
by the OTS. The appraisal of the real property upon which Waldoboro makes a
real estate loan is of particular significance to the Bank in the event that
the loan must be foreclosed. An improper appraisal may contribute to a loss or
other financial detriment to the Bank upon the disposition of foreclosed
property.

      The Bank's underwriting standards are guided by a formal written loan
policy which is reviewed and approved annually by the board of directors of the
Bank (the "Board"). This policy provides that, following the submission of a
loan application by a borrower, the Loan Committee, which determines whether a
borrower has met the required underwriting conditions, and the Security
Committee, which ensures that the value of the real estate securing the loan is
adequate, must approve the loan. Once approved, the loan must then be ratified
by the Board. In the case of a loan made to an officer of the Bank or the
Holding Company, the loan must be approved by the Board as well as the Loan
Committee and the Security Committee. Waldoboro requires title certification on
all first mortgage liens, and the borrower is required to maintain hazard
insurance on the security property.

      Waldoboro has purchased loans and will continue to consider
participations from third parties provided the terms are favorable and the
loans meet Waldoboro's underwriting standards. The Bank routinely sells
fixed-rate real estate loans in the secondary market as a means to better match
its interest-sensitive assets and liabilities. For the year ended March 31,
1997, the Bank received $2,248,585 in proceeds from the sale of loans.
Waldoboro will continue to consider additional sales of its loans in the
future, depending on its needs, and the terms available in the market for such
transactions.

      Fee Income. In addition to interest earned on loans, Waldoboro realizes
fee income from its lending activities, including origination and collection
fees for residential loans. Waldoboro also receives loan fees and charges
related to existing loans, which include late charges and servicing fees. Net
origination fees originally deferred that were recognized as additional
interest on loans during fiscal 1997 totaled $42,042. At March 31, 1997, net
origination fees deferred to future periods approximated $119,966.

Classified Assets and Delinquencies

      If a borrower fails to make a required payment on a loan, the loan is
classified as delinquent. In this event, Waldoboro will make contact with the
borrower at prescribed intervals in an effort to bring the loan current. In
most cases, delinquencies are cured promptly, but if a mortgage loan
delinquency is not cured within 60 days, Waldoboro will generally initiate
foreclosure proceedings under applicable state law. If the loan remains
delinquent, the mortgaged property typically will be sold through a foreclosure
sale.

      The remedies available to a lender in the event of a default or
delinquency, and the procedures by which such remedies may be exercised, are
generally subject to laws and regulations of the jurisdiction where the
property is located in the case of mortgage loans, or of the jurisdiction where
the lender and/or borrower is situated in the case of unsecured loans. Federal
and Maine law generally require notice of default and right to cure and notice
of the availability of credit counseling and potential state-provided financial
assistance prior to the time a lender commences a legal action or takes
possession of Maine residential real estate securing a loan. Management
attempts to secure payment with regard to consumer and commercial business
loans which become delinquent. Ultimately, if such efforts are unsuccessful,
foreclosure and sale of collateral are considered. In the case of unsecured
installment and commercial business loans, rather than proceeding to collect by
legal action, Waldoboro will often attempt to negotiate a "workout" payment
schedule with the borrower over a period which may exceed the original term of
the loan.

      Under the OTS classification system, problem assets of insured
institutions are classified as "special mention," "substandard," "doubtful" or
"loss," depending on the presence of certain characteristics discussed below.

      An asset is considered "special mention" if the asset displays potential
weaknesses that deserve close attention by a bank's management and that if
uncorrected might result in a deterioration either of the asset's repayment
prospects or in the future credit condition of the bank. Special mention assets
do not expose a bank to sufficient risk to warrant adverse classification under
the classifications discussed below.

      An asset is considered "substandard" if inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral
pledged, if any. "Substandard" assets include those characterized by the
"distinct possibility" that the insured institution will sustain "some loss" if
the deficiencies are not corrected. Assets classified "doubtful" possess the
added characteristic that the weaknesses present make "collection or
liquidation in full," on the basis of currently existing facts, conditions and
values, "highly questionable and improbable." Assets classified "loss" are
those considered "uncollectible" and of such little value that their
continuance as assets without the establishment of a specific loss reserve is
not warranted. When an insured institution classifies problem assets as "loss",
it is required either to establish a specific allowance for losses equal to
100% of the amount of the asset so classified or to charge off such amount.

      The Bank places loans on non-accrual status at 91 days from due date. The
following table sets forth information regarding nonaccrual loans and real
estate owned by the Bank. The Bank had no loans which are 90 days or more
delinquent but on which Waldoboro is accruing interest at the dates indicated.
Additional interest income that would have been recorded on non-accrual loans
had they been on accrual status at March 31, 1997 and March 31, 1996 was
$12,923 and $30,901 respectively. The following table summarizes the Bank's
non-performing assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                At March 31,
                                                      --------------------------------
                                                        1997        1996        1995
                                                      --------    --------    --------
<S>                                                   <C>         <C>         <C>
Nonaccrual loans:

  Mortgage loans in process of foreclosure.........   $     --    $160,919    $ 93,859
  Loans more than 90 days past due.................    145,466     214,419     213,633
                                                      --------------------------------
Total nonaccrual loans.............................    145,466     375,338     307,492

Real estate owned, net.............................     91,823     224,137     246,079
Loans to facilitate................................         --          --      44,246
                                                      --------------------------------
Total nonperforming assets.........................   $237,289    $599,475    $597,817
                                                      ================================

Ratio of nonaccrual loans to total loans...........        .29%       0.88%       0.70%
Ratio of nonperforming assets to total assets......        .40%       1.10%       1.13%
</TABLE>

      The Bank adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, as
amended by SFAS No. 118, Accounting by Creditors for Impairment of a
Loan--Income Recognition and Disclosure, on April 1, 1995. Adoption of these
statements did not have a significant impact on the financial position or
results of operations, and prior periods have not been restated.

      Allowance for Loan Losses. The allowance for loan losses is maintained by
a provision charged against income at a level that management considers
adequate to provide for potential losses. The amount of the provision is based
upon management's evaluation of individual loans, past loss experience, current
economic conditions, the inherent risk in the loan portfolio and other relevant
factors. No portion of the allowance for loan losses balance at March 31, 1997
related to specific loans for which charge offs are expected in fiscal 1998.

      An analysis of activity in the allowance for loan losses for the years
ended March 31, 1997 and 1996 is provided below.

<TABLE>

             <S>                                            <C>
             Balance, March 31, 1995                        $ 183,683
                Charge-offs - Mortgages                       (21,627)
                Charge-offs - Consumer                         (6,538)
                Recoveries - Consumer                           3,828
                                                            ---------
                Net charge offs                               (24,337)
                Provision for loan losses                      62,010
                                                            ---------

             Balance, March 31, 1996                        $ 221,356
                Charge-offs - Mortgages                       (12,000)
                Charge-offs - Consumer                         (8,810)
                Recoveries - Mortgages                             --
                Recoveries - Consumer                           7,911
                                                            ---------
                Net charge offs                               (12,899)
                Provision for loan losses                      87,000
                                                            ---------

             Balance, March 31, 1997                        $ 295,457
                                                            =========

             Net charge offs to average loans outstanding

                Year ended March 31, 1996                        0.06%
                Year ended March 31, 1997                        0.03%
</TABLE>


      A breakdown of the allowance for loan losses is shown below.

<TABLE>
<CAPTION>
                                            1997                       1996
                                   -----------------------    -----------------------
                                               Percent of                 Percent of
                                                Loans to                   Loans to
                                    Amount     Total Loans     Amount     Total Loans
                                   --------    -----------    --------    -----------

<S>                                <C>           <C>          <C>           <C>
Mortgage loans-Residential         $ 45,000       74.1%       $ 45,000       77.3%
Commercial-Mortgage loans           130,000       12.8          80,000       10.6
Consumer and other loans             43,500       13.1          38,000       12.1
General allocation                   76,957         --          58,356         --
                                   ----------------------------------------------
                                   $295,457      100.0%       $221,356      100.0%
                                   ==============================================
</TABLE>

Investments

      Federally chartered thrift institutions have authority to invest in
various types of liquid assets, including U.S. Treasury obligations, securities
of various federal agencies, certain certificates of deposit of insured banks
and thrift institutions, certain bankers' acceptances and federal funds.
Subject to various restrictions, federally chartered thrift institutions may
also invest a portion of their assets in commercial paper and corporate debt
securities and in mutual funds whose assets conform to the investments that a
federally chartered thrift institution is otherwise authorized to make
directly. At March 31, 1997, 5.8% of the total assets of the Holding Company
were investment securities. See Notes 3 and 4 to the Holding Company's
Consolidated Financial Statements included herein by reference.

      Currently, the Bank's debt securities are classified as
"held-to-maturity" or "available for sale" in accordance with Financial
Accounting Standards No. 115, "Accounting For Certain Investments in Debt and
Equity Securities." The investment securities classified as "held-to-maturity"
are reported in the Bank's financial statements at amortized cost. Investments
in a mutual fund of $564,702 and debt securities classified as "available for
sale" are carried at market value. The following table sets forth the
composition of the Bank's portfolio of investment securities and mortgage
backed securities at the dates indicated.

<TABLE>
<CAPTION>
                                                                     At March 31,
                                                 ----------------------------------------------------
                                                           1997                        1996
                                                 ------------------------    ------------------------
                                                    Book         Market         Book         Market
                                                   Value         Value         Value         Value
                                                 ----------    ----------    ----------    ----------

<S>                                              <C>           <C>           <C>           <C>
Held to maturity:
Investment securities:
  Federal Home Loan Bank Bonds                   $  400,000    $  372,000    $  500,000    $  464,326
  U.S. Treasury Obligations                         299,109       292,875     2,246,562     2,243,354
  Federal National Mortgage Association Bonds       250,000       246,250       250,000       245,585
  Student Loan Marketing Application Notes               --            --       250,000       249,992
  Federal Farm Credit Bank Notes                         --            --       100,000       100,019
                                                 ----------------------------------------------------
      Total investment securities                                             3,346,562     3,303,276

Mortgage backed securities                               --            --       218,323       219,775
                                                 ----------------------------------------------------
                                                 $  949,109    $  911,125    $3,564,885    $3,523,051
                                                 ====================================================

Available for sale:
Investment securities:
  U.S. Treasury Obligations                      $  497,578    $  496,960    $       --    $       --
  U.S. Agency Obligations                           750,000       747,000            --            --
                                                 ----------------------------------------------------
                                                  1,247,578     1,243,960            --            --

Mutual Fund                                         561,084       564,702       528,673       528,673
Required investment in Federal Home Loan 
 Bank Stock                                         622,000       622,000       548,300       548,300
Other                                                10,000        10,000        10,000        10,000
                                                 ----------------------------------------------------
                                                 $2,440,662    $2,440,662    $1,086,973    $1,086,973
                                                 ====================================================
</TABLE>

      The following table shows the maturities, including scheduled principal
reductions, of the Bank's bonds and mortgage backed securities at March 31,
1997 and the weighted average yield on such securities.

<TABLE>
<CAPTION>
                                                            After 1       After 5
                                                            Year but     Years but
                                                 Within      Within       Within       After
                                                 1 Year     5 Years      10 Years     10 Years      Total
                                                 ------    ----------    ---------    --------    ----------

<S>                                              <C>       <C>           <C>          <C>         <C>
Held to maturity:
U.S. Treasury Obligations:
  Book Value                                     $   --    $  299,109    $     --     $     --    $  299,109
  Yield                                              --         4.75%          --           --         4.75%
Federal Home Loan Bank
Bonds:
  Book Value                                         --       200,000     200,000           --       400,000
  Yield                                              --          3.5%       4.00%           --         3.75%
Federal National Mortgage Association Bonds:
  Book Value                                         --       250,000          --           --       250,000
  Yield                                              --          4.75%         --           --         4.75%
                                                 -----------------------------------------------------------
Held to Maturity Total                               --       749,109     200,000           --       949,109
                                                 -----------------------------------------------------------

Available for Sale:
U.S. Treasury Obligations:
  Book Value                                     $   --    $  497,578    $     --     $     --    $  497,578
  Yield                                              --         5.75%          --           --         5.75%
Federal National Mortgage Association Bonds
  Book Value                                         --       750,000          --           --       750,000
  Yield                                              --         6.23%          --           --         6.23%
                                                 -----------------------------------------------------------
Available for Sale Total                             --     1,247,578          --           --     1,247,578
                                                 -----------------------------------------------------------
Total                                            $   --    $1,996,687    $200,000     $     --    $2,196,687
                                                 ===========================================================
</TABLE>

Sources of Funds

      General. The Bank's primary sources of funds are deposits, borrowings and
regular payments of loan principal and interest and prepayments of loan
principal. Deposit inflows and outflows are influenced by general interest rate
conditions. The Bank has been able to respond to market rate changes by
borrowing from the Federal Home Loan Bank (the "FHLB") of Boston in the form of
fixed- rate loans with a variety of maturities.

      Deposits. The Bank offers a variety of deposit products ranging in
maturity from deposits withdrawable upon demand to certificates with maturities
of up to 5 years. Deposits are attracted principally from within the Bank's
market area. Waldoboro relies primarily upon customer service, advertising and
competitive pricing policies to attract and retain deposits.

      Regular savings deposits increased $1,048,510 or 22.6% during the year
ended March 31, 1997. Balances in money market deposit accounts increased
$379,190 or 8.0% during the year ended March 31, 1997. NOW accounts and demand
deposits increased $893,418 or 18.2% and certificates of deposit decreased
$1,957,322 or 7.1% during the year ended March 31, 1997.

      As a member of the FHLB System, the Bank is required to maintain liquid
assets at minimum levels which vary from time to time. The Bank's investment
portfolio, cash and deposits in other institutions provide not only a source of
income but also a source of liquidity to meet lending demands, fluctuations in
deposit flows and required liquidity levels. The Bank has periodically used
excess liquidity to meet heavy loan demand. The relative mix of investments and
loans in the Bank's portfolio is dependent upon the Bank's judgment, from time
to time, as to the attractiveness of yields available on loans as compared to
available investment yield. The Bank also considers the relative safety of the
investment and loans and the liquidity needs of Waldoboro. The Bank's
investment portfolio is managed in compliance with the investment policy
established by the Board.

      The Bank offers short-term certificates of deposit and other deposit
alternatives that are more responsive to market conditions than the Bank's
passbook deposits and the longer maturity fixed-rate certificates that have
traditionally served as the Bank's primary sources of deposits. Waldoboro's
overall variety of deposits has enabled the Bank to be competitive in obtaining
funds when necessary and has enabled it to respond with more flexibility to the
threat of disintermediation.

      Historically, the Bank has obtained deposits primarily from the areas in
Maine immediately surrounding its offices. Management expects to continue
obtaining substantially all of its deposits from its Lincoln and Knox County
market areas. It is the Bank's policy not to accept brokered deposits.

      The distribution of a financial institution's deposits in terms of
interest rate paid is a major determinant of its average cost of funds, while
the distribution of an institution's deposits in terms of maturity has in the
past been an important indicator of the relative stability of its supply of
lendable funds. Management of the Bank believes that because of improved
pricing flexibility, and the relatively low cost of borrowings from the FHLB,
the distribution of deposit maturity is of less importance as an indicator of
stability of its deposits as a source of lendable funds.

      The following table sets forth the average balances of deposits of the
Bank in dollar amounts and as a percent of total deposits, the interest expense
and the weighted average rate for each type of deposit account for the periods
indicated.

<TABLE>
<CAPTION>
                                                Year Ended March 31, 1997
                                    -------------------------------------------------
                                                     % of
                                      Average      Average      Interest     Average
                                      Balance      Deposits     Expense        Rate
                                    -----------    --------    ----------    --------

<S>                                 <C>             <C>        <C>             <C>
Demand deposits                     $ 2,113,328       5.08%    $       --        --%
NOW Accounts                          3,482,742       8.37         70,486      2.02
Savings                               4,850,950      11.66        135,482      2.79
Money Market deposit accounts         4,884,566      11.74        188,740      3.86
Certificates of deposit              26,255,429      63.15      1,514,948      5.77%
                                    -----------------------------------------------
                                    $41,587,015     100.00%    $1,909,656      4.59%
                                    ===============================================

<CAPTION>
                                                Year Ended March 31, 1996
                                    -------------------------------------------------
                                                     % of
                                      Average      Average      Interest     Average
                                      Balance      Deposits     Expense        Rate
                                    -----------    --------    ----------    --------

<S>                                 <C>             <C>        <C>             <C>
Demand deposits                     $ 1,149,086       2.88%    $       --        --%
NOW Accounts                          3,137,280       7.87         72,855      2.32
Savings                               4,649,322      11.67        128,570      2.77
Money Market deposit accounts         4,579,405      11.49        209,556      4.58
Certificates of deposit              26,334,638      66.09      1,561,752      5.93
                                    -----------------------------------------------
                                    $39,849,731     100.00%    $1,972,733      4.95%
                                    ===============================================
</TABLE>

      The maturities of certificates of deposit in amounts greater than
$100,000 at March 31, 1997 are set forth in the following table.


<TABLE>
<CAPTION>
                    Maturity                      Amount
                ---------------                 ----------

                <S>                             <C>
                   0 - 3 months                 $       --
                   3 - 6 months                    320,779
                  6 - 12 months                    939,326
                After 12 months                    400,000
                                                ----------
                                                $1,660,105
                                                ==========
</TABLE>

      The Bank offers a number of investment alternatives to depositors.
Interest rates paid and minimum balance requirements for deposits may vary from
time to time as determined by the Bank's management, based on prevailing market
conditions. Waldoboro's deposit accounts are obtained primarily from the areas
immediately surrounding its offices.

      The Bank has offered IRA accounts and intends to continue to do so in the
future. At March 31, 1997, $3,201,123 of IRA accounts were on deposit with the
Bank.

      Borrowings. Deposits are Waldoboro's primary source of funds for lending
activities and other general business purposes. During periods when the supply
of lendable funds cannot meet the demand for such activities and purposes, the
FHLB system seeks to provide a portion of the funds necessary through advances
to its members. Historically, Waldoboro has relied on advances from the FHLB of
Boston rather than other sources. Waldoboro has used such advances from the
FHLB of Boston as an alternative to deposits when rates are favorable as a
means to enhance the Bank's interest rate spread and as a source of lendable
funds. Such advances have also been primarily used to fund a portion of the
Bank's Adjustable Rate Mortgage portfolio which, by shortening the average
maturity of its loan portfolio, makes the Bank less sensitive to future
interest rate fluctuations. At March 31, 1997, Waldoboro had $11,440,000 in
outstanding advances from the FHLB at a weighted average stated rate of 5.79%.

      Waldoboro also has access to a line of credit approximating $1,050,000 at
March 31, 1997, with the FHLB of Boston for short-term borrowing purposes. The
Bank did not have any outstanding borrowings under this line of credit at March
31, 1997.

      The Bank intends to continue to fund its mortgage loan commitments with
borrowed funds from the FHLB of Boston when the supply of other lendable funds
is insufficient or more costly and/or when such borrowings would enhance the
Bank's ability to manage its mix of assets and liabilities.

Asset/Liability Management

      The following table sets forth the scheduled repricing or maturity of the
Bank's financial assets and liabilities at March 31, 1997.

      For purposes of this table no portfolio loans are assumed to prepay
before their scheduled maturity date. Also, all NOW, Savings, and Money Market
deposit accounts are assumed to reprice or mature in one year. Neither of these
assumptions may be indicative of actual future events.

<TABLE>
<CAPTION>
                                    1 Year        >1 to 2        >2 to 3        >3 to 5       >5 to 10        Over
                                   or Less         Years          Years          Years          Years       10 Years       Total
                                 ------------   ------------   ------------   ------------   -----------   ----------   -----------

<S>                              <C>            <C>            <C>            <C>            <C>           <C>          <C>
Financial Assets (1):
  Mortgage loans & mortgage
   backed securities:
  Balloon & adjustable-rate
    (all property types)         $ 15,223,039   $  5,426,289   $  5,128,655   $    521,767   $ 3,137,614   $   87,013   $29,524,377
    Fixed-rate 1-4 family              51,467        123,339          7,291        263,889       714,044    5,381,903     6,541,933
    Fixed-rate - other                     --             --             --             --            --           --            --
Consumer & other loans              5,657,495      1,068,466      1,570,839      1,584,804     1,609,822    1,836,719    13,328,145

Investments & other interest-
 earning assets                     3,431,767      1,444,396             --        750,291       200,000           --     5,826,454
                                 --------------------------------------------------------------------------------------------------

Total financial assets           $ 24,363,768   $  8,062,490   $  6,706,785   $  3,120,751   $ 5,661,480   $7,305,635   $55,220,909
                                 ==================================================================================================

Financial Liabilities (1):
  Deposits:
    NOW accounts, Savings and 
     Money Market Accounts       $ 16,620,866   $         --   $         --   $         --            --   $       --   $16,620,866
    Certificates of deposit        19,333,540      2,734,896      2,717,624        761,527        12,245           --    25,559,832
  FHLB borrowings                   6,750,000      3,475,000      1,000,000             --            --      215,000    11,440,000
                                 --------------------------------------------------------------------------------------------------

Total financial liabilities      $ 42,704,406   $  6,209,896   $  3,717,624   $    761,527   $    12,245   $  215,000   $53,620,698
                                 ==================================================================================================

GAP                              $(18,340,638)  $  1,852,594   $  2,989,161   $  2,359,224   $ 5,649,235   $7,090,635
GAP to total assets                    (31.13)%         3.14%          5.07%          4.00%         9.59%       12.03%
Cumulative GAP                   $(18,340,638)  $(16,488,044)  $(13,498,883)  $(11,139,659)  $(5,490,424)  $1,600,211  
Cumulative GAP to total assets         (31.13)%       (27.98)%       (22.91)%       (18.90)%       (9.32)%       2.72%

<FN>
-------------------
<F1>  For purposes of this table, financial assets are defined as all interest
      earning assets other than FHLB and other stock. Financial liabilities
      consist of all interest- bearing liabilities.
</FN>
</TABLE>

Employees

      At March 31, 1997, the Bank had a total of 22 full-time employees and two
part-time employees, none of whom were represented by collective bargaining
units. The Bank offers its employees a variety of training programs designed to
enhance their skills. The Bank also provides its full-time employees with a
benefits package which includes life, long-term disability and medical
insurance, a 401(k) plan and a pension plan. Management of Waldoboro believes
that good relations are maintained with its employees.

Service Corporation

      The Bank has one service corporation, First Waldoboro Corporation ("First
Waldoboro"). First Waldoboro was originally formed for the purpose of offering
certain securities brokerage services. However, management of the Bank
subsequently determined not to use First Waldoboro for that purpose, and the
service corporation is presently inactive.

      Federal regulations permit the Bank to invest an amount up to 2% of its
assets in the capital stock, obligations and other securities of its service
corporations. This amount is increased to 3% if the additional 1% is used
primarily for community, inner city or community development purposes. At March
31, 1997, the Bank's direct investment in First Waldoboro was $10,000.

                                  Competition

      Waldoboro faces strong price-oriented competition in the attraction of
deposits. Its most direct competition for deposits comes from the other thrifts
and commercial banks located in its primary market area of Knox and Lincoln
Counties. The Bank also faces additional significant competition for investors'
funds from short-term money market funds and other corporate and government
securities. The Bank is the sixth in asset size of the 11 SAIF-insured
institutions in the state.

      The Bank competes for deposits principally by offering depositors a high
level of customer service, combined with a wide variety of savings programs, a
market rate of return, tax-deferred retirement program and other related
services. The Bank does not rely upon any individual, group or entity for a
material portion of its deposits.

      The Bank's competition for real estate loans comes from mortgage banking
companies, other thrift institutions and commercial banks. The Bank competes
for loan originations primarily through the interest rates and loan fees it
charges and the efficiency and quality of services it provides borrowers, real
estate brokers and builders. The Bank's competition for loans varies from time
to time depending upon the general availability of lendable funds and credit,
general and local economic conditions, current interest rate levels, volatility
in the mortgage markets and other factors which are not readily predictable.

                                   Regulation

General

      As a federal savings bank chartered by the OTS, the Bank is subject to
extensive regulation, examination and supervision by the OTS. The Bank is also
a member of the FHLB System, and its deposit accounts are insured by the SAIF,
which is administered by the FDIC. By virtue of federal insurance of its
deposits, the Bank is also subject to regulation and supervision by the FDIC,
which supervision and regulation is intended primarily to protect depositors
and the SAIF. Certain of these regulatory requirements are described below or
elsewhere herein.

The Home Owners' Loan Act

      The Bank's lending and investment powers are governed by the Home Owner's
Loan Act, as amended ("HOLA") and the regulations thereunder. Under these laws
and regulations, the Bank may invest in mortgage loans secured by residential
and commercial real estate, commercial and consumer loans, certain types of
debt securities, and certain other assets. The Bank may also establish service
corporations that may engage in activities not otherwise permissible for the
Bank, including certain real estate equity investments and securities and
insurance brokerage. These investment powers are subject to various
limitations, including (a) a prohibition against the acquisition of any
corporate debt security that is not rated in one of the four highest rating
categories, (b) a limit of 400% of an association's capital on the aggregate
amount of loans secured by non-residential real estate property, (c) a limit of
20% of an association's assets on commercial loans, (d) a limit of 35% of an
association's assets on the aggregate amount of consumer loans and acquisitions
of certain debt instruments, (e) a limit of 5.0% of total assets on
non-conforming loans (loans in excess of the specific limitations of the HOLA)
and (f) a limit of 5% of the greater of 5% of assets or an association's
capital on certain construction loans made for the purpose of financing what is
or is expected to become residential property.

      Insurance of Deposits. The Bank's deposits are insured up to applicable
limits under the SAIF as administered by the FDIC under the Federal Deposit
Insurance Act ("FDIA"). The assessments paid by depository institutions for the
insurance of deposits are determined on a risk-based assessment system pursuant
to which each institution is assigned to one of nine categories. For the first
three quarters of 1996, SAIF-insured institutions paid deposit insurance
assessments at annual rates that ranged from 0.23% of deposits for the least
risky institutions to 0.31% of deposits for the most risky institutions. In
contrast, the least risky institutions insured under the Bank Insurance Fund
("BIF") paid deposit insurance assessments at the annual minimum of $2,000, and
the other BIF-insured institutions paid assessments at rates that ranged from
0.03% to 0.27% of deposits.

      On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
"Funds Act") was enacted into law to address, among other things, the disparity
in the deposit insurance assessment rates imposed on BIF-insured and on
SAIF-insured institutions. The Funds Act amended the FDIA in several ways to
recapitalize the SAIF and to reduce the disparity in the assessment rates for
the BIF and the SAIF. To recapitalize the SAIF, the Funds Act authorized the
FDIC to impose a special assessment on all institutions with SAIF-assessable
deposits in the amount necessary to recapitalize the SAIF. As implemented by
the FDIC, the special assessment was fixed, subject to adjustment, at 0.657% of
an institution's SAIF-assessable deposits, and the special assessment was paid
on November 27, 1996. The special assessment was based on the amount of
SAIF-assessable deposits held at March 31, 1995, as adjusted under the Funds
Act. For the Bank, the special assessment on the deposits held on March 31,
1995, was $241,299 (before giving effect to any tax benefits).

      The Funds Act also provides that the FDIC cannot assess regular insurance
assessments for an insurance fund unless required to maintain or to achieve the
designated reserve ratio of 1.25%, except on those of its member institutions
that are not classified as "well capitalized" or that have been found to have
"moderately severe" or "unsatisfactory" financial, operational or compliance
weaknesses. The Bank has not been so classified by the FDIC or the OTS. In view
of the recapitalization of the SAIF, the FDIC reduced the annual assessment
rates for SAIF-assessable deposits for periods beginning on October 1, 1996.
For the last quarter of 1996, the reduced annual assessment rates ranged from
0.18% to 0.27% of deposits. Beginning with January 1, 1997, the annual
assessment rates are the same for both BIF-insured and SAIF-insured
institutions, with the annual assessment rates ranging from 0.0% to 0.27% of
deposits.

      In addition, the Funds Act expanded the assessment base for the payments
on the bonds ("FICO bonds") issued in the late 1980s by the Financing
Corporation to recapitalize the now defunct Federal Savings and Loan Insurance
Corporation. Beginning January 1, 1997, the deposits of both BIF- and
SAIF-insured institutions will be assessed for the payments on the FICO bonds.
Until December 31, 1999, or such earlier date on which the last savings
association ceases to exist, the rate of assessment for BIF-assessable deposits
will be one-fifth of the rate imposed on SAIF-assessable deposits. The FDIC has
reported that, for the semiannual period beginning on January 1, 1997, the rate
of assessments for the payments on the FICO bonds will be 0.013% for
BIF-assessable deposits and 0.0648% for SAIF- assessable deposits.

      The Funds Act also provides for the merger of the BIF and SAIF on January
1, 1999, with such merger being conditioned upon the prior elimination of the
thrift charter. The Funds Act required the Secretary of the Treasury to conduct
a study of relevant factors with respect to the development of a common charter
for all insured depository institutions and the abolition of separate charters
for banks and thrifts and to report the Secretary's conclusions and the
findings to the Congress. The Secretary of the Treasury has recommended that
the separate charter for thrifts be eliminated only if other legislation is
adopted that permits bank holding companies to engage in certain non-financial
activities. Absent legislation permitting such non-financial activity, the
Secretary of the Treasury recommended retention of the thrift charter. The
Secretary of the Treasury also recommended the merger of the BIF and the SAIF
irrespective of whether the thrift charter is eliminated. Other proposed
legislation has been introduced in Congress that would require thrift
institutions to convert to bank charters.

      An insured institution is subject to periodic examination, and regulators
may revalue the assets of an institution, based upon appraisals, and require
establishment of specific reserves in amounts equal to the difference between
such revaluation and the book value of the assets. SAIF insurance of deposits
may be terminated by the FDIC, after notice and hearing, upon a finding by the
FDIC that a savings institution has engaged in an unsafe or unsound practice,
or is in an unsafe or unsound condition to continue operations, or has violated
any applicable law, regulation, rule, order or condition imposed by the OTS or
the FDIC. Management of the Bank is not aware of any practice, condition or
violation that might lead to termination of its deposit insurance.

      Loan Limitations. Under HOLA, savings associations are subject to the
same limitations on the permissible amount of loans to one borrower that apply
to national banks. These limitations generally do not permit loans to one
borrower or related parties in excess of 15% of the institution's unimpaired
capital and surplus. Loans in an amount equal to an additional 10% of
unimpaired capital and surplus may be made to a borrower or related parties if
the loans are fully secured by, among other things, readily marketable
securities. The Bank believes that these provisions do not materially adversely
affect its lending activities.

      The Qualified Thrift Lender Test. A savings institution is required to
maintain at least 65 percent of its portfolio assets in Qualified Thrift
Investments in at least 9 of the most recent 12 months. Upon failing to
maintain compliance with the QTL test, a savings institution is required either
to convert to a commercial bank charter or to operate subject to certain
restrictions imposed on the operations of national banks. Qualified Thrift
Investments include loans to purchase, construct or improve residential
housing; home equity loans; mortgage-backed securities; and subject to
restrictions, consumer loans, loans to finance hospitals, churches and other
public facilities, as well as certain other obligations. As of March 31, 1997,
the Bank had met the Qualified Thrift Lender test in the requisite months and
expects to continue to operate as a Qualified Thrift Lender in the future.

      Enforcement. The OTS, as the primary regulator of savings institutions,
is primarily responsible for the initiation and prosecution of any enforcement
action it may deem to be required, but the FDIC also has authority to impose
enforcement action independently after following certain procedures. Under
FIRREA, civil penalties are classified into three levels, with amounts
increasing with the severity of the violation.

      The OTS has the authority to impose enforcement action on a savings
institution that fails to comply with its regulatory requirements, particularly
with respect to its capital requirements. Possible enforcement actions include
the imposition of a capital plan and termination of deposit insurance. The FDIC
also may recommend that the Director of OTS take enforcement action. If action
is not taken by the Director, the FDIC would have authority to compel such
action under certain circumstances.

      Capital Requirements. Each of the three capital standards applicable to
savings institutions is discussed separately below.

      Tangible Capital Requirement. Each savings institution is required to
maintain tangible capital equal to at least 1.5% of its adjusted total assets.
Tangible capital includes common stockholders' equity (including retained
earnings), certain noncumulative perpetual preferred stock and related surplus,
and minority interests in the equity accounts of fully consolidated
subsidiaries. In computing tangible capital, intangible assets must, in
general, be deducted from an institution's assets and capital, and mortgage
servicing rights may be included within certain limitation on amount if the
rights satisfy certain requirements. In determining compliance with capital
requirements, equity and debt investments in subsidiaries that are not
"includable subsidiaries," which term includes subsidiaries engaged solely in
activities permissible for a national bank, in activities only as an agent for
its customers, or in mortgage- banking activities, are excluded from an
institution's assets and capital. At March 31, 1997, the Bank had no
investments in or extensions of credit to nonincludable subsidiaries, and its
tangible capital amounted to approximately $5,025,000 or 8.9% of its adjusted
total assets.

      Core Capital Requirements. Capital requirements also require core capital
equal to at least 3% of an institution's adjusted total assets. Core capital is
defined similarity to tangible capital, but core capital also includes certain
qualifying supervisory goodwill and certain purchased credit card
relationships. At March 31, 1997, the Bank had no supervisory goodwill and the
Bank's core capital amounted to approximately $5,025,000 or 8.9% of its
adjusted total assets.

      Risk-Based Capital Requirement. Each savings institution is also required
to maintain total capital equal to at least 8% of its risk-weighted assets.
Total capital consists of the sum of core capital and supplementary capital,
provided that supplementary capital cannot exceed core capital, as previously
defined.

      Supplementary capital includes (i) permanent capital instruments such as
cumulative perpetual preferred stock, perpetual subordinated debt, and
mandatory convertible subordinated debt, (ii) maturing capital instruments such
as subordinated debt, intermediate-term preferred stock and mandatory
redeemable preferred stock, subject to an amortization schedule, and (iii)
general valuation loan and lease loss allowances up to 1.25% of risk-weighted
assets.

      In computing both assets and total capital for purposes of the risk-based
capital ratio, the portion of land loans and nonresidential construction loans
in excess of an 80% loan-to-value ratio and non-qualifying equity investments
are each deducted. At March 31, 1997, the Bank had no non-qualifying equity
investments, excess land loans or nonresidential construction loans.

      The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories, which are based on the
amount of credit risk associated with that particular class of assets. Assets
excluded for purposes of calculating capital are excluded in calculating
risk-weighted assets. The risk categories range from 0% for assets such as cash
and securities issued by, or backed by the full faith and credit of, the U.S.
Government to 100% for assets such as consumer loans, repossessed assets or
assets more than 90 days past due, and certain equity investments that have the
same risk characteristics as foreclosed as determined by the OTS. Qualifying
residential mortgage loans and qualifying residential construction loans are
assigned a 50% risk weight, while nonqualifying residential mortgage loans and
that portion of land loans and nonresidential construction loans which do not
exceed an 80% loan-to-value ratio are assigned 100% risk weight.

      The book value of assets in each risk category is multiplied by the
weighing factor (from 0% to 100%) assigned to that category. These products are
then totaled to arrive at total risk-weighted assets. Off-balance sheet items
are included in risk-weighted assets by converting them to an approximate
balance sheet "credit equivalent amount" based on a conversion schedule. The
credit equivalent amounts are then assigned to risk categories in the same
manner as balance sheet assets and included in risk- weighted assets.

      At March 31, 1997, the Bank's total capital amounted to approximately
$5,320,000 or 15.1% of its total risk-weighted assets.

      When determining its compliance with the risk-based capital requirement,
a savings institution with "above normal" interest rate risk is required to
deduct a portion of its total capital to account for any "above normal"
interest rate risk. An institution's interest rate risk is a measure of the
potential percentage decline in the economic value of its portfolio equity
resulting from a hypothetical 200 basis point increase or decrease in interest
rates (whichever change results in the greater decline). A savings association
whose measured interest rate risk exceeds 2% would be considered to have "above
normal" risk. The amount to be deducted from capital is an amount equal to 50%
of its "excess" interest-rate risk exposure (the percentage in excess of 2%)
multiplied by the estimated economic value of its total assets. While the
effective date of the interest rate risk requirement was January 1, 1994, the
OTS has indefinitely deferred implementation of the interest rate risk
deduction. The OTS continues to monitor the interest rate risk of individual
institutions and retains the right to impose additional capital requirements on
individual institutions. The Bank remains in compliance with its risk-based
capital requirements as would be adjusted by the interest-rate risk component.

      The following table sets forth the various components of the regulatory
capital for the Bank at March 31, 1997.

<TABLE>
<CAPTION>
                       Minimum
                       Required            Actual          Excess
                    --------------     ---------------     ------
                                (Dollars in Thousands)

<S>                 <C>     <C>        <C>      <C>        <C>
Tangible            1.5%    $  888      8.9%    $5,025     $4,137
Core Leverage       3.0%    $1,776      8.9%    $5,025     $3,249
Risk Based          8.0%    $2,822     15.1%    $5,320     $2,498
</TABLE>

      Dividends. OTS regulations impose limitations on the ability of savings
institutions to engage in various distributions of capital such as dividends,
stock repurchases and cash-out mergers. The regulation utilizes a three-tiered
approach which permits various levels of distributions based primarily upon a
savings institution's capital level.

      A savings institution that has capital in excess of all applicable
regulatory capital requirements is considered to be a Tier 1 savings
institution, and it may make capital distributions during a calendar year
without applying for regulatory approval in an aggregate amount up to (a) 100%
of its net income to date during the calendar year plus the amount that would
reduce by one-half its surplus capital ratio at the beginning of the calendar
year or (b) 75% of its net earnings for the previous four quarters. Capital
distributions in excess of such amount require advance approval from the OTS.
Other law prohibits insured depository institutions, such as the Bank, from
making any capital distribution if, after such distribution, the institution
would fail to meets its minimum capital requirements.


                                    TAXATION

Federal Taxation

      General. The Holding Company and the Bank will report their income on the
basis of a taxable year ending March 31 using the accrual method of accounting
and will be subject to federal income taxation in the same manner as other
corporations with some exceptions. The following discussion of tax matters is
intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Bank or the Holding Company.

      Recent Tax Legislation Regarding Tax Bad Debt Reserves. Prior to the
enactment, on August 20, 1996, of the Small Business Job Protection Act of 1996
(the "Small Business Act"), for federal income tax purposes, thrift
institutions such as the Bank, which met certain definitional tests primarily
relating to their assets and the nature of their business, were permitted to
establish tax reserves for bad debts and to make annual additions thereto,
which additions could, within specified limitations, be deducted in arriving at
their taxable income. The Bank's deduction with respect to "qualifying loans,"
which are generally loans secured by certain interests in real property, could
be computed using an amount based on a six-year moving average of the Bank's
actual loss experience (the "Experience Method"), or a percentage equal to 8.0%
of the Bank's taxable income (the "PTI Method"), computed without regard to
this deduction and with additional modifications and reduced by the amount of
any permitted addition to the non-qualifying reserve.

      Under the Small Business Act, the PTI Method was repealed and the Bank,
as a "small bank" (one with assets having an adjusted basis of $500 million or
less), is required to use the Experience Method of computing additions to its
bad debt reserve for taxable years beginning with the Bank's taxable year
beginning April 1, 1996. In addition, the Bank will be required to recapture
(i.e., take into taxable income) over a six-year period, beginning with the
Bank's taxable year beginning April 1, 1996, the excess of the balance of its
bad debt reserves (other than the supplemental reserve) as of March 31, 1996
over the greater of (a) the balance of its "base year reserve," i.e., its
reserves as of March 31, 1988 or (b) an amount that would have been the balance
of such reserves as of March 31, 1996 had the Bank always computed the
additions to its reserves using the Experience Method. However, such recapture
requirements were suspended for each of the two successive taxable years
beginning April 1, 1996 in which the Bank originates a minimum amount of
certain residential loans during such years that is not less than the average
of the principal amounts of such loans made by the Bank during its six taxable
years preceding April 1, 1996. Since the Bank has already provided a deferred
income tax liability related to this for financial reporting purposes, there
will be no adverse impact to the Bank's financial condition or results of
operations from the enactment of this legislation.

      Distributions. To the extent that the Bank makes "nondividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the Bank's base year reserve and then from its
supplemental reserve for losses on loans, and an amount based on the amount
distributed will be included in the Bank's taxable income. Nondividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation. However, dividends paid out
of the Bank's current or accumulated earnings and profits, as calculated for
federal income tax purposes, will not constitute nondividend distributions and,
therefore, will not be included in the Bank's income.

      The amount of additional taxable income created from a nondividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the nondividend distribution would be includable in gross income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate. The Bank does not intend to pay dividends that would result in a
recapture of any portion of its tax bad debt reserve.

      Corporate Alternative Maximum Tax. The Internal Revenue Code (the "Code")
imposes a tax on alternative minimum taxable income ("AMTI") at a rate of 20%.
Only 90% of AMTI can be offset by net operating losses. AMTI is also adjusted
by determining the tax treatment of certain items in a manner that negates the
deferral of income resulting from the regular tax treatment of those items.
Thus, the Bank's AMTI is increased by an amount equal to 75% of the amount by
which the Bank's adjusted current earnings exceeds its AMTI (determined without
regard to this adjustment and prior to reduction for net operating losses). In
addition, for taxable years beginning after December 31, 1986, and before
January 1, 1996, an environmental tax of .12% of the excess of AMTI (with
certain modifications) over $2.0 million is imposed on corporations, including
the Bank, whether or not an Alternative Maximum Tax ("AMT") is paid. The Bank
does not expect to be subject to the AMT. Under President Clinton's fiscal year
1998 budget proposal, as submitted to Congress on February 6, 1997 ("President
Clinton's Proposal"), the corporate environmental income tax would be
reinstated for taxable years beginning after December 31, 1996 and before
January 1, 2008. Under Congressional legislative proposals, the AMT would be
repealed for "small corporations," effective for taxable years beginning after
December 31, 1997.

      Dividends-Received Deduction and Other Matters. The Holding Company may
exclude from its income 100% of dividends received from the Bank as a member of
the same affiliated group of corporations. The corporate dividends-received
deduction is generally 70% in the case of dividends received from unaffiliated
corporations with which the Holding Company and the Bank will not file a
consolidated tax return, except that if the Holding Company or the Bank owns
more than 20% of the stock of a corporation distributing a dividend, then 80%
of any dividends received may be deducted. Under President Clinton's Proposal,
the 70% dividends-received deduction would be reduced to 50% with respect to
dividends paid after enactment of any such legislation.

      The Bank's federal income tax returns were audited by the IRS for the
years ended March 31, 1992 and 1993.

Maine State Taxation

      The State of Maine imposes a franchise tax on banks, such as Waldoboro,
doing business in Maine. The tax is comprised of two components. The first
component is a 1% tax on Maine net income as reported on such bank's federal
income tax return. The amount represents net book income after reduction for
federal and state income and franchise taxes. The second component is a tax of
$.08 per $1,000 of assets at the end of the year as reported on Schedule L of
the Bank's federal income tax return.


Item 2.  Description of Property

      The Holding Company neither owns nor leases any real property. It
presently uses the premises, equipment and furniture of Waldoboro without
direct payment of any rental fees to the Bank. The Bank conducts its business
out of its offices in Waldoboro and Rockland. The office building in Waldoboro
is owned by the Bank and is a modern, full-service facility with ample parking
and a convenient location on U.S. Route 1. The Rockland office is a newly
constructed facility, offering full-service and ample parking. The facility is
located in a high traffic area on U.S. Route 1.

      The following table sets forth certain information with respect to the
Bank's principle executive offices in Waldoboro and its new branch in Rockland
as of March 31, 1997:

<TABLE>
<CAPTION>
                                              Year
             Location                    Occupied/Opened         Owned(1)
    ---------------------------          ---------------         --------

    <S>                                       <C>                <C>
    Principal Executive Offices               1988               $736,135
    1768 Atlantic Highway
    P. O. Box 589
    Waldoboro, Maine

    Rockland Branch Office                    1995               $363,312
    73 Camden Street
    P. O. Box 669
    Rockland, Maine

<FN>
-------------------
<F1>   Net of depreciation.
</FN>
</TABLE>


Item 3.  Legal Proceedings

      From time to time, the Holding Company and the Bank are involved in
routine litigation stemming from the operations of the Bank. During the fiscal
year ended March 31, 1997, however, there was no material litigation pending to
which the Holding Company or the Bank was a party or of which the property of
the Holding Company or the Bank was the subject.

Item 4.  Submission of Matters to a Vote of Security Holders

      During the fourth quarter of fiscal year ended March 31, 1997, there was
no matter that was submitted to a vote of the stockholders.



PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

      On March 31, 1997 there were 231,439 shares of the Holding Company's
Common Stock outstanding held by approximately 320 holders of record. Also at
such date, the Holding Company had granted options to purchase 9,963 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
markups, mark-down or commission and may not necessarily represent actual
transactions. The Holding Company's common stock is traded on the National
Association of Securities Dealers Automated Quotation System (NASDAQ) under the
symbol "MCBN."

<TABLE>
<CAPTION>
                                                            Cash
                                                          Dividends
                                                          Paid per
    Quarter Ended             High          Low             share
    ------------------        ------        ------        ---------

    <S>                       <C>           <C>            <C>
    March 31, 1995            $14.75        $14.50         $  --
    June 30, 1995              17.25         14.50          0.23
    September 30, 1995         18.75         15.00            --
    December 31, 1995          20.25         15.50          0.25(1)

    March 31, 1996             20.00         17.50            --
    June 30, 1996              20.00         18.00          0.25
    September 30, 1996         20.00         18.00            --
    December 31, 1996          19.00         18.75          0.26

    March 31, 1997             19.00         18.75

<FN>
-------------------
<F1>  During the quarter ended December 31, 1995 the Holding Company declared a
      5% stock dividend in addition to the $0.25 per share cash dividend.
</FN>
</TABLE>

      On April 15, 1997 the Holding Company declared a dividend of $0.26 per
share to stockholders of record on June 2, 1997 and payable June 30, 1997. See
"Regulation - Dividends" for information about the Holding Company's ability to
pay dividends.


Item 6.  Management's Discussion and Analysis.

      Management's Discussion and Analysis, on Pages 1 through 10 of the Annual
Report for the year ended March 31, 1997, is incorporated herein by reference.

Item 7.  Financial Statements.

      See Item 13 for index to Financial Statements which are incorporated by
reference.

Item 8.  Changes in and Disagreements with Accountants on Accounting and 
         Financial Disclosure.

      Not applicable.



PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act.

      Information regarding Directors, Executive Officers and control persons
and compliance with Section 16(a) of the Exchange Act on Page 9 of the Proxy
Statement dated June 6, 1997 is incorporated herein by reference.

Item 10. Executive Compensation.

      Information regarding Executive Compensation on Page 8 of the Proxy
Statement dated June 6, 1997 is incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

      Information regarding security ownership of certain beneficial owners and
management on Pages 2 through 4 of the Proxy Statement dated June 6, 1997 is
incorporated herein by reference.

Item 12. Certain Relationships and Related Transactions.

      Information regarding certain relationships and related transactions on
Page 10 of the Proxy Statement dated June 6, 1997 is incorporated herein by
reference.

Item 13. Exhibits.

A)    1)    The following financial statements, the report thereon and notes 
            thereto, which follow, are incorporated by reference in Item 7 and 
            are incorporated by reference herein from the Holding Company's 
            1997 Annual Report:

<TABLE>
<CAPTION>
                                                                    Pages in
                                                                  Annual Report
                                                                  -------------

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

      Consolidated Balance Sheets, March 31, 1997 and 1996         F-2 - F-3

      Consolidated Statements of Income, Years Ended March 31,
       1997, 1996 and 1995                                               F-4

      Consolidated Statements of Changes in Stockholders'
       Equity, Years Ended March 31, 1997, 1996 and 1995                 F-5

      Consolidated Statements of Cash Flows, Years Ended
       March 31, 1997, 1996 and 1995                               F-6 - F-7

      Notes to Consolidated Financial Statements                  F-8 - F-29
</TABLE>


      2)    The Holding Company did not file any reports on Form 8-K during the
            last quarter of the period covered by this report.



      Exhibit No.

B)    3(i)  Certificate of Incorporation (previously filed on June 26, 1996 as
            an exhibit to the Holding Company's Form 10-KSB for the year ended
            March 31, 1996, and incorporated herein by reference).

      3(ii) Bylaws (previously filed on June 26, 1996 as an exhibit to the
            Holding Company's Form 10-KSB for the year ended March 31, 1996, 
            and incorporated herein by reference).

      10.1  Employment Agreement dated May 18, 1993 between Wesley E.
            Richardson, the Holding Company and the Bank (previously filed on
            June 26, 1996 as an exhibit to the Holding Company's Form 10-KSB
            for the year ended March 31, 1996, and incorporated herein by
            reference).

      10.2  Recognition and Retention Plan of Mid-Coast Bancorp, Inc.
            (previously filed on June 6, 1997 as Appendix A to the Holding
            Company's Proxy Statement and incorporated herein by reference).

      13    Annual Report to the Shareholders for the year ended March 31, 1997
            (filed on June 27, 1997 and incorporated herein).

      21    Subsidiaries of Issuer (previously filed on June 26, 1996 as an
            exhibit to the Holding Company's Form 10-KSB for the year ended
            March 31, 1996, and incorporated herein by reference).

      23    Consent of Baker Newman & Noyes.

      27    Financial Data Schedule.



                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereto duly authorized.

                                     MID-COAST BANCORP, INC.


June 18, 1997                        By: /s/ WESLEY E. RICHARDSON
                                     -----------------------------------------
                                         Wesley E. Richardson, President,
                                         Chief Executive Officer and Treasurer

      Pursuant to the requirements of the Securities Exchange Act of 1934, 
this Report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

         Signatures                              Title                          Date
----------------------------      -----------------------------------      --------------

<S>                               <C>                                      <C>
By: /s/ WESLEY E. RICHARDSON      President, Chief Executive Officer,      June 18, 1997
        Wesley E. Richardson      Treasurer and Director


By: /s/ WAITE W. WESTON           Director and Chairman                    June 19, 1997
        Waite W. Weston


By: /s/ ROBERT W. SPEAR           Director and Vice Chairman               June 19, 1997
        Robert W. Spear


By: /s/ MAYNARD A. PROCK          Director                                 June 18, 1997
        Maynard A. Prock


By: /s/ SHARON CROWE              Director                                 June 21, 1997
        Sharon Crowe


By: /s/ LINCOLN DAVIS, III        Director                                 June 18, 1997
        Lincoln Davis, III


By: /s/ RONALD DOLLOFF            Director                                 June 18, 1997
        Ronald Dolloff


By: /s/ SAMUEL COHEN              Director                                 June 18, 1997
        Samuel Cohen


By: /s/ LINCOLN ORFF              Director                                 June 19, 1997
        Lincoln Orff

</TABLE>