<PAGE>
As filed with the Securities and Exchange Commission on June 17, 1996
Securities Act Registration No. 333-3442
- --------------------------------------------------------------------------------
U.S. Securities and Exchange Commission, Washington, D.C. 20549
FORM SB-1/A
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALBINA COMMUNITY BANCORP
(Name of small business issuer in its charter)
Oregon 6022 93-1129061
- ---------------------- ------------------------- --------------------------
(State or jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
1130 N.E. Alberta St.
Portland, Oregon 97211 503-287-7537
(Address and telephone number of principal executive offices)
Leon C. Smith, President
1130 N.E. Alberta St.
Portland, Oregon 97211
503-287-7537
(Name, address and telephone number of agent for service)
Copies of all communications to:
Gordon E. Crim, Esq. or Kenneth E. Roberts, Jr., Esq.
Foster Pepper & Shefelman
101 S.W. Main St., 15th Floor
Portland, Oregon 97204
Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Title of each class of securities Dollar Amount Proposed maximum Proposed maximum Amount of
to be registered to be registered offering price per unit offering price registration fee
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock
no par value $1,000,000.00 $10.00 $1,000,000.00 $345.00
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Disclosure alternative used (check one): Alternative 1 ; Alternative 2 X
---- -----
<PAGE>
ALBINA COMMUNITY BANCORP
CROSS REFERENCE SHEET
Between Form SB-1 and Prospectus
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION
- --------------------------------------- ------------------
1. Inside Front and Outside Back (Inside Front and Outside Back
Cover)
Cover Pages of Prospectus
2. Significant Parties Management; Principal Shareholders;
Legal Matters
3. Relationship with Issuer of Legal Matters; Experts
Experts Named in Registration
Statement
4. Legal Proceedings Business
5. Changes in and Disagreements (Not Applicable)
with Accountants
6. Disclosure of Commission Description of Capital Stock
Position on Indemnification
for Securities Act Liabilities
MODEL B ITEMS
1. Cover Page (Outside Front Cover Page)
2. Distribution Spread (Outside Front Cover)
3. Summary Information, Risk Prospectus Summary; Risk Factors;
Factors and Dilution Dilution
4. Plan of Distribution Plan of Distribution
5. Use of Proceeds to Issuer Use of Proceeds
6. Description of Business Prospectus Summary; Business
7. Description of Property Business
8. Directors, Executive Officers Management
and Significant Employees
9. Remuneration of Directors and Management
Officers
10. Security Ownership of Certain Management; Principal Shareholders
Security Holders and Management
11. Interest of Managerial Officers Management
in Certain Transactions
12. Securities Being Offered Description of Capital Stock
PART F/S
1. Financial Information Required Financial Statements
in Prospectus
<PAGE>
ALBINA COMMUNITY BANCORP
1130 N.E. Alberta St.
Portland, Oregon 97211
Telephone: 503-287-7537
100,000 SHARES OF CLASS A COMMON STOCK
All of the shares of Class A Common Stock, without par value, ("Common
Stock") offered hereby are newly issued shares of Albina Community Bancorp (the
"Company"). Prior to this Offering there has been no public market for the
capital stock of the Company, and no active public market is anticipated
following the offering. The offering price ($10.00 per share) was set by the
Company at the price at which the initial shares of Common Stock were offered
and sold in a private offering closed in December, 1995. The offering price
represents solely a decision by the Company as to the price for which the
securities may be successfully offered. The book value per share as of March
31, 1996, was $9.23. The Offering is a continuous offering being done on a
best-efforts basis by means of irrevocable subscriptions. The Offering will
continue until all shares are sold unless terminated earlier by the Company in
its sole discretion. No assurances can be made as to the number of shares
that will actually be sold, or the amount of proceeds the Company will receive
from the Offering.
----------------------------------------
THE SHARES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE BANK INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SECURITIES INVOLVES A SUBSTANTIAL DEGREE OF RISK.
----------------------------------------
SEE "CERTAIN RISK FACTORS" ON PAGE 4 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Underwriting Proceeds to
Price to Public Commissions (1) Company (2)(3)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share . . . . . . . . . . . . . . $ 10.00 $.30 $ 9.70
- ---------------------------------------------------------------------------------------------
Total (maximum of 100,000 shares) $1,000,000.00 $ 30,000 $970,000.00
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) This offering is not underwritten. The Company has, however, retained
Pacific Crest Securities Inc. to act as a placement agent in connection
herewith. Commissions apply only to shares actually sold by Pacific Crest.
(2) Before deducting expenses payable by the Company in connection with this
offering, estimated to be $60,000.
(3) Assumes the sale of all 100,000 shares offered hereby, and that all shares
are sold by Pacific Crest Securities Inc. The Company is using its best
efforts to sell the securities offered hereby, but no assurance can be made
that the Company will receive the proceeds
indicated above.
--------------------------------------------------
A maximum of 100,000 shares of Common Stock is being offered by the
Company, subject to prior sale and subject to the Company's right to accept or
reject any subscription therefor, in whole or in part. There is no minimum
offering amount. Subscriptions will be accepted when received by the Company
together with payment therefor. Subscriptions are irrevocable when made.
Delivery of the Common Stock will be made at the office of the Company as
subscriptions are received and accepted by the Company. See "Plan of
Distribution".
--------------------------------------------------
The date of this Prospectus is , 1996
---------------
<PAGE>
[INSIDE FRONT COVER OF PROSPECTUS]
ALBINA COMMUNITY BANCORP
[COMPANY LOGO]
The Company will provide to shareholders quarterly reports containing
unaudited financial statements and annual reports containing financial
statements audited by the Company's independent public accountants. In
addition, the Company will furnish annual reports on Form 10-KSB and quarterly
reports on Form 10-QSB free of charge to shareholders who so request in writing
addressed to the Secretary of the Company.
Prior to this Offering, the Company has not been subject to the reporting
requirements of, and has not filed any reports pursuant to, the Securities
Exchange Act of 1934.
<PAGE>
[OUTSIDE BACK COVER OF PROSPECTUS]
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
TABLE OF CONTENTS
Prospectus Summary........................................................... 1
Certain Risk Factors......................................................... 3
Dilution..................................................................... 5
Plan of Distribution......................................................... 6
Use of Proceeds.............................................................. 7
Dividends.................................................................... 7
Market for the Common Stock.................................................. 8
Capitalization............................................................... 9
Description of Business...................................................... 10
Legal Proceedings............................................................ 15
Supervision and Regulation................................................... 16
Management................................................................... 22
Significant Shareholder.......................................................26
Principal Shareholders....................................................... 27
Description of Capital Stock................................................. 28
Experts...................................................................... 29
Transfer Agent............................................................... 29
Securities and Exchange Commission Policy on Indemnification................. 30
Other Information............................................................ 30
UNTIL __________, 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
100,000 Shares
ALBINA COMMUNITY BANCORP
Class A Common Stock
----------------------------
PROSPECTUS
----------------------------
PACIFIC CREST SECURITIES INC.
, 1996
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION FOUND ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY DOES NOT PURPORT
TO BE COMPLETE, AND SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS AS A
WHOLE.
THE COMPANY
Albina Community Bancorp (the "Company") is an Oregon business corporation
organized in 1993 by a group of concerned community and corporate citizens to
promote community development services in North and Northeast Portland, Oregon,
to benefit the low- and moderate-income residents and to support and finance
private-sector redevelopment projects in the area. The Company intends to
promote investment and development in the Albina district through its wholly-
owned subsidiary community development bank, Albina Community Bank (the "Bank").
Although the Company's primary objective is to generate profits for its
shareholders, in view of its unique mission, the Company may from time to time
make decisions which are motivated by considerations other than maximizing
profits. See "Description of Business -- Albina Community Bancorp" and
"Description of Business -- Business Plan".
In a private offering completed in December, 1995, the Company sold 165,670
shares of Common Stock at a price of $10.00 per share. That offering was
intended to raise capital for the purpose of organizing the Bank. Concurrent
with that offering the Company issued 16,300 shares of its Series A Preferred
Stock to the Northeast Portland Community Development Trust (the "Trust") at a
price of $140.25 per share, and sold 8,518 shares of its Series B Preferred
Stock at $100 per share to certain public charities and private foundations that
desired to support the Company and its mission. Further, the Company sold
4,570 shares of Series C Preferred Stock at $100 per share to Federal National
Mortgage Association. See "Description of Capital Stock" and "Significant
Shareholder". The Company's paid-in capital from the sale of securities, after
pre-opening expenses, totaled approximately $4.6 million. Substantially all of
the initial capital ($4.5 million) was used to capitalize the Bank. The Bank
commenced operations on December 19, 1995.
The Company currently has no operations separate from the Bank. Although
the Company has no current plans to do so, it may consider opportunities in the
future to acquire one or more existing banks which may be positioned to further
the Company's mission. Further, the Company anticipates promoting redevelopment
through a real estate development company to be organized as a separate, wholly-
owned subsidiary of the Company (the "Development Company"). The Development
Company has not yet been organized, and it is not known when or whether it will
be organized. Substantially all of the assets of the Company are invested in
the Bank, and it is expected that the Development Company will not be organized
unless and until additional capital is available. No assurances can be made
that the Development Company will be organized, and if organized, that it will
contribute to the income of the Company.
THE BANK
Albina Community Bank is a commercial bank organized under Oregon law, the
deposits of which are insured by the Federal Deposit Insurance Corporation
("FDIC"). The Bank conducts its business from its temporary facilities located
at 1130 N.E. Alberta St., Portland, Oregon. The Bank expects to move to its
permanent office being constructed at 2002 N.E. Martin Luther King, Jr.
Boulevard, Portland, Oregon, during the late summer of 1996. The Bank was
organized with the intention of qualifying as a Community Development Bank under
federal law, so as to be eligible for federal assistance in accordance with the
Community Development Banking and Financial Institutions Act of 1994 (the
"Community Development Banking Act"). The Company has filed an application for
assistance from the Community Development Financial Institutions Fund (the "CDFI
Fund") which was created by the Community Development Banking Act, but no
assurances can be given as to what, if any, assistance from the Fund will be
available to the Bank or the Company. At the present time, the Bank is
adequately capitalized, and Management does not believe that receipt of any
assistance from the Fund or proceeds from this Offering is necessary for the
Bank to operate successfully.
The Bank's lending programs are focused on residential loans, for
acquisition and rehabilitation and home improvement, and commercial loans to
small businesses, some of which may be guaranteed by the federal Small
1
<PAGE>
Business Administration. The Bank's primary deposits include large time
deposits by governmental entities, corporations, socially responsible local
citizens, and program-related investors. The Bank does not intend to establish
a branch network, but rather maintains a small retail staff at its main office
to accommodate needs of the local residents and business owners.
The Bank believes it is competitive with other financial institutions in
its relevant market area as a result of the unique focus of its business. In
addition, the absence of a costly branch system, a lower cost of capital
resulting from the settlement money invested by the Trust, and by various
charitable foundations, and possible additional low-cost capital through federal
funding, should contribute to higher profitability of the Bank than would be the
case without such funding. Moreover, the Bank believes the services of
experienced banking professionals at all levels of the Bank enhance productivity
and are important in the development of non-interest income from fee-based
services.
THE DEVELOPMENT COMPANY
The Development Company, if and when organized, would undertake to partner
with existing non-profit and for-profit developers to expand their respective
development capacities. The Development Company may also initiate development
projects for its own account to stimulate development activity in the area. The
Development Company has not been organized, and its business plan has not yet
been established. Further, the Company does not anticipate organizing the
Development Company until the Company has sufficient capital to support the
activities of the Development Company in addition to those of the Bank. It is
anticipated that approximately $750,000 would be needed for the Development
Company to be organized and to commence operations. A decision by the Company
to establish the Development Company would, however, depend on the performance
of the Bank and a determination that capital could be directed to the
Development Company without adversely affecting the safety and soundness of the
Bank. No assurances can be made that the Development Company will eventually be
organized or when in the future the organization may occur.
THE OFFERING
<TABLE>
<CAPTION>
COMMON STOCK
------------
<S> <C>
Common Stock offered
by the Company...............................................100,000 shares
Common Stock to be outstanding
after the Offering...........................................265,670 shares
MINIMUM INVESTMENT..................................................$250.00
USE OF PROCEEDS: The net proceeds of the Offering will be used as
additional working capital of the Company and possibly
to fund the Development Company. If there are less
than $750,000 in net proceeds from the Offering, the
Company will utilize the proceeds for general working
capital, which may include contributing some or all of
the funds to the Bank as additional capital.
</TABLE>
2
<PAGE>
CERTAIN RISK FACTORS
GEOGRAPHIC CONCENTRATION AND ECONOMIC CONDITIONS OF MARKET AREA
A majority of the Company's operations are concentrated in the Albina
district in North/Northeast Portland, Oregon. This has historically been an
economically distressed community, suffering from high unemployment and lower
average household income levels than state and national averages. The area has
experienced significant population decline since 1960, when the population was
95,592, compared to the 1990 population of 73,457. The exodus of higher-income
residents to suburban areas spurred development of regional shopping malls which
drew retail consumers away from local commercial shopping centers. The loss of
population and commercial vitality in the area undermined neighborhood
stability, contributing to job losses, rise in crime rates, and decline in
property values. Bank's market area comprises mostly moderate-income
neighborhoods, with median household income in 1990 ranging between 63% and 88%
of median household income for the Portland metropolitan area. The most
distressed neighborhoods in the Target Area had a 1990 median household income
of approximately 45% of median income for the metropolitan area. The
demographic trends have contributed to the physical deterioration of the area.
The success of the Company is dependent on the Bank's ability to attract credit-
worthy borrowers, and to finance viable commercial enterprises and property
development to restore economic vitality to the community.
LACK OF OPERATING HISTORY
The Company is a new enterprise with a limited track record, having
commenced operations in December, 1995. While similar enterprises have shown
success in other cities, no assurance can be given that, despite the
community support for the Company's mission, financial success will be achieved.
As of December 31, 1995, and March 31, 1996, the Company had an accumulated
deficit of $633,558 and $901,045, respectively. Profitable operations are not
anticipated initially and no assurances can be given that the Company will be
profitable in the future.
NEED FOR ADDITIONAL CAPITAL
As a new enterprise, the Company is expected to experience losses during
its initial phase of operations, and possibly for the first two or three years.
Although the Company and the Bank will strive to keep such losses at a minimum,
a significant decline in capital could have a material adverse impact on the
Bank's ability to make loans and increase its portfolio of interest-earning
assets. Consequently, if the Company is unable to achieve profitability,
additional capital may be required to fund operations. No assurances can be
given that the Company will be able to raise additional capital if needed.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will depend on the services of Leon C. Smith,
President of the Company and the Bank. The loss of services of Mr. Smith could
adversely affect the Company's ability to achieve the objectives of its business
plan. The Company does not maintain key employee life insurance on Mr. Smith.
CONTROL BY AFFILIATES
The Trust, through its ownership of all of the shares of the Company's
Series A Preferred Stock, is deemed to be an affiliate of the Company, and is
itself a registered bank holding company. As the holder of the Series A
Preferred Stock, the Trust is entitled to elect 25% of the directors, and in any
event, not fewer than two directors. Directors elected by the Trust, in
addition to their fiduciary duties to the Company and all shareholders, may be
expected to attempt to influence the board of directors in making decisions
affecting the Company and the Bank based on considerations deemed by the
trustees to be important to the community. Such decisions may be different from
or directly conflict with normal business considerations of maximizing profits.
See "Significant Shareholder".
LACK OF MARKET FOR THE SHARES
There is currently no active public market for the Company's Common Stock,
and the Company does not anticipate that an active market for the shares will
develop or be maintained following the Offering, and no
3
<PAGE>
assurances can be made in that regard. Even if an active market for the Common
Stock does develop, the market price could be subject to significant
fluctuations in response to variations in quarterly operating results of the
Company, general conditions of the banking industry and other factors. If an
active market in the shares does not develop, the price of the shares may
fluctuate substantially as a result of the effect of supply and demand in a
limited market. Investors should be prepared to hold their investment for an
indefinite period of time.
OFFERING PRICE
The price of the shares offered hereby was determined solely by the
Company's directors. There can be no assurance that the offering price
necessarily indicates the actual value of the Common Stock, or that investors
will be able to sell the shares purchased in this Offering at or above the
offering price.
DIVIDENDS
No dividends are anticipated. The Company has no operating history and
earnings can not be assured. Even if earnings are achieved, there is no plan to
institute a cash dividend policy as any income will likely be retained to fund
further growth of the Company. Further, as the Company is dependent on
dividends from the Bank for income, the availability of funds with which to make
dividends to Company shareholders is limited by regulatory constraints on
dividends by the Bank. See "Supervision and Regulation -- Dividends".
CREDIT RISKS
The greatest risk facing lenders is credit risk, which is the risk of
losing principal and interest as a result of customers' failure to perform in
accordance with their loan obligations. The market area of the Company is
concentrated in an economically distressed part of the city of Portland, which
area has historically experienced high unemployment and low income levels. The
financial success of the Bank and the Company is dependent on the ability of
borrowers to make timely payments, and on the positive impact of community
development efforts on property values in the market area. See "Description of
Business."
COMPETITION
The Company operates in a small area in the city of Portland, and competes
with a number of larger, well-established banks, credit unions and other
financial and non-financial institutions for loans to businesses located in that
area. With the increased attention given by banking regulations to compliance
with the federal Community Reinvestment Act which requires insured depositories
to make credit available to all segments of their market area, the major
financial institutions serving the greater Portland market area have increased,
or are expected to increase, their efforts to find and fund eligible borrowers
in the North/Northeast Portland community. The Bank anticipates that it can
offer financial services on a competitive basis with such institutions, but no
assurance can be given that customers who represent the best credit risk can be
attracted to the Bank. The Bank does not expect to maintain a branch office
system, and the lack of branches could hamper the growth of the Bank. The Bank
will, however, actively seek to continue to build its deposit base, primarily
through local residents and businesses, and large time deposits from
governmental entities, corporations, socially responsible citizens, and program-
related investors. The unavailability of sources of such deposits in the
amounts and on the terms anticipated may have a material adverse effect on the
growth of the Bank.
IMPACT OF CHANGES IN INTEREST RATES
The Bank's earnings are largely derived from net interest income, which is
interest income and fees earned on loans and investment income less interest
expense paid on deposits and other borrowings. As interest rates change, net
interest income is affected. With fixed rate assets (such as fixed rate loans)
and liabilities (such as certificates of deposit), the rate at which this change
occurs depends on the maturity of the asset or liability. The differences
between the amounts of interest-sensitive assets and interest-sensitive
liabilities, measured over various time periods, are referred to as sensitivity
gaps. Although management will strive to minimize risk through asset/liability
management policies, from time to time maturities may not be balanced. During
such periods, a rapid decrease or increase in interest rates could have an
adverse effect on the spreads between the interest rates earned on assets and
the rates of interest paid on liabilities, and therefore on the results of
operations of the Bank.
4
<PAGE>
Interest rates are highly sensitive to many factors which are beyond the
control and financial condition of the Company or the Bank. The results of the
operations of the Company and its subsidiaries may be materially and adversely
affected by changes in prevailing economic conditions, including changes in
interest rates and the monetary and fiscal policies of the federal government.
During 1992 and 1993, the banking industry in general witnessed a surge in
profitability, in large part as a consequence of declining interest rates, which
in turn lowered banks' cost of funds and increased net interest spreads and
margins. During 1994 and 1995, interest rates generally increased and earnings
moderated. Although interest rates remain at relatively low levels, compared
with rates experienced in the past ten years, any increase in rates would likely
increase the cost of funds for banks, and may negatively impact potential
profits. In addition, increases in interest rates could have a negative impact
on economic activity. An economic downturn could adversely affect employment
rates and development activity in the market area, which in turn could have a
detrimental effect on the value of collateral and borrowers' ability to repay
loans.
BANK REGULATION AND RELATED UNCERTAINTIES
Banking is a highly regulated industry. Regulatory agencies have the
authority to limit or prohibit certain activities which may affect the safety
and soundness of the Bank. From time to time legislation is proposed or enacted
that has the effect of increasing the cost of doing business, limiting or
expanding permissible activities or affecting the competitive balance between
banks and other financial and non-financial institutions. Proposals to change
the laws and regulations governing the operations and taxation of banks and
other financial institutions are frequently made in Congress, the Oregon state
legislature and before various state and federal bank regulatory agencies. Most
recently, legislation authorizing interstate branching has been enacted into law
by Congress and the Oregon Legislature. The effects these changes may have on
the competitive position of the Company or the Bank and the likelihood of
additional changes cannot be accurately predicted. The Company has applied for
assistance from the CDFI Fund, created by the Community Development Banking Act
of 1994 to provide federal assistance to entities committed to community
development efforts. The Company and the Bank are expected to qualify for such
federal assistance, but no assurance can be given that such federal funds will
be available to the Company or the Bank. See "Supervision and Regulation -
Community Development Banking Legislation."
DILUTION
The net tangible book value of the Company at March 31, 1996 was
$4,300,513, or $9.23 per share of Common Stock. Net tangible book value per
share of Common Stock is determined by subtracting the liquidation preferences
o f any outstanding preferred stock from the net tangible book value of the
Company, and dividing the result by the sum of the number of outstanding shares
of Common Stock plus the common stock equivalent liquidation participation
interests of participating preferred stock up to the maximum total liquidation
amount applicable to such preferred stock. After giving effect to the issuance
and sale of 100,000 shares of Common Stock being offered by the Company at an
offering price of $10.00 per share, and after deducting underwriting commissions
and offering costs, the net tangible book value per share at March 31, 1996
would have been $9.18. This represents an immediate decrease in the net
tangible book value of $0.05 per share to the existing shareholders, and an
immediate dilution of $0.82 per share to new investors.
The following table illustrates the per share dilution in net tangible book
value:
<TABLE>
<CAPTION>
<S> <C> <C>
Offering Price $10.00
Net tangible book value before Offering $9.23
Decrease attributable to sale of Common Stock by
the Company to new investors 0.05
-----
Pro forma net tangible book value after Offering(1) 9.18
-----
Dilution to new investors(2) $0.82
-----
-----
</TABLE>
- ---------------------
(1) After deduction of underwriting commissions and anticipated offering
expenses to be paid by the Company.
(2) Dilution is determined by subtracting net tangible book value per share
after the Offering from the amount of cash paid by a new investor for a
share of Common Stock.
5
<PAGE>
PLAN OF DISTRIBUTION
The Company is offering up to 100,000 shares of Common Stock at a price of
$10.00 per share. The Company intends to distribute the shares offered hereby
by means of stock subscription agreements executed by prospective purchasers.
This Offering is not underwritten. The Company has, however, engaged Pacific
Crest Securities as a placement agent in connection with the sale of shares, for
which Pacific Crest will receive a commission of 3% for all shares it sells,
plus an advisory fee of 1% of the total proceeds of the Offering. The Company
is also offering the Common Stock through its officers and directors, who will
not be entitled to receive any discounts or commissions for selling such shares.
Such persons may, however, be reimbursed for reasonable expenses incurred in
connection with the sale of shares. Pacific Crest Securities will not receive
commissions with respect to shares sold by or through the Company's officers and
directors but will receive a fee of 1% of the total proceeds of the Offering
regardless of whether the shares are sold by Pacific Crest Securities or by
others.
The Offering is undertaken by the Company in part to give residents and
businesses in the Company's market area an opportunity to invest in the Company
and, indirectly, the Bank. The probable success of the Bank is believed to be
enhanced if residents and businesses in the Company's market area have an
ownership interest in the Company. It is also believed that shareholders are
more likely to do business with and make referrals to the Bank, thereby
increasing the Bank's business opportunities.
OFFERING PERIOD
The Offering is a continuous offering beginning at the time the
registration statement filed with the Securities and Exchange Commission in
connection therewith is declared effective by the Commission and will terminate
upon the acceptance by the Company of subscriptions for all 100,000 shares
offered (the "Offering Period"). The Company may, in its sole discretion
terminate the Offering at any time without regard to the number of shares
subscribed for or sold.
DETERMINATION OF OFFERING PRICE
The public offering price of $10.00 per share has been determined solely by
the directors of the Company. Such offering price should not necessarily be
considered an indication of the market value of the Common Stock of the Company
after the Offering, and there can be no assurance that the market will sustain
the initial public offering price or that the initial public offering price will
represent the actual value of the Common Stock.
MINIMUM INVESTMENT
The minimum investment in the Offering is $250.00, or 25 shares. There is
no maximum investment in the Offering. The Company, however, reserves the right
to accept or reject any subscription in its sole discretion, and intends to
ensure that shares will be available to residents and businesses in the
Company's market area who desire to invest in the shares.
SUBSCRIPTION FOR SHARES
Persons wishing to purchase shares may subscribe by delivering a completed
and signed form of stock subscription agreement ("Subscription") to the Company
at its head office, currently at 1130 N.E. Alberta, Portland, Oregon 97211.
Copies of the Subscription form, if not included with this Prospectus, are
available from the Company. Investors must subscribe for the minimum
investment. Subscriptions will generally be accepted by the Company on a first-
come, first-accepted basis until the termination of the Offering. Investors
should indicate the number of shares desired, subject to the limitations set
forth above. No Subscription is binding on the Company until accepted by it,
and the Company reserves the right to accept or reject any Subscription in whole
or in part, in its sole discretion. None of the Company's directors, officers
or significant shareholders are expected to subscribe for shares in the
Offering.
A Subscription constitutes a continuing offer by the subscriber until such
time as it is accepted or notice of rejection is given by the Company. A
Subscription is irrevocable once made. If any material change, with
6
<PAGE>
respect to any aspect of the Offering, the Company, the Bank, the business and
financial condition of either the Company or the Bank, or any other information
contained in this Prospectus, occurs after submission of a Subscription, but
prior to acceptance by the Company, the subscriber's funds will be returned, and
the subscriber will be provided with additional information with respect to such
material change and be given an opportunity to re-subscribe for shares, subject
to prior sale or termination of the Offering.
Subscriptions generally must be accompanied by payment for the full price
of all shares which the subscriber desires to purchase. Payment may be made by
personal check, cashier's check, wire transfer or money order. Personal checks
are accepted subject to collection. The Company may, in its sole discretion,
accept Subscriptions with an irrevocable commitment to pay the subscription
price upon call by the Company. Funds submitted with a Subscription will not be
held in escrow. The Company will accept or reject Subscriptions as they are
received, and funds relating to Subscriptions that are rejected in whole or in
part will be promptly returned to the subscriber.
SHARE CERTIFICATES
A certificate representing shares of Common Stock of the Company duly
authorized and paid for, will be issued to each subscriber as soon as
practicable after acceptance of the Subscription therefor.
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of Common Stock
offered hereby are expected to be $910,000 after deduction of commissions and
fees payable to Pacific Crest Securities Inc., and other expenses payable by the
Company. The net proceeds will be available to the Company to increase its
working capital and possibly fund the organization of the Development Company.
It is expected that the Development Company will require approximately $750,000
in initial capital. If less than $750,000 in net proceeds from this Offering
are received by the Company, some or all of the net proceeds may be contributed
to the Bank as additional capital, or may be retained by the Company for general
working capital. Even if all of the shares being offered in this Offering are
sold, however, a decision by the Company to establish the Development Company
would depend on the performance of the Bank and a determination that capital
could be directed to the Development Company without adversely affecting the
safety and soundness of the Bank. Such a decision or determination by the
Company may be postponed until the Bank's operations have stabilized and
earnings and cash flow trends are identified. In addition, the organization of
the Development Company may be delayed until other funding, if any, were to
become available, such as assistance from the CDFI Fund. Pending the
application of the net proceeds to the above uses, the Company intends to invest
the net proceeds in investment securities. It is estimated that the expenses
and costs of the Offering, including fees, will total approximately $90,000.
The Company and the Bank currently exceed all regulatory capital
requirements and are therefore not required to raise additional capital to
comply with such requirements. After the Offering, the Company expects to
continue to exceed all regulatory requirements.
DIVIDENDS
The Company does not have, nor intend to establish, a cash dividend policy
with respect to the Common Stock. Notwithstanding such dividends as may be
declared and payable on any or all series of Preferred Stock outstanding, it is
anticipated that net income from the operations of the subsidiaries will be
retained for use by those subsidiaries as working capital to further the
objectives of the Company. Further, as the Company is dependent on dividends
from the Bank for income, the availability of funds with which to make dividends
to Company shareholders is limited by regulatory constraints on dividends by the
Bank. See "Supervision and Regulation -- Dividends".
7
<PAGE>
MARKET FOR THE COMMON STOCK
There is currently no active public market for the Common Stock. The
Company does not anticipate, and no assurances can be made, that such a market
in the Common Stock will develop or be maintained following the Offering. The
Company does not intend to apply to any national or regional stock exchange for
listing of the Common Stock. If a market for the Common Stock does develop, the
market price could nonetheless be subject to significant fluctuations in
response to variations in quarterly operating results of the Company, general
conditions of the banking industry and other factors. If an active market in
the shares does not develop, the price of the shares may fluctuate substantially
as a result of the effect of supply and demand in a limited market. Investors
should be prepared to hold their investment for an indefinite period of time.
8
<PAGE>
CAPITALIZATION
The following table presents the capitalization of the Company as of March
31, 1996, and the pro forma capitalization as of completion of the Offering, and
the receipt of the estimated net proceeds therefrom, to account for the issuance
of 100,000 shares of common stock offered hereby at $10.00 per share:
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
<S> <C> <C>
SHAREHOLDERS' EQUITY
Preferred Stock (without par value);
1,000,000 shares authorized
Series A 1% Preferred Stock;
30,000 shares designated, 16,300
outstanding $2,236,058 $2,236,058
Series B 1% Preferred Stock;
10,000 shares designated,
8,518 outstanding 851,800 851,800
Series C 10% Convertible
Preferred Stock;
10,000 shares designated,
4,570 outstanding 457,000 457,000
Common Stock
Class A Common Stock (without
par value); 3,000,000 authorized,
165,670 outstanding at
December 31, 1995 1,656,700
265,670 outstanding
after Offering 2,566,700(1)
Class B Common Stock (without
par value), 1,000,000 authorized,
none outstanding -0- -0-
Accumulated Deficit Attributable to:
Preferred Stock (2) (773,023) (773,023)
Common Stock (128,022) (128,022)
---------- ----------
Retained Earnings (deficit) (901,045) (901,045)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY $4,300,513 $5,210,513
---------- ----------
---------- ----------
</TABLE>
(1) Assumes all shares offered hereby are sold by Pacific Crest Securities
Inc., for total net proceeds of $910,000.
(2) The Series A and Series B Preferred Stock, after consideration of the $1.00
per share liquidation preference, participates in any loss of shareholder
equity, at the rate of $10 per share of Preferred Stock for each $1 per
share of Common Stock, if the total amount to which such Preferred Stock is
entitled upon liquidation less than $100.
9
<PAGE>
DESCRIPTION OF BUSINESS
BACKGROUND
In 1991, PacifiCorp, an electric utility holding company serving the
Northwest, settled a class-action lawsuit brought by certain ratepayers. The
settlement agreement ("Settlement Agreement") provided that instead of giving
rebates to its customers, PacifiCorp would make grants totalling approximately
$5.1 million to various community-oriented or charitable causes. As part of the
Settlement Agreement, PacifiCorp agreed to grant $1.7 million, plus interest, to
the Oregon Community Foundation ("OCF") to fund a community development project
(the "Project") for the express purpose of creating a self-sustaining, private
institution with the primary mission of financing private-sector redevelopment
projects to benefit low- and moderate-income residents in all or part of
PacifiCorp's electric service territory in North and Northeast Portland, Oregon.
The Settlement Agreement further provided that PacifiCorp would grant an
additional $300,000, plus interest, in matching funds on a 1:3 basis, as a
challenge to raise additional capital for the Project from third-party
investors.
At the time of the settlement, the OCF retained Shorebank Advisory Services
("SAS"), a consulting subsidiary of South Shore Bancorp, a community development
bank holding company in Chicago, Illinois, to investigate and report on the
feasibility of the Project. Pursuant to a Funding Pledge Agreement, by which
PacifiCorp conveyed the funds to the OCF, the Neighborhood Partnership Fund
("NPF"), a designated fund of the OCF, was given authority to oversee the
Project, and, in its discretion, authority to delegate the oversight to another
entity.
At the recommendation of SAS, the NPF, through an organizing group,
established Albina Community Bancorp (the "Company"), for the purpose of
becoming a holding company of a community development bank and a real estate
development company. The Northeast Portland Community Development Trust (the
"Trust"), a non-profit, limited-life charitable trust was also established to
receive the balance of the settlement funds after paying expenses incurred by
OCF and the organizing group, and the organizational expenses of the Company and
the subsidiary bank.
The Company commenced a private offering in September, 1994, to meet the
challenge grant and raise additional capital for investment in the Bank. The
Company was successful in placing 165,670 shares of Common Stock with investors,
which raised approximately $1.65 million. The Company raised an additional
$815,800 from the sale of shares of Series B Preferred Stock to certain
charitable organizations that desired to make "program-related" investments to
support the Company's mission, and $457,000 from the sale of Series C Preferred
Stock to Federal National Mortgage Association. The Trust, upon capitalization
of the Company and authorization of the subsidiary bank to conduct business,
invested substantially all of the remaining settlement funds ($1,630,000) in
shares of the Company's Series A Preferred Stock, bringing the initial
capitalization of the Company to approximately $4.6 million. See "Significant
Shareholder" and "Description of Capital Stock."
ALBINA COMMUNITY BANCORP
Albina Community Bancorp is an Oregon business corporation which was
organized in 1993 as Northeast Community Bancorp. The Company's primary mission
is to serve the commercial credit needs of North/Northeast Portland, Oregon,
area of Albina (the "Target Area") by promoting community development services
to benefit the low- and moderate-income residents and by supporting and
financing private-sector redevelopment projects in the area. The boundaries of
the Target Area are the same as those used by the City of Portland in its
"Albina Community Plan," which encompasses 19 square miles and 15 neighborhoods
in North and Northeast Portland.
The Target Area has historically been a port of entry for newcomers to the
Portland area, particularly for minorities. The population is diverse, but is
disproportionately represented by African-Americans, Native-Americans,
Hispanics, and Asian immigrants, with, for example, 77% of all of Portland's
African-American population living in the area. The area has experienced
significant population decline since 1960, and can be characterized generally as
an area of high unemployment and low income levels. In 1990, the population in
the Target Area was 73,457, representing a 9% decline from 1980, continuing a
trend which began in 1960 when the population was 95,592. The construction of
Interstate 5 accelerated an exodus of higher-income residents to suburban areas,
spurring development of regional shopping malls. These malls drew retail
consumers away from
10
<PAGE>
local commercial shopping centers. The loss of population and commercial
vitality in the area undermined neighborhood stability, contributing to job
losses, rise in crime rates, and loss in property values. Consequently,
conventional financial institutions became reluctant to invest or make loans in
the area.
Most of the neighborhoods in the Target Area are moderate-income
neighborhoods, with 1990 median household income ranging between $19,250 and
$26,800, compared to 1990 median household income of $30,625 for the Portland
metropolitan area. The most distressed neighborhoods in the Target Area had a
1990 median household income of $13,900, or approximately 45% of median income
for the metropolitan area. Population in these neighborhoods is approximately
70% African-American, representing the highest concentration of African-
Americans in the state. Over 50% of households in the most distressed
neighborhoods are headed by single females living below the poverty line. The
demographic trends have contributed to the physical deterioration of the Target
Area.
The Company believes that, despite the current challenges facing the Target
Area, there are significant opportunities for investment which could benefit the
residents of the Area in accordance with the purpose of the Project and provide
a reasonable return to the Company. The Area is well situated geographically
with excellent public transportation available. The Area enjoys close proximity
to Portland's downtown, a nearby regional shopping mall, and several major
public facilities, including Memorial Coliseum and the Rose Garden, Portland's
new sports arena and home of the Portland Trailblazers National Basketball
Association franchise.
The Target Area has seen some increase in property values resulting from
interest of investors and small redevelopment companies. The Company is
concerned that gentrification of the Area will raise the cost of living to
current residents, removing the availability of affordable housing from the
area, forcing many to relocate. By encouraging investment by existing residents
in rehabilitation projects or other entrepreneurial ventures, the existing
residents may realize the economic benefits of the community redevelopment
taking place, while maintaining the availability of affordable housing.
BUSINESS PLAN
OVERVIEW
The Company's business plan was created in consultation with Shorebank
Advisory Services, a subsidiary of South Shore Bancorp in Chicago, Illinois, the
parent holding company of South Shore Bank, one of the first community
development banks in the United States. Community development banks, as well as
other community development financial institutions, tailor specific loan
products to meet the needs of low-income and minority communities, and have been
innovators in the creation of non-standard transactions which have sometimes
been adopted by mainstream lending institutions. These institutions have also
been successful in promoting community revitalization by providing a presence
that is known and trusted within communities which have become disconnected from
the mainstream social and economic system. Moreover, these institutions provide
a wide array of services intended to build the capacity of borrowers and
community institutions and to promote revitalization efforts. The success of
these institutions is due in part to the focus of lending decisions on the
collective benefit to entire communities, rather than on the benefit to the
institution of discreet transactions.
The business plan is intended to implement the Company's stated mission of
promoting redevelopment and reinvestment in the Target Area, through credit
assistance for renovation and rehabilitation of existing residences, stimulation
of the rehabilitation industry and small business enterprises, and by attracting
capital from outside investors. Although the Company's primary objective is to
generate profits for its shareholders, in view of its unique mission, the
Company may from time to time make decisions which are motivated by
considerations other than maximizing profits.
MARKET FOCUS
The business plan initially calls for making credit available to
residents of the Target Area for acquisition and rehabilitation of residential
properties, small business financing, and consumer loans. The Bank will
participate with other financial institutions in loans which exceed the Bank's
lending limit, or which are originated by other institutions and present
opportunities for the Bank to deploy its capital within the market area at an
appropriate level
11
<PAGE>
of risk. Over time there will be more emphasis on business development and
housing development within the Target Area. The Company believes that by
focusing its resources on a concentrated area, the perception of outside
investors and entrepreneurs will improve, attracting additional capital,
business development, and employment prospects.
The activities of the Company and its subsidiaries are intended to
participate in, and give support to, the nascent reversal of the trend of
disinvestment in the Target Area by encouraging active involvement in the
community through investments by the development company subsidiary in local
businesses, and by linking residents, local government and financial resources
in a coherent renewal effort. As a holding company of a community development
bank, the Company may be capable of managing higher-risk investments, by
conducting some of its activities through the Development Company subsidiary,
than might be considered appropriate for the Bank.
RISK MANAGEMENT
As the Bank is devoted to community redevelopment, it has the unique
advantage of significant capacity and commitment to underwrite non-standard
loans. This capacity is in part due to low-cost capital invested by the Trust
in the Series A Preferred Stock, and the risk and return expectations of the
investors, charitable organizations and foundations who have invested in the
Company's Series B Preferred Stock, and have been or are expected to be sources
of deposits for the Bank. Further, the Bank intends to extensively use
government guarantee programs to enhance the credit-worthiness of many
borrowers. In addition, the Company expects to qualify with as a Community
Development Financial Institution under the Community Development Banking and
Financial Institutions Act of 1994 (see "Description of Business -- Community
Development Banking Legislation"). This program may be an important source of
capital for the Bank, permitting the Company to devote resources to other
related subsidiaries in furtherance of the Project, although no assurances can
be made that this source of capital will be available to the Bank or the
Company.
CAPITAL RESOURCES
The Company currently has no operations separate from the Bank. The Bank
commenced operations on December 19, 1995, following the private offering of the
Company which raised approximately $4.6 million.
The Company believes that proceeds of the Offering, together with existing
capital will satisfy the cash requirements of the Company for at least the first
twelve months of operation. It is anticipated that the Company's cash
requirements will not exceed $1.5 million during that period, and it will not be
necessary to raise additional capital. Nonetheless, the Company is seeking
additional capital through assistance from the CDFI Fund, which assistance, if
any, would likely be in the form of an investment in shares of the Company's
Series B Preferred Stock. See "Description of Capital Stock." It is
anticipated that substantially all of the funds from this source would be
contributed to the Bank as additional capital, permitting the Company to utilize
the proceeds of this Offering to capitalize the Development Company. Any
additional contribution to the Bank's capital would be expected to enhance the
Bank's business prospects and flexibility in fulfilling its business objectives.
Although funds are currently available to successful applicants to the CDFI
Fund, no assurances can be given that the Company will be successful in
obtaining assistance from the Fund, and no assurance can be given that Congress
will continue to appropriate funds to the Fund. Consequently, no assurances can
be made that this source of additional capital will be available to the Bank or
the Company.
Although the Company has no current plans to do so, it may consider
opportunities in the future to acquire one or more existing banks which may be
positioned to further the objectives of the Company, and may consider prudent
business opportunities outside the Target Area.
ALBINA COMMUNITY BANK
The Bank is a commercial bank organized under Oregon law, the deposits of
which are insured by the FDIC. The Bank's lending programs are focused on
residential loans for acquisition, rehabilitation, and home improvement,
including federally guaranteed loans. In addition, the Bank offers commercial
loans to small businesses, including inventory and working capital financing,
and loans guaranteed by the federal Small Business
12
<PAGE>
Administration. The Bank's primary deposit base includes large time deposits by
governmental entities, corporations, socially responsible local citizens, and
program-related investors. The Bank does not intend to establish a branch
network, but rather expects to continue to maintain a small retail staff at its
main office to accommodate needs of the local residents and business owners.
The Bank may consider branch banking opportunities in the future, if such
opportunities are consistent with the objectives of the Bank.
The Bank believes it is competitive with other financial institutions in
its relevant market area as a result of the unique focus of its business. In
addition, the absence of a costly branch system, the lower cost of capital
resulting from the investments by the Trust in the Series A Preferred Stock, and
the program-related investments by the OCF and other private foundations in the
Series B Preferred Stock, and possible additional low-cost capital through
federal funding, should contribute to higher profitability than would otherwise
be obtained. Profitable operations are not anticipated initially and no
assurances can be given that the Company will be profitable in the future.
CREDIT RISK
The most significant risk to the Bank is that of losses resulting from
defaults on loans. The market area of the Company is concentrated in an
economically highly distressed part of the city of Portland, which area has
historically experienced high unemployment and low income levels. The financial
success of the Bank and the Company is dependent on the ability of borrowers to
make timely payments, and on the positive impact of community development
efforts on property values in the market area. Although the Bank will establish
a reserve for possible loan losses, if its loss experience is high, the charge
to income to cover such losses could eliminate any profits of the Company, and
could jeopardize the Bank's capital and ongoing operations. As the Bank intends
to make many loans which other commercial lenders have not made, or are
unwilling to make, the underwriting criteria utilized by the Bank, and the
credit risk assessment made by its management team, become particularly critical
to limiting potential loan losses.
Management believes it can limit such losses to an acceptable level by the
use of government guarantees when available, retaining adequate security for
loans, and by becoming more familiar with the borrowers and the Community than
other lenders have been able to do.
INTEREST RATE RISK
It is the Bank's business to borrow funds from depositors and other
sources, and to lend those funds to borrowers or invest in interest-bearing
securities. Net interest income, the Bank's primary source of income, is
determined by the difference between the cost of deposits or other funds and the
interest earned on loans or investment securities. Consequently, the Bank could
suffer significant losses if its cost of funds were to rise and the additional
costs could not be passed on to borrowers. Similar interest rate risks apply if
the Bank invests in long-term fixed rate securities.
The Bank strives to ameliorate such risk in two ways: First, the Bank
offers loans with variable interest rates, which permit the Bank to increase the
interest rate, periodically, to reflect changes in the prevailing cost of funds.
However, many borrowers are not prepared or able to accept variable rate loans,
and such loans frequently carry significantly lower rates than fixed-rate loans
of similar maturities.
The second way the Bank attempts to reduce the effects of interest rate
changes is to match, to the extent possible, the maturities of the interest-
bearing liabilities (such as time certificates of deposit) and fixed-rate loans
or investment securities (such as U.S. Treasury bonds) it has purchased. In
this way, as loans or investments are paid off or mature, a like or similar
amount of deposits also matures, and loans can be matched with deposits to
establish an acceptable interest rate spread over the maturity of the loan.
Although management strives to minimize risk through asset/liability management
policies, from time to time maturities may not be balanced. During such
periods, a rapid decrease or increase in interest rates could have an adverse
effect on the spreads between the interest rates earned on assets and the rates
of interest paid on liabilities, and therefore on the results of operations of
the Bank.
13
<PAGE>
RESULTS OF RECENT OPERATIONS
The Company has no operations separate from the Bank. The Bank commenced
operations in December, 1995, and its activities have primarily consisted of
gathering deposits and writing loans, as well as installing internal operating
systems. At March 31, 1996, the Bank had total assets of approximately $8.8
million, total loans of approximately $1.2 million, and total deposits of $4.4
million. The Bank experienced a loss of $267,500 for the three month period
ended March 31, 1996, primarily as a result of high payroll expenses
attributable to retaining more employees than a community bank of its size would
typically do. In order to attract deposits, the Bank hired a deposit
development officer which causes the Bank to incur significant payroll costs
which are not covered by the level of interest income currently being generated.
Further, additional costs are attributable to salaries for loan officers in the
process of initiating loans, the fees and interest income from which has yet to
be fully realized. It is believed that employing additional personnel to
achieve profitability as early as possible is important to the ultimate success
of the Bank, notwithstanding the attendant decline of capital which is expected
to be temporary. It is anticipated that as the deposits and loans continue to
grow, the rate of losses will decline. Moreover, it is hoped that as the
lending officers gain experience with lending in the Bank's target market, the
level of loan production will increase, and the payroll expenses as a percent of
revenue will decline. It is not known, and cannot be accurately predicted at
this time if or when the Bank will achieve profitability.
DEPOSITS
The following table sets forth the average deposit liabilities of and the
rates paid by the Bank for the three months ended March 31, 1996:
<TABLE>
<CAPTION>
Average Balance Average Rate Paid
--------------- -----------------
<S> <C> <C>
Non Interest-bearing demand $ 25,037 n/a
Interest-bearing demand 48,978 1.50%
Savings 177,977 2.60%
Time 2,769,710 4.92%
-----------
Total deposits 3,021,702
-----------
-----------
</TABLE>
Of the time deposits listed above, the deposits of $100,000 or more had the
following times remaining to maturity:
<TABLE>
<CAPTION>
Balance at
March 31, 1996
--------------
<S> <C>
Remaining maturity:
less than 3 months 330,414
3-6 months 100,822
6-12 months 1,713,970
over 12 months -
----------
Total deposits $100,000 or more $2,145,206
----------
----------
</TABLE>
LOANS
Interest earned on the loan portfolio is the primary source of income for
the Bank. Net loans represent 13.8% of total assets as of March 31, 1996. The
Bank makes substantially all of its loans to customers located within the Bank's
service area. The Bank has no loans defined as highly leveraged transactions by
the Federal Reserve Board, and has no loan losses as of March 31, 1996. The
following table sets forth the composition of the loan portfolio at March 31,
1996:
14
<PAGE>
<TABLE>
<CAPTION>
March 31, 1996
--------------
<S> <C>
Commercial $ 49,725
Residential Real Estate 1,101,566
Installment 61,427
-----------
Total loans 1,212,718
Reserve for loan losses (6,206)
Net loans 1,206,512
-----------
-----------
</TABLE>
INVESTMENT PORTFOLIO
The investment portfolio at March 31, 1996, consisted entirely of United
States Treasury Bills maturing in one year or less, with an aggregate cost of
$3,424,788 and weighted average maturity of 5.24%.
THE DEVELOPMENT COMPANY
The Development Company is expected to be a for-profit corporation focusing
on rehabilitation of high-quality, affordable housing in concentrated areas,
emphasizing rental property, lease-to-own transition strategies, and for-sale
rehab properties. It is expected that a significant amount of development will
be done in partnership with existing housing developers. The Development
Company is also expected to initiate projects in the commercial sector, either
for its own account, or in partnership with other public, non-profit, or private
developers. The capitalization and implementation of the Development Company
may be delayed until management is satisfied that sufficient capital can be
directed toward the organization and operation of the Development Company
without causing a material adverse impact on the operations or financial
condition of the Bank.
PROPERTIES
The Company currently maintains its executive offices at the temporary
offices of the Bank at 1130 N.E. Alberta St., Portland, Oregon, which it leases
on a short-term lease at the rate of $2,000 per month. The Company will
maintain its permanent main office, located at the permanent office of the Bank
to be located at 2000 N.E. Martin Luther King Jr. Boulevard, Portland, Oregon.
The office, currently under construction, will comprise 5,347 square feet of
space in a mixed-use development pursuant to a lease agreement, dated May 6,
1996, which lease is for a term of 10 years at a monthly cost to the Bank of
$4,015. It is anticipated that such space will be adequate for the Company's
needs including the needs of the Bank and the Development Company, if organized.
The Bank is not financing the construction of the permanent office facility.
EMPLOYEES
As of March 31, 1996, the Bank had a total of 15.5 employees, 14 of which
were full-time-equivalent employees. The Company has no employees other than
those of the Bank.
LEGAL PROCEEDINGS
As of the date of this Prospectus, there were no legal proceedings pending
or threatened against the Company, the Bank, or any of their affiliates, which
would materially affect the ability of the Company or the Bank to conduct
business, or to complete this Offering.
15
<PAGE>
SUPERVISION AND REGULATION
GENERAL
The Company and the Bank are extensively regulated under federal and state
law. These laws and regulations are intended to protect depositors, not
shareholders. To the extent that the following information describes statutory
or regulatory provisions, it is qualified in its entirety by reference to the
particular statutory or regulatory provisions. Any change in applicable laws or
regulations may have a material effect on the business and prospects of the
Company and the Bank. The operations of the Company and the Bank may be
affected by legislative changes and by the policies of various regulatory
authorities. The Company is unable to predict the nature or the extent of the
effects on its business and earnings that fiscal or monetary policies, economic
control or new federal or state legislation may have in the future.
The Company, as a corporation organized under Oregon law, is subject to
certain limitations and restrictions of state law. Such limitations and
restrictions relate to such corporate matters as indemnification of directors,
distributions to shareholders, transactions with officers or directors, proper
maintenance of books and records, and procedural requirements with respect to
directors' and shareholders' meetings.
Securities of the Company are subject to the registration requirements of
the Securities Act of 1933, and applicable state securities laws, unless an
exemption from registration is available. Following registration of the Common
Stock in this Offering, the Company will be required to file periodic reports
with the Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, as amended. Such periodic reports can be inspected and
copied at, or obtained from, the Washington, D.C. office of the SEC.
FEDERAL BANK HOLDING COMPANY REGULATION
The Company is a bank holding company within the meaning of the Bank
Holding Company Act (the "BHCA"), and as such, it is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). The Company is required to file annual reports
with the Federal Reserve and to provide the Federal Reserve such additional
information as the Federal Reserve may require.
The BHCA requires every bank holding company to obtain the prior approval
of the Federal Reserve before (i) acquiring, directly or indirectly, ownership
or control of any voting shares of another bank or bank holding company, after
such acquisition, if it would own or control more than 5% of such shares (unless
it already owns or controls the majority of such shares); (ii) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(iii) merging or consolidating with another bank holding company. The Federal
Reserve will not approve any acquisition, merger or consolidation that would
have a substantial anti-competitive result, unless the anti-competitive effects
of the proposed transaction are clearly outweighed by a greater public interest
in meeting the convenience and needs of the community to be served. The Federal
Reserve also considers capital adequacy and other financial and managerial
factors in reviewing acquisitions or mergers.
With certain exceptions, BHCA also prohibits a bank holding company from
acquiring or retaining direct or indirect ownership or control of more than 5%
of the voting shares of any company which is not a bank or bank holding company,
or from engaging directly or indirectly in activities other than those of
banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by Federal Reserve regulation or order,
have been identified as activities closely related to the business of banking or
of managing or controlling banks. In making this determination, the Federal
Reserve considers whether the performance of such activities by a bank holding
company can be expected to produce benefits to the public such as greater
convenience, increased competition or gains in efficiency in resources, which
can be expected to outweigh the risks of possible adverse effects such as
decreased or unfair competition, conflicts of interest or unsound banking
practices. Community redevelopment entities are among the activities deemed
permissible by the Federal Reserve.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to the
bank holding company or its subsidiaries, on investments in their securities and
on the use of their securities as collateral for loans to any borrower. These
regulations and
16
<PAGE>
restrictions may limit the Company's ability to obtain funds from the Bank for
its cash needs, including funds for payment of dividends, interest and operating
expenses. Further, under the Federal Reserve Act and certain regulations of the
Federal Reserve, a bank holding company and its subsidiaries are prohibited from
engaging in certain tying arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services. For example, the
Bank may not generally require a customer to obtain other services from the Bank
or the Company, and may not require that the customer promise not to obtain
other services from a competitor, as a condition to an extension of credit to
the customer.
FEDERAL AND STATE BANK REGULATION
The Bank, as a state chartered bank with deposits insured by the Federal
Deposit Insurance Corporation ("FDIC") that is not a member of the Federal
Reserve System, is subject to the supervision and regulation of the Director of
the Oregon Department of Consumer and Business Services, administered through
the Division of Finance and Corporate Securities (the "Oregon Director"), and to
the supervision and regulation of the FDIC. These agencies may prohibit the
Bank from engaging in what they believe constitute unsafe or unsound banking
practices.
As of July 1, 1989, Oregon has permitted out-of-state banking institutions
to acquire banks or holding companies that have been in existence for a period
of no fewer than three years. Generally, such acquisitions are subject to the
approval of the Federal Reserve Board and the Oregon Director. As a result of
1993 Oregon legislation and 1995 federal law changes, Oregon banks may merge
with out-of-state national or state banks, and out-of-state national and state
banks may acquire Oregon branches or may merge with or acquire branches of
Oregon or federal savings associations. Initial acquisitions must involve
institutions which have been engaged in banking in Oregon for at least three
years, but once such an acquisition is made, the resulting bank may add
additional branches.
The Community Reinvestment Act (the "CRA") requires that, in connection
with examinations of financial institutions within their jurisdiction, the
Federal Reserve or the FDIC evaluates the record of the financial institutions
in meeting the credit needs of their local communities, including low- and
moderate-income neighborhoods, consistent with the safe and sound operation of
those banks. These factors are also considered in evaluating mergers,
acquisitions and applications to open a branch or facility. The provisions of
the CRA may be enforced by private citizens and interest groups as well as
federal banking regulators, who conduct regular CRA examinations. A
satisfactory rating means the Bank has adequately met the needs of the
community, consistent with safe and sound banking practices. Although the Bank
has not yet been subjected to a CRA examination, it is anticipated that the Bank
will consistently receive more than satisfactory ratings on its CRA performance,
as a result of its particular focus on meeting such credit needs.
The Bank is also subject to certain restrictions imposed by the Federal
Reserve Act on extensions of credit to executive officers, directors, principal
shareholders or any related interest of such persons. Extensions of credit (i)
must be made on substantially the same terms, including interest rates and
collateral as, and following credit underwriting procedures that are not less
stringent than, those prevailing at the time for comparable transactions with
persons not covered above and who are not employees, and (ii) must not involve
more than the normal risk of repayment or present other unfavorable features.
The Bank is also subject to certain lending limits and restrictions on
overdrafts to such persons. A violation of these restrictions may result in the
assessment of substantial civil monetary penalties on the Bank or any officer,
director, employee, agent or other person participating in the conduct of the
affairs of the Bank, the imposition of a cease and desist order, and other
regulatory sanctions.
Under the Federal Deposit Insurance Corporation Improvement Act ("FDICIA"),
each Federal banking agency is required to prescribe, by regulation, non-capital
safety and soundness standards for institutions under its authority. These
standards are to cover internal controls, information systems and internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, fees and benefits, such other operational and managerial
standards as the agency determines to be appropriate, and standards for asset
quality, earnings and stock valuation. An institution which fails to meet these
standards must develop a plan acceptable to the agency, specifying the steps
that the institution will take to meet the standards. Failure to submit or
implement such a plan may subject the institution to regulatory sanctions. The
Company believes that the Bank already meets
17
<PAGE>
substantially all the standards which have been or are likely to be adopted, and
therefore does not believe that the implementation of these regulatory standards
will materially affect the Company's business operations.
DEPOSIT INSURANCE
As an FDIC member institution, the deposits of the Bank are currently
insured to a maximum of $100,000 per depositor through the Bank Insurance Fund
("BIF"), administered by the FDIC. The Bank is required to pay semi-annual
deposit insurance premium assessments to the FDIC.
The FDICIA includes provisions to reform the Federal deposit insurance
system, including the implementation of risk-based deposit insurance premiums.
The FDICIA also permits the FDIC to make special assessments on insured
depository institutions in amounts determined by the FDIC to be necessary to
give it adequate assessment income to repay amounts borrowed from the U.S.
Treasury and other sources or for any other purpose the FDIC deems necessary.
Pursuant to the FDICIA, the FDIC implemented a transitional risk based insurance
premium system on January 1, 1993. Generally, under this system, banks are
assessed insurance premiums according to how much risk they are deemed to
present to BIF. Banks with higher levels of capital and a low degree of
supervisory concern are assessed lower premiums than banks with lower levels of
capital or involving a higher degree of supervisory concern. The Bank's current
FDIC premium rate is $.00 per $100 of domestic deposits. The premium range is
from $.00, for the highest-rated institutions (subject to a statutory minimum
assessment of $2,000) to $.27 per $100 of domestic deposits.
DIVIDENDS
The principal source of the Company's cash revenues is dividends received
from the Bank. Under the Oregon Act, the Bank is subject to restrictions on its
payment of cash dividends to the Company. The Bank may not pay cash dividends
if that payment would reduce the amount of its capital below that necessary to
meet minimum applicable regulatory capital requirements. In addition, the
amount of the dividend may not be greater than its net undivided profits then on
hand, after first deducting (i) all losses; (ii) all bad debts, unless the debts
are well-secured, (a) on which interest for a period of one year is past due and
unpaid, and (b) upon which final judgment has been obtained, but for more than
one year the judgment has been unsatisfied and interest has not been paid; (iii)
all assets or depreciation charged off as required by the Oregon Director; and
(iv) all accrued expenses, interest and taxes of the Bank.
In addition, the appropriate regulatory authorities are authorized to
prohibit banks and bank holding companies from paying dividends which would
constitute an unsafe or unsound banking practice. The Bank and the Company are
not currently subject to any regulatory restrictions on their dividends other
than those noted above. The Bank is currently unable to pay dividends to the
Company as a result of the lack of retained earnings. It is not known when, if
ever, the Bank will be able to pay such "upstream" dividends.
CAPITAL ADEQUACY
The federal bank regulatory agencies use capital adequacy guidelines in
their examination and regulation of bank holding companies and banks. If the
capital falls below the minimum levels established by these guidelines, the bank
holding company or bank may be denied approval to acquire or establish
additional banks or non-bank businesses or to open facilities.
The FDIC and Federal Reserve have adopted risk-based capital guidelines for
banks and bank holding companies. The risk-based capital guidelines are
designed to make regulatory capital requirements more sensitive to differences
in risk profile among banks and bank holding companies, to account for off-
balance sheet exposure and to minimize disincentives for holding liquid assets.
Assets and off-balance sheet items are assigned to broad risk categories, each
with appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items. The
guidelines are minimums, and the Federal Reserve has noted that bank holding
companies contemplating significant expansion programs should not allow
expansion to diminish their capital ratios and should maintain ratios well in
excess of the minimum. The current guidelines require all bank holding
companies and federally-regulated banks to maintain a minimum risk-based total
capital ratio equal to 8%, of which at least 4% must be Tier 1 capital.
18
<PAGE>
Tier 1 capital for bank holding companies includes common shareholders'
equity, qualifying perpetual preferred stock (up to 25% of total Tier 1 capital,
if cumulative; under a Federal Reserve rule, redeemable perpetual preferred
stock may not be counted as Tier 1 capital unless the redemption is subject to
the prior approval of the Federal Reserve) and minority interests in equity
accounts of consolidated subsidiaries, less intangibles except as described
above. Tier 2 capital includes: (i) the allowance for loan losses of up to
1.25% of risk-weighted assets; (ii) any qualifying perpetual preferred stock
which exceeds the amount which may be included in Tier 1 capital; (iii) hybrid
capital instrument; (iv) perpetual debt; (v) mandatory convertible securities
and (vi) subordinated debt and intermediate term preferred stock of up to 50% of
Tier 1 capital. Total capital is the sum of Tier 1 and Tier 2 capital less
reciprocal holdings of other banking organizations, capital instruments and
investments in unconsolidated subsidiaries.
Banks' and bank holding companies' assets are given risk-weights of 0%,
20%, 50%, and 100%. In addition, certain off-balance sheet items are given
credit conversion factors to convert them to asset equivalent amounts to which
an appropriate risk-weight will apply. These computations result in the total
risk-weighted assets.
Most loans are assigned to the 100% risk category, except for first
mortgage loans fully secured by residential property, which carry a 50% rating.
Most investment securities are assigned to the 20% category, except for
municipal or state revenue bonds, which have a 50% risk-weight, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have 0% risk-weight. In converting off-
balance sheet items, direct credit substitutes, including general guarantees and
standby letters of credit backing financial obligations, are given 100%
conversion factor. The transaction related contingencies such as bid bonds,
other standby letters of credit and undrawn commitments, including commercial
credit lines with an initial maturity of more than one year, have a 50%
conversion factor. Short-term, self-liquidating trade contingencies are
converted at 20%, and short-term commitments have a 0% factor.
The Federal Reserve also has implemented a leverage ratio, which is Tier 1
capital as a percentage of total assets less intangibles, to be used as a
supplement to risk-based guidelines. The principal objective of the leverage
ratio is to place a constraint on the maximum degree to which a bank holding
company may leverage its equity capital base. The Federal Reserve requires a
minimum leverage ratio of 3%. However, for all but the most highly rated bank
holding companies and for bank holding companies seeking to expand, the Federal
Reserve expects an additional cushion of at least 1% to 2%.
For bank holding companies with less than $150 million in consolidated
assets, the guidelines are applied on a bank-only basis unless the holding
company is engaged in a non-bank activity involving significant leverage or has
a significant amount of outstanding debt that is held by the general public. As
of March 31, 1996, the Company was in compliance with applicable capital
requirements.
The FDICIA also created a statutory framework of supervisory actions
indexed to the capital level of the individual institution. Under regulations
adopted by the FDIC, an institution is assigned to one of five capital
categories depending on its total risk-based capital ratio, Tier 1 risk-based
capital ratio, and leverage ratio, together with certain subjective factors.
Institutions which are deemed to be "undercapitalized" depending on the category
to which they are assigned are subject to certain mandatory supervisory
corrective actions. The Company does not anticipate that these regulations will
have any material effect on the Bank.
Under Oregon law, shares of the Bank may be assessable under certain
circumstances. If the capital of the Bank becomes impaired, shareholders of the
Bank (i.e. the Company) may be required to contribute additional capital.
Shareholders of the Company will not be called upon for such a contribution.
EFFECTS OF GOVERNMENT MONETARY POLICY
The earnings and growth of the Bank, and its existing and future
activities, are affected not only by general economic conditions, but also by
the fiscal and monetary policies of the federal government, particularly the
Federal Reserve. The Federal Reserve can and does implement national monetary
policy for such purposes as curbing inflation and combating recession, but its
open market operations in U.S. government securities, control of the discount
rate applicable to borrowings from the Federal Reserve, and establishment of
reserve requirements against certain deposits, influence growth of bank loans,
investments and deposits, and also affect interest rates charged on
19
<PAGE>
loans or paid on deposits. The nature and impact of future changes in monetary
policies and their impact on the Company cannot be predicted with certainty.
CHANGING REGULATORY STRUCTURE OF THE BANKING INDUSTRY
The laws and regulations affecting banks and bank holding companies are
currently undergoing significant changes. Bills are now pending or expected to
be introduced in the United States Congress that contain proposals for altering
the structure, regulation, and competitive relationships of the nation's
financial institutions. If enacted into law, these bills could have the effect
of increasing or decreasing the cost of doing business, limiting or expanding
permissible activities (including activities in the insurance and securities
fields), or affecting the competitive balance among banks, savings associations,
and other financial institutions. Some of these bills would reduce the extent
of federal deposit insurance, broaden the powers or the geographical range of
operations of bank holding companies, modify interstate branching restrictions
applicable to banks, regulate bank involvement in derivative securities
activities, and realign the structure and jurisdiction of various financial
institution regulatory agencies. Whether or in what form any such legislation
may be adopted or the extent to which the business of the Company might be
affected thereby cannot be predicted with certainty.
Of particular note is legislation which has been recently been enacted by
Congress, as referred to above, permitting interstate banking and branching,
which would allow banks to expand nationwide through acquisition, consolidation
or merger. Under this law, an adequately capitalized bank holding company may
acquire banks in any state if permitted by state law. In addition, banks may
acquire branches of out-of-state banks through merger followed by conversion of
the acquired bank branches into branches of the resulting bank. Further, banks
may establish and operate branches in any state subject to the restrictions of
applicable state law. Under Oregon law, an out-of-state bank or bank holding
company may merge with or acquire an Oregon state-chartered bank or bank holding
company if the Oregon bank, or in the case of a bank holding company, the
subsidiary bank, has been in existence for a minimum of three years, and the law
of the state in which the acquiring bank in located permits such merger.
COMMUNITY DEVELOPMENT BANKING LEGISLATION
Of particular importance to the Bank and the Company is legislation
recently passed by Congress which provides for federal assistance of community
development banks. The Community Development Banking and Financial Institutions
Act of 1994 (the "Community Development Banking Act"), created the Community
Development Financial Institutions Fund (the "CDFI Fund"), an agency within the
Department of the Treasury, to promote economic development of distressed
communities by providing financial and technical assistance to new and existing
Community Development Financial Institutions ("CDFI"). A CDFI must have a
primary mission of promoting community development, serve an investment area or
targeted population, provide development services and equity investments or
loans, and maintain accountability (through representation on its governing
boards or otherwise) to residents of its investment area/target population.
The Community Development Banking Act authorizes the appropriation of
federal funds to provide assistance to CDFIs. Assistance may be in the form of
equity investments, deposits, loans, grants, or direct or indirect technical
assistance. Equity investments by the Fund may not exceed 50% of the total
equity of the institution, and are limited to transferrable, nonvoting
securities, provided however, that such investments may be convertible to voting
securities upon transfer by the Fund. The Fund may not control the operations
of a CDFI. A particular CDFI, together with its affiliates, may not receive
more than $2 million of assistance in any one year, and no more than $5 million
in any three-year period.
To qualify for assistance, an institution must meet the criteria of a CDFI,
and must have a comprehensive strategic plan, including a five-year business
plan demonstrating the institution's capacity for future independent viability,
which describes the needs of the community for such assistance, the use of the
proceeds consistent with existing economic and community development plans
applicable to the area, and a plan of coordination with other sources of
financial assistance. Assistance is contingent on, and must be matched dollar-
for-dollar by, funds raised from other sources, such as charitable contributions
and capital investments. The Act provides for "Community Partnerships" wherein
the CDFI may apply for assistance together with an affiliated entity, which may
be a bank holding company, provided that such assistance is directed only to the
CDFI, and not to other affiliates.
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<PAGE>
It is believed that the Bank qualifies as a CDFI, and has filed an
application for assistance from the CDFI Fund for the purpose of obtaining
additional capital through an equity investment by the Fund. Such an investment
would be expected to have a material positive impact on the business of the Bank
and the Company. As of the date of this Prospectus, no action has been taken by
the Fund with respect to the Company's application, and no assurances can be
made that the Company will be successful in obtaining assistance from the Fund.
The success of the Company is, however, not believed to be dependent upon the
availability of funds from the CDFI Fund.
INITIAL VISITATION
On March 5, 1996, the Oregon Division of Finance and Corporate Securities
conducted an informal visitation of the Bank, as is routinely done within the
first three months of operation of a new bank. During this visit, several
deficiencies were identified and recommendations were made relating to the
operations of the Bank. Of particular concern to the examiners were the absence
of a current general ledger, the inability of the Bank to produce a daily
balance sheet and the failure to produce statements which could be certified
internally on a periodic basis. Management believes that these deficiencies
were primarily caused by delays in installing and implementing technical and
operational systems, and the initial training of bank personnel. Management
believes that these problems have been resolved and will have no material impact
on the ongoing operations of the Bank. Management anticipates banking
regulators will continue to monitor the Bank's operations, but does not expect
any further action by regulatory authorities.
21
<PAGE>
MANAGEMENT
OFFICERS AND DIRECTORS
The following table sets forth information about the officers and directors
of the Company and the Bank. Unless otherwise indicated, the respective
individuals hold positions in both corporations.
<TABLE>
<CAPTION>
NAME AGE POSITION PRINCIPAL OCCUPATION
- -------------------- ---- ---------------------- --------------------
<S> <C> <C> <C>
Roger S. Ahlbrandt 54 Director Dean, Portland State
University School of
Business
James R. Bradshaw 38 Director of Bank Investment Banker,
Pacific Crest
Securities Inc.
Graham C. Bryce 54 Director of Bank Real Estate Investor
Bernard V. Foster 53 Director of Company Publisher, The
Skanner Newspapers
Ted K. Gilbert 44 Director of Company Real Estate
Developer
Avel Louise Gordly 48 Director of Company State Representative
Michael C. Henderson 49 Chairman of the Board President,
PacifiCorp Financial
Services
Sheila D. Holden 41 Director of Company District Manager,
PacifiCorp
Deborah E. Kennedy 42 Director of Company Managing Director,
Cole & Weber
James E. May 43 Director of Company President and CEO,
Legacy Portland
Hospitals
Deborah Saweuyer-Parks 42 Director of Bank President and CEO,
Oregon Corporation
of Affordable
Housing
Howard M. Shapiro 64 Vice Chairman of Consultant
the Board
Leon C. Smith 48 Director, President,
Chief Executive
Officer Banker
Robert L. Thome 64 Senior Lending Officer
of Bank Banker
Jeana M. Woolley 43 Director of Company Consultant
</TABLE>
For both the Company and the Bank, directors serve or will serve staggered
terms of office so that approximately one-third of the directorship positions
are voted upon each year and are elected to three year terms. Directors have
not yet been assigned to classes for the purposes of determining the directors
whose terms will expire in the next one, two or three years. It is expected
that such assignments will be made in connection with the election of directors
at the next annual meeting of shareholders. The executive officers are Leon C.
Smith, President and Chief Executive Officer, and Robert L. Thome, Senior
Lending Officer of the Bank. No director or executive officer of the Company or
the Bank has a direct family relationship with another director or executive
officer of the Company or the Bank. Margaret Cheek, Controller of the Company
and Cashier of the Bank resigned as of May 23, 1996, for personal reasons.
Candidates to fill those positions are being interviewed, and nominations are
under review by state and federal banking regulators. A successor has not yet
been selected. Carl E. Peres, a retired banker with over 20 years of banking
experience, primarily with First Interstate Bank, is acting Chief Accounting
Officer in the interim.
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the business experience of the directors and
executive officers for the past five years:
22
<PAGE>
ROGER S. AHLBRANDT is Dean of Portland State University School of Business
Administration, a position he has held since 1993. Prior to that time, Dr.
Ahlbrandt was a professor and Associate Dean of the Graduate School of Business
at the University of Pittsburgh, positions he held from 1982 to 1993. Dr.
Ahlbrandt has extensive experience in housing and economic development, and is a
member of the Advisory Committee of the Neighborhood Partnership Fund of the
Oregon Community Foundation. He also serves as a director for ESCO Corporation
and the Ellwood Group, Inc., steel and heavy equipment manufacturers.
JAMES R. BRADSHAW, is a Vice President at Pacific Crest Securities Inc., a
Portland-based investment banking firm, where he has been employed since 1992 as
an investment research analyst focusing on financial institutions. Pacific
Crest Securities is the Placement Agent for this Offering. Prior to joining
Pacific Crest Securities, Mr. Bradshaw was a senior bank examiner for the State
of California and was also a consultant involved in the liquidation of a failed
California thrift.
GRAHAM C. BRYCE has served as President of QG Investment Company, a real
estate investment company, since 1986. Mr. Bryce has extensive prior
experience in the banking and financial services industry, holding positions as
an officer at Mellon Bank, Wells Fargo Bank and Orbanco Financial Services. He
also served as a director of Sprouse-Reitz Stores, Inc., which was liquidated in
bankruptcy in 1994. Mr. Bryce holds a Masters degree in Finance from
Northwestern University.
BERNARD V. FOSTER is owner and publisher of The Skanner Newspapers and is
President of the West Coast Black Publishers Association, representing 22
newspapers in 18 markets throughout western United States. Mr. Foster is
actively involved in many community organizations and activities which serve the
needs of the minority youth and disadvantaged of the Portland area, including
sponsorship of the Northeast Neighborhood Fun Run, The Skanner Music Awards,
Thanksgiving and Christmas food drives, and the annual Minority Business
Enterprise Awards. Mr. Foster is also a member of the Metropolitan Exposition-
Recreation Commission, a regional policy-making board.
TED K. GILBERT serves as President of Baron Equities And Resources, Inc., a
firm specializing in real estate acquisition and development, and has been
actively involved in real estate investment and management since 1973. Mr.
Gilbert also has experience in creating affordable and low income housing, with
an emphasis on north and northeast Portland's inner city neighborhoods. He is
Chairman of HOST Development, Inc., a non-profit developer of affordable home
ownership.
AVEL LOUISE GORDLY serves as an elected State Representative. Appointed in
1991 to fill a vacant position, she has been twice elected to serve her
district, first 1992 and again 1994. For more than 20 years she has been active
in community and social programs, most recently serving as Program Director for
the Portland Housing of Umoja (1991) and Associate Executive Secretary
(Director) of the Pacific Northwest Region American Friends Service Committee in
the Portland, Oregon office (1987-1990).
MICHAEL C. HENDERSON has been President and Chief Operating Officer of
PacifiCorp Holdings Company, a subsidiary of PacifiCorp which controls all of
the non-utility operations of PacifiCorp, since 1995. Prior to that time, he
served, from 1991 to 1995, as President and Chief Executive Officer of
PacifiCorp Financial Services, one of the non-utility subsidiaries, a $1.3
billion diversified financial services company with investments in aviation,
real estate, computer leasing and manufacturing, and middle-market loan and
lease portfolios. Mr. Henderson is a Certified Public Accountant and a
Certified Management Consultant, and has more than 16 years of experience as a
partner in a major accounting firm. He is active in, and has served on the
boards of, several community organizations. Mr. Henderson currently serves as
Chairman of the Board of Directors of the Company and the Bank.
SHEILA D. HOLDEN has been employed by PacifiCorp since 1985, and currently
serves a district manager of community relations for Pacific Power & Light
Company, a subsidiary of PacifiCorp, a position she has held since 1991. She
has been actively involved in organizations which assist low-income residents
with energy-related issues.
DEBORAH E. KENNEDY is Managing Director of Cole & Weber, a Portland
advertising agency. Prior to joining Cole & Weber in 1990, Ms. Kennedy was
Director of Tourism for the State of Oregon for 3 years, and
23
<PAGE>
previously International Advertising Manager for Nike, Inc. She is a member of
the board of directors of the Northwest Business Committee for the Arts and the
Oregon Independent College Foundation. Ms. Kennedy is also the founder of Cycle
Oregon, an annual 450-mile bicycle tour of rural Oregon.
JAMES E. MAY is President and Chief Executive Officer of Legacy Portland
Hospitals and Chief Operating Officer of Managed Healthcare Northwest, positions
he has held since 1991 and 1994, respectively. Mr. May holds an M.B.A. in
Finance and Health Administration from the University of Chicago, and has more
than 15 years of experience in hospital management. Mr. May is actively
involved in several community organizations serving the Portland area, including
the American Red Cross, Needy Kids Fund, North/Northeast Business Association,
and Home Ownership a Street at a Time.
DEBORAH SAWEUYER-PARKS is the President and Chief Operating Officer of the
Oregon Corporation for Affordable Housing, a position she has held since its
formation in July, 1993. Prior to the formation of the OCAH, she served as the
Low-Income Tax Credit Program Manager for the Oregon Housing and Community
Services Department. Ms. Saweuyer-Parks graduated from the University of Oregon
and has taken graduate courses toward her MBA at the College of William and
Mary.
HOWARD M. SHAPIRO is an independent business consultant specializing in
management, marketing, fund raising and organizational restructuring. Mr.
Shapiro holds a degree in Business Administration, and serves on the boards of
several charitable and community organizations.
LEON C. SMITH is President and Chief Executive officer of the Company and
the Bank. Prior to joining the Company in January, 1994, Mr. Smith was a Senior
Vice President for Bank of Boston, Connecticut, a position he held from 1992 to
1994, and was previously Chief Executive Officer of Emerald City Bank in
Seattle, Washington from 1991 to 1992. Mr. Smith has also had extensive
experience with community organizations and redevelopment lending projects. He
holds an MBA from the University of Chicago and a law degree from Northwestern
University.
ROBERT L. THOME is the Bank's Senior Lending Officer. Mr. Thome has over
10 years of experience in lending as Vice President of The Money Store
Investment Corporation, a position he has held since 1985. Prior to that time,
Mr. Thome served for over 20 years as Assistant District Director for Finance
and Investment for the Small Business Administration.
JEANA M. WOOLLEY is President and principal of JM Woolley & Associates, a
planning and development consulting firm she has owned and operated since 1991.
Ms. Woolley has over 20 years of experience in public- and private-sector
organizations, including management positions in technology and real estate
businesses. Ms. Woolley also serves as the Chairperson and Trustee of the
Northeast Portland Development Trust, the Company's largest shareholder.
REMUNERATION OF OFFICERS AND DIRECTORS
The following sets forth the aggregate remuneration of the highest paid
executive officer during the past fiscal year. As the Bank commenced operations
in late December, 1995, no other executive officers received significant
remuneration in 1995. Directors do not receive compensation for service or for
participation in meetings of the board of directors.
<TABLE>
<CAPTION>
Name of Individual Capacity in which
or Identity of Group Remuneration was received Aggregate Remuneration
- --------------------- ------------------------- ----------------------
<S> <C> <C>
Leon C. Smith President, Chief Executive $125,000
Officer
</TABLE>
EMPLOYMENT AGREEMENTS
As of February 1, 1994, the Company and Leon C. Smith entered into an
employment agreement, pursuant to which Mr. Smith is to serve as President and
Chief Executive Officer for a term of two years, extendable for
24
<PAGE>
one year at the Company's option. The agreement provides for an annual salary
of $110,000 in 1994, and $125,000 in 1995, and provides for equity participation
through a stock option plan to be established by the Company following the
chartering and funding of the Bank. The agreement further provides for
severance pay of $31,250 in the event the option to extend the agreement is not
exercised, or $125,000 in the event his employment is terminated as a result of
a change of control of the Company by reason of merger, acquisition or
otherwise. The agreement has been extended for one year at an annual salary of
$125,000 for 1996. The parties are in discussions with respect to further
extension or renewal of the current agreement, or possibly a new agreement. A
stock option plan has not been established as of the date hereof, although a
plan may be established in the future, subject to approval by the shareholders.
The Bank entered into an employment contract, dated December 26, 1995, with
Robert L. Thome, pursuant to which agreement Mr. Thome is to serve as senior
vice president for a term of two years at a salary of $72,000 per year. The
agreement provides for an pager/cellular phone and automobile allowances in
aggregate of $400 per month.
EMPLOYEE BENEFIT PLANS
As of the date of this Prospectus, the Company had no established employee
benefit plans generally available to all employees. The Company intends to
establish a health insurance plan and other benefits for officers and other
employees, typical of community banks.
CERTAIN TRANSACTIONS
Certain officers or directors may engage in transactions with the Company
or any of its affiliates, including the Bank, in the ordinary course of the
business of the Company or such affiliates. It is expected that the terms and
conditions of such transactions will be substantially the same as similar
transactions with unrelated parties.
James R. Bradshaw, a director of the Bank, is a Vice President of Pacific
Crest Securities Inc., the Placement Agent for this Offering.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Leon C. Smith, President and Chief Executive Officer of the Company served
twenty-two months as President and Chief Executive Officer of Emerald City Bank,
a Washington state bank, which failed approximately eight months after Mr. Smith
had left the bank. Mr. Smith had been appointed at a time when the bank was
already a very troubled institution and was subject to an FDIC-imposed consent
decree. During Mr. Smith's tenure, the bank significantly decreased its
operating losses, increased the loan portfolio, and decreased the level of
classified assets. Despite Mr. Smith's success in restoring the institution's
balance sheet, the lack of necessary additional capital resulted in the failure
of the bank and the appointment of the FDIC as receiver.
Graham C. Bryce, director of the Bank, served from 1990 to 1994 as a
director of the Sprouse, Inc. ("Sprouse"), an operator of retail variety stores.
Sprouse filed for protection under chapter 11 of the Federal Bankruptcy Code in
1992, and again in 1993. Sprouse was liquidated in a proceeding under Chapter 7
of the Bankruptcy Code in 1994.
25
<PAGE>
SIGNIFICANT SHAREHOLDER
NORTHEAST PORTLAND COMMUNITY DEVELOPMENT TRUST
The Northeast Portland Community Development Trust (the "Trust"), a non-
profit, limited-life charitable trust, was created by the NPF on December 1,
1993, for the purpose of receiving the balance of the settlement funds after
payment of expenses incurred by OCF and the organizing group, and the
organizational expenses of the Company and the subsidiary bank, including
expenses incurred in connection with raising the initial capital of the Company.
The Trust, although a limited-life, charitable trust, is a registered bank
holding company pursuant to the Bank Holding Company Act of 1956, as amended, as
a consequence of its ownership of all of the Company's Series A Preferred Stock,
which carries special voting rights.
The Trust is entitled to elect up to 25% of the directors of the Company,
and in any event, at least two directors, starting with the Company's next
annual meeting of shareholders scheduled to be held on mid-year, 1996, after the
Bank occupies its new head office. Currently one of the trustees, Jeana
Woolley, serves as a director of the Company, and another trustee, Gretchen
Kafoury, serves as an advisory director. The directors elected by the Trust
need not be Trustees of the Trust, but are expected to be persons who live or
work in the North/Northeast Community, or otherwise represent an interest in
such area. However, no specific qualifications will be imposed upon the
selection of such directors except the age limitation applicable to all
directors. The Trust has not made any determination as to who it will elect at
the 1996 annual meeting of shareholders.
The Declaration of Trust appoints four Trustees who are elected at each
annual meeting of the Board of Trustees. Trustees are elected by all currently
serving trustees. The current Trustees of the Trust and their addresses are
listed below:
Mary A. Anderson, Executive Director Lolenzo T. Poe, Jr.
Black United Fund of Oregon 1401 N.E. 68th Ave.
P.O. Box 12406 Portland, Oregon 97213
Portland, Oregon 97212
Gretchen M. Kafoury, Commissioner Jeana M. Woolley
City of Portland 5006 N.E. Mallory
1220 S.W. Fifth Ave., Room 211 Portland, Oregon 97211
Portland, Oregon 97204
26
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth the security ownership of the highest paid
executive officer, all directors officers as a group, and principal shareholders
of the Company as of June 10, 1996, and as of the close of the Offering. It is
not anticipated that any of the shareholders listed below will purchase any
significant additional shares in this Offering.
<TABLE>
<CAPTION>
AMOUNT OWNED AMOUNT OWNED PERCENT OF CLASS
TITLE OF CLASS NAME AND ADDRESS OF OWNER BEFORE OFFERING AFTER OFFERING(1) AFTER OFFERING (1),(2)
- --------------- ------------------------- --------------- ----------------- -----------------------
<S> <C> <C> <C> <C>
Class A Common Leon C. Smith 2,000 2,000 *
1130 N.E. Alberta
Portland, Oregon 97211
Class A Common ALL OFFICERS AND DIRECTORS 51,070(3) 51,070(3) 19.22%
AS A GROUP
Class A Common James E. May/Legacy Emanuel Hospital 25,250(1) 25,250(3) 9.50%
2801 North Gatenbein
Portland, Oregon 97227
Series A Preferred Northeast Portland Community 16,300 16,300 100.0%
Development Trust
5006 N.E. Mallory
Portland, Oregon 97211
Series B Preferred Oregon Community Foundation 4,110 4,110 48.25%
621 S.W. Morrison, Ste. 720
Portland, Oregon 97205
Series B Preferred The Collins Foundation 1,000 1,000 11.74%
1618 S.W. First Ave., Ste. 305
Portland, Oregon 97201
Series B Preferred Meyer Memorial Trust 2,000 2,000 23.48%
1515 S.W. Fifth Ave., Ste. 500
Portland, Oregon 97201
Series C Preferred Federal National Mortgage Association 4,570 4,570 100.0%(1)
3900 Wisconsin Ave NW
Washington, D.C. 20016
Attn: Wendell L. Johns
* less than 1.0%
</TABLE>
- -------------------
1. Assumes no purchases of shares in this Coffering by which shareholder or
members of the group.
2. Assumes sale of all shares offered in this offering.
3. Includes 25,000 shares held by Legacy Emanuel Hospital, of which Mr. May
is President. Also includes250 shares held by Mr. May jointly with his
spouse.
4. Represents 29,500 shares of Class A Common Stock (9.999% of Class A Common
then outstanding) and 16,200 shares of Clas B Common Stock (100% of Class B
Common then outstanding) if all 4,570 shares were converted to Common
Stock.
28
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock sets forth the
material aspects of each class. This description is qualified by reference to
the relevant provisions of the Company's articles of incorporation and bylaws.
The authorized capital stock consists of 5,000,000 shares divided into
4,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. All
issued and outstanding shares are, and all shares of Common Stock to be issued
in this Offering will be, fully paid and non-assessable. The Board of Directors
is authorized to issue or sell additional capital stock of the Company, at its
discretion and for fair value, and to issue future cash or stock dividends,
without shareholder approval.
COMMON STOCK
The authorized Common Stock consists of 3,000,000 shares without par value
of Class A Voting Common Stock ("Common Stock") and 1,000,000 shares without par
value of Class B Non-Voting Common Stock ("Class B Common Stock"). As of the
date of this Prospectus, there were 165,670 shares of the Common Stock
outstanding, and no shares of the Class B Common Stock outstanding. Other than
as set forth below, shares of the Common Stock and Class B Common Stock each
have the same rights to the assets of the Company upon liquidation, subject to
any liquidation preference of any Preferred Stock which may be outstanding.
There are no preemptive rights to acquire additional securities that the Company
may issue.
Each share of Common Stock is entitled to one vote on all matters presented
for shareholder vote, including the election of directors, subject to the
special voting rights of the holders of the Series A Preferred Stock.
Shareholders do not have the right to accumulate votes in the election of
directors.
Shares of Class B Common Stock have no voting rights other than as required
by law, but are otherwise in all respects identical to shares of Common Stock.
Under Oregon law, shareholders who are not otherwise entitled to vote are
nevertheless entitled to vote on any amendment to the articles of incorporation
which may adversely affect their rights as shareholders by, for example,
authorizing additional shares of the same class, altering the par value,
dividend or liquidation preferences, creating a class of shares with dividend or
liquidation preferences equal or senior to shares of that class, or
reclassifying shares of that class into shares of another class.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared by the Board of Directors out of funds legally available for
such purpose. Rights to receive dividends on the Common Stock are subject to
the prior rights of shares of Preferred Stock then outstanding, if any.
PREFERRED STOCK
The Company is currently authorized to issue up to 1,000,000 shares of
Preferred Stock (without par value). The Board of Directors has the authority
to issue Preferred Stock in one or more series, and to designate the
preferences, limitations and relative rights of the shares of any such series
without any further vote or action of the shareholders. The Board also has the
authority to determine the liquidation and dividend rights of any Preferred
Stock that may be issued, including the priority of such rights over the
liquidation and dividend rights of holders of the Common Stock.
SERIES A 1% PREFERRED STOCK.
As of June 10, 1996, there were 20,000 shares of Preferred Stock designated
as Series A 1% Preferred Stock ("Series A Preferred"), of which 16,300 shares
are issued and outstanding. The Series A Preferred carries a liquidation
preference of $1.00 per share, and liquidation participation rights at ten times
the amount distributable on liquidation with respect to the Common Stock up to a
maximum of $100.00 per share of Series A Preferred. The Series A Preferred thus
participates with the Common Stock and the Series B Preferred Stock in any loss
of shareholder equity if the amount to which it would be entitled upon
liquidation is less than $100.00. The Series A Preferred is entitled to a non-
cumulative annual dividend of $1.00 per share, when and as declared by the Board
of Directors, which must be paid in any year a cash dividend on the Common Stock
is declared.
29
<PAGE>
The Articles of Incorporation provide that the holder of the Series A
Preferred has the right to elect directors representing 25% of the total number
of directors to be elected, disregarding any fraction, but in any event, no
fewer than two directors. With respect to such board positions, only holders of
Series A Preferred shall be entitled to vote for nominees or their replacements.
All directors, including those elected by the holders of the Series A Preferred,
will serve staggered three-year terms of office, although initially, directors
will serve terms of one, two or three years. Holders of the Series A Preferred
have no other voting rights except as otherwise provided by Oregon law. As of
the date of this Prospectus, all of the Series A Preferred was held by the
Trust.
SERIES B 1% NON-VOTING PREFERRED STOCK.
The Articles of Incorporation designate 10,000 shares of the Preferred
Stock as Series B 1% Non-Voting Preferred Stock ("Series B Preferred"). The
Series B Preferred has no voting rights except as provided by Oregon law, but is
in all other respects identical to and on parity with the Series A Preferred.
As of June 10, 1996, there were 8,518 shares of Series B Preferred outstanding.
SERIES C 10% NON-VOTING CONVERTIBLE PREFERRED STOCK.
The Articles of Incorporation designate 10,000 shares of the Preferred
Stock as Series C 10% Non-Voting Convertible Preferred Stock ("Series C
Preferred"), of which 4,570 shares were outstanding as of June 10, 1996. The
Series C Preferred has a liquidation preference of $100.00 which is on parity
with the liquidation preferences of the Series A and Series B Preferred, and
prior to the liquidation participation of the Series A and Series B Preferred
with the Common Stock liquidation rights, but otherwise has no liquidation
participation. The Series C Preferred is entitled to a non-cumulative annual
dividend of $10.00 per share, when and as declared by the Board of Directors,
which must be paid in any year a cash dividend on the Common Stock is declared.
The Series C Preferred has no voting rights except as provided by Oregon law.
Each share of the Series C Preferred is convertible into ten shares of Common
Stock, up to a maximum of 4.99% of the Common Stock then outstanding. To the
extent the conversion of shares of Series C Preferred would result in the
issuance in aggregate of more than 4.99% of the then outstanding Common Stock,
shares of Class B Common Stock will be issued.
LEGAL MATTERS
For purposes of this Offering the following has acted as Special Counsel to
the Company:
Foster Pepper & Shefelman
101 S.W. Main St. 15th Floor
Portland, Oregon 97204
EXPERTS
The consolidated financial statements of Albina Community Bancorp and
subsidiaries at and for the year ended December 31, 1995, have been included in
this Prospectus in reliance on the reports of KPMG Peat Marwick LLP, independent
certified public accountants, given on the authority of said firm as experts in
auditing and accounting.
TRANSFER AGENT
The Transfer Agent for the Common Stock of the Company is Albina Community Bank,
its subsidiary.
30
<PAGE>
SECURITIES AND EXCHANGE COMMISSION POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the Company's Articles of Incorporation,
contractual agreements, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission ("SEC") such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
OTHER INFORMATION
The Company has filed a registration statement on Form SB-1 with the SEC
under the Act with respect to the Common Stock being offered hereby. As
permitted by the rules and regulations of the SEC, this Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, which may be obtained
from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20459. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete and, in such instance, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
31
<PAGE>
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
ALBINA COMMUNITY BANCORP
Page
----
Report of Independent Auditors F-1
Consolidated Balance Sheets at March 31, 1996 (unaudited)
and at December 31, 1995 and 1994 F-2
For the Three Months Ended March 31, 1996 and 1995 (unaudited) and
for the Years Ended December 31, 1995, 1994, and 1993:
Consolidated Statements of Operations F-3
Consolidated Statements of Changes in Shareholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Albina Community Bancorp:
We have audited the accompanying consolidated balance sheets of Albina Community
Bancorp and subsidiary (collectively a development stage enterprise) as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for the years then
ended and for the period from August 18, 1993 (inception) through December 31,
1993 and for the period from August 18, 1993 (inception) through December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Albina Community
Bancorp and subsidiary as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for the years then ended and for the period from
August 18, 1993 (inception) through December 31, 1993 and for the period from
August 18, 1993 (inception) through December 31, 1995 in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
March 5, 1996, except note 10 as to
which the date is May 6, 1996
F-1
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- ---------
ASSETS 1995 1994 1996
---- ---- ----
<S> <C> <C> <C>
(UNAUDITED)
Cash and cash equivalents:
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 223,457 $ 42,044 $ 386,607
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100,000 - 3,540,000
----------- ----------- -----------
Total cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . 2,323,457 42,044 3,926,607
----------- ----------- -----------
Investment securities - held to maturity (note 4). . . . . . . . . . . . . . . . . . 3,380,443 - 3,424,788
Loans receivable, net (notes 5 and 6). . . . . . . . . . . . . . . . . . . . . . . . - - 1,206,512
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,277 - 168,665
Prepaid insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,949 - 18,575
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,107 - 11,136
----------- ----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,875,233 $ 42,044 $ 8,756,283
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposit liabilities:
Deposits (note 7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173,500 - 4,397,419
----------- ----------- -----------
Total deposit liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 1,173,500 - 4,397,419
----------- ----------- -----------
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,572 14,062 14,532
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,161 129 43,819
----------- ----------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,307,233 14,191 4,455,770
----------- ----------- -----------
Shareholders' equity (notes 2 and 3):
Preferred stock, authorized 1,000,000, without par value.
29,388 shares issued and outstanding:
Series A, 1%; $1.00 per share liquidation preference;
non-cumulative; 20,000 shares designated, 16,300
shares issued and outstanding at December 31, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,236,058 - 2,236,058
Series B, $1.00 per share liquidation preference;
non-cumulative; 10,000 shares designated, 8,518
shares issued and outstanding at December 31, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851,800 - 851,800
Series C, 10%, $100.00 per share liquidation preference;
non-cumulative; convertible; 10,000 shares designated,
4,570 shares issued and outstanding at December 31, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,000 - 457,000
Common stock:
Class A common stock, without par value. Authorized
3,000,000 shares; 165,670 shares issued and outstanding. . . . . . . . . . . . 1,656,700 - 1,656,700
Class B common stock, without par value. Authorized
1,000,000 shares; none issued or outstanding . . . . . . . . . . . . . . . . . - - -
Contributed capital (note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . - 331,646 -
Deficit accumulated in the development stage ($612,614 and
$773,023 allocable to Series A and B preferred stock and
$20,944 and $128,022 allocable to common stock at
December 31, 1995 and March 31, 1996, respectively). . . . . . . . . . . . . . . (633,558) (303,793) (901,045)
----------- ----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 4,568,000 27,853 4,300,513
----------- ----------- -----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . $ 5,875,233 $ 42,044 $ 8,756,283
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
AUGUST 18, AUGUST 18,
1993 1993
(INCEPTION) (INCEPTION) THREE MONTHS
THROUGH YEAR ENDED YEAR ENDED THROUGH ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, -------------------
1993 1994 1995 1995 1995 1996
---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest from subscriptions. . . . . . . . $ - $ - $ 27,383 $ 27,383 $ - $ -
Interest from loans. . . . . . . . . . . . - - - - - 6,274
Interest on federal funds sold . . . . . . - - 8,721 8,721 - 39,370
Interest on investment securities. . . . . - - 4,845 4,845 - 44,345
--------- --------- --------- --------- --------- ---------
Total interest income. . . . . . . . - - 40,949 40,949 - 89,989
--------- --------- --------- --------- --------- ---------
Interest expense:
Time deposits (note 7) . . . . . . . . . . - - 2,069 2,069 - 37,327
--------- --------- --------- --------- --------- ---------
Total interest expense . . . . . . . - - 2,069 2,069 - 37,327
--------- --------- --------- --------- --------- ---------
Net interest income. . . . . . . . . - - 38,880 38,880 - 52,662
Provision for loan losses (note 6) . . . . . - - - - - 6,206
--------- --------- --------- --------- --------- ---------
Net interest income after
provision for loan losses. . . . . - - 38,880 38,880 - 46,456
--------- --------- --------- --------- --------- ---------
Noninterest income:
Fees and services charges. . . . . . . . . - - - - - 2,412
--------- --------- --------- --------- --------- ---------
Total noninterest income . . . . . . - - - - - 2,412
--------- --------- --------- --------- --------- ---------
Noninterest expense:
Salaries and related benefits. . . . . . . - 158,183 210,516 368,699 48,875 231,562
Occupancy expense (note 9) . . . . . . . . - - 2,000 2,000 - 11,801
Furniture and equipment expense. . . . . . - - 4,390 4,390 - 11,516
Professional services. . . . . . . . . . . 37,205 82,198 84,329 203,732 10,157 4,362
Other expenses . . . . . . . . . . . . . . - 26,207 67,410 93,617 2,180 57,114
--------- --------- --------- --------- --------- ---------
Total noninterest expense. . . . . . 37,205 266,588 368,645 672,438 61,212 316,355
--------- --------- --------- --------- --------- ---------
Net loss . . . . . . . . . . . . . . $ (37,205) $ (266,588) $ (329,765) $ (633,558) $ (61,212) $ (267,487)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
----------------------- ----------------------
NUMBER OF NUMBER OF CONTRIBUTED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, August 18, 1993
(inception). . . . . . . . . - $ - - $ - $ - $ - $ -
Contributed capital. . . . . . - - - - 37,205 - 37,205
Net loss . . . . . . . . . . . - - - - - (37,205) (37,205)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, December 31, 1993 . . - - - - 37,205 (37,205) -
Contributed capital. . . . . . - - - - 294,441 - 294,441
Net loss . . . . . . . . . . . - - - - - (266,588) (266,588)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 . . - - - - 331,646 (303,793) 27,853
Contributed capital. . . . . . - - - - 324,412 - 324,412
Proceeds from sale of stock
(note 3) . . . . . . . . . . 29,388 3,544,858 165,670 1,656,700 (656,058) - 4,545,500
Net loss . . . . . . . . . . . - - - - - (329,765) (329,765)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 . . 29,388 3,544,858 165,670 1,656,700 - (633,558) 4,568,000
Net loss (unaudited) . . . . . - - - - - (267,487) (267,487)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, March 31, 1996
(unaudited). . . . . . . . . 29,388 $ 3,544,858 165,670 $ 1,656,700 $ - $ (901,045) $ 4,300,513
------- ----------- ------- ---------- ---------- ---------- ----------
------- ----------- ------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
AUGUST 18, AUGUST 18,
1993 1993
(INCEPTION) (INCEPTION)
THROUGH YEAR ENDED YEAR ENDED THROUGH THREE MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
1993 1994 1995 1995 1995 1996
---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . $ (37,205) $ (266,588) $ (329,765) $ (633,558) $ (61,212) $ (267,487)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Depreciation expense . . . . . . . - - - - - 9,395
Provision for loan loss. . . . . . - - - - - 6,206
(Increase) decrease in prepaid
insurance. . . . . . . . . . . . - - (21,949) (21,949) - 3,374
Increase in other assets . . . . . - - (3,107) (3,107) - (8,029)
Increase (decrease) in accrued
liabilities. . . . . . . . . . . - 14,062 104,510 118,572 - (104,040)
Increase in other liabilities. . . - 129 15,032 15,161 - 28,658
---------- ---------- ---------- ---------- ---------- ----------
Net cash used in operating
activities . . . . . . . . . . (37,205) (252,397) (235,279) (524,881) (61,212) (331,923)
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchase of investment securities. . . - - (3,380,443) (3,380,443) - (44,345)
Additions to premises and equipment. . - - (146,277) (146,277) - (31,783)
Loan originations. . . . . . . . . . . - - - - - (1,212,718)
---------- ---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities . . . . . . . . . . - - (3,526,720) (3,526,720) - (1,288,846)
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Net increase in deposit liabilities. . - - 1,173,500 1,173,500 - 3,223,919
Proceeds from contributed capital. . . 37,205 294,441 324,412 656,058 80,000 -
Proceeds from stock issuance . . . . . - - 4,545,500 4,545,500 - -
---------- ---------- ---------- ---------- ---------- ----------
Net cash provided by
financing activities . . . . . 37,205 294,441 6,043,412 6,375,058 80,000 3,223,919
---------- ---------- ---------- ---------- ---------- ----------
Net increase in cash and
cash equivalents . . . . . . . - 42,044 2,281,413 2,323,457 18,788 1,603,150
Cash and cash equivalents at
beginning of period. . . . . . . . . . - - 42,044 - 42,044 2,323,457
---------- ---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at
end of period. . . . . . . . . . . . . $ - $ 42,044 $ 2,323,457 $ 2,323,457 $ 60,832 $ 3,926,607
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F - 5
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION OF COMPANY
Albina Community Bancorp (the Company) was incorporated on
August 18, 1993 as an Oregon bank holding company, in connection
with PacifiCorp's (a Northwest Portland electric utility holding
company) settlement of certain ratepayer litigation. This
settlement provided for a contributed cash grant in the amount of
approximately $2 million (plus interest) for the investigation
and implementation of a community development financial
institution. The Company was formed to organize, through the
investment of the grant from a community trust (Northeast
Portland Community Development Trust, "the Trust"), a Federal
Deposit Insurance Corporation insured state chartered community
development bank (the Bank) and, at a later time, a real estate
development company (the Development Company). The Company will
conduct business through these two wholly owned subsidiaries.
During the organizational phase, the Company's operations focused
primarily on organizing its subsidiaries, developing business
strategies and market analyses, preparing applications for
regulatory approval, planning for capital raising, and recruiting
personnel.
In November of 1995, the Company received conditional regulatory
approvals to commence banking operations which were dependent
upon the completion of capital raising efforts. On December 15,
1995 the Company completed its initial capital raising efforts
and invested $4.5 million into Albina Community Bank (the Bank).
On December 19, 1995, after receiving approval for Federal
Deposit Insurance Corporation insurance, the Bank opened its
Portland, Oregon office. The Bank plans to specialize in home
mortgages and small business loans primarily to moderate and
lower income residents in North and Northeast Portland.
(b) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Albina Community Bancorp (the Company), a bank
holding company, and its wholly-owned subsidiary, the Bank.
Significant intercompany accounts and transactions have been
eliminated in consolidation.
(Continued)
F-6
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(c) BASIS OF FINANCIAL STATEMENT PREPARATION
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the balance sheet and
revenues and expenses for the period. Actual results could
differ significantly from those estimates.
(d) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and Federal funds
sold. Generally, Federal funds are sold for one-day periods.
(e) INVESTMENT SECURITIES
Investment securities are classified as either available for sale or
held to maturity. Investment securities purchased are recorded as of
their trade date. Investment securities held to maturity are stated
at cost, adjusted for amortization of premiums and accretion of
discounts. Securities available for sale are stated at market value.
Accretion of discounts and amortization of premiums arising at
acquisition of investment securities are included in income using
methods approximating the interest method. Realized gains or losses
on sales of investment securities available for sale, if any, are
determined based on the specific identification method. Net
unrealized gain or loss on securities available for sale are included,
net of tax, as a component of shareholders' equity.
(f) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is charged to expense over the estimated
useful lives of the assets.
(g) INCOME RECOGNITION
Interest is accrued on a level yield basis. The accrual of
interest on loans is discontinued when in management's judgment,
the future collectibility of interest or principal is in serious
doubt.
Loan origination and commitment fees, net of certain direct loan
origination costs, are generally recognized over the life of the
related loan as an adjustment of the yield.
(Continued)
F-7
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(h) RESERVE FOR LOAN LOSSES
The reserve for loan losses represents management's recognition
of the assumed risks of extending credit and its evaluation of
the quality of the loan portfolio. The reserve is maintained at
a level considered adequate to provide for potential loan losses
based on management's assessment of various factors affecting the
loan portfolio, including a review of problem loans, business
conditions, loss experience and an overall evaluation of the
quality of the portfolio. The reserve is increased by provisions
charged to operations and reduced by loans charged off, net of
recoveries. Uncollectible interest on loans is charged off or an
allowance established by a charge to income equal to all interest
previously accrued and interest is subsequently recognized only
to the extent cash payments are received until delinquent
interest is paid in full and, in management's judgment, the
borrower's ability to make periodic interest and principal
payments is back to normal in which case the loan is returned to
accrual status.
(i) ORGANIZATIONAL COSTS
Costs incurred in the start-up of the Company and its business
have been expensed as incurred.
(j) INCOME TAXES
The Company accounts for income taxes using the asset and
liability method. Under the asset and liability method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
(k) UNAUDITED INTERIM FINANCIAL DATA
The interim financial data at March 31, 1996 and for the
three-month periods ended March 31, 1996 and 1995, included
herein, are unaudited and, in the opinion of management, reflect
all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of the financial position and
the results of operations and cash flows for such interim
periods.
(Continued)
F-8
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(2) CONTRIBUTED CAPITAL
In accordance with the terms of the Funding Pledge Agreement dated
June 12, 1991, the $2 million contributed grant, as discussed in
note 1, consisted of a $1,792,554 absolute grant and an additional
fund-raising challenge grant of $316,333 to raise additional capital
from third party investors ($1 of this challenge grant would be
available for each $3 of third party funds contributed). These grants
were set aside in a fund (the Settlement Fund) to be used as needed
for the investigation and implementation of a community development
financial institution.
Payments and funding requests have been made from the Settlement Fund
to assist in the formation of the Company as well as to obtain
necessary regulatory approvals, raise capital, and recruit senior
officers. Interest accumulates on the Settlement Fund balance
monthly. At December 31, 1994, the remaining balance of the
Settlement Fund (original contributed grant plus interest less
expenditures and funding requests) was $1,875,070.
Although the Company may have requested funding from the Settlement
Fund, the Settlement Fund balance, including the accumulated interest
income, was never controlled by the Company and therefore it is not
recorded in the accompanying financial statements. In December 1993,
a non-profit, limited life charitable trust (the Trust) was formed to
receive the balance of the Settlement Fund remaining upon the
capitalization and authorization of the Company to carry on business
through the Bank. On December 15, 1995, the Settlement Fund balance
was transferred to the Trust for investment in the Company and
substantially all of the balance of the Settlement Fund ($1,630,000)
and amounts previously contributed to the Company from the Settlement
Fund ($656,058) were used to purchase shares of the Company's Series A
1% preferred stock. (See note 3.)
(Continued)
F-9
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(3) SHAREHOLDERS' EQUITY
Through December 15, 1995 all organization and pre-opening costs and
expenses were being paid from proceeds of the Settlement Fund.
To be entitled to the balance of the Settlement Fund, meet the
$316,333 challenge grant, and raise capital for the funding of the
Bank, the Company commenced a private placement offering (the
Offering) consisting of up to 500,000 shares of Class A common stock
of the Company at a price of $10 per share. Closing of the Offering
was conditioned on the Company raising a minimum of $4.5 million in
total capital, including subscriptions pursuant to the Offering or any
other offering or source of funds and funds to be received from the
Settlement Trust in connection with the issuance of the Series A
preferred stock. In addition, closing of the Offering was contingent
on receipt by the Company of regulatory approvals from the Oregon
Division of Finance and Corporate Securities, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal
Reserve System. On December 15, 1995, $2,965,500 was raised from the
private placement to investors in common and preferred stock. In
addition, preferred stock was issued to the Trust in exchange for
$1,630,000 in cash and $656,058 of earlier advances from the
Settlement Fund which had been recorded as contributed capital.
Expenses associated with the offerings of all shares issued, totaling
approximately $50,000 were netted against the proceeds of the Series A
preferred stock shares. The Company then invested $4,500,000 in the
Bank as described in note 1. In November of 1995 the Bank received
all required regulatory approvals.
The authorized capital stock consists of 5,000,000 shares divided into
4,000,000 shares of common stock and 1,000,000 shares of preferred
stock:
(a) PREFERRED STOCK
The Company is currently authorized to issue up to 1,000,000
shares of preferred stock. The Board of Directors of the Company
has the authority to issue preferred stock in one or more series,
and to designate the preferences, limitations and relative rights
of the shares of any such series. The Board of Directors also
has the authority to determine the liquidation and dividend
rights on any preferred stock that may be issued, including the
priority of such rights over the liquidation and dividend rights
of holders of the common stock.
(Continued)
F-10
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
There are 20,000 shares of preferred stock designated as Series A
1% preferred stock (Series A Preferred) with a liquidation
preference of $1.00 per share, and liquidation participation
rights at ten times the amount distributable on liquidation with
respect to the common stock up to a maximum of $100 per share.
The Series A Preferred thus fully participates (after the $1.00
liquidation preference) with the Series B Preferred and the
common stock in any gain or loss in shareholder equity if the
amount to which the Series A Preferred would be entitled upon
liquidation is less than $100 per share. This stock is entitled
to a non-cumulative annual dividend of $1 per share, when and as
declared by the Board of Directors, which must be paid in any
year a cash dividend on the common stock is declared. Series A
Preferred has the right to elect directors representing 25% of
the total number of directors to be elected. Holders of the
Series A Preferred will have no other voting rights except for
matters which directly affect the rights of that class of stock.
10,000 shares of preferred stock are designated as Series B 1%
non-voting preferred stock (Series B Preferred). These shares
are identical to the Series A Preferred except that the Series B
Preferred has no voting rights with respect to the election of
the Board of Directors, and has no other voting rights, except as
required by law.
10,000 shares of preferred stock are designated as Series C 10%
non-voting convertible preferred stock (Series C Preferred). The
Series C Preferred is on even parity with the Series A and Series
B Preferred with respect to dividend rights, however there is a
$100.00 per share liquidation preference for the Series C
Preferred. The Series C Preferred is entitled to a
non-cumulative annual dividend of $10.00 per share, when and as
declared by the Board of Directors, which must be paid in any
year a cash dividend on the common stock is declared. The Series
C Preferred is convertible at the option of the holder into
common stock at the rate of ten shares of Class A common stock
for each share of Series C Preferred up to a maximum of 4.99% of
the shares of Class A common stock outstanding at the time of
conversion. Any shares of common stock in excess of 4.99% of
Class A common stock issued upon the conversion of Series C
Preferred would be shares of Class B non-voting common stock.
The Series C Preferred has no voting rights except as required by
law. Under certain circumstances, the holders of the Series C
Preferred are entitled to have such shares (of the Class A common
stock into which such shares are exchanged) registered under
applicable securities law for resale.
(Continued)
F-11
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(b) COMMON STOCK
The authorized common stock consists of 3,000,000 shares without
par value of Class A voting common stock and 1,000,000 shares
without par value of Class B non-voting common stock. None of
the Class B non-voting common stock is outstanding. Shares of
the common stock each have the same rights to the assets of the
Company upon liquidation, subject to any liquidation preference
of preferred stock which may be outstanding. There are no
preemptive rights to acquire additional securities that the
Company may issue. The holders of common stock are entitled to
receive dividends, if any, as may be declared by the Board of
Directors. Rights to receive dividends on the common stock are
subject to the prior rights of shares of preferred stock then
outstanding.
Each share of the Class A common stock is entitled to one vote on
all matters presented for shareholder vote, including the
election of directors, subject to special voting rights of the
holders of the Series A preferred stock. Shareholders do not
have the right to accumulate votes in the election of the
directors.
Shares of Class B common stock have no voting rights other than as
required by law, but are otherwise in all respects identical to shares
of Class A common stock.
(4) INVESTMENT SECURITIES - HELD TO MATURITY
The Bank has invested in zero-coupon U.S. treasury securities. The
book value of these securities approximates market at December 31,
1995 and March 31, 1996 as the securities were purchased near the end
of the period. The entire investment portfolio matures within one
year.
(Continued)
F-12
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(5) LOANS
Major categories of loans at March 31, 1996 included in the portfolio
are as follows:
<TABLE>
<CAPTION>
<S> <C>
Commercial. . . . . . . . . . . . . . . . . . . . $ 49,725
Residential real estate . . . . . . . . . . . . . 1,101,566
Installment . . . . . . . . . . . . . . . . . . . 61,427
----------
Total loans. . . . . . . . . . . . . . . . . 1,212,718
Reserve for loan losses . . . . . . . . . . . . . (6,206)
----------
Net loans. . . . . . . . . . . . . . . . . . $1,206,512
----------
----------
</TABLE>
There were no loans on nonaccrual status at March 31, 1996.
The Bank has no commitments to extend additional credit on loans which
are renegotiated, nonaccrual or impaired at March 31, 1996.
The Bank's lending activities are concentrated in Northeast Portland,
Oregon.
(6) RESERVE FOR LOAN LOSSES
Transactions on the reserve for loan losses for the three months ended
March 31, 1996 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, beginning of period . . . . . . . . . . . . . $ -
Provision for loan losses. . . . . . . . . . . . . . . 6,206
Loans charged off. . . . . . . . . . . . . . . . . . . -
Recoveries of loans previously charged off . . . . . . -
--------
Balance, end of period . . . . . . . . . . . . . . . . $ 6,206
--------
--------
</TABLE>
(Continued)
F-13
<PAGE>
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(7) TIME DEPOSITS
Time certificates of deposit in excess of $100,000 aggregated
approximately $2,145,000 and $500,000 at March 31, 1996 and
December 31, 1995, respectively. Interest expense on these
certificates amounted to approximately $955 for the year ended
December 31, 1995 and $26,400 for the three-month period ended
March 31, 1996.
(8) INCOME TAXES
At March 31, 1996 and December 31, 1995 and 1994, the Company has
deferred tax assets of approximately $342,000, $241,000 and $115,000,
respectively, resulting primarily from capitalized operating costs for
tax purposes and has recorded a valuation allowance for all such
deferred tax assets. The Company has no provision for income taxes
for any of the periods through December 31, 1995. The Company's
expected tax expense using the U.S. federal statutory rate differs
from the actual rate due to the increase in the Company's valuation
allowance.
(9) RELATED PARTY TRANSACTIONS
PacifiCorp provided office space, utilities and certain furniture at
no cost to the Company from inception through December 1995.
(10) COMMITMENTS AND CONTINGENCIES
The Company has entered into a lease dated May 6, 1996 for the
permanent office of the Bank. The lease is for a term of ten years
with two options to renew for additional five-year periods. The base
rent during the original term of the lease will be approximately
$4,000 per month and will increase or decrease every other year based
on inflation. The Company will incur costs of approximately $500,000
to complete tenant improvements in and furnishings for the Bank. The
facility is expected to be available mid-1996. The Company has
entered a lease for its temporary quarters at another location.
Monthly rent for this short-term tenancy is $2,000 and the lease is
noncancelable through June of 1996.
F-14
<PAGE>
PART II
(Items not required in Prospectus)
ITEM 1. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Articles of Incorporation provide for elimination or limitation of
personal liability of directors to the Company or its shareholders for money
damages for conduct as a director, except that in accordance with Oregon law, a
director's liability cannot be eliminated or limited for conduct which
constitutes a breach of the director's duty of loyalty to the Company or its
shareholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, or for any unlawful distribution or
transaction involving improper personal benefit.
The Articles of Incorporation further provide for indemnification of
officers and directors for expenses incurred in connection with any proceeding
to which a person is made a party by reason of the fact that the person was
serving as an officer or director of the Company or any of its subsidiaries, or
of any other entity at the request of the Company, provided that such person
acted in good faith, did not engage in intentional misconduct, and, with respect
to any criminal action, did not know the conduct was unlawful.
ITEM 2. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses incurred by the
Company in connection with the Offering. Except for the SEC registration fees
and NASD filing fees, all expenses are estimates:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fees $345
NASD Filing Fees $600
Blue Sky Fees $2,000
Costs of Printing $5,000
Legal Fees $20,000
Accounting Fees $10,000
Miscellaneous Expenses $22,055
-------
Total Other Expenses $60,000
-------
-------
</TABLE>
ITEM 3. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(A) The registrant will file, during any period in which it offers or
sells securities, a post-effective amendment to this registration statement
to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(B) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
1
<PAGE>
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(C) For determining any liability under the Securities Act, the registrant
will treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant under Rule
424(b)(1), or (4), or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission declared it effective.
(D) For determining any liability under the Securities act, the registrant
will treat each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as
the initial bona fide offering of those securities.
ITEM 4. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR.
The registrant has issued or sold the following securities within one year
prior to filing this registration statement which were not registered under the
Securities Act of 1933 (the "Securities Act").
1. COMMON STOCK.
(a) A total of 165,670 shares of the Company's Common Stock were
sold in a private offering commenced in September, 1994, and ended December
15, 1995.
(b) No underwriters were involved. Purchasers of the securities
were:
Howard Shapiro and Manya Shapiro
Leon Cabot Smith
Alice Powell and Michael Powell
Fred Meyer, Inc.
GSL Properties, Inc.
H. Naito Corporation
Legacy Emanuel Hospital & Health Center
Nature's fresh Northwest, Inc.
Realvest Corporation
Sovereign Partners LLC
Wholesome & Hearty Foods, Inc.
McKenzie River Gathering Foundation
Anne Mendel McCormack
Winthrop L. McCormack
Bernard Foster and Bobbie Foster
II-2
<PAGE>
C. William Savery and Meredith G. Savery
Dean Witter Reynolds, Inc. Cust. for Graham C. Bryce, IRA 3/29/83
Deborah E. Kennedy
Avel L. Gordly
Duncan Campbell and Cynthia Campbell
First Interstate Bank of Oregon, N.A. Trustee FBO Owen Blank, Account
#070631 Tonkon, Torp, Galen, Marmaduke & Booth Plan
Frances Lanier Hurst
Lydia Rich CUST UL OREG Gehron A.
Burkholder MIN
Lydia Rich CUST UL OREG Lars H. Burkholder MIN
Harriet H. Denison
Helen Siegel
Henry A. Ashforth, Jr.
Henry P. Ritz
Homer Williams
J. C. Milne
James E. May
James H. Winkler and Susan R. Winkler
Jeana Woolley
Jerry G. Jones
Joan Gamble Hering
Phyllis S. Courtney
John W. Dixon
John Emrick and Jane Emrick
Katherine N. Wheeler
H. Darrell Harvey
Margaret Cheek and David Price
Mary C. Scott
II-3
<PAGE>
Janet Sitarz CUST UL OREG Mayan Sitarz
Fogarty MIN
Michael C. Henderson
Michael J. Hasson
DLJSC IRA FBO Paul Lorenzini
Richard C. Josephson and Jean A. Josephson
Richard J. Alden and Maggie Rudy
Richard Marantz
Robert H. Huntington
Robert L. Thome and Nora B. Wallace-Thome
Robert L. Woodell and Mary Anne Woodell
Walsh Construction Co. - Deferred Compensation
Robert Stoll and Barre Stoll
Roger Ahlbrandt
Roy Hall and Danielle Forsyth
Sheila Holden
Key Trust Company - Schwabe Williamson & Wyatt HR-10 Retirement Plan &
Trust FBO Kenneth E. Roberts Jr.
Ted K. Gilbert and Connie J. Gilbert
Warren J. Rosenfeld
William B. Lazar
William W. Wyse
Construction Partners Ltd., LLC
Joan H. Strouse and William D. Greenfield, Jr.
MLPF&S Cust FBO Cliff Engel SEP Tax ID #13-3180817
Piper Jaffrey as Custodian FBO Nels Gabbert IRA 580-297209
Doug Sherman
Jeanne Henry
Margaret Sherman
II-4
<PAGE>
Katherine Sherman
The Northern Trust Company as Trustee U/A/D 9-7-87 with Winthrop L.
McCormack for the benefit of Thomas Mendel McCormack
The Northern Trust Company as Trustee U/A/D 9-7-87 with Winthrop L.
McCormack for the benefit of Noah Mendel McCormack
Anne Mendel McCormack
The Northern Trust Company as Trustee U/A/D 9-7-87 with Winthrop L.
McCormack for the benefit of Thomas Mendel McCormack
The Northern Trust Company as Trustee U/A/D 9-7-87 with Winthrop L.
McCormack for the benefit of Noah Mendel McCormack
Winthrop L. McCormack
(c) The shares were sold for cash in the aggregate amount of
$1,656,700.
(d) The transactions were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506
of Regulation D thereunder. There was no general solicitation or
advertising with respect to the offering. Each of the purchasers was
either a director or officer of the registrant, or was otherwise determined
prior to the sale to be an accredited investor as such term is defined in
the Securities Act and the rules and regulations thereunder. Each of the
purchasers acknowledged that they were purchasing for investment and not
with a view to distribution, and legends restricting transfer have been
placed on the certificates evidencing the securities.
2. SERIES A PREFERRED STOCK
(a) A total of 16,300 shares of the Company's Series A 1% Preferred
Stock were issued on December 15, 1995.
(b) No underwriters were involved. The sole purchaser was the
Northeast Portland Community Development Trust, which was organized
pursuant to the Settlement Agreement as a vehicle to transfer the
settlement funds to the Company and thence to the subsidiary community
development bank.
(c) The shares were sold for cash, including prior advances to the
Company, in the aggregate amount of $2,286,058.
(d) The transaction was exempt from registration under the
Securities Act pursuant to Section 4(2) as a transaction by an issuer not
involving any public offering. The purchaser acknowledged that the shares
were purchased for investment and not with a view to distribution and a
legend restricting transfer has been placed on the certificate representing
the securities.
3. SERIES B PREFERRED STOCK
(a) A total of 8,518 shares of the Company's Series B 1% Non-Voting
Preferred Stock were issued on December 15, 1995.
(b) No underwriters were involved. The Series B Preferred was
created specifically for those purchasers desiring to make "program-related
investments" to support the objectives of the Company where an outright
grant would not be possible. The purchasers were as follows:
The Oregon Community Foundation
The Collins Foundation
II-5
<PAGE>
The Meyer Memorial Trust
Boatmen's First National Bank of Kansas City, as trustee for the Ralph L.
Smith Foundation
(c) The shares were sold for cash in the aggregate amount of
$851,800.
(d) The transactions were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering. The
purchasers acknowledged that the shares were purchased for investment and
not with a view to distribution and legends restricting transfer have been
placed on the certificates representing the securities.
4. SERIES C PREFERRED STOCK
(a) A total of 4,570 shares of the Company's Series C 1% Non-Voting
Convertible Preferred Stock were issued on December 15, 1995.
(b) No underwriters were involved. The sole purchaser was Federal
National Mortgage Association.
(c) The shares were sold for cash in the aggregate amount of
$457,000.
(d) The transaction was exempt from registration under the
Securities Act pursuant to Section 4(2) as a transaction by an issuer not
involving any public offering. The purchaser acknowledged that the shares
were purchased for investment and not with a view to distribution and a
legend restricting transfer has been placed on the certificates
representing the securities.
II-6
<PAGE>
ITEM 5.INDEX TO EXHIBITS.
The following exhibits are filed with or incorporated by reference
into this Registration Statement, and this list constitutes the Exhibit Index:
EXHIBIT
1 Engagement Letter of Pacific Crest Securities Inc. *
2.1 Articles of Incorporation of Albina Community Bancorp *
2.2 Bylaws of Albina Community Bancorp *
2.3 Specimen Stock Certificate *
4. Form of Subscription Agreement **
6.1 Employment Contract of Leon C. Smith *
6.2 Employment Contract of Robert L. Thome *
6.3 Lease Agreement, dated November 9, 1995, relating to the Bank's
temporary facility at 1130 N.E. Alberta St., Portland, Oregon. *
6.4 Lease Agreement, dated May 6, 1996, relating to the Bank's permanent
offices at 2002 N.E. Martin Luther King, Jr. Blvd.,
Portland, Oregon. **
10.1 Consent of Foster Pepper & Shefelman (contained in Exhibit 11)
10.2 Consent of KPMG Peat Marwick LLP **
11. Opinion of Foster Pepper & Shefelman **
99. Other Solicitation Materials
* Previously filed on April 10, 1996 (Form SB-1, File number 333-1442).
** Filed herewith
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Portland, State of Oregon, on June 10, 1996.
ALBINA COMMUNITY BANCORP
By:/s/ Leon C. Smith
---------------------------------
Leon C. Smith, President
In accordance with the requirements of the Securities Act of 1933,
this amendment to the registration statement on Form SB-1 was signed by the
following persons in their respective capacities on June 10, 1996:
/s/ Carl E. Peres
- ------------------------------
Carl E. Peres (Chief Accounting Officer)
/s/ Michael C. Henderson /s/ Howard S. Shapiro
- ------------------------------ ------------------------------
Michael C. Henderson, Director, Chairman Howard M. Shapiro, Director, Vice-
Chairman
/s/ Roger S. Ahlbrandt
- ------------------------------ ------------------------------
Roger S. Ahlbrandt, Director Bernard V. Foster, Director
/s/ Ted K. Gilbert /s/ Avel L. Gordly
- ------------------------------ ------------------------------
Ted K. Gilbert, Director Avel Louise Gordly, Director
/s/ Deborah E. Kennedy
- ------------------------------ ------------------------------
Sheila D. Holden, Director Deborah E. Kennedy, Director
/s/ Leon C. Smith
- ------------------------------ ------------------------------
James E. May, Director Leon C. Smith, Director
- ------------------------------
Jeana M. Woolley, Director
<PAGE>
EXHIBIT 4
ALBINA COMMUNITY BANCORP
APPLICATION FOR SUBSCRIPTION FOR COMMON STOCK
The undersigned hereby acknowledges receipt from Albina Community Bancorp,
Portland, Oregon (the "Company") of a Prospectus dated __________, 1996, whereby
the Company is offering for sale, at a price of $10.00 per share, up to 100,000
shares of its Class A Common Stock, without par value (the "Common Stock").
Having received and read the Prospectus, the undersigned hereby subscribes
to purchase the number of shares indicated below, at $10.00 per share. Attached
is a check, bank draft or money order made payable to "Albina Community
Bancorp."
x $10.00 = $
- ----------------------------- ------------------------ -----------------
No. of Shares Subscribed For Offering Price Amount Payable
(minimum of 100 shares)
Shares purchased by the undersigned will be registered as listed below. If
certificates for shares are to be issued in more than one name, please specify
whether ownership is to be as tenants in common, joint tenants, etc. If
certificates for shares are to be issued in the name of one person for the
benefit of another, please indicate whether registration should be as trustee or
custodian for such other person.
How Shares Are To Be Registered
(Please Print)
- ------------------------------ ---------------------------------------------
Name (please print or type) Name (please print or type)
Form of Ownership:
Individual
- -----
Tenants in Common
- -----
Tenants by the Entirety
- -----
Joint Tenants with Rights of Survivorship and not as Tenants in Common
- -----
As Custodian under the Laws of Oregon for _________________________, a
- ----- minor
As Custodian for _____________________, a minor under
- ----- ________________ (state) Uniform Gifts to Minors Act
Other. Please specify in detail: ____________________________________
- ----- _____________________________________________________________________.
<PAGE>
No Subscription Application is binding on the Company until accepted by it,
and the Company reserves the right to accept or reject, in whole or in part, in
its sole discretion, any subscription for shares. Subscriptions may not be
revoked. The Company is not obligated to obtain or accept subscriptions for the
maximum number of shares being offered. The Company may, in its sole
discretion, terminate the offering at any time.
IN WITNESS WHEREOF, I/we have executed this Subscription Application, and
return it to:
Albina Community Bancorp
1130 N.E. Alberta St.
Portland, Oregon 97211
DATED:
--------------------------------------
- ------------------------------ ---------------------------------------------
Signature Signature
(Each person to be named on the Certificate must sign, include your full title
if purchasing as custodian, corporate officer, etc. If shares are to be held in
joint ownership, all joint owners must sign.)
Name (please print or type) Name (please print or type)
Street Address:
---------------------------------------------------------------
City and State: Zip:
---------------------------------------- ------------------
Telephone:
------------------------------------------
Social Security or Taxpayer Identification Number:
------------------------------
PLEASE NOTE THAT SUBSCRIPTIONS FOR LESS THAN 25 SHARES
WILL NOT BE ACCEPTED
- --------------------------------------------------------------------------------
FOR COMPANY USE ONLY
- --------------------------------------------------------------------------------
Date received: Accepted by Albina No. of Shares to be issued:
Community Bancorp
by: --------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 6.4
COMMERCIAL LEASE
Date: _______________
Between: Albina Corner Limited Partnership ("Landlord")
2002 N. E. Martin Luther King Blvd.
Portland, OR 97212
And: Portland Community Design ("Property Manager")
2002 N.E. Martin Luther King Blvd.
Portland, OR 97212
And: Albina Community Bank ("Tenant")
825 NE Multnomah, Suite 775
Portland, OR 97232
Landlord leases to Tenant and Tenant leases from Landlord the
following described space, together with improvements thereon (the "Premises"),
located in the building (the "Building") on the real property described on
Exhibit A-1 attached hereto (together the Building and the real property are
referred to as the "Property"), with a street address of 2000 N.E. Martin Luther
King Jr. Boulevard, Portland, Oregon, together with rights of ingress and egress
over common areas in and around the Building, on the terms and conditions set
forth herein:
Comprising approximately 5,357 square feet of space on
the southwest corner of the ground floor of the Building
and the exclusive use of ten (10) parking spaces
pursuant to Section 1.3.1 herein, as noted on the site
plan attached as Exhibit A-2
1. OCCUPANCY.
1.1 ORIGINAL TERM. The term of this Lease shall be for 10 years and
shall commence no later than 60 days after the Possession Date as set out on
Exhibit B attached hereto and incorporated herein by this reference (the
"Commencement Date"). Tenant's obligation to pay rent shall commence on the
Commencement Date.
1.2 POSSESSION. The Possession Date shall be determined in accordance
with the work letter regarding initial tenant improvements (the "Work Letter")
attached hereto as Exhibit B. Landlord shall have no liability for delays in
delivery of possession and Tenant will not have the right to terminate this
Lease because of delay in delivery of possession except as hereinafter provided.
If Landlord is not able to give Tenant possession of the Premises on or before
May 1, 1996, Tenant may rescind the Lease by giving notice in writing at any
time thereafter prior to the date on which possession is tendered by Landlord,
and Landlord shall refund to Tenant the security deposit referenced in Section
2.2. If Tenant is unable to obtain a certificate of occupancy for the Premises
due to conditions in, under or around the Building but outside the Premises, or
due to work in the Premises for which the Landlord was responsible, Tenant shall
give written notice to Landlord of such inability, and Landlord shall have 10
business days from receipt of such notice to complete any necessary repairs. If
Landlord fails to make repairs necessary to enable Tenant to obtain its
certificate of occupancy, Tenant may terminate this Lease
<PAGE>
and Landlord shall refund the security deposit and, within 180 days from demand
by Tenant, reimburse Tenant for all costs to remove tenant improvements
undertaken by Tenant.
1.3 PARKING; PUBLIC TRANSIT INCENTIVE PROGRAM.
1.3.1 Tenant shall have the exclusive use of ten (10) parking
spaces located closest to the Premises from 8:30 a.m. to 5:30 p.m. Monday
through Friday. Such parking spaces shall be provided by Landlord and Tenant
may mark the spaces with signage, pursuant to the Design Standards (as defined
herein) that indicates such restricted use, and Landlord shall be responsible
for removing any vehicles that violate the use restrictions, all at Landlord's
sole expense. Tenant shall have the right to use, on a nonexclusive basis, all
other nondesignated parking spaces serving the Building.
1.3.2 As material consideration for the reduced rent payable
by Tenant under this Lease, Tenant shall adopt an Employee transit/nonautomobile
commute incentive program (the "Commute Incentive Program") over the term of the
Lease. The terms of the Commute Incentive Program are set forth on Exhibit C
attached hereto and incorporated herein by this reference. Tenant agrees to
comply with any reasonable parking plans and/or incentive programs required by
Landlord.
1.4 RENEWAL OPTION. If the Lease is not in default at the time each
option is exercised or at the time the renewal term is to commence, Tenant shall
have the option to renew this Lease for two (2) successive terms of five (5)
years each, as follows:
1.4.1 Each of the renewal terms shall commence on the day
following expiration of the preceding terms.
1.4.2 The option may be exercised by written notice to
Landlord given not less than 180 days prior to the last day of the expiring
term. The giving of such notice shall be sufficient to make the Lease binding
for the renewal term without further act of the parties. Landlord and Tenant
shall then be bound to take the steps required in connection with the
determination of rent as specified below.
1.4.3 The terms and conditions of the Lease for each renewal
term shall be identical with the original term except for rent and except that
Tenant will no longer have any option to renew this Lease beyond the third
renewal term. Rent for a renewal term shall be greater of (a) the rental during
the preceding original or renewal term or (b) the rental during the preceding
original or renewal term, whichever is greater, plus the cost of any increase in
CAM expenses, as defined in Section 3 below.
2. RENT.
2.1 BASE RENT. During the Original Term, Tenant shall pay to Landlord as
base rent the sum of $4,015 ("Base Rent") per month. Rent shall be payable on
the first day of each month in advance at such place as may be designated by
Landlord except that rent for the first month has been paid upon the execution
of this Lease, and Landlord acknowledges receipt of this sum.
2.2 SECURITY DEPOSIT. To secure Tenant's compliance with all terms of
this Lease, Tenant has paid Landlord the sum of $4,000.00 as a deposit. The
security deposit shall be placed in an interest-bearing account, with interest
accruing to the benefit of Tenant and released to the Tenant on an annual basis.
Landlord shall have the right to offset against the deposit any sums owing from
Tenant to Landlord and not paid when due, any damages caused by Tenant's
default, the cost of curing any default
4
<PAGE>
by Tenant should Landlord elect to do so, and the cost of performing any repair
or cleanup that is Tenant's responsibility under this Lease. Offset against the
deposit shall not be an exclusive remedy in any of the above cases, but may be
invoked by Landlord, at its option, in addition to any other remedy provided by
law or this Lease for Tenant's nonperformance. Landlord shall give notice to
Tenant each time an offset is claimed against the deposit, and, unless the Lease
is terminated, Tenant shall within 10 days after such notice deposit with
Landlord a sum equal to the amount of the offset so that the total deposit
amount, net of offset, shall remain constant throughout the Lease term. The
security deposit shall be refundable within 30 days after expiration of the
Lease term or other termination not caused by Tenant's default. In the case of
a sale or transfer of the fee of the Property, or any cessation of Landlord's
interest therein, whether in whole or in part, Landlord shall pay over any
unapplied part of the security to the succeeding owner of the Property.
2.3 ADDITIONAL RENT. All taxes, insurance costs, utility charges and
common area maintenance ("CAM") charges that Tenant is required to pay by this
Lease, and any other sum that Tenant is required to pay to Landlord or third
parties shall be additional rent.
2.4 ESCALATION. The Base Rent provided in Section 2.1 shall be
increased or decreased in the month of April every year by a percentage equal to
the percentage change in the Revised Consumer Price Index for Urban Wage Earners
and Clerical Workers - Portland, Oregon ("CPI") since the previous escalation
date. In recalculating the base rent, the change in the CPI for each
intervening year in which the rent is not adjusted and each year in which the
rent is adjusted shall be averaged. In no event, however, shall Base Rent be
reduced below that payable during the first year of this Lease.
3. COMMON AREA EXPENSES.
3.1 COMMON AREA MAINTENANCE. For the purposes of this Lease, the term
Common Areas means only the areas shown on Exhibit D attached hereto and
incorporated in this Lease. For the purposes of this Lease, common area
maintenance charges ("CAM Charges") means all expenses paid or incurred by
Landlord (or on Landlord's behalf) as reasonably determined by Landlord to be
necessary or appropriate for the efficient operation, maintenance and repair of
all the Common Areas of the development including without limitation:
3.1.1 Salaries, wages, medical, surgical, union, and general
welfare benefits (including, without limitation, group life insurance), and
pension payments of employees of Landlord engaged in the repair, operation, and
maintenance of the Common Areas;
3.1.2 Payroll taxes, workers' compensation insurance,
uniforms, and related expenses for employees of Landlord engaged in the repair,
operation, and maintenance of the Common Areas;
3.1.3 The cost of all charges for electricity, water, garbage
hauling and/or recycling, and other utilities furnished to the Common Areas,
together with any taxes on such utilities;
3.1.4 The cost of restriping parking areas;
3.1.5 The cost of all charges for insurance, including
casualty, liability, fire with extended coverage endorsement, and fidelity
insurance with regard to the improvements in the Common Areas;
5
<PAGE>
3.1.6 The cost of maintenance and operation of the Common
Areas, and the cost or rental of all supplies, materials, and equipment, and
sales and other taxes on such items for use in operating and maintaining the
Common Areas;
3.1.7 The cost of hand tools and other movable equipment used
in the repair, maintenance, or operation of the Common Areas amortized over the
useful life of such hand tools and movable equipment (as reasonably estimated by
Landlord);
3.1.8 The cost of janitorial services for the Common Areas;
3.1.9 The cost of security services for the Common Areas;
3.1.10 Charges of independent contractors performing repairs or
services to the Common Areas;
3.1.11 Noncapital repairs to the Common Areas;
3.1.12 Alterations and improvements to the Common Areas as
determined by Landlord or as may be otherwise required by insurance bodies (but
excluding therefrom the cost of capital expenditures);
3.1.13 Management fees paid to a third party, or, if no
managing agent is employed by Landlord, Landlord shall be entitled to charge a
management fee that does not exceed 15% of the CAM Charges exclusive of taxes;
3.1.14 The cost of any capital improvements or repairs to the
Common Areas and/or of any machinery or equipment installed in the Common Areas
amortized (with interest at the rate of 9% on the unamortized balance) over the
useful life of the improvement, machinery, and/or equipment as reasonably
estimated by Landlord which is made or becomes operational, as the case may be,
after the completion of the construction of the Common Areas and that have a
reasonable probability of reducing the expenses that otherwise would be included
in CAM Charges;
3.1.15 Reasonable accounting and other professional fees
incurred in connection with the operation, maintenance, and management of the
Common Areas;
3.1.16 The cost of landscape maintenance and repair to the
Common Areas;
3.1.17 Taxes as defined below attributable to the Common Areas;
and
3.1.18 All other charges properly allocable to the operation,
repair, and maintenance of the Common Areas in accordance with generally
accepted accounting principles.
CAM CHARGES SHALL NOT INCLUDE:
3.1.19 Depreciation or amortization (except as specifically
provided above);
3.1.20 Interest on and amortization of debts (except as
specifically provided above);
3.1.21 Refinancing costs;
6
<PAGE>
3.1.22 Damages recoverable by any tenant due to violation by
Landlord of any of the terms and conditions of this Lease or any other Lease
relating to the Common Areas;
3.1.23 Repairs occasioned by fire, windstorm, or other
casualty, to the extent such repairs are paid for by insurance proceeds;
3.1.24 Costs resulting from enforcement of leases with other
tenants in the Building or the failure of other tenants to pay their
proportionate share of the CAM Charges;
3.1.25 Lease or brokerage commissions; and
3.1.26 Capital repairs and replacements (except as specifically
provided above).
3.2 TAXES. The term "Taxes" shall mean (1) all real property taxes and
assessments and personal property, taxes, charges, rates, duties, and
assessments rated, levied, or imposed by any governmental authority with respect
to the Common Areas and any improvements, fixtures, and equipment on the Common
Areas and with respect to all other property of Landlord, real or personal,
located on the Common Areas and used in connection with the operation of the
Common Areas; and (2) any tax in lieu of a real property tax.
3.3 As used in this Section 3, the term "CAM Year" means each period
from April 1 to March 31 of the Lease Term and in the event this Lease begins or
ends on any date other than the first day of the calendar year, the
calculations, costs, and payments referred to in this Section 3 shall be
prorated on a daily basis.
3.4 Tenant shall pay, as Additional Rent, Tenant's Pro Rata Share of the
CAM Charges during each CAM Year. "Tenant's Pro Rata Share" shall mean a
percentage determined by dividing 5,357 (the number of rentable square feet of
the Premises) by the total number of rentable square feet of the Building.
Notwithstanding the foregoing, Tenant's Pro Rata Share of the CAM Charges shall
not exceed the following:
Commencement of Lease - March 31, 1997 $1.30 per square foot
April 1, 1997 - March 31, 1998 $1.50 per square foot
April 1, 1998 - March 31, 1999 $1.70 per square foot
April 1, 1999 - March 31, 2000 $1.90 per square foot
April 1, 2000 - March 31, 2001 $2.10 per square foot
April 1, 2001 - end of Lease term
including renewals actual expenses
3.5 At least ten (10) days before each CAM Year commences during the
Lease Term, Landlord shall furnish Tenant with a written statement setting forth
Tenant's Pro Rata Share of the CAM Charges for the next CAM Year. Tenant shall
pay to Landlord as Additional Rent commencing on the first day of the CAM Year,
and thereafter on the first day of each calendar month, an amount equal to one-
twelfth of the amount of Tenant's Pro Rata Share as shown in Landlord's written
statement. In the event Landlord delivers the written statement late, Tenant
shall continue to pay to Landlord an amount equal to one-twelfth of Tenant's Pro
Rata Share of the estimated CAM Charges for the immediately preceding CAM Year
until Landlord furnishes the written statement, at which time Tenant shall pay
the amount of any excess of Tenant's Pro Rata Share for the expired portion of
the current CAM Year over Tenant's actual payments during such time and any
excess payments by Tenant shall be credited to the next due payment of Rent from
Tenant. The late delivery of any written statement by Landlord shall not
7
<PAGE>
constitute a waiver of Tenant's obligation to pay its Pro Rata Share of CAM
Charges nor subject Landlord to any liability, but Landlord shall use reasonable
efforts to deliver such written statements of estimated CAM Charges as soon as
reasonably possible after the commencement of each CAM Year.
3.6 Within 60 days after the close of each CAM Year during the Term,
Landlord shall deliver to Tenant a written statement (the "CAM Statement") of
the actual CAM Charges of the Building and Tenant's Pro Rata Share of the actual
CAM Charges for the preceding CAM Year. In the event Tenant's Pro Rata Share of
the actual CAM Charges is in excess of the Tenant's pro rata estimated CAM
Charges, Tenant shall pay the amount of such excess to Landlord as Additional
Rent within thirty (30) days after receipt of such statement by Tenant. In the
event Tenant's Pro Rata Share of the actual CAM Charges is less than Tenant's
Pro Rata Share of the estimated CAM Charges actually paid by Tenant, then the
amount of the excess overpayment shall be paid by Landlord to Tenant within
thirty (30) days following the date of such statement or Landlord may elect to
apply the overpayment to Tenant's next Rent payment, reimbursing only the excess
over such next payment, if any. The late delivery of any written statement by
Landlord shall not constitute a waiver of Tenant's obligation to pay its Pro
Rata Share of CAM Charges, but Landlord shall use reasonable efforts to deliver
such written statements of estimated CAM Charges as soon as reasonably possible
after the commencement of each CAM Year.
3.7 The CAM Statement referred to in this Section 3 need not be audited
but shall contain sufficient detail to enable Tenant to verify the calculation
of its Pro Rata Share. In addition, Tenant, upon at least five (5) days'
advance written notice to Landlord and during business hours, may examine any
invoices, receipts, cancelled checks, vouchers, or other instruments used to
support, the figures shown on the CAM Statement, provided, however, that Tenant
shall be entitled to such an examination only once in each CAM Year.
3.8 Each such CAM Statement given by Landlord pursuant to this Section 3
shall be conclusive and binding on Tenant unless, within forty-five (45) days
after the receipt of such CAM Statement, Tenant shall notify Landlord that it
disputes the correctness of the CAM Statement, specify the particular respects
in which the CAM Statement is claimed to be incorrect. If such disputes have
not been settled by agreement, either party, within forty-five (45) days after
receipt of such CAM Statement, may pursue its available legal remedies, but
Tenant agrees that a dispute over the CAM Statement or any error by Landlord in
interpreting or applying this Section 3 or in calculating the amounts in the CAM
Statement shall not be a breach of this Lease by Landlord, and even if any legal
proceeding over the CAM Statement is resolved against Landlord this Lease shall
remain in full force and effect and Landlord shall not be liable for any
consequential damages, and pending the determination of such depute, Tenant,
within ten (10) days of receipt of such CAM Statement, shall pay Additional Rent
in accordance with the CAM Statement, without prejudice to Tenant's position.
If the dispute shall be determined in Tenant's favor, Landlord shall forthwith
pay to Tenant the amount of Tenant's overpayment of Rent resulting from
compliance with the CAM Statement. If a CAM year ends after this Lease expires
or terminates, the Additional Rent determined under this Section shall be paid
by Tenant or refunded to Tenant within ten (10) days of its receipt of the CAM
Statement for such CAM Year.
4. USE OF THE PREMISES.
4.1 PERMITTED USE. The Premises shall be used for banking and for no
other purpose.
4.2 RESTRICTIONS ON USE. In connection with the use of the Premises,
Tenant shall:
4.2.1 Conform to all applicable laws and regulations of any
public authority affecting the Premises and the use. Notwithstanding the
foregoing, Tenant shall not be obligated at its
8
<PAGE>
expense to comply with any laws, ordinances, orders and regulations (including
regulations of Landlord's insurance companies) which require any changes in or
to the Premises or the Building unless the same are made necessary by any act or
work performed by Tenant or by the particular nature of Tenant's business or the
particular manner of Tenant's use of the Premises; all other changes shall be
the sole responsibility of Landlord.
4.2.2 Refrain from any activity that would make it impossible
to insure the Premises against casualty, would increase the insurance rate, or
would prevent Landlord from taking advantage of any ruling of the Oregon
Insurance Rating Bureau, or its successor, allowing Landlord to obtain reduced
premium rates for long-term fire insurance policies, unless Tenant pays the
additional cost of the insurance.
4.2.3 Refrain from any use that would be reasonably offensive
to other tenants or owners or users of neighboring Premises or that would tend
to create a nuisance or damage the reputation of the Premises.
4.2.4 Refrain from loading the electrical system or floors
beyond the point considered safe by a competent engineer or architect selected
by Landlord.
4.2.5 Refrain from making any marks on or attaching any sign,
insignia, antenna, aerial, or other device to the exterior or interior walls,
windows, or roof of the Premises without the written consent of Landlord.
5. REPAIRS AND MAINTENANCE.
5.1 LANDLORD'S OBLIGATION. The following shall be the responsibility of
Landlord:
5.1.1 Repairs and maintenance of the roof and gutters,
exterior walls (including painting), bearing walls, structural members, floor
slabs, and foundation.
5.1.2 Repair and maintenance of the public and common areas of
the Building in good order and condition consistent with the operation and
maintenance of a first-class office building in Portland, Oregon, including but
not limited to maintenance and repair of sidewalks, driveways, curbs, parking
areas, and areas used in common by Tenant and Landlord or tenants of other
portions of the Building.
5.1.3 Repair and maintenance of exterior water, sewage, gas,
and electrical services up to the point of entry to the Premises.
5.1.4 Maintenance, repair and replacement of all heating,
ventilation, and air conditioning systems that serve the Premises.
5.1.5 Repair of interior walls, ceilings, doors, windows, and
related hardware, light fixtures, switches, and wiring and plumbing from the
point of entry to the Premises.
5.1.6 All other repairs to the Premises which Tenant is not
required to make under Section 5.2.
5.2 TENANT'S OBLIGATIONS. The following shall be the responsibility of
Tenant:
9
<PAGE>
5.2.1 Any repairs necessitated by the negligence of Tenant,
its agents, employees, and invitees, except as provided in Section 8.2 dealing
with waiver of subrogation, but including repairs that would otherwise be the
responsibility of Landlord under Section 5.1.
5.2.2 Any repairs or alterations required under Tenant's
obligation to comply with laws and regulations as set forth in Section 4.2.1.
5.3 LANDLORD'S INTERFERENCE WITH TENANT. In performing any repairs,
replacements, alterations, or other work performed on or around the Premises,
Landlord shall not cause unreasonable interference with use of the Premises by
Tenant, and to the extent possible, such work shall be done after normal
business hours. Tenant's obligations for Rent due hereunder shall be abated to
the extent the Premises are untenantable if Landlord, for any reason, fails to
commence within five (5) business days and thereafter to diligently proceed to
complete any repairs required to be made by Landlord under this Lease.
5.4 TENANT'S INTERFERENCE WITH OTHER TENANTS. In performing any
repairs, replacements, alterations, or other work performed on or around the
Premises, Tenant shall not cause unreasonable interference with use of the
Building by other tenants, and to the extent possible, such work shall be done
after normal business hours.
5.5 REIMBURSEMENT FOR REPAIRS ASSUMED. If either party fails or refuses
to make repairs that are required by this Section 5, the other party may make
the repairs and charge the actual costs of repairs to the defaulting party.
Such expenditures by Landlord shall be reimbursed by Tenant on demand, together
with interest at the rate of ten percent (10%) per annum from the date of
expenditure. Such expenditures by Tenant, together with interest at the rate of
ten percent (10%) per annum from the date of expenditure, may be deducted from
rent and other payments subsequently becoming due, or at Tenant's election,
collected directly from Landlord. Except in an emergency creating an immediate
risk of personal injury or property damage, neither party may perform repairs
which are the obligation of the other party and charge the defaulting party for
the resulting expense unless at least ten (10) days before work is commenced,
the defaulting party is given notice in writing outlining with reasonable
particularity the repairs required, and the defaulting party fails within that
time to initiate such repairs in good faith.
5.6 INSPECTION OF PREMISES. Landlord shall have the right to inspect
the Premises at any reasonable time or times to determine the necessity of
repair. Whether or not such inspection is made, the duty of Landlord to make
repairs shall not mature until a reasonable time after Landlord has received
written notice from Tenant of the repairs that are required.
6. ENVIRONMENTAL MATTERS.
6.1 DEFINITIONS. For purposes of this Section 6, the term "Hazardous
Substance" means any substance, material or waste, including oil or petroleum
products or their derivatives, solvents, PCB's, explosive substances, asbestos,
radioactive materials or waste, and any other toxic, ignitable, reactive,
corrosive, contaminating or pollution materials which are now or in the future
subject to any governmental regulation; the term "Hazardous Substance Laws"
means all federal, state and local laws, ordinances, regulations and standards
relating to the use, analysis, production, storage, sale, disposal or
transportation of any Hazardous Substance.
6.2 TENANT COMPLIANCE WITH HAZARDOUS SUBSTANCE LAWS. Tenant shall not
cause or permit any Hazardous Substance to be spilled, leaked, disposed of, or
otherwise released on or under the Premises. Tenant may use or otherwise handle
on the Premises only those Hazardous Substances
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typically used or sold in the prudent and safe operation of the business
specified in Section 4.1. Tenant may store such Hazardous Substances on the
Premises only in quantities necessary to satisfy Tenant's reasonably anticipated
needs. Tenant shall comply with all Hazardous Substance Laws and exercise care
in the use, handling, and storage of Hazardous Substances and shall take all
practicable measures to minimize the quantity and toxicity of Hazardous
Substances used, handled, or stored on the Premises. Upon the expiration or
termination of this Lease, Tenant shall remove all Hazardous Substances brought
onto the Premises by the Tenant from the Premises.
6.3 REPRESENTATION AND WARRANTIES. Landlord represents and warrants to
Tenant that, to the best of Landlord's actual knowledge, as of the commencement
of this Lease (or when Tenant takes possession of the Premises, whichever is
later), the Premises and the tract of land owned by Landlord under and
surrounding the Premises, including, without limitation, all groundwater and all
other substances therein (the "Landlord's Real Property") were free of Hazardous
Substances and in compliance with all Hazardous Substance Laws except as set
forth in those certain environmental reports issued by Northwest Consultants of
Oregon dated February 9, 1993 and March 13, 1994, and that certain report issued
by PBS Environmental dated April, 1995.
6.4 INDEMNIFICATION BY TENANT. Tenant shall indemnify, defend (with
counsel selected by Landlord) and hold Landlord and its officers, employees and
agents harmless from any claims, judgments, damages, penalties, fines, costs,
liabilities (including sums paid in settlement of claims) or loss, including but
not limited to, attorneys' fees, consultant fees, and expert fees which arise
during or after the Lease term as a result of contamination by Hazardous
Substances as a result of Tenant's use or activities on the Premises. This
indemnification of Landlord by Tenant shall include, without limitation, all
costs incurred in connection with any investigation of site conditions or any
cleanup, remedial, removal or restoration work required by any federal, state,
or local governmental agency or political subdivision because of Hazardous
Substances present in the soil and ground water on or under the Premises.
6.5 INDEMNIFICATION BY LANDLORD. Landlord shall indemnify, defend (with
counsel selected by Tenant) and hold Tenant and its officers, employees and
agents harmless from any claims, judgments, damages, penalties, fines, costs,
liabilities (including sums paid in settlement of claims) or loss, including but
not limited to, attorneys' fees, consultant fees, and expert fees which arise
during or after the term of this Lease as a result of (a) contamination by
Hazardous Substances existing on the Premises as of the date of commencement of
this Lease, (b) the inaccuracy of any of the representations and warranties set
forth in Section 6.3 of this Lease, or (c) the presence or suspected presence of
Hazardous Substances in, on or under the Landlord's Real Property, that are
present as a result of the conduct of Landlord, its officers, employees or
agents.
6.6 SCOPE OF INDEMNIFICATION. Without limiting the generality of the
foregoing, the indemnification provided by Section 6.4 and Section 6.5 shall
specifically cover costs incurred in connection with any investigation of site
conditions or any cleanup, remedial removal or restoration work required by any
federal, state, or local governmental agency or political subdivision because of
the presence or suspected presence of Hazardous Substances in, on or under the
Landlord's Real Property.
6.7 NOTIFICATION. Each party shall give written notice to the other
within three (3) business days after the date on which the party learns or first
has reason to believe that:
(a) there has or will come to be located on or about the
Landlord's Real Property any Hazardous Substance;
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(b) a release, discharge or emission of a Hazardous Substance has
occurred on or about the Landlord's Real Property;
(c) an enforcement, cleanup, removal or other governmental or
regulatory action has been threatened or commenced against the party or with
respect to the Premises pursuant to any Hazardous Substance Laws;
(d) a claim has been made or threatened by any person or entity
against the party or the Landlord's Real Property on account of an alleged loss
or bodily injury claimed to result from the alleged presence or release on the
Premises of a Hazardous Substance; or
(e) a report, notice, or complaint has been made to or filed with
a governmental agency concerning the presence, use or disposal of any Hazardous
Substance on the Landlord's Real Property. Any such notice shall be accompanied
by copies of any such claim, report, complaint, notice, warning or other
communication that is in the possession of or is reasonably available to the
party.
6.8 CLEANUP ACTIVITY.
6.8.1 If during the term of this Lease any remedial action is
necessary to cleanup any environmental contamination of Landlord's Real Property
(the "Cleanup Activity"), unless such contamination is attributable to the
conduct of Tenant, its officer, employees or agents, Landlord shall proceed with
reasonable diligence to complete the Cleanup Activity as promptly as possible.
Prior to commencing the Cleanup Activity, Landlord shall provide Tenant with
copies of any environmental reports or audits pertaining to the contamination
together with a written explanation describing (in layman's terms) how the
Cleanup Activity will be conducted. In conducting the Cleanup Activity, the
Landlord shall take all steps reasonably possible to ensure the protection and
safety of Tenant's employees, guests and invitees and to minimize the impact on
Tenant's business operations. If any portion of the Premises shall become
unavailable to Tenant as a result of the Cleanup Activity, Tenant shall receive
an appropriate abatement of rent. Landlord shall also compensate Tenant for any
business loss or any increase in operation costs suffered by Tenant as a result
of the Cleanup Activity. If Landlord fails to proceed with reasonable diligence
top complete the Cleanup Activity, Tenant shall have the right, but no the
obligation, to carry out the Cleanup Activity, and to recover all of the costs
and expenses thereof from Landlord as a set off against payment of rent under
this Lease. The rights and obligations of the parties set forth in this Section
6 shall be in addition to those rights and obligations set forth elsewhere in
this Lease.
6.8.2 If the presence of any Hazardous Substances on the
Premises caused by Tenant results in any contamination of the Premises, Tenant
shall promptly take all actions at its sole expense as are necessary to return
the Premises to the condition existing prior to the release of any such
Hazardous Substances, provided that Landlord's approval of such Cleanup Activity
shall be first obtained, which approval shall not be unreasonably withheld.
Prior to commencing the Cleanup Activity, Tenant shall provide Landlord with
copies of any environmental reports or audits pertaining to the contamination
together with a written explanation describing (in layman's terms) how the
Cleanup Activity will be conducted. In conducting the Cleanup Activity, the
Tenant shall take all steps reasonably possible to ensure the protection and
safety of Landlord's employees, guests and invitees and to minimize the impact
on Landlord's business operations. Tenant shall also compensate Landlord for
any business loss or any increase in operation costs suffered by Landlord as a
result of the Cleanup Activity.
6.9 RIGHT OF OFFSET. With respect to Tenant's obligations to pay rent
under this Lease, Tenant may, upon thirty (30) days prior written notice to
Landlord, offset payment of rent to Landlord for costs
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and expenses incurred by Tenant for any breach of Landlord's representations and
warranties set forth in Section 6.3 of this Lease.
6.10 TERMINATION OF LEASE. In the event of any breach of representations
of Landlord under Section 6.3 of this Lease, Tenant may, upon thirty (30) days
prior written notice to Landlord, terminate this Lease.
7. IMPROVEMENTS; SIGNAGE.
7.1 INSTALLATION OF TENANT IMPROVEMENTS.
7.1.1 Tenant shall make no alterations, additions or
improvements to the interior of the Premises, including wiring or plumbing,
nonstructural partitioning, and painting and redecorating, without obtaining
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Any such alterations, additions or improvements shall be installed by
Tenant at its sole cost and in compliance with all laws, orders and regulations
of any applicable governing body and Tenant, at its expense, shall furnish to
Landlord drawings for such work to enable the Building's record drawings to be
updated to reflect such changes.
7.1.2 Upon request, Tenant shall present to Landlord plans and
specifications for such work at the time approval is sought. Within thirty (30)
days after Tenant has submitted plans and specifications to Landlord, Landlord
shall return to Tenant the plans and specifications marked "Approved", "Approved
as Noted", or "Disapproved". The parties will use the same procedure to obtain
Landlord's approval of previously Disapproved plans, if any. Landlord agrees
not to unreasonably withhold its consent. If Landlord fails to respond to
Tenant's request for approval within the thirty day period, Tenant may give
notice (the "Second Notice") in writing to Landlord that if Landlord fails to
comply with this Section within fifteen days (15) of receipt of the Second
Notice, any plans and specifications submitted by Tenant shall be deemed
approved by Landlord, and Tenant may proceed with construction of the
improvements.
7.1.3 INITIAL TENANT IMPROVEMENTS. Landlord shall provide, at
Landlord's expense, the following improvements to the Premises: HVAC with main
supplies and returns that services the Premises only, including a separate
meter, foundation reinforcement for safe/vault pursuant to the specifications
previously supplied by Tenant, all required demising walls with fire-taping
where sheetrocked (not sheetrocked on the interior of the Premises), rough-in
standard electrical in all perimeter walls with separate meter reflecting only
Tenant's electrical use, automatic teller machine ("ATM") structural
preparation, rough-in plumbing, and framing of lavatory partitions. All such
improvements, and all further improvements provided by the Landlord or Tenant
prior to the commencement of this Lease shall be in accordance with the Work
Letter attached hereto as Exhibit B.
7.2 OWNERSHIP AND REMOVAL OF TENANT IMPROVEMENTS. All alterations,
additions and improvements made by Tenant and affixed to the Premises by any
means (the "Tenant Improvements") shall remain the property of Tenant for the
term of the Lease and any extension of it. Upon termination or expiration of
this Lease or any extension of it, Tenant shall remove all Tenant Improvements
and restore the Premises to their original condition if the applicable Landlord
consent so required. If the applicable Landlord's consent required removal of
the improvement at the termination of the Lease and Tenant fails to remove the
improvement within a reasonable period of time following termination of the
Lease, it shall become the property of the Landlord.
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7.3 LIENS FOR TENANT IMPROVEMENTS. If Tenant makes any Tenant
Improvements to the Premises, Tenant shall promptly pay all contractors and
materialmen who furnished labor or materials therefor, and Tenant agrees to
indemnity, defend and hold harmless Landlord and the Premises from any lien for
construction labor or materials. Should any such lien be made or filed, Tenant
shall bond against or discharge the same within 10 days after the lien is filed
or attaches. Any such bond shall be written by a corporate surety duly
qualified in the state of Oregon and be issued in accordance with Oregon law.
7.4 EXTERIOR SIGNS. Tenant shall have the right, with Landlord's prior
written consent, which shall not be unreasonably withheld, to place its standard
signs in the interior of the Premises and on the exterior face of the Premises,
including banners and window signs on the interior and exterior of the Premises
("Signs"). All Signs must meet the Design Standards for Signs on the Premises
set forth on Exhibit E attached hereto and incorporated herein, relative to
size, location, type and materials. Tenant shall maintain all Signs in good and
clean condition and repair at all times. Any approved Sign shall continuously
meet all requirements of applicable state and local statutes, ordinances, rules
and regulations.
8. INSURANCE; WAIVER OF SUBROGATION.
8.1 INSURANCE REQUIRED. Landlord shall keep the Premises insured, at
full cost replacement value excluding the value of the land, at Landlord's
expense against fire and other risks covered by a standard fire insurance policy
with an endorsement for extended coverage. Tenant shall carry similar insurance
insuring the property of Tenant on the Premises against such risks naming
Landlord as an additional insured.
8.2 WAIVER OF SUBROGATION. Neither party, nor its officers, directors,
employees, agents or invitees, nor, in the case of Tenant, subtenants, shall be
liable to the other party or to any insurance company (by way of subrogation or
otherwise) insuring the other the other party for any loss or damage to any
building, structure or other tangible property, when such loss is caused by any
of the perils which are or could be insured against under a standard policy of
full replacement costs insurance for fire, theft and all risk coverage, or
losses under workers' compensation laws and benefits, even though such loss or
damage might have been occasioned by the negligence of such party, its agents or
employees (this clause shall not apply, however, to any damages causes by
intentionally wrongful actions or omissions); provided, however, that if, by
reason of the foregoing waiver, either party shall be unable to obtain any such
insurance, such waiver shall be deemed not to have been made by such party and,
provided further, that if either party shall be unable to obtain any such
insurance without the payment of an additional premium therefor, then, unless
the party claiming the benefit of such waiver shall agree to pay such party for
the cost of such additional premium within thirty (30) days after notice setting
forth such requirement and the amount of the additional premium, such waiver
shall be of no force and effect between such party and such claiming party.
Each party shall use reasonable efforts to obtain such insurance from a company
that does not charge an additional premium or, if that is not possible, one that
charges the lowest additional premium. Each party shall give the other party
notice at any time when it is unable to obtain insurance with such a waiver of
subrogation without the payment of an additional premium and the foregoing
waiver shall be effective until thirty (30) days after notice is given. Each
party represents that its current insurance policies allow such waiver.
9. TAXES; UTILITIES.
9.1 PROPERTY TAXES. Tenant shall pay as due all taxes on its personal
property located on the Premises. Tenant shall pay as due Tenant's Pro Rata
Share (as defined in Section 3.4) of real property taxes and special assessments
levied against the Property, but not less than 100% of the taxes assessed
directly attributable to the Premises. As used herein, real property taxes
includes any fee or charge
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relating to the ownership, use, or rental of the Premises, other than taxes on
the net income of the Landlord or Tenant.
9.2 SPECIAL ASSESSMENTS. If an assessment for a public improvement is
made against the Premises, Landlord shall take all appropriate action to cause
such assessment to be paid in the maximum number of installments permitted by
law, statute or ordinance. All of the installments payable during the Lease
term shall be treated the same as real property taxes.
9.3 CONTEST OF TAXES. Tenant shall be permitted to contest the amount
of tax or assessment as long as such contest is conducted in a manner that does
not cause any risk that Landlord's interest in the Premises will be foreclosed
for nonpayment.
9.4 PRORATION OF TAXES. Tenant's share of real property taxes and
assessments for the years in which this Lease commences or terminates shall be
prorated based on the portion of the tax year that this Lease is in effect.
9.5 NEW CHARGES OR FEES. If a new charge or fee relating to the
ownership or use of the Premises or the receipt of rental therefrom or in lieu
of property taxes is assessed or imposed, then, to the extent permitted by law,
Tenant shall pay such charge or fee. Tenant, however, shall have no obligation
to pay any income, profits, or franchise tax levied on the net income derived by
Landlord from this Lease.
9.6 UTILITIES. Beginning on the Commencement Date, Tenant shall pay
when due charges for HVAC and electric current used on the Premises as reflected
by the separate meters servicing the Premises, as well as all telephone service
used by Tenant on the Premises. If any of these utility services are furnished
by Landlord, then the rates charged Tenant shall not exceed those of the local
public utility company as if its services were furnished directly to provided by
or through Landlord, charges to Tenant shall be comparable with prevailing rates
for comparable services. If the charges are not separately metered or stated,
Landlord shall apportion the charges on an equitable basis, and Tenant shall pay
its apportioned share on demand.
Landlord shall furnish all other necessary services to the Premises,
including but not limited to water, sewer, garbage and recycling services.
9.7 HEATING, VENTILATION AND AIR CONDITIONING. Landlord shall provide
the Premises with a dedicated HVAC system that services the Premises only. The
HVAC system shall be separately metered, and Tenant shall pay, as additional
rent, the costs associated with the operation of the HVAC. Landlord shall be
responsible for any maintenance, repairs or replacements to the HVAC, unless
such maintenance, repair or replacement is due to the failure of Tenant to
comply with Tenant's repair obligations under Section 5.2.
9.8 INTERRUPTION OF UTILITIES. The interruption or curtailment of any
service beyond Landlord's reasonable control shall not constitute constructive
eviction and shall not entitle Tenant to any abatement of rent or any other
claim against Landlord, except that if any interruption continues for 48 hours
or more, Rent shall thereafter abate to the extent the Premises are unusable for
their normal purposes.
10. DAMAGE AND DESTRUCTION.
10.1 PARTIAL DAMAGE. If the Premises are partly damaged and Section 10.2
does not apply, the Premises shall be repaired by Landlord at Landlord's
expense. Repairs shall be accomplished with
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all reasonable dispatch subject to interruptions and delays from labor disputes
and matters beyond the control of Landlord and shall be performed in accordance
with the provisions of Section 5.3. Notwithstanding the foregoing, if any
repair is reasonably estimated by Tenant to require more than 120 days to
complete and the damage is sufficient to make the Premises unsuitable for the
use which Tenant was then making of the Premises, Tenant may elect to terminate
this Lease.
10.2 DESTRUCTION. If the Premises are destroyed or damaged such that the
cost of repair exceeds 50% of the value of the structure before the damage,
either party may elect to terminate this Lease as of the date of the damage or
destruction by notice given to the other in writing not more than 45 days
following the date of damage. In such event all rights and obligations of the
parties shall cease as of the date of termination, and Tenant shall be entitled
to the reimbursement of any prepaid amounts paid by Tenant and attributable to
the anticipated term. If neither party elects to terminate, Landlord shall
proceed to restore the Premises to substantially the same form as prior to the
damage or destruction. Work shall be commenced as soon as reasonably possible
and thereafter shall proceed without interruption except for stoppages on
account of labor disputes and matters beyond Landlord's reasonable control.
10.3 RENT ABATEMENT. Rent shall be abated during the repair of any
damage to the extent the Premises are untenantable except that there shall be no
rent abatement where the damage occurred as a result of the fault of Tenant.
10.4 DAMAGE LATE IN TERM. If damage or destruction to which Section 10.1
would apply occurs within one year before the end of the then-current Lease
term, Tenant may elect to terminate the Lease by written notice to Landlord
given within 30 days after the date of the damage.
11. EMINENT DOMAIN.
11.1 PARTIAL TAKING. If a portion of the Premises is condemned and
Section 11.2 does not apply, the Lease shall continue on the following terms:
11.1.1 Landlord shall proceed as soon as reasonably possible to
make such repairs and alterations to the Premises as are necessary to restore
the remaining Premises to a condition as comparable as reasonably practicable to
that existing at the time of condemnation, and Tenant shall have no claim
against Landlord as a result of the condemnation.
11.1.2 After the date on which title vests in the condemning
authority or an earlier date on which alterations or repairs are commenced by
Landlord to restore the balance of the Premises in anticipation of taking, the
rent shall be reduced in proportion to the reduction in value of the Premises as
an economic unit on account of the partial taking. If the parties are unable to
agree on the amount of the reduction of rent, the amount shall be determined by
arbitration in the manner provided in Section 19.
11.1.3 If a portion of Landlord's property not included in the
Premises is taken, and severance damages are awarded on account of the Premises,
or an award is made for detriment to the Premises as a result of activity by a
public body not involving a physical taking of any portion of the Premises, this
shall be regarded as a partial condemnation to which Sections 11.1 and 11.3
apply, and the rent shall be reduced to the extent of reduction in rental value
of the Premises as though a portion had been physically taken.
11.2 TOTAL TAKING. If a condemning authority takes all of the Premises
or a portion sufficient to render the remaining Premises reasonably unsuitable
for the use that Tenant was then making of
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the Premises, the Lease shall terminate as of the date the title vests in the
condemning authorities. The parties shall be entitled to share in the
condemnation proceeds in the proportion to the values of their respective
interests in the Premises.
11.3 TENANT CLAIM. Tenant shall be entitled to make a separate claim
against the condemning authority for Tenant's monthly expenses, lost business
and cost of improvements or personal property lost.
11.4 SALE IN LIEU OF CONDEMNATION. Sale of all or part of the Premises
to a purchaser with the power of eminent domain in the face of a threat or
probability of the exercise of the power shall be treated for the purposes of
this Section 11 as a taking by condemnation.
12. LIABILITY AND INDEMNITY.
12.1 LIENS.
12.1.1 Except with respect to activities for which Landlord is
responsible, Tenant shall pay as due all claims for work done on and for
services rendered or material furnished to the Premises, and shall keep the
Premises free from any liens. If Tenant fails to pay any such claims or to
discharge any lien, Landlord may do so and collect the cost as additional rent.
Any amount so added shall bear interest at the rate of ten percent (10%) per
annum from the date expended by Landlord and shall be payable on demand. Such
action by Landlord shall not constitute a waiver of any right or remedy which
Landlord may have on account of Tenant's default.
12.1.2 Tenant may withhold payment of any claim in connection
with a good-faith dispute over the obligation to pay, as long as Landlord's
property interests are not jeopardized. If a lien is filed as a result of
nonpayment, Tenant shall, within 10 days after knowledge of the filing, secure
the discharge of the lien or deposit with Landlord cash or sufficient corporate
surety bond or other surety satisfactory to Landlord in an amount sufficient to
discharge the lien plus any costs, attorney fees, and other charges that could
accrue as a result of a foreclosure or sale under the lien.
12.2 INDEMNIFICATION. Tenant shall indemnify and hold Landlord harmless
from any and all liability, claim, loss, cost or expense arising from a third
party claim arising out of or related to any activity of Tenant on the Premises
or any condition of the Premises in the possession or under the control of
Tenant and which resulted in bodily injury or property damage. Landlord shall
indemnify and hold Tenant harmless from any and all liability, loss, cost or
expense arising from a third party claim respecting an incident which occurred
within the Common Areas of the Building or Landlord's Real Property. The
indemnification obligations of each party under this section shall not apply
with respect to any claim for host liquor liability, as to which each party
shall be responsible for obtaining their own host liquor liability insurance.
12.3 LIABILITY INSURANCE. Before going into possession of the Premises,
Tenant shall procure and thereafter during the term of the Lease shall continue
to carry the following insurance at Tenant's cost: commercial general liability
policy (occurrence version) in a responsible company with coverage for bodily
injury and property damage liability, personal and advertising injury liability,
and medical payment with a general aggregate limit of not less than $1,000,000
and a per occurrence limit of not less than $300,000. Such insurance shall
cover all risks arising directly or indirectly out of Tenant's activities on or
any, condition of the Premises. Such insurance shall protect Tenant against the
claims of Landlord on account of the obligations assumed by Tenant under Section
12.2, and shall name Landlord and Landlord's general partner, Portland Community
Design, as additional insureds. Certificates evidencing
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such insurance and bearing endorsements requiring 10 days' written notice to
Landlord prior to any change or cancellation shall be furnished to Landlord
prior to Tenant's occupancy of the property.
13. QUIET ENJOYMENT; MORTGAGE PRIORITY.
13.1 LANDLORD'S WARRANTY. Landlord warrants that it is the owner of the
Premises and has the right to lease them. Landlord will defend Tenant's right
to quiet enjoyment of the Premises from the lawful claims of all persons during
the Original Term of this Lease and all renewals thereof.
13.2 MORTGAGE PRIORITY. The Premises are subject to mortgages given or
to be given to United States National Bank of Oregon, Portland Development
Commission, Livable City Housing Counsel, the Enterprise Foundation, Portland
Community Design and Network for Affordable Housing as mortgagees. This Lease
is conditioned upon approval by the mortgagees and upon execution by the
mortgagees and Tenant of an attornment and nondisturbance agreement under which
the mortgagees agree that upon foreclosure of any of the mortgages this Lease
will remain in effect according to its terms and Tenant's possession will not be
disturbed as long as Tenant is in compliance with this Lease.
13.3 ESTOPPEL CERTIFICATE. Either party will, within 20 days after
notice from the other, execute and deliver to the other party a certificate
stating whether or not this Lease has been modified and is in full force and
effect and specifying any modifications or alleged breaches by the other party.
The certificate shall also state the amount of any security deposit or prepaid
rent. Failure to deliver the certificate within the specified time shall be
conclusive upon the party from whom the certificate was requested that the Lease
is in full force and effect and has not been modified except as represented in
the notice requiring the certificate.
14. ASSIGNMENT AND SUBLETTING.
Tenant shall not sublet or assign all or part of the Premises without the
written consent of Landlord, which consent shall not be unreasonably withheld,
delayed or conditioned.
15. DEFAULT.
The following shall be events of default:
15.1 DEFAULT IN RENT. Failure of Tenant to pay any rent or other charge
within 10 days after it is due.
15.2 DEFAULT IN OTHER COVENANTS. Failure of Landlord or Tenant to comply
with any term or condition or fulfill any obligation of the Lease (other than
the payment of rent or other charges) within 30 days after written notice by the
nondefaulting party specifying the nature of the default with reasonable
particularity. If the default is of such a nature that it cannot be completely
remedied within the 30 day period, this provision shall be complied with if the
defaulting party begins correction of the default within the 30 day period and
thereafter proceeds with reasonable diligence and in good faith to effect the
remedy as soon as practicable.
15.3 INSOLVENCY. Insolvency of Tenant; an assignment by Tenant for the
benefit of creditors; the filing by Tenant of a voluntary petition in
bankruptcy; an adjudication that Tenant is bankrupt or the appointment of
receiver of the properties of Tenant; the filing of any involuntary petition of
bankruptcy and failure of Tenant to secure a dismissal of the petition within 60
days after filing; attachment of or the levying of execution on the Leasehold
interest and failure of Tenant to secure discharge of the attachment
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or release of the levy of execution within 30 days shall constitute a default.
If the Lease has been assigned, the events of default so specified shall apply
only with respect to the one then exercising the rights of the Tenant under the
Lease.
15.4 ABANDONMENT. Failure of Tenant for thirty (30) days or more to
occupy the Premises for one or more of the purposes permitted under this Lease,
unless such failure is excused under other provisions of this Lease.
16. REMEDIES ON DEFAULT.
16.1 TERMINATION. In the event of a default continuing beyond any
applicable cure period the Lease may be terminated by written notice to the
defaulting party. If the Lease is terminated by Landlord, Landlord shall be
entitled to recover damages from Tenant for the default, and Landlord may
reenter, take possession of the Premises, and remove any persons or property by
legal action and without having accepted a surrender.
16.2 RELETTING. Following reentry or abandonment, Landlord may relet the
Premises and in that connection may make any suitable alterations or refurbish
the Premises, or both, or change the character or use of the Premises, but
Landlord shall not be required to relet for any use or purpose other than that
specified in the Lease or which landlord may reasonably consider injurious to
the Premises, or to any tenant that Landlord may reasonably consider
objectionable. Landlord may relet all or part of the Premises, alone or in
conjunction with other properties, for a term longer or shorter than the term of
this Lease, upon any reasonable terms and conditions, including the granting of
some rent-free occupancy or other rent concession.
16.3 DAMAGES. In the event of termination or retaking of possession
following default, Landlord shall be entitled to recover immediately, without
waiting until the due date of any future rent or until the date fixed for
expiration of the Lease term, the following amounts as damages:
(a) The loss of rental from the date of default until a new tenant
is, or with the exercise of reasonable efforts could have been, secured and
paying rent.
(b) The reasonable costs of reentry and reletting including
without limitation the cost of any cleanup, refurbishing, removal of Tenant's
property and fixtures, costs incurred under Section 16.5, or any other expense
occasioned by Tenant's default including but not limited to, any remodeling or
repair costs, attorney fees, court costs, broker commissions, and advertising
costs.
(c) Any excess of the value of the rent and all of Tenant's other
obligations under this Lease over the reasonable rental value of the Premises
for the period commencing on the earlier of the date of trial or the date the
Premises are relet, and continuing through the end of the term. The present
value of future amounts will be computed using a discount rate equal to the
prime loan rate of major Oregon banks in effect on the date of trial.
16.4 RIGHT TO SUE MORE THAN ONCE. Landlord may sue periodically to
recover damages during the period corresponding to the remainder of the Lease
term, and no action for damages shall bar a later action for damages
subsequently accruing.
16.5 LANDLORD'S RIGHT TO CURE DEFAULTS. If Tenant fails to perform any
obligation under this Lease, Landlord shall have the option to do so after 30
days' written notice to Tenant. All of Landlord's expenditures to correct the
default shall be reimbursed by Tenant on demand with interest at the rate of
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nine percent (9%) annum from the date of expenditure by Landlord. Such action
by Landlord shall not waive any other remedies available to Landlord because of
the default.
16.6 REMEDIES CUMULATIVE. The foregoing remedies shall be in addition to
and shall not exclude any other remedy available to Landlord under applicable
law.
16.7 Notwithstanding any other provisions contained in this Lease, in the
event that (a) Tenant or its successors or assigns shall become insolvent or
bankrupt, or if it or their interests shall be levied upon or sold under
execution or other legal process, or (b) the depository institution the
operating on the Premises is closed, or is taken over by any depository
institution supervisory authority ("Authority"), Landlord may, in either such
event, terminate this Lease only with the concurrence of any Receiver or
Liquidator appointed by such Authority; provided, that in the event this Lease
is terminated by the Receiver or Liquidator, the maximum claim of Landlord for
rent, damages, or indemnity for injury resulting from the termination,
rejection, or abandonment of the unexpired Lease shall by law in no event be
greater than an amount equal to all accrued and unpaid rent to the date of
termination.
17. SURRENDER AT EXPIRATION.
17.1 CONDITION OF PREMISES. Subject to the provisions of Section 10
herein, upon expiration of the Lease term or earlier termination on account of
default, Tenant shall deliver all keys to Landlord and surrender the Premises in
first class condition and broom clean, reasonable wear and tear excepted.
Alterations constructed by Tenant with permission from Landlord shall not be
removed or restored to the original condition unless the terms of permission for
the alteration so require.
17.2 FIXTURES.
17.2.1 Tenant shall remove all fixtures placed upon the
Premises during the term, other than Tenant's trade fixtures, if the Landlord's
applicable consent referenced in Section 7 so requires, and shall repair any
physical damage resulting from the removal (excluding any initial tenant
improvements referenced in Section 7). If Tenant fails to remove such fixtures,
Landlord may do so and charge the cost to Tenant with interest at the legal rate
from the date of expenditure.
17.2.2 Prior to expiration or other termination of the Lease
term Tenant shall remove all furnishings, furniture, and trade fixtures that
remain its property. If Tenant fails to do so, this shall be an abandonment of
the property, and Landlord may retain the property and all rights of Tenant with
respect to it shall cease or, by notice in writing given to Tenant within 20
days after removal was required, Landlord may elect to hold Tenant to its
obligation of removal. If Landlord elects to require Tenant to remove, Landlord
may effect a removal and place the property in public storage for Tenant's
account. Tenant shall be liable to Landlord for the cost of removal,
transportation to storage, and storage, with interest at the legal rate on all
such expenses from the date of expenditure by Landlord.
17.2.3 Tenant's trade fixtures shall include, but are not
limited to, the following items: automatic teller machines, safe, safe deposit
boxes, vault (not including the cement or other walls which surround the vault),
vault door, vault ventilator, counter and gate fixtures, and night depository.
17.3 HOLDOVER.
17.3.1 If Tenant does not vacate the Premises at the time
required, Landlord shall have the option to treat Tenant from month to month,
subject to all of the provisions of this Lease except the provisions for term
and renewal and at a rental rate equal to 125 percent of the rent last paid by
Tenant
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during the original term, or to eject Tenant from the Premises and recover
damages caused by wrongful holdover. Failure of Tenant to remove fixtures,
furniture, furnishings, or trade fixtures that Tenant is required to remove
under this Lease shall constitute a failure to vacate to which this section
shall apply if the property not removed will substantially interfere with
occupancy by Landlord for any purpose including preparation for a new tenant.
17.3.2 If a month-to-month tenancy results from a holdover by
Tenant under this Section 17.3, the tenancy shall be terminable at the end of
any monthly rental period on written notice from Landlord given not less than 10
days prior to the termination date which shall be specified in the notice.
Tenant waives any notice that would otherwise be provided by law with respect to
a month-to-month tenancy.
18. MISCELLANEOUS.
18.1 REGULATORY APPROVAL. Tenant's obligations hereunder are contingent
upon obtaining approval by all necessary governmental authorities, including but
not limited to the Federal Deposit Insurance Corporation, to operate as banking
corporation in Oregon. Tenant may terminate this Lease, with no liability to
Landlord, if such approvals are not obtained.
18.2 NO COMPETING USE. During the term of this Lease (including any
extensions or renewals), Landlord shall not (a) execute a lease of space in the
Building to a Prohibited User, and (b) consent to an assignment of a lessee's
lease or a sublease of space to a Prohibited User. A "Prohibited User" is an
individual or entity whose primary business is the providing of financial
services in competition with Tenant.
18.3 NONWAIVER. Waiver by either party of strict performance of any
provision of this Lease shall not be a waiver of or prejudice the party's right
to require strict performance of the same provision in the future or of any
other provision.
18.4 ATTORNEY FEES. If suit or action is instituted in connection with
any controversy arising out of this Lease, the prevailing party shall be
entitled to recover in addition to costs such sum as the court or arbitrator(s)
may adjudge reasonable as attorney fees at arbitration, trial, on petition for
review, and on appeal.
18.5 GOVERNING LAW. This Lease will be governed by and construed in
accordance with the laws of the state of Oregon.
18.6 CHOICE OF FORUM. Any claim or action arising out of or in
connection with this Lease shall be brought exclusively in Multnomah County,
Oregon and both parties hereby submit to the jurisdiction of those courts and
consent to venue in that court for any such claims or actions. This provision
shall not be construed as modifying or amending any provision of this Lease
regarding the arbitration of disputes or the use of other alternative dispute
resolution methods.
18.7 NOTICES. Any notice required or permitted under this Lease shall be
given when actually delivered or 48 hours after deposited in the United States
mail as certified mail addressed to the address first given in this Lease or to
such other address as may be specified from time to time by either of the
parties in writing.
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18.8 SUCCESSION. Subject to the above-stated limitations on transfer of
Tenant's interest this Lease shall be binding on and inure to the benefit of the
parties and their respective successors and assigns.
18.9 ENTRY FOR INSPECTION. Landlord shall have the right to enter upon
the Premises during normal business hours upon reasonable advance notice to
determine Tenant's compliance with this Lease, to make necessary repairs to the
building or to the Premises, or to show the Premises to any prospective tenant
or purchaser, and in addition shall have the right, at any time during the last
two months of the term of this Lease to place and maintain upon the Premises
notices for leasing or selling of the Premises. Notwithstanding the foregoing,
if there is an emergency creating immediate risk of personal injury or
significant property damage, Landlord may enter the Premises without advance
notice as long as Landlord notifies Tenant of such entry as soon as possible
thereafter.
18.10 INTEREST ON RENT AND OTHER CHARGES. If Tenant fails to pay rent or
any other charge due under this Lease within 10 days after it is due, Landlord
may elect to impose a late charge of five cents per dollar of the overdue
payment to reimburse Landlord for the costs of collecting the overdue payment.
Tenant shall pay the late charge upon demand by Landlord. Landlord may levy and
collect a late charge in addition to all other remedies available for Tenant's
default, and collection of a late charge shall not waive the breach caused by
the late payment.
18.11 PRORATION OF RENT. In the event of commencement or termination of
this Lease at a time other than the beginning or end of one of the specified
rental periods, then the rent shall be prorated as of the date of commencement
or termination and in the event of termination for reasons other than default,
all prepaid rent shall be refunded to Tenant or paid on its account.
18.12 TIME OF ESSENCE. Time is of the essence of the performance of each
of Tenant's and Landlord's obligations under this Lease.
19. ARBITRATION.
19.1 Any claim between the parties, under this Lease or otherwise, must
be determined by arbitration in Multnomah County, Oregon commenced in accordance
with applicable law. All statutes of limitations which would otherwise be
applicable will apply to the arbitration proceeding. There will be one
arbitrator agreed upon by the parties within ten (10) days before the
arbitration or, if not, selected by the administrator of the nearest American
Arbitration Association (AAA) office. The arbitrator must be an attorney with
at least 15 years' experience in real property law and must reside in the
Portland area. Whether a claim is covered by this Lease will be determined by
the arbitrator. At the request of either party made not later than 75 days
after the arbitration demand, the parties agree to attempt to resolve the
dispute by nonbinding mediation or evaluation or both (but without delaying the
arbitration hearing date).
19.2 The arbitration must be conducted in accordance with the AAA
Commercial Arbitration Rules in effect on the date hereof, as modified by this
Lease. There will be no substantive motions or discovery except that the
arbitrator may authorize such discovery as may be necessary to ensure a fair
hearing, and discovery may not extend the time limits set forth in this Section.
The arbitrator will not be bound by the rules of evidence or civil procedure.
19.3 The arbitrator must hold a private hearing within one hundred twenty
(120) days after the arbitration demand; conclude the hearing within three (3)
days; and render a written decision within fourteen (14) calendar days after the
hearing. These time limits are not jurisdictional. In making the
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decision and award, the arbitrator must apply applicable substantive law and
must make a brief statement of the claims determined and the award made on each
claim.
19.4 Absent fraud, collusion or willful misconduct by the arbitrator, the
award will be final, and judgment may be entered in any court having
jurisdiction thereof. The arbitrator may award injunctive relief or any other
remedy available from a judge, including the joinder of parties or consolidation
of this arbitration with any other involving common issues of law or fact or
which may promote judicial economy, and may award attorneys' fees and costs to
the prevailing party but will not have the power to award punitive or exemplary
damages.
LANDLORD:
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TENANT:
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PROPERTY MANAGER:
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EXHIBIT A
(Legal Description, including designated parking spaces)
A-1
<PAGE>
EXHIBIT B
Construction of Tenant Improvements
Landlord shall proceed with due diligence to construct and complete the
Building and other improvements ("Improvements"), including without limitation
parking, utilities, walkways, curbing and lights and landscaping in accordance
with the plans and specifications provided to Landlord. All construction shall
be performed in a good workmanlike manner. Landlord may not make subsequent
changes in plans and specifications which modify the size, layout or appearance
of the Premises without the consent of Tenant, which consent will not be
unreasonably withheld.
Landlord shall provide, at Landlord's expense, the following improvements
to the Premises prior to delivery of possession to Tenant:
1. DEMISING WALLS: All required demising walls: steel-framed demising
walls with sound batts and gaskets; demising walls will be fire-taped where
sheetrocked; walls will not be sheetrocked on the interior of the Premises;
2. FLOORS: Trowelled concrete slab floor; foundation reinforcement for
safe/vault pursuant to the specifications supplied by Tenant;
3. ELECTRICAL AND TELEPHONE: Rough-in standard electrical to the
electrical panel box serving the premises, with separate meter reflecting only
Tenant's electrical use; conduit to the leased Premises shall be provided for
telephone service;
4. HEATING, VENTILATION AND AIR CONDITIONING: HVAC with main supplies
and returns that services the Premises only, including a separate meter;
5. ATM: Automatic teller machine ("ATM") structural preparation;
6. WATER/PLUMBING: Potable water service, sanitary drainage, and
rough-in plumbing; separate water meter will be provided (at Tenant's expense);
7. ENTRY/EXIT DOORS: Standard entry door to exterior envelope;
8. WINDOWS: Storefronts installed on south and west walls, without
interior finish; window wall on east side completed;
The Premises and Improvements shall be deemed substantially completed and
Tenant shall be given possession of the Premises when items 1 - 8 above are
completed to Tenant's reasonable satisfaction.
Landlord shall deliver to Tenant promptly upon substantial completion a
letter agreement executed by Landlord which specifies the date of delivery of
possession of the Premises (the "Possession Date"). Prior to taking possession
of the Premises, Tenant shall execute the letter agreement and deliver one fully
executed duplicate to Landlord. Once fully executed the letter agreement shall
automatically be incorporated into and become part of this Lease.
B-1
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In the event the Premises are not constructed in a good and workmanlike
manner, Tenant may reject delivery of the Premises and require that Landlord
repair the defective work, or Tenant may repair the defects and offset the costs
of repair.
Tenant shall fully fixture and equip the Premises with all trade fixtures,
operating equipment and furniture, furnishings, floor coverings and exterior
signs ("Trade Fixtures") deemed necessary or proper by Tenant for the operation
of its business and shall open for business on the Premises within 60 days after
delivery to Tenant of the Premises. Tenant's works shall be done in accordance
with such plans and specifications as may be approved by the Landlord, which
approval shall not be unreasonably withheld.
Tenant will prepare and submit to the Landlord or its architect for
approval no later than March 22, 1996 complete drawings and specifications
conforming to good engineering practice, including ceiling finishes, floor
coverings, and other items Landlord may reasonably request. Landlord will
notify Tenant within five (5) business days of its approval or of any specific
changes reasonably required by Landlord. If required, Tenant shall promptly
prepare and submit to the Landlord amended drawings and specifications
reflecting changes requested by Landlord.
B-2
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EXHIBIT C
(Commute Incentive Program)
The Commute Incentive Program will incorporate the following terms:
1. Introductory information for new employees
2. Transit information
3. Carpooling/Vanpooling information
4. Bike/Walk to work programs
5. Incentives for using alternative transportation
6. Tracking and reporting results
The Commute Incentive Program may also incorporate, without limitation,
the following terms:
1. Individual subsidies;
2. Carpool subsidies;
3. Emergency Ride programs; and
4. Promotion of Commute Incentive Program.
C-1
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EXHIBIT D
(Diagram of Common Areas
D-1
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EXHIBIT E
Albina Corner Tenant Signage Rules
1 OVERVIEW AND GENERAL GUIDELINES
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1.1 SIGN TYPES
1.1.1 There are generally six types of permanent exterior signage that
individual tenants at Albina Corner will be permitted to install.
However, some types are mutually exclusive, so not all types of
signs can be installed at one time. Additionally, tenants have the
option of periodically installing one type of temporary signage. As
key parts of the over-all Albina Corner approach, the designs of all
types of signs are strictly controlled and subject to the approval
of the commercial property manager, Portland Community Design (PCD).
1.1.2 First, WALL SIGNS are signs attached to walls on the designated SIGN
BANDS of the building. Sign bands are the area so designated on
figure 1. Generally, each tenant will be allowed one such sign per
distinct storefront wall area fronting on that tenant's leased
space. Illumination, if any, for wall signs must be either EXTERNAL
ILLUMINATION, or HALO EFFECT NEON. Note: INTERNALLY ILLUMINATED
SIGNS are not allowed. Please see section 2.4 for further
explanation of these terms.
1.1.3 As an alternative to wall signs, NEON SIGNS may be mounted on the
inside faces of the exterior glazing of a given tenant's storefront
area. Generally, each tenant will be allowed one such sign per
distinct storefront wall area fronting on that tenant's leased space
as an alternative to wall signs. Wall signage and neon signage may
not be installed on the same building face by any one tenant. Due
to its location off the main street, an exception may be made for
the tenant space located at the southeast Corner of the building,
which will be allowed to place an exterior neon sign in the
designated sign band.
1.1.4 FIXED AWNING SIGNS are similar to wall signs except that they are
mounted to the front edge of the fixed awnings which are planned
along the MLK Jr. Blvd. elevation only.
1.1.5 The BLADE SIGN is a pedestrian-oriented sign mounted perpendicularly
to the building walls, either attached directly to an exterior wall
or hung from an arcade ceiling or awning.
1.1.6 WINDOW SIGNAGE is affixed directly to storefront glazing, either on
fixed glazing, or to storefront doors. Window signage may used as a
tenant's principal signage in lieu of wall signs or neon signs, or
may be used as a smaller, secondary sign on the tenant door.
1.1.7 TEMPORARY SIGNAGE, if any, is to be mounted only on the inside
surface of a tenant's lower storefront (non-clerestory) windows.
Temporary signage is permitted provided it meets the following
conditions: (1) that it does not exceed 15% of the square footage of
exterior glazing of the tenant's portion of the facade on which the
temporary signage is to be mounted, (2) that it does not obscure
more than 30% of any single piece of glass (text/graphics and
backing) nor 20% of any two adjacent pieces of glass, and, (3) that
it is not left up for more than 15 working days sequentially and is
not reinstalled, nor any other comparable (i.e. same type, size,
essential message) temporary signage installed, within 30 days after
its removal.
1.1.8 PARKING STALL SIGNAGE, if any, is to mounted either on the face of
an adjacent curb at the end of the stall, if any, or otherwise on
the paving at least l' from the nearest end of the
C-3
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stall. See figure 2. Only tenants with dedicated parking stalls
granted in their lease may install parking lot signage.
1.2 GENERAL RESTRICTIONS
1.2.1 These guidelines govern the materials and construction, location and
quantity, size limitations, illumination, and design of all types of
permanent signs. Additional requirements and restrictions regarding
permanent signs are governed by the City of Portland Sign Ordinances
and by the Albina Community Plan Design Guidelines as applied by the
Bureau of Planning to the Albina Corner project. Where more
restrictive, City ordinances take precedence over the rules
described herein. Please note that other restrictions may also
apply. For example, all signage must comply with the requirements
of the Americans with Disabilities Act.
1.2.2 All signage is to be installed and satisfactorily maintained in an
as-new condition by the tenant. Installed signage which was not
approved per these rules or which, in the estimation of the property
manager, has deteriorated may be removed by the property manager and
any costs attached thereto shall be the sole responsibility of the
tenant. However, the property manager shall give 30 days written
notice before proceeding with any such action.
1.2.3 All signs shall be fabricated and installed by a qualified, licensed
and bonded signage contractor with at least three years experience
in providing similar signage in the Portland area. All signage must
have any requisite permits from the Portland Bureau of Buildings or
other permitting authorities. Tenants are responsible for any
permit and/or city approval fees.
1.2.4 Shop drawings are to be provided to Portland Community Design for
approvals at least 21 working days prior to the proposed
commencement of fabrication; PCD will respond with its comments or
approval within 7 working days. PCD reserves the right to require
changes at that time if it deems compliance with the relevant codes
and ordinances and the intent of these guidelines has not been met.
1.2.5 All requisite engineering, such as that provided by structural and
electrical consultants, are the responsibility of the Tenant. Note:
Such services are usually provided by the signage contractor.
1.2.6 No third party brands, trademarks or logos (e.g.. vendor supplied
signs advertising brand names, such as Coca-Cola) may be
incorporated into any signage appearing on the Albina Corner
building.
1.2.7 Tenant is responsible for providing needed electrical power to the
sign, and repairing any damage to the building caused by the
installation and removal of the sign. Such repair, including
repainting, is to be to original building conditions and
specifications, and is subject to the approval of the property
manager.
1.2.8 No flashing or moving signs are allowed on any portion of the Albina
Corner building.
1.2.9 When the terms "approved", "approvable", or "approved by" are used,
said approval is by PCD unless noted otherwise.
1.2.10 No exterior sign poles are allowed.
2 WALL SIGNS
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2.1 MATERIALS AND CONSTRUCTION
2.1.1 Wall signs must be constructed of a durable, corrosion-resistant
exterior material with an anticipated lifespan of at least twice the
term of the lease. Brushed or permanently painted metal (brass,
stainless steel, or copper) is the preferred material. Properly
treated wooden letters, or solid plastic may be acceptable if they
are of approved durability. Foamed plastic letters are not
approvable. Signs are required to be constructed so as to be, or
appear to be constructed of individual letters (no background panels
are permitted).
Albina Corner Signage Rules C-4
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Letters may be joined by a horizontal connecting and mounting
structural member that does not exceed four (4) inches in height.
Such a structural member must be painted to match the color of the
building behind. In the case of halo effect neon signs, such a
member should also be used as a power conduit. Please see section
2.4.
2.2 LOCATION AND QUANTITY
2.2.1 One fixed wall sign is allowed for each tenant on each distinct
exterior building wall that the tenant's leased space adjoins (a
tenant space on a corner, thus fronting on two exterior building
walls would be allowed up to two wall signs). These signs shall be
located within the sign bands, as indicated in figure 1. The sign
faces shall be parallel to the adjacent property line.
2.3 SIZE LIMITATIONS
2.3.1 Wall signs may not be taller than 18"' in height and may not be
longer than 3/4 of the length of the portion of the sign band on a
given building face fronting on that tenant's leased space.
2.3.2 Signs may not extend horizontally into areas of the sign band that
are within twelve (12) inches of the interior walls denoting the end
of that tenant's leased space. See figure 3.
2.4 ILLUMINATION
2.4.1 Internally illuminated signs (i.e. metal boxes with acrylic fronts
and internal fluorescent tubes) are not permitted.
2.4.2 External illumination: For external illumination, where a light
fixture is mounted so as to cast light upon the sign, the allowable
fixture is the USI-Columbia Model SOD-5 lamped with 430ma Slimlines.
The fixture must be mounted using the integral mounting arms and
manufacturer supplied ballasts hidden within the tenant space, for
example within the ceiling plenum. Fixtures must be mounted at the
top of the sign band and be aimed downward onto the sign, so that
light source is not directly visible from residential windows above.
See figure 1.
2.4.3 Halo effect neon: This type of illumination, where neon tubes are
placed within fabricated, hollow metal letters that are mounted off
the face of the building wall, is the desired form of illumination
for wall signs. Cold cathode lighting, in addition to neon, is
allowed for this type of
illumination. The face of the letters facing towards the building
are open and allow a "halo" of light to surround the individual
letters. The sides and front faces of the letters must completely
shield the light tubes from view. Letters may be joined by a
structural and power carrying conduit. As with neon lighting,
transformers and other electrical parts should be hidden within the
tenant space, for example within the ceiling plenum.
2.5 DESIGN
2.5.1 In keeping with the historically sensitive architecture of Albina
Corner, bold, block letters (e.a. Helvetica type face) are
discouraged. Lively script and decorative fonts are encouraged. An
exception can be made for letters that are associated with an
established tenant's logo.
3 NEON SIGNS
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3.1 MATERIALS AND CONSTRUCTION
3.1.1 Transformer and connection boxes should be located out of sight
within the tenant space (for example within the ceiling plenum,
allowing for a minimum of attachments and visible parts to the
building exterior.
Albina Corner Signage Rules C-5
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3.2 LOCATION AND QUANTITY
3.2.1 Location and Quantity
One neon sign is allowed for each tenant on each distinct storefront
wall area fronting on that tenant's leased space as an alterative to
a wall sign. These shall be located in the upper third of the main
storefront windows; they may not be placed behind the clerestories
themselves. The sign faces shall be parallel to the window that the
sign is installed behind.
3.3 SIZE LIMITATIONS
3.3.1 A neon sign may not encompass an area greater than 30% of the
portion of storefront glazing behind which it is mounted. Neon
signs may not be wider than one piece of storefront glazing nor pass
behind a mullion separating two pieces of said glazing.
3.4 ILLUMINATION
3.4.1 Cold cathode lighting is not allowed.
3.5 DESIGN
3.5.1 In keeping with the historically sensitive architecture of Albina
Corner, bold, block letters (e.g. Helvetica type face) are
discouraged. Lively script and decorative fonts are encouraged. An
exception can be made for letters that are associated with an
established tenant's logo. Images and symbols are also encouraged.
4 FIXED AWNING SIGNS
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4.1 MATERIALS & CONSTRUCTION
4.1.1 Upon approval, awning signs may be painted on the awning fascia.
Alternately, fixed awning, signage may be constructed with materials
and restrictions similar to those of wall signs, and mounted on the
awning fascia.
4.2 LOCATION AND QUANTITY
4.2.1 One axed awning sign is allowed for each tenant facing onto NE MLK
Jr. Blvd. These shall be located on the front face of the fixed
awnings along MLK Jr. Blvd. only. The sign faces are thus to be
parallel to the property line.
4.3 SIZE LIMITATIONS
4.3.1 Fixed Awning Signs may not be taller than 3/4 of the height of the
front edge of the fixed awnings nor wider than 3/4 of the total
length of a the fixed awning where the sign is to be mounted. in
addition, fixed awning signs may not extend horizontally within
twelve (12) inches of the interior walls denoting the end of that
tenant's leased space.
4.4 ILLUMINATION
4.4.1 The particular location of signage on the hard awnings fronting NE
MLK Jr. Blvd. preclude them from having external illumination.
There should be sufficient ambient light from street lighting for
these signs.
4.5 DESIGN
4.3.1 In keeping with the historically sensitive architecture of Albina
Corner, bold, block letters (e.g- Helvetica type face) are
discouraged. Lively script and decorative fonts are encouraged. An
exception can be made for letters that are associated with an
established tenant's logo.
5 BLADE SIGNS
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Albina Corner Signage Rules C-6
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5.1 MATERIALS & CONSTRUCTION
5.1.1 Blade signs must be constructed of a durable, corrosion-resistant
exterior material with an anticipated lifespan of at least twice the
term of the LEASE. Brushed or permanently painted metal (brass,
stainless steel, or copper) is the preferred material. Properly
treated wooden signs, or solid plastic may be acceptable if they are
of approved durability. Foamed plastic signs are not approvable.
Mounting, brackets, constructed of satin or polished brass (or
bronze), wrought iron, or metal painted to match the adjacent
building drip edge, should be integrated into the over-all design of
the sign, and be professionally mounted to the building or awning,
with escutcheon plates used as required to present a neat
appearance.
5.2 LOCATION AND QUANTITY
5.2.1 One blade sign is permitted to be located adjacent to the principal
entry door for each tenant, or group of tenants in the case of a
master lease and sub-tenants. In the case of a master lease, only
one blade sign is allowed: tenants who share sign costs may have
their name listed on a singe blade sign at the common entry door
with the master lease holder listed first.
5.2.2 For wall mounted locations, blade signs should be fastened along the
vertical center line of the building pilaster adjacent to the entry,
unless that pilaster contains an exterior building light, as is the
case for some pilasters along NE MLK Jr. Blvd. In this case, the
blade sign should be located along the vertical center line of the
next available pilaster that adjoins the tenant space. Where
tenants occupy only one building bay, and such placement puts
adjacent tenant's signs in conflict, PCD may allow other locations.
5.2.3 For awning mounted locations, the blade signs can be suspended from
the awning above tenant's entry door.
5.2.4 For shared tenancies, one blade sign may be used to list two or more
tenants using a common doorway with the master lease holder listed
first.
5.3 SIZE LIMITATIONS
5.3.1 Wall mounted blade signs: Maximum square footage: Four (4) square
feet. Maximum projection from wall (including supports): 10" if
vertical in aspect, 42" if horizontal in aspect.
Note: Projecting signage must comply with restrictions in the
Americans with Disabilities Act.
5.3.2 Awning or ceiling mounted blade signs: Maximum square footage: Four
(4) square feet. Maximum projection from ceiling (including
hangers):
12".
5.3.3 Variety of signage is encouraged. The above restrictions are not
intended to necessarily produce rectangular signs. The projection
limits may be exceeded to allow for unusual shapes (e.g. tenant
logos), provided the total square footage remains under 4 square
feet. Note: The signs must still comply with the restrictions on
placement and projection stated in the Americans with Disabilities
Act.
5.4 ILLUMINATION
5.4.1 Only awning- or ceiling-mounted blade signs may be illuminated with
dedicated lighting. One fixture is allowed for each side of the
sign,, to be mounted on the underside of the ceiling or wall holding
the sign: Lumiere Design & Manufacturing model #806 lamped with one
120v/50w/PAR 20/H/NFL. Fixtures are to be mounted using matching,
mounting hardware approximately 6' feet horizontally from the sign
to be illuminated.
5.5 DESIGN
Albina Corner Signage Rules C-7
<PAGE>
5.5.1 In keeping with the historically sensitive architecture of Albina
Corner, bold, block letters (e.g- Helvetica type face) are
discouraged. Lively script and decorative fonts are encouraged. An
exception can be made for letters that are associated with an
established tenant's logo.
6 WINDOW SIGNAGE
6.1 MATERIALS & CONSTRUCTION
6.1.1 Professionally painted, screened, or vinyl die-cut letters mounted
to the inside face of the glass are permitted. Other methods may be
permissible subject to approval.
6.2 LOCATION AND QUANTITY
6.2.1 For window signage used as principal signage: One sign is allowed
for each tenant on each distinct exterior building wall that the
tenant's leased space adjoins (a tenant space on a corner, thus
fronting on two exterior building walls would be allowed up to two
wall signs). These signs will be located on the lower storefront
glass panels (not the clerestory).
6.2.2 For window signage used when wall or neon signs are used as
principal signage: One per principal entry door, located in the
upper half of the tenant door.
6.3 SIZE LIMITATIONS
6.3.1 For window signage used as principal signage: The same restrictions
as for neon signs if the proposed signage is generally opaque in
nature. If the opaque portions of the signage is less than 25% of
the over-all area covered by the sign, as determined by its greatest
width times its greatest length (e.g. as would be the case with
separate, gold leaf letters), then the signage can expand to a
maximum of 75% of the total glass panel that it is placed on.
6.3.2 For window signage used when wall or neon signs are used as
principal signage: Not to exceed 2' x 2' in over-all height and
width dimensions.
6.3.3 Variety of signage is encouraged. The above restrictions are not
intended to necessarily produce rectangular signs. The projection
limits may be exceeded to allow for unusual shapes (e.g. -tenant
logos), provided the total square footage remains under the
designated limits.
6.3.4 Care should be taken to size and locate the window signs so as not
to obstruct the view of passersby into tenant show windows.
6.4 ILLUMINATION
6.4.1 With the exception of normal interior storefront window display
lighting illumination of window signage is permissible.
6.5 DESIGN
6.5.1 In keeping, with the historically sensitive architecture of Albina
Corner, bold, block letters (e.o-- Helvetica type face) are
discouraged. Lively script and decorative fonts are encouraged. An
exception can be made for letters that are associated with an
established tenant's logo.
6.5.2 Traditional gold leaf type lettering is encouraged.
7 TEMPORARY SIGNAGE
- --------------------------------------------------------------------------------
7.1 MATERIALS & CONSTRUCTION
Albina Corner Signage Rules C-8
<PAGE>
7.1.1 Materials may be of painted or printed paper or vinyl die-cut
letters, which may be mounted directly to the glass or onto suitable
backing material, such as "Sintra" Board. The method by which paper
or boards are mounted to the glass should be neat and of
professional appearance. Pennants, flags, or banners done in a
professional manner and suspended behind the glass are also
approvable. In some instances, pennants, flags, bunting, or banners
may be approvable for exterior locations.
7.2 LOCATION AND QUANTITY
7.2.1 See section 1.1.5.
7.3 SIZE LIMITATIONS
7.3.1 See section 1.1.5.
7.4 ILLUMINATION
7.4.1 With the exception of normal interior storefront window display
lighting, no illumination of window signage is permissible.
7.5 DESIGN
7.5.1 In keeping with the historically sensitive architecture of Albina
Corner, bold, block letters (e.g. Helvetica type face) are
discouraged. Lively script and decorative fonts are encouraged. An
exception can be made for letters that are associated with an
established tenant's logo. Images and symbols are also encouraged.
7.5.2 Temporary signage should be constructed in such a manner as to
create a professional appearance.
8 PARKING SPACE SIGNAGE
- --------------------------------------------------------------------------------
8.1 MATERIALS & CONSTRUCTION
8.1.1 Signs are to be painted directly onto parking lot asphalt, or curbs
where applicable, using synthetic rubber traffic paint in white
color only. Acceptable manufacturers and numbers include Miller S-
260 and Rodda 671.
8.2 LOCATION AND QUANTITY
8.2.1 One painted sign per parking stall, centered in stall and at least
1' into the stall as shown in Figure 2.
8.3 SIZE LIMITATIONS
8.3.1 Maximum 3" high for curb signage, or 8" high for horizontal
signage, x 2' less than the parking stall width.
8.4 ILLUMINATION
8.4.1 Parking stall signage shall not be illuminated.
8.5 DESIGN
8.5.1 In keeping with the historically sensitive architecture of Albina
Corner, bold, block letters (e.g. Helvetica type face) are
discouraged. Lively script and decorative fonts are encouraged. An
exception can be made for letters that are associated with an
established tenant's logo. Images and symbols are also encouraged.
8.3.2 Parking stall signage should be applied in such a manner as to
create a professional appearance.
Albina Corner Signage Rules C-9
<PAGE>
[LOGO] EXHIBIT 10.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Albina Community Bancorp
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in this prospectus.
/S/KPMG Peat Marwick LLP
Portland, Oregon
June 12, 1996
<PAGE>
EXHIBIT 11
[LOGO]
June 11, 1996
Board of Directors
Albina Community Bancorp
1130 N.E. Alberta Ave.
Portland, Oregon 97211
Re: Proposed Public Offering of Albina Community Bancorp Common Stock
Ladies and Gentlemen:
The undersigned has acted as counsel to Albina Community Bancorp (the
"Company") in the preparation and filing of a Registration Statement on Form
SB-1 (the "Registration Statement") under the Securities Act of 1933, as
amended, covering 100,000 shares (the "Shares") of the Company's Common Stock.
In the course of our representation we have examined the Registration
Statement, copies of the Articles of Incorporation, Bylaws, and excerpts of
minutes of meetings of the Boards of Directors of the Company. We have also
received from officers of the Company certain other documents, corporate
records, and representations concerning factual matters. We have reviewed such
documents and have made such review of laws as we consider necessary for
purposes of this opinion.
We have relied as to matters of fact upon the above documents and
investigation. We have assumed without investigation the genuineness of all
signatures and the completeness and authenticity of all documents submitted to
us as originals and the conformity to authentic and complete original documents
of all documents submitted to us as certified or photostatic copies.
Based upon the foregoing and subject to the qualifications and exceptions
heretofore and hereinafter set forth, we are of the opinion that, when the
Registration Statement has been declared effective, the applicable provisions of
state securities laws have been complied with and the Company has issued the
Shares against payment therefor in the manner described the Registration
Statement, the shares will be validly issued and fully paid, and non-assessable.
The opinion herein expressed are specifically subject to and qualified by
the following:
This opinion is limited to the present laws of the State of Oregon and the
United States of America and to the facts bearing on this opinion as they exist
on the date of this letter.
<PAGE>
Board of Directors
Albina Community Bancorp
June 11, 1996
Page 2
We hereby consent to the filing of this opinion as an Exhibit to the
Company's Registration Statement.
Very truly yours,
FOSTER PEPPER & SHEFELMAN
By: /s/ Kenneth E. Roberts
------------------------
Kenneth E. Roberts
<PAGE>
EXHIBIT 99
ALBINA COMMUNITY BANCORP
STOCK OFFERING QUESTIONS & ANSWERS
Albina Community Bancorp is offering up to 100,000 shares of its Class A
Common Stock to the public at a public offering price of $10.00 per share.
Investment in these securities involves certain risks. The following are
commonly asked questions regarding the offering. The information below is only
a summary, and does not purport to be complete. The information is qualified
entirely by reference to the information given in the accompanying Prospectus.
Investors are urged to read the Prospectus carefully for a more complete
discussion of the risks associated with an investment in this offering and other
information regarding Albina Community Bancorp.
Q. WHAT IS ALBINA COMMUNITY BANCORP?
A. Albina Community Bancorp (the "Company") is a bank holding company with its
main office at 1130 N.E. Alberta St., Portland, Oregon 97211. The Company
conducts all of its operations through its wholly-owned subsidiary bank,
Albina Community Bank, an Oregon state-chartered bank, the deposits of
which are insured by the Federal Deposit Insurance Corporation. Albina
Community Bank was organized as a community development bank to serve the
credit needs of residents and businesses of North/Northeast Portland in an
effort to help revitalize the community. The bank opened for business on
December 19, 1995.
Q. WHY IS THE COMPANY OFFERING STOCK AT THIS TIME?
A. In a series of private securities offerings completed in December, 1995,
the Company raised more than $4.5 million to provide the initial capital of
the bank. This offering is intended to raise additional capital and to
give members of the community an opportunity to own a share of a local
financial institution committed to the improvement of their community.
Q. WHO ARE SHAREHOLDERS OF THE COMPANY NOW?
A. The Company currently has 77 shareholders, among which are 12 major local
corporations, nine charitable foundations, including the Oregon Community
Foundation and the Meyer Memorial Trust, and 56 individual investors, many
of whom are local community leaders, who desired to support the mission of
the Company.
Q. HOW MANY SHARES ARE BEING OFFERED, AND AT WHAT PRICE?
A. The Company is offering 100,000 shares of common stock at a price of $10
per share.
Q. HOW MANY SHARES CAN I PURCHASE?
A. The minimum is $250 or 25 shares. There is no maximum amount that can be
purchased.
Q. HOW DO I PURCHASE SHARES?
A. You may subscribe for shares by completing and returning the subscription
agreement together with your payment. Subscriptions are irrevocable when
made. Subscriptions will be accepted on a first-come, first-accepted
basis. The Company reserves the right to accept or reject any subscription
in whole or in part. The offering will continue until all shares are sold,
unless the Board of Directors elects to terminate it sooner.
Q. HOW CAN I PAY FOR MY SHARES OF STOCK?
A. You can pay the subscription amount by check, cash or money order.
Q. DO I HAVE TO PAY COMMISSIONS?
A. No. You will not be charged commissions or fees on the purchase of shares
in the offering.
<PAGE>
Q. CAN I CANCEL MY SUBSCRIPTION AFTER SUBMITTING IT?
A. No. Subscriptions are irrevocable when made.
Q. CAN I SELL MY STOCK?
A. You are free to sell shares purchased in the offering at any time. It is
expected, however, that the public market for the stock will be limited,
and there is no assurance that you will be able to sell your shares at or
above the price paid.
Q. WILL DIVIDENDS BE PAID ON THE STOCK?
A. No dividends are expected to be paid initially. The Company intends to
retain earnings to support growth of its business. The Board of Directors
may consider declaring dividends in the future, but no assurances can be
made that dividends will be paid, or if paid, the level or continuation of
such dividends.
Q. WILL MY STOCK BE COVERED BY DEPOSIT INSURANCE?
A. No. Common stock is not insured by the FDIC or any other government
agency.
Q. HOW DO I GET MORE INFORMATION?
A. Investors are urged to carefully read the accompanying prospectus for a
more complete discussion of the offering and the Company. If you have any
other questions, you may contact Leon Smith at Albina Community Bank, 1130
N.E. Alberta St., Portland, Oregon 97211, telephone 503-287-7537.
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE COMMON STOCK INVOLVES A SUBSTANTIAL DEGREE
OF RISK.
THIS IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO PURCHASE
COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 1995 AND FOR MARCH 31, 1996
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 386,607 223,457
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 3,540,000 2,100,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 3,424,788 3,380,443
<INVESTMENTS-MARKET> 3,424,788 3,380,443
<LOANS> 1,206,512 0
<ALLOWANCE> 6,206 0
<TOTAL-ASSETS> 8,756,283 5,875,233
<DEPOSITS> 4,397,419 1,173,500
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 58,351 133,733
<LONG-TERM> 0 0
0 0
3,544,858 3,544,858
<COMMON> 1,656,700 1,656,700
<OTHER-SE> (901,045) (633,558)
<TOTAL-LIABILITIES-AND-EQUITY> 8,756,283 5,875,233
<INTEREST-LOAN> 8,686 0
<INTEREST-INVEST> 83,715 13,566
<INTEREST-OTHER> 0 27,383
<INTEREST-TOTAL> 89,989 40,949
<INTEREST-DEPOSIT> 37,327 2,069
<INTEREST-EXPENSE> 37,327 2,069
<INTEREST-INCOME-NET> 52,662 38,880
<LOAN-LOSSES> 6,206 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 316,355 368,645
<INCOME-PRETAX> (267,487) (329,765)
<INCOME-PRE-EXTRAORDINARY> (267,487) (329,765)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (267,487) (329,765)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 0 0
<LOANS-NON> 0 0
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 0
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 6,206 0
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
