FIRST NATIONAL LINCOLN CORP /ME/ - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: Commission File No.
September 30, 2002 0-26589

FIRST NATIONAL LINCOLN CORPORATION
(Exact name of registrant as specified in its charter)

MAINE 01-0404322
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)

MAIN STREET, DAMARISCOTTA, MAINE 04543
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (207) 563 - 3195

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes XX No __

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

Class Outstanding at November 7, 2002
Common Stock, Par One Cent 2,417,544

FIRST NATIONAL LINCOLN CORPORATION

INDEX

PART 1 Financial Information (Unaudited)
Page No.

Item 1:

Selected Financial Data .................................... 1

Independent Accountants' Review Report ..................... 2

Financial Statements

Consolidated Balance Sheets -
September 30, 2002, September 30, 2001 and December 31, 2001 3 - 4

Consolidated Statements of Income - for the three and
nine months ended September 30, 2002 and September 30, 2001 5 - 6

Consolidated Statements of Changes in Shareholders' Equity -
for the nine months ended September 30, 2002
and September 30, 2001 7 - 8

Consolidated Statements of Cash Flows - for the nine months
ended September 30, 2002 and September 30, 2001........... 9 - 10

Notes to Financial Statements -
Nine months ended September 30, 2002 and September 30, 2001 11 - 12

Item 2: Management's discussion and analysis of
financial condition and results of operations .......... 13 - 20

Item 3: Quantitative and qualitative disclosures
about market risk ...................................... 21 - 23

Item 4: Controls and Procedures ................................ 24

PART II Other Information

Item 1: Legal Proceedings ...................................... 25

Item 2: Changes in Securities .................................. 26

Item 3: Defaults Upon Senior Securities ........................ 27

Item 4: Submission of Matters to a Vote of Security Holders .... 28

Item 5: Other Information ...................................... 29

Item 6: Exhibits and reports on Form 8-K ....................... 30

Signatures .......................................................... 31

Certifications ...................................................... 32 - 33

FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY
SELECTED FINANCIAL DATA

- -----------------------------------------------------------------------------
For the nine months For the quarters
ended September 30, ended September 30,
Dollars in thousands, 2002 2001 2002 2001
except for per share amounts (Unaudited) (Unaudited)
- -----------------------------------------------------------------------------

Summary of Operations

Operating income $25,374 $25,546 $8,881 $8,694
Operating expense 18,557 19,785 6,470 6,654
Net interest income 12,828 10,900 4,339 3,878
Provision for loan losses 945 690 255 215
Net income 4,808 4,083 1,689 1,446
- -----------------------------------------------------------------------------

Per Common Share Data

Net Income
Basic $2.00 $1.71 $ 0.70 $ 0.61
Diluted 1.95 1.66 0.68 0.59
Cash dividends declared 0.72 0.60 0.25 0.21
Book value 17.42 15.48 17.42 15.48
Market value 28.80 20.00 28.80 20.00
- -----------------------------------------------------------------------------

Financial Ratios

Return on average equity(a) 16.49% 15.72% 16.56% 16.07%
Return on average assets(a) 1.40% 1.33% 1.38% 1.37%
Average equity to average
assets 8.47% 8.46% 8.35% 8.52%
Net interest margin
tax-equivalent(a) 4.08% 3.92% 3.92% 4.08%
Dividend payout ratio 35.96% 35.04% 35.78% 34.68%
Allowance for loan
losses/total loans 1.10% 0.95% 1.10% 0.95%
Non-performing loans
to total loans 0.52% 0.63% 0.52% 0.63%
Non-performing assets
to total assets 0.39% 0.54% 0.39% 0.54%
Efficiency ratio, tax equivalent 50.06% 50.85% 51.45% 53.01%
- -----------------------------------------------------------------------------

At Period End

Total assets 497,248 421,704 497,248 421,704
Total loans 331,142 287,799 331,142 287,799
Total investment securities 124,104 105,791 124,104 105,791
Total deposits 336,800 277,733 336,800 277,733
Total shareholders' equity 42,114 36,978 42,114 36,978
- -----------------------------------------------------------------------------

(a) Annualized using a 365-day basis

Page 1

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

The Board of Directors and Shareholders
First National Lincoln Corporation

We have reviewed the accompanying interim consolidated financial information of
First National Lincoln Corporation and Subsidiary as of September 30, 2002 and
2001, and for the three- and nine-month periods then ended. These financial
statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with U.S. generally accepted auditing standards, the objective of
which is to express an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with U.S. generally accepted accounting principles.

Berry, Dunn, McNeil & Parker

Portland, Maine
November 5, 2002

Page 2
FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

- --------------------------------------------------------------------------
9/30/02 9/30/01 12/31/01
(000 OMITTED except number of shares) (Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------
Assets

Cash and due from banks $ 19,904 $ 10,147 $ 10,894
Interest-bearing deposits in other banks 6,400 3,300 0

Investments:

Available for sale 57,115 58,812 50,914

Held to maturity (market values $68,556
at 9/30/02, $47,574 at 9/30/01 and
$56,921 at 12/31/01) 66,989 46,979 57,272

Loans held for sale (fair value
approximates cost) 1,983 458 466

Loans 331,142 287,799 301,304
Less allowance for loan losses 3,628 2,742 3,000
-------- -------- --------
Net loans 327,514 285,057 298,304
-------- -------- --------
Accrued interest receivable 2,852 2,785 2,635
Bank premises and equipment 7,851 6,189 7,563
Other real estate owned 192 429 202
Other assets 6,448 7,548 6,216
-------- -------- --------
Total Assets $497,248 $421,704 $434,466
======== ======== ========
- --------------------------------------------------------------------------

Page 3
BALANCE SHEETS CONT.

- --------------------------------------------------------------------------
9/30/02 9/30/01 12/31/01
(Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------
Liabilities

Demand deposits $ 29,885 $ 23,590 $ 22,496
NOW deposits 49,078 43,274 43,644
Money market deposits 76,632 13,199 15,878
Savings deposits 58,986 44,856 46,855
Certificates of deposit 72,096 84,277 79,907
Certificates $100,000 and over 50,123 68,537 53,909
-------- -------- --------
Total deposits 336,800 277,733 262,689
-------- -------- --------

Borrowed funds 113,975 102,696 131,357
Other liabilities 4,359 4,297 3,086
-------- -------- --------
Total Liabilities 455,134 384,726 397,132
-------- -------- --------
Shareholders' Equity

Common stock 25 25 25
Additional paid-in capital 4,687 4,687 4,687
Retained earnings 37,103 33,146 34,030
Accumulated Other Comprehensive Income:
Net unrealized gains on available-for-
sale securities (net of tax) 2,356 1,329 784
Treasury stock (2,057) (2,209) (2,192)
-------- -------- --------
Total Shareholders' Equity 42,114 36,978 37,334
-------- -------- --------
Total Liabilities &
Shareholders' Equity $497,248 $421,704 $434,466
======== ======== ========
- --------------------------------------------------------------------------

Number of shares authorized 6,000,000 6,000,000 6,000,000
Number of shares issued 2,481,270 2,481,270 2,481,270
Number of shares outstanding 2,417,637 2,388,054 2,391,375
Book value per share $17.42 $15.48 $15.61
- --------------------------------------------------------------------------

See Accountants' Review Report. The accompanying notes are an integral part of
these consolidated financial statements.

Page 4
FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

- ------------------------------------------------------------------------
For the nine months ended September 30,
(000s OMITTED except per share data 2002 2001
and number of shares) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------
Interest and dividend income:
Interest and fees on loans $16,652 $17,261
Interest on deposits with other banks 26 70
Interest and dividends on investments 5,392 5,380
------- -------
Total interest and dividend income 22,070 22,711
------- -------
Interest expense:
Interest on deposits 5,809 7,893
Interest on borrowed funds 3,433 3,918
------- -------
Total interest expense 9,242 11,811
------- -------
Net interest income 12,828 10,900
Provision for loan losses 945 690
------- -------
Net interest income after provision
for loan losses 11,883 10,210
------- -------
Other operating income:
Fiduciary income 555 521
Service charges on deposit accounts 719 671
Other operating income 2,030 1,643
------- -------
Total other operating income 3,304 2,835
------- -------
Other operating expenses:
Salaries and employee benefits 4,113 3,611
Occupancy expense 532 426
Furniture and equipment expense 958 742
Other 2,767 2,505
------- -------
Total other operating expenses 8,370 7,284
------- -------
Income before income taxes 6,817 5,761
Applicable income taxes 2,009 1,678
------- -------
NET INCOME $ 4,808 $ 4,083
======= =======
- ------------------------------------------------------------------------
Earnings per common share:
Basic earnings per share $2.00 $1.71
Diluted earnings per share $1.95 $1.66
Cash dividends declared per share $0.72 $0.60
Weighted average number of shares
outstanding 2,401,365 2,384,402
Incremental Shares 67,499 71,161
- ------------------------------------------------------------------------
See Accountants' Review Report. The accompanying notes are an integral part of
these consolidated financial statements.

Page 5
FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

- ------------------------------------------------------------------------
For the quarters ended September 30,
(000s OMITTED except per share data 2002 2001
and number of shares) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------
Interest and dividend income:
Interest and fees on loans $ 5,623 $ 5,764
Interest on deposits with other banks 21 20
Interest and dividends on investments 1,869 1,757
------- -------
Total interest and dividend income 7,513 7,541
------- -------
Interest expense:
Interest on deposits 2,034 2,577
Interest on borrowed funds 1,140 1,086
------- -------
Total interest expense 3,174 3,663
------- -------
Net interest income 4,339 3,878
Provision for loan losses 255 215
------- -------
Net interest income after provision
for loan losses 4,084 3,663
------- -------
Other operating income:
Fiduciary income 172 176
Service charges on deposit accounts 249 225
Other operating income 947 752
------- -------
Total other operating income 1,368 1,153
------- -------
Other operating expenses:
Salaries and employee benefits 1,451 1,318
Occupancy expense 174 155
Furniture and equipment expense 334 267
Other 1,082 1,036
------- -------
Total other operating expenses 3,041 2,776
------- -------
Income before income taxes 2,411 2,040
Applicable income taxes 722 594
------- -------
NET INCOME $ 1,689 $ 1,446
======= =======
- ------------------------------------------------------------------------
Earnings per common share:
Basic earnings per share $0.70 $0.61
Diluted earnings per share $0.68 $0.59
Cash dividends declared per share $0.25 $0.21
Weighted average number of shares
outstanding 2,417,235 2,387,889
Incremental Shares 69,904 71,161
- ------------------------------------------------------------------------
See Accountants' Review Report. The accompanying notes are an integral part of
these consolidated financial statements.

Page 6
FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

Page 8
FIRST NATIONAL LINCOLN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
For the nine months ended September 30,
(000 omitted) 2002 2001
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 4,808 $ 4,083

Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 708 561
Provision for loan losses 945 690
Loans originated for resale (22,527) (16,017)
Proceeds from sales and transfers of loans 21,010 15,559
Net gain on call of securities available for sale 0 (73)
Net change in other assets and accrued interest (449) (997)
Net change in other liabilities 384 1,146
Net accretion of discounts on investments (544) (148)
------- -------
Net cash provided by operating activities 4,335 4,804
------- -------
Cash flows from investing activities:
Net increase in interest-bearing
deposits in other banks (6,400) (3,300)
Proceeds from maturities, payments and calls of
securities available for sale 1,822 10,528
Proceeds from maturities, payments and calls of
securities to be held to maturity 24,974 14,904
Proceeds from sales of other real estate owned 10 365
Purchases of securities available for sale (5,582) (4,585)
Purchases of securities to be held to maturity (34,206) (19,491)
Net increase in loans (30,155) (23,557)
Purchases of premises and equipment (996) (1,398)
------- -------
Net cash used in investing activities (50,533) (26,534)
------- -------
Cash flows from financing activities:
Net increase in demand deposits, savings,
money market and NOW accounts 85,708 13,779
Net increase (decrease) in
certificates of deposit (11,597) 9,388
Advances on long-term borrowings 17,000 51,500
Repayments on long-term borrowings 0 (7,114)
Net decrease in short-term borrowings (34,382) (44,609)
Payment to repurchase common stock (304) (146)
Proceeds from sale of Treasury stock 439 187
Dividends paid (1,656) (1,432)
------- -------
Net cash provided by financing activities 55,208 21,553
------- -------
- ------------------------------------------------------------------------------

Page 9
STATEMENTS OF CASH FLOWS CONT.

- ------------------------------------------------------------------------------
For the nine months ended September 30,
2002 2001
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents 9,010 (177)
Cash and cash equivalents at beginning of period 10,894 10,324
------- -------
Cash and cash equivalents at end of period $ 19,904 $10,147
======= =======
- ------------------------------------------------------------------------------
Interest paid $9,347 $11,811
Income taxes paid 1,970 1,177

Non-cash transactions:
Loans transferred to other real estate
owned (net) 0 438
Net change in unrealized gain on available for
sale securities (net of tax) 1,572 1,126
- ------------------------------------------------------------------------------

See Accountants' Review Report. The accompanying notes are an integral part of
these consolidated financial statements.

Page 10
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

First National Lincoln Corporation (the Company) is a financial holding company
that owns all of the common stock of The First National Bank of Damariscotta
(the Bank). The accompanying unaudited consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. All significant intercompany
transactions and balances are eliminated in consolidation. The income reported
for the 2002 period is not necessarily indicative of the results that may be
expected for the year ending December 31, 2002. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 2001.

NOTE 2 - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share for the three and nine months ended September 30, 2002 and 2001:

- -----------------------------------------------------------------------------
Three Months Nine Months
In thousands, except for number of Ended September 30 Ended September 30
shares and per share data 2002 2001 2002 2001
- -----------------------------------------------------------------------------
Income as reported $ 1,689 $ 1,446 $ 4,808 $ 4,083
Income available to
common shareholders $ 1,689 $ 1,446 $ 4,808 $ 4,083
Weighted average shares outstanding 2,417,235 2,387,889 2,401,365 2,384,402
Basic earnings per share $ 0.70 $ 0.61 $ 2.00 $ 1.71

Income as reported $ 1,689 $ 1,446 $ 4,808 $ 4,083
Income available to
common shareholders $ 1,689 $ 1,446 $ 4,808 $ 4,083
Weighted average shares outstanding 2,417,235 2,387,889 2,401,365 2,384,402
Effect of dilutive securities:
Incentive stock options 69,904 71,161 67,499 71,161
Adjusted weighted-average
shares outstanding 2,487,139 2,459,050 2,468,864 2,455,563
Diluted earnings per share $ 0.68 $ 0.59 $ 1.95 $ 1.66
- -----------------------------------------------------------------------------

The basic earnings per share computation is based upon the weighted-
average number of shares of stock outstanding during the period. Potential
common stock is considered in the calculation of weighted-average shares
outstanding for diluted earnings per share.

Page 11
NOTES CONT.

NOTE 3 - COMPREHENSIVE INCOME

Comprehensive income presented in the Statements of Changes in Shareholders'
Equity is for the nine-month periods ended September 30, 2002 and 2001.
Comprehensive Income for the quarters ended September 30, 2002 and 2001 is
presented in the following table:
- ------------------------------------------------------------------------------
For the quarters ended September 30,
2002 2001
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------

NET INCOME $ 1,689 $ 1,446

Other Comprehensive Income:
Unrealized gains arising during period,
net of taxes of $512 in 2002 and $409 in 2001 993 794
------- -------
TOTAL COMPREHENSIVE INCOME $ 2,682 $ 2,240
======= =======
- ------------------------------------------------------------------------------

NOTE 4 - STOCK OPTIONS

A summary of the status of the Company's Stock Option Plan as of September 30,
2002, and changes during the nine months then ended, is presented below.
- -------------------------------------------------------------------------------
Number of Shares Weighted Average Exercise Price
- -------------------------------------------------------------------------------
Balance at December 31, 2001 138,000 9.84
Granted during the period 11,000 28.00
Exercised during the period (28,100) 6.93
------- -----
Balance at September 30, 2002 120,900 12.17
======= =====
- -------------------------------------------------------------------------------

NOTE 5 - RECENT ACCOUNTING DEVELOPMENTS

Statement of Position (SOP) 01-6, "Accounting by Certain Entities (Including
Entities with Trade Receivables) That Lend to or Finance the Activities of
Others," was issued in December 2001. The SOP is effective for financial
statements issued for fiscal years beginning after December 15, 2001. The SOP
reconciles and conforms the accounting and financial reporting provisions
established by various audit and accounting industry guides. The adoption of
the SOP did not have an effect on the Company's consolidated financial
condition and results of operations.

SFAS No. 147, "Acquisitions of Certain Financial Institutions," amends SFAS 72,
"Accounting for Certain Acquistitions of Banking or Thrift Institutions," to
exclude from its scope most acquisitions of financial institutions. Such
transactions should be accounted for in accordance with SFAS No. 141, "Business
Combinations". SFAS No 147 is effective as of October 1, 2002. SFAS No. 147
does not affect the Company's consolidated financial condition and results of
operations.

Page 12
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

Management's discussion and analysis of the Company's financial condition is
based on the consolidated financial statements which are prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of such financial statements requires Management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosure of contingent assets and
liabilities. On an ongoing basis, Management evaluates its estimates,
including those related to the allowance for loan losses. Management bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form
the basis in making judgments about the carrying values of assets that are not
readily apparent from other sources. Actual results could differ from the
amount derived from Management's estimates and assumptions under different
assumptions or conditions.
Management believes the allowance for loan losses is a critical accounting
policy that requires the most significant estimates and assumptions used in the
preparation of the consolidated financial statements. The allowance for loan
losses is based on Management's evaluation of the level of the allowance
required in relation to the estimated loss exposure in the loan portfolio.
Management believes the allowance for loan losses is a significant estimate and
therefore regularly evaluates it for adequacy by taking into consideration
factors such as prior loan loss experience, the character and size of the loan
portfolio, business and economic conditions and Management's estimation of
potential losses. The use of different estimates or assumptions could produce
different provisions for loan losses.

EARNINGS SUMMARY

Net income for the nine months ended September 30, 2002 was $4,808,000, an
increase of 17.8% over net income of $4,083,000 in the comparable period of
2001. Revenue growth was the primary factor in the Company's increased earnings
for the first nine months of 2002 compared to the same period in 2001. This was
a direct result of asset growth and increased interest margins, which produced
higher levels of net interest income. Between September 30, 2001 and September
30, 2002, the loan and investment portfolios increased by a combined $61.7
million, which Management views as excellent for the first nine months of the
year.
Fully diluted earnings per share for the first nine months of 2002 were
$1.95, a 17.5% increase over the $1.66 reported for the first nine months of
2001.
Net income for the three months ended September 30, 2002 was $1,689,000,
an increase of 16.8% over net income of $1,446,000 in the third quarter of
2001. Revenue growth was the primary factor in the Company's increased earnings
and was a direct result of asset growth noted above, which produced higher
levels of net interest income.
Fully diluted earnings per share for the third quarter of 2002 were $0.68,
a 15.3% increase over the $0.59 reported in the third quarter of 2001.

Page 13
MANAGEMENT'S DISCUSSION CONT.

NET INTEREST INCOME

Total interest income of $22,070,000 for the nine months ended September 30,
2002 is a 2.8% decrease from total interest income of $22,711,000 in the
comparable period of 2001. Total interest expense of $9,242,000 for the first
nine months of 2002 is a 21.8% decrease from total interest expense of
$11,811,000 for the first nine months of 2001, and this decrease is the primary
factor in the Company's improved operating results. The decreases in both
interest income and interest expense were due to significantly lower interest
rates resulting from current economic conditions, despite significantly higher
balances for both assets and liabilities. Net interest income for the nine
months ended September 30, 2002, was $12,828,000, a 17.7% increase over the
$10,900,000 reported for the same period in 2001. Net interest margin on a tax-
equivalent basis increased from 3.92% in the first nine months of 2001 to 4.08%
in the first nine months of 2002. This was due to the continued low interest
rate climate created by the policies of the Federal Reserve Board over the past
21 months.
Total interest income for the three months ended September 30, 2002 was
$7,513,000, a 0.4% decrease from total interest income of $7,541,000 for the
third quarter of 2001. Total interest expense of $3,174,000 is a 13.3% decrease
from total interest expense of $3,663,000 for the third quarter of 2001. The
decreases in both interest income and interest expense were a result of lower
interest rates. Net interest income for the third quarter of 2002 was
$4,339,000, an 11.9% increase over the $3,878,000 reported for the third
quarter of 2001, which resulted from higher levels of earning assets.

PROVISION FOR LOAN LOSSES

A $945,000 provision to the allowance for loan losses was made during the first
nine months of 2002, a $255,000 increase over the $690,000 provision made for
the same period of 2001. In Management's opinion, the increase is not
indicative of a decline in overall credit quality within the portfolio.
Instead, it is the result of significant growth in the commercial loan
portfolio, current weakness in the national economy, and the deterioration of
one large credit due to weakness in the commercial fishing industry.

NON-INTEREST INCOME

Non-interest income was $3,304,000 for the nine months ended September 30,
2002, an increase of 16.5% from the $2,835,000 reported for the first nine
months of 2001. The increase in other operating income was due primarily to
higher merchant credit card processing income and mortgage origination and
servicing income. There were also increases in fiduciary income, as well as
service charge income on deposit accounts. Demand for residential mortgages was
strong in the first nine months of 2002. The Bank sold $21.0 million of
residential loans in the first nine months of 2002 compared to $15.6 million in
the first nine months of 2001. This resulted in increased gains on sales of
loans.
Non-interest income was $1,368,000 for the three months ended September
30, 2002, an increase of 18.6% from the $1,153,000 reported in the third
quarter of 2001. The increase was due primarily to increases in merchant
credit card processing income, mortgage origination and servicing income, and
service charge income on deposit accounts.

Page 14
MANAGEMENT'S DISCUSSION CONT.

NON-INTEREST EXPENSE

Non-interest expense of $8,370,000 for the nine months ended September 30,
2002, is an increase of 14.9% from non-interest expense of $7,284,000 for the
first nine months of 2001. This increase has been primarily due to higher
personnel and computer hardware/software costs to provide more comprehensive
and competitive services for customers, an increase of nearly 40% in health
care insurance premiums, as well as staffing and operating costs for the Bank's
new Rockland office which was placed in service in late 2001. In addition,
there were increases in merchant credit card processing costs which were offset
by an increase in merchant credit card processing income. Included in 2002's
other operating expense is a $135,000 one-time expense representing the write-
down of a repossessed asset.
Non-interest expense of $3,041,000 for the three months ended September
30, 2002 is an increase of 9.5% from non-interest expense of $2,776,000 for the
third quarter of 2001. This increase is attributable to the same factors as
the year-to-date increases and includes the one-time expense noted above.

INCOME TAXES

Income taxes on operating earnings increased to $2,009,000 for the first nine
months of 2002 from $1,678,000 for the same period a year ago. The increase is
in line with the increase in pre-tax income.

Page 15
MANAGEMENT'S DISCUSSION CONT.
AVERAGE DAILY BALANCE SHEET
The following table shows the Company's average daily balance sheets for the
nine-month periods ended September 30, 2002 and 2001
- --------------------------------------------------------------------------
Nine-Month Periods ended September 30,
Dollars in thousands 2002 2001
- --------------------------------------------------------------------------
Cash and due from banks $ 9,101 7,764
Interest-bearing deposits 2,240 2,208
Investments
U.S. Treasury securities & government agencies 61,117 54,547
Obligations of states & political subdivisions 21,003 17,905
Other securities 36,041 36,936
--------- ---------
Total investments 118,161 109,388
--------- ---------
Loans held for sale 1,849 169
--------- ---------
Loans
Commercial 109,977 93,946
Consumer 29,934 31,817
State and municipal 8,022 9,218
Real estate 167,071 142,619
--------- ---------
Total loans 315,004 277,600
Allowance for loan losses (3,303) (2,480)
--------- ---------
Net loans 311,701 275,120
--------- ---------
Fixed assets 7,777 5,920
Other assets 9,545 9,697
--------- ---------
Total assets $ 460,374 410,266
========= =========
Deposits
Demand $ 23,116 19,866
NOW 44,949 39,551
Money market 40,507 11,397
Savings 51,042 40,509
Certificates of deposit 77,636 83,179
Certificates of deposit over $100,000 53,979 71,380
--------- ---------
Total deposits 291,229 265,882
--------- ---------
Borrowed funds 126,742 106,667
Other liabilities 3,424 2,996
--------- ---------
Total liabilities 421,395 375,545
--------- ---------
Common stock 25 25
Additional paid in capital 4,687 4,687
Retained earnings 35,468 31,707
Unrealized Gain/Loss on AFS 935 537
Treasury stock (2,136) (2,235)
-------- ---------
Total capital 38,979 34,721
-------- ---------
Total liabilities and capital $ 460,374 410,266
========= =========
Page 16
MANAGEMENT'S DISCUSSION CONT.

INVESTMENTS

The Company's investment portfolio increased by $15.9 million or 14.7% between
December 31, 2001, and September 30, 2002. A portion of the portfolio consists
of callable securities, some of which were called by issuers and replaced at
lower levels. At September 30, 2002, the Company's available-for-sale portfolio
had an unrealized gain, net of taxes, of $2.4 million, which is attributable to
the interest rate declines seen in the first nine months of 2002.

LOANS

Loans grew by $29.8 million or 9.9% during the first nine months of 2002. The
growth in commercial loans was $17.7 million or 17.5% and municipal loans
increased $2.6 million or 35.1%. Although the residential mortgage portfolio
declined by $4.1 million, this decrease was more than offset by home equity
lines of credit, which grew $14.1 million or 149.0% -- the result of more
competitive product pricing and marketing. A substantial amount of the
Company's loan growth in 2002 is attributable to the new banking office in
Rockland, Maine, which opened in September 2001.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses represents the amount available for credit losses
inherent in the Company's loan portfolio. Loans are charged off when they are
deemed uncollectible, after giving consideration to factors such as the
customer's financial condition, underlying collateral and guarantees, as well
as general and industry economic conditions.
In general, the Company determines the appropriate overall reserve for
loan losses based upon periodic, systematic reviews of its portfolio to
identify inherent losses and Management's judgment about various qualitative
factors. These reviews result in the identification and quantification of loss
factors, which are used in determining the amount of the allowance for loan
losses. The Company periodically evaluates prevailing economic and business
conditions, industry concentrations, changes in the size and characteristics of
the portfolio and other pertinent factors. Portions of the allowance for loan
losses are quantified to cover the estimated losses inherent in each loan
category based on the results of this detailed review process.
Commercial loans are individually reviewed and assigned a credit risk
rating from "1" (low risk of loss) to "8" (high risk of loss). For non-impaired
loans with a credit risk rating of "1" to "7", estimated loss factors based on
historical loss experience (ranging from two to five years) are used to
calculate a loan loss reserve for each credit risk rating classification.
Qualitative adjustments are also made based upon Management's assessment of
prevailing economic conditions, trends in volumes and terms of loans, levels
and trends in delinquencies and non-accruals, and the effect of changes in
lending policies. A specific allocation is made for impaired loans (loans on
non-accrual status), which are measured at the net present value of future cash
flows, discounted at the loan's effective interest rate, or at fair market
value of collateral if the loan is collateral dependent. The combination of
these analyses is the basis for the determination of the commercial loan
portion of the allowance for loan losses.
Consumer loans, which include credit cards, residential mortgages, home
equity loans/lines, and direct/indirect loans, are generally evaluated as a
group based on product type. The determination of the consumer loan portion of
the allowance for loan losses is based on a five-year average of annual
historical losses, adjusted for the qualitative factors noted above.

Page 17
MANAGEMENT'S DISCUSSION CONT.

The results of all analyses are reviewed and discussed by the Directors' Loan
Committee. An integral component of the Company's risk management process is to
ensure the proper quantification of the reserve for loan losses based upon an
analysis of risk characteristics, demonstrated losses, loan segmentations, and
other factors. Reserve methodology is reviewed on a periodic basis and modified
as appropriate. The unallocated component of the allowance for loan losses
represents Management's view that, given the complexities of the loan
portfolio, there are estimable losses that have been incurred within the
portfolio but not yet specifically identified.
Based on this analysis, including the aforementioned assumptions, the
Company believes that the allowance for loan losses is adequate as of September
30, 2002. As of that date, the balance of $3,628,000 was 1.10% of total loans,
compared to 1.00% at December 31, 2001 and 0.95% at September 30, 2001. Loans
considered to be impaired according to SFAS 114/118 totalled $1,738,0000 at
September 30, 2002, compared to $667,000 at December 31, 2001. This increase is
attributable to the deterioration of a single large credit as noted above. The
portion of the allowance for loan losses allocated to impaired loans at
September 30, 2002, was $678,000 compared to $202,000 at December 31, 2001.

DEPOSITS

During the first nine months of 2002, deposits increased by $74.1 million or
28.2% over December 31, 2001. Core deposits grew by $85.7 million or 66.5% in
the first nine months of 2002, including a $21.4 million increase in money
market accounts from deposits for the Bank's investment management division
which were previously placed with a mutual fund company. Management believes
the remaining increase in core deposits (demand, NOW, savings, and money
markets) is partially attributable to an inflow from equity and mutual fund
investments. During the same period, certificates of deposit decreased $11.6
million, primarily due to pricing strategies which resulted in certificates
maturing and not renewing at the lower rates offered by the Bank. Approximately
$12 million of the increase in deposits during the first nine months of 2002 is
attributable to funds deposited in the Bank's new office in Rockland, Maine,
which opened in September 2001.
As of September 30, 2002, deposits grew year-over-year by 21.3%, or $59.1
million. Demand deposits grew $6.3 million, NOW accounts $5.8 million, savings
$14.1 million, and money market accounts $63.4 million, while certificates of
deposit decreased $30.6 million.

BORROWED FUNDS

The Company's funding includes borrowings from the Federal Home Loan Bank and
repurchase agreements. The Company utilizes borrowings as an additional source
of funding for both loans and investments, enabling it to grow its balance
sheet and, in turn, grow its revenues. They may also used to carry out interest
rate risk management stategies, and are increased as other sources of funding
decrease, including core deposits and certificates of deposit. During the nine
months ended September 30, 2002, borrowed funds decreased by $17.4 million or
13.2% from December 31, 2001, and these were replaced by core deposits.
Between September 30, 2001 and September 30, 2002, while core deposits
grew substantially, additional borrowings were needed to fund liquidity needs
created by the growth in the loan and investment portfolios and the outflow of
certificates of deposit. The increase during this period was $11.3 million or
11.0%.

Page 18
MANAGEMENT'S DISCUSSION CONT.

SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES

Shareholders' equity as of September 30, 2002 was $42,114,000, compared to
$37,334,000 as of December 31, 2001. The Company's strong earnings performance
in the first nine months months of 2002 provided a significant addition to
retained earnings and was accompanied by an increase in the net unrealized gain
on available-for-sale securities, as required under SFAS 115.
During 2001, the Company increased its dividend each quarter to end the
year at a quarterly dividend rate of 22 cents per share. In 2002, a cash
dividend of 23 cents per share was declared in the first quarter compared to 19
cents in the first quarter of 2001, a cash dividend of 24 cents per share was
declared in the second quarter compared to 20 cents per share in the second
quarter of 2001, and a cash dividend of 25 cents per share was declared in the
third quarter compared to 21 cents per share in the third quarter of 2001.
Regulatory leverage capital ratios for the Company were 8.18% and 8.56% at
September 30, 2002 and December 31, 2001, respectively. The Company had a tier
one risk-based capital ratio of 12.36% and tier two risk-based capital ratio of
13.50% at September 30, 2002, compared to 12.88% and 13.95%, respectively, at
December 31, 2001. These are comfortably above the standards to be rated "well-
capitalized" by regulatory authorities -- qualifying the Company for lower
deposit-insurance premiums.
On September 23, 2002, the Company announced that its Board of Directors
authorized the repurchase of up to 5.0% of the outstanding shares of the
Company's common stock, or slightly more than 120,000 shares. The Company
expects such repurchases to be effected from time to time, in the open market,
in private transactions or otherwise, during a period of up to 24 months. The
amount and timing of shares to be purchased will be subject to market
conditions and will be based on several factors, including the price of the
Company's stock and the level of stock issuances under the Company's employee
stock plans. No assurance can be given as to the specific timing of the share
repurchases or as to whether and to what extent the share repurchase will be
consummated. In Management's opinion, the Company has adequate capital
resources to undertake this repurchase plan.

LIQUIDITY MANAGEMENT

As of September 30, 2002 the Bank had primary sources of liquidity of $64.2
million and an additional $39.7 million of secondary sources. It is
Management's opinion that this is adequate. In its Asset/Liability policy, the
Bank has adopted guidelines for liquidity. The Company is not aware of any
recommendations by the regulatory authorities which, if they were to be
implemented, would have a material effect on the Corporation's liquidity,
capital resources or results of operations.

Page 19
MANAGEMENT'S DISCUSSION CONT.

NON-PERFORMING ASSETS

At September 30, 2002, loans on a non-accrual status totaled $1,738,000, which
compares to non-accrual loans of $667,000 as of December 31, 2001. In
Management's opinion, the level at September 30, 2002 is not reflective of the
overall quality of the Company's loan portfolio but is, instead, the result of
an unexpected and isolated decline in one credit. In addition to loans on non-
accrual status at September 30, 2002, loans past due 90 days or more and
accruing (calculated on a constant 30-day month basis) totaled $509,000, which
compares to $452,000 as of December 31, 2001. The Company continues to accrue
interest on these loans because it believes collection of the interest is
reasonably assured.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

No material off-balance sheet risk exists that requires a separate liability
presentation.

SALE OF LOANS
No recourse obligations have been incurred in connection with the sale of
loans.

FORWARD-LOOKING STATEMENTS

Certain disclosures in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain certain forward-looking statements
(as defined in the Private Securities Litigation Reform Act of 1995). In
preparing these disclosures, Management must make assumptions, including, but
not limited to, the level of future interest rates, prepayments on loans and
investment securities, required levels of capital, needs for liquidity, and the
adequacy of the allowance for loan losses. These forward-looking statements may
be subject to significant known and unknown risks uncertainties, and other
factors, including, but not limited to, those matters referred to in the
preceding sentence.
Although First National Lincoln Corporation believes that the expectations
reflected in such forward-looking statements are reasonable, actual results may
differ materially from the results discussed in these forward-looking
statements. Readers are cautioned not to place undue reliance on these forward
looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to republish revised forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. Readers are also urged to carefully review
and consider the various disclosures made by the Company which attempt to
advise interested parties of the facts which affect the Company's business.

Page 20
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK MANAGEMENT

Market risk is the risk of loss arising from adverse changes in the fair value
of financial instruments due to changes in interest rates. First National
Lincoln Corporation's market risk is composed primarily of interest rate risk.
The Bank's Asset/Liability Committee (ALCO) is responsible for reviewing the
interest rate sensitivity position of the Company and establishing policies to
monitor and limit exposure to interest rate risk. All guidelines and policies
established by ALCO have been approved by the Board of Directors.

ASSET/LIABILITY MANAGEMENT

The primary goal of asset/liability management is to maximize net interest
income within the interest rate risk limits set by ALCO. Interest rate risk is
monitored through the use of two complementary measures: static gap analysis
and earnings simulation modeling. While each measurement has limitations, taken
together they represent a reasonably comprehensive view of the magnitude of
interest rate risk in the Company, the level of risk through time, and the
amount of exposure to changes in certain interest rate relationships.
Static gap analysis measures the amount of repricing risk embedded in the
balance sheet at a point in time. It does so by comparing the differences in
the repricing characteristics of assets and liabilities. A gap is defined as
the difference between the principal amount of assets and liabilities which
reprice within a specified time period. The Bank's cumulative one-year gap, at
September 30, 2002, was 2.2% of total assets. ALCO's policy limit for the one-
year gap is plus or minus 20% of total assets. Core deposits with non-
contractual maturities are presented based upon historical patterns of balance
attrition and pricing behavior which are reviewed at least annually.
The gap repricing distributions include principal cash flows from
residential mortgage loans and mortgage-backed securities in the time frames in
which they are expected to be received. Mortgage prepayments are estimated by
applying industry median projections of prepayment speeds to portfolio segments
based on coupon range and loan age.

Page 21
MARKET RISK CONT.

A summary of the Bank's static gap, as of September 30, 2002, is presented in
the following table:

- -------------------------------------------------------------------------------
0-90 91-365 1-5 5+
Dollars in thousands days days years years
- -------------------------------------------------------------------------------
Investment securities at
amortized cost $ 24,768 18,751 38,809 37,358
Loans held for sale 16 75 629 1,264
Loans 115,427 56,456 129,885 29,197
Other interest-earning assets 19,401 - - -
Non-rate-sensitive assets - - - 23,952
-------- -------- -------- --------
Total assets $ 159,612 75,282 169,323 91,771
-------- -------- -------- --------
Interest-bearing deposits 97,611 68,118 33,110 108,076
Borrowed funds 17,728 40,747 28,000 27,500
Non-rate-sensitive
liabilities and equity - - - 75,098
-------- -------- -------- --------
Total liabilities and equity $ 115,339 108,865 61,110 210,674
-------- -------- -------- --------
Period gap $ 44,273 (33,583) 108,213 (118,903)
========= ======== ======== ========
Percent of total assets 8.9% (6.8%) 21.8% (24.0%)
Cumulative gap (current) $ 44,273 10,690 118,903 -
Percent of total assets 8.9% 2.2% 24.0% 0.0%
- -------------------------------------------------------------------------------

The earnings simulation model forecasts captures the impact of changing
interest rates on one-year and two-year net interest income. The modeling
process calculates changes in interest income received and interest expense
paid on all interest-earning assets and interest-bearing liabilities reflected
on the Company's balance sheet. None of the assets used in the simulation are
held for trading purposes. The modeling is done for a variety of scenarios that
incorporate changes in the absolute level of interest rates as well as basis
risk, as represented by changes in the shape of the yield curve and changes in
interest rate relationships. Management evaluates the effects on income of
alternative interest rate scenarios against earnings in a stable interest rate
environment. This analysis is also most useful in determining the short-run
earnings exposures to changes in customer behavior involving loan payments and
deposit additions and withdrawals.
The Bank's most recent simulation model projects net interest income would
increase by approximately 1.55% of stable-rate net interest income if rates
fall gradually by one percentage point over the next year, and increase by
approximately 1.10% if rates rise gradually by two percentage points. Both
scenarios are well within ALCO's policy limit of a decrease in net interest
income of no more than 10.0% given a 2.0% move in interest rates, up or down.
Management believes this reflects a reasonable interest rate risk position. In
year two, and assuming no additional movement in rates, the model forecasts
that net interest income would be higher than that earned in a stable rate
environment by 4.47% in a falling rate scenario and decrease by 0.67% in a
rising rate scenario when compared to the year two base scenario.

Page 22
MARKET RISK CONT.

This dynamic simulation model includes assumptions about how the balance
sheet is likely to evolve through time and in different interest rate
environments. Loans and deposits are projected to maintain stable balances. All
maturities, calls and prepayments in the securities portfolio are assumed to be
reinvested in similar assets. Mortgage loan prepayment assumptions are
developed from industry median estimates of prepayment speeds for portfolios
with similar coupon ranges and seasoning. Non-contractual deposit volatility
and pricing are assumed to follow historical patterns. The sensitivities of key
assumptions are analyzed annually and reviewed by ALCO.
A summary of the Bank's interest rate risk simulation modeling, as of
September 30, 2002 is presented in the following table:

- -------------------------------------------------------------
Changes in Net Interest Income 2002
- -------------------------------------------------------------
Year 1
Projected change if rates decrease by 1.0% +1.55%
Projected change if rates increase by 2.0% +1.10%
- -------------------------------------------------------------
Year 2
Projected change if rates decrease by 1.0% +4.47%
Projected change if rates increase by 2.0% -0.67%
- -------------------------------------------------------------

The information for static gap and changes in net interest income
presented in this section pertains to the Bank only and does not include a
small volume of assets and liabilities owned by the Company and included in its
consolidated financial statements as of September 30, 2002. In Management's
opinion, the Bank-only information would not be materially different than that
for the Company's consolidated balances. This sensitivity analysis does not
represent a Company forecast and should not be relied upon as being indicative
of expected operating results. These hypothetical estimates are based upon
numerous assumptions including, among others, the nature and timing of interest
rate levels, yield curve shape, prepayments on loans and securities, deposit
decay rates, pricing decisions on loans and deposits, and reinvestment/
replacement of asset and liability cash flows. While assumptions are developed
based upon current economic and local market conditions, the Company cannot
make any assurances as to the predictive nature of these assumptions, including
how customer preferences or competitor influences might change.

INTEREST RATE RISK MANAGEMENT

A variety of financial instruments can be used to manage interest rate
sensitivity. These may include investment securities, interest rate swaps, and
interest rate caps and floors. Frequently called interest rate derivatives,
interest rate swaps, caps and floors have characteristics similar to securities
but possess the advantages of customization of the risk-reward profile of the
instrument, minimization of balance sheet leverage and improvement of
liquidity. As of September 30, 2002, the Company was not using any derivative
instruments for interest rate risk management.
The Company engages an independent consultant to periodically review its
interest rate risk position, as well as the effectiveness of simulation
modeling and reasonableness of assumptions used. As of September 30, 2002,
there were no significant differences between the views of the independent
consultant and Management regarding the Company's interest rate risk exposure.
Management expects interest rates will remain constant for the remainder of
2002 and believes that the current level of interest rate risk is acceptable.

Page 23
Item 4: Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

As required by new Rule 13a-15 under the Securities Exchange Act of 1934,
within the 90 days prior to the date of this report, the Company carried out an
evaluation under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules
and forms. In connection with the new rules, the Company is currently in the
process of further reviewing and documenting disclosure controls and
procedures, including internal controls and procedures for financial reporting,
and may from time to time make changes aimed at enhancing their effectiveness
and to ensure that these systems evolve with the Company's business.

(b) Changes in internal controls.

None.

Page 24
PART II

ITEM 1. LEGAL PROCEEDINGS

The Company was not involved in any legal proceedings requiring disclosure
under Item 103 of Regulation S-K during the reporting period.

Page 25
ITEM 2. CHANGES IN SECURITIES

None

Page 26
ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

Page 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Page 28
ITEM 5: Other Information

None.

Page 29
ITEM 6: Exhibits, Financial Statement Schedules, and reports on Form 8-K

A. EXHIBITS

None.

B. REPORTS ON FORM 8-K

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002, the certifications
of Daniel R. Daigneault, President & Chief Executive Officer, and F. Stephen
Ward, Treasurer & Chief Financial Officer, were filed on Form 8-K under item 9
on August 14, 2002. The certifications were filed in connection with the filing
of the Company's report on Form 10-Q for the period ended June 30, 2002,

The Company's press release announcing the third quarter 2002 dividend
declaration was filed on Form 8-K under item 5 on September 20, 2002.

The Company's press release announcing a new program to repurchase up to 5.0%
of the outstanding shares of the Company's common stock, or slightly more than
120,000 shares, was filed on Form 8-K under item 5 on September 23, 2002.

Page 30
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

FIRST NATIONAL LINCOLN CORPORATION

November 8, 2002 /s/ Daniel R. Daigneault
Date Daniel R. Daigneault
President & Chief Executive Officer

November 8, 2002 /s/ F. Stephen Ward
Date F. Stephen Ward
Treasurer & Chief Financial Officer

Page 31
CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Daniel R. Daigneault, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First National Lincoln
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 8, 2002

/s/ Daniel R. Daigneault

Daniel R. Daigneault
President & Chief Executive Officer
First National Lincoln Corporation

Page 32
CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, F. Stephen Ward, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First National Lincoln
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 8, 2002

/s/ F. Stephen Ward

F. Stephen Ward
Treasurer & Chief Financial Officer
First National Lincoln Corporation

Page 33
November 8, 2002

Securities and Exchange Commission
Washington, DC 20549

Gentlemen:

Pursuant to the requirements of the Securities and Exchange Act
of 1934, we are transmitting herewith the attached Form 10-Q.

Sincerely,

FIRST NATIONAL LINCOLN CORPORATION

/s/ F. Stephen Ward

F. Stephen Ward, Treasurer & Chief Financial Officer