UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996 or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number 333-3442
ALBINA COMMUNITY BANCORP
(Exact Name of Registrant as Specified in Its Charter)
Oregon 93-1129061
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2002 N.E. Martin Luther King, Jr. Blvd., Portland, Oregon 97212
(Address of Principal Executive Offices) (Zip Code)
503-287-7537
(Issuer's telephone number)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act after the distribution of during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes No X
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at November 8, 1996
Class A Common Stock, no par value 187,302
Transitional Small Business Disclosure Format (check one): Yes X No
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Albina Community Bancorp and Subsidiary
Consolidated Balance Sheet at June 30, 1996
<TABLE>
<CAPTION>
Assets September 30, 1996
<S> <C>
Cash and cash equivalents:
Cash and due from banks 674,902
Federal funds sold 3,098,000
Total cash and cash equivalents 3,772,902
Investment securities - held to maturity 3,513,149
Loans, net 6,305,798
Premises and equipment 666,971
Prepaid insurance 10,929
Other assets 148,403
---------
Total assets 14,418,152
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand 862,329
Interest-bearing demand 339,413
Money market 1,630,531
Savings accounts 148,174
Time deposits 7,586,516
---------
Total deposits 10,566,963
----------
Accrued liabilities 35,152
Other liabilities 70,149
------
Total liabilities 10,672,264
Shareholders' equity (note 3)
Preferred stock, authorized 1,000,000, without par value.
Series A 1%; $1.00 per share liquidation preference; 2,236,058
non-cumulative; 20,000 shares designated, 16,300 shares
issued and outstanding at September 30, 1996.
Series B 1%; $1.00 per share liquidation preference; 851,800
non-cumulative; 10,000 shares designated, 8,518 shares
issued and outstanding at September 30, 1996.
Series C 10%; $100.00 per share liquidation preference; 457,000
non-cumulative; 10,000 shares designated, 4,570 shares issued and
outstanding at September 30, 1996.
Common Stock:
Class A common stock, without par value. Authorized 3,000,000 shares; 1,656,700
165,670 shares issued and outstanding at September 30, 1996.
Class B common stock, without par value. Authorized 1,000,000 shares; none -
issued or outstanding.
Accumulated deficit ($1,105,623 allocable to Series A and B preferred stock and
$350,047 allocable to common stock at September 30, 1996). (1,455,670)
Total shareholders' equity 3,745,888
---------
Total liabilities and shareholders' equity 14,418,152
==========
</TABLE>
-1-
<PAGE>
Albina Community Bancorp and Subsidiary
Consolidated Statements of Operations
for the Three-Month and Nine-Month Periods Ended September 30, 1995 and 1996
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1995 1996 1995 1996
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $ - $143,488 $ - $ 222,301
Interest on federal funds sold - 38,856 - 111,133
Interest on investment securities - 48,076 - 147,939
---- ------ ---- -------
Total interest income - 230,420 - 481,373
Interest expense:
Deposits:
Interest-bearing demand - 1,381 - 2,021
Money market - 13,522 - 25,576
Savings - 591 - 1,071
Time - 89,840 - 182,297
Other interest expense - 318 - 482
------ ---- --------
Total interest expense - 105,652 - 211,447
---- ------- ---- -------
Net interest income - 124,768 - 269,926
Provision for loan losses - 27,603 - 87,409
---- ------ ---- -------
Net interest income after
provision for loan losses - 97,165 - 182,517
Non-interest income:
Fees and service charges - 10,206 - 15,526
---- -------- ---- --------
Total non-interest income - 10,206 - 15,526
Non-interest expense:
Salaries and related benefits 48,819 239,177 141,160 687,924
Occupancy expense - 12,151 - 29,585
Furniture and equipment - 16,487 - 42,686
Professional services 29,206 23,606 68,529 58,877
Other expenses 8,164 48,563 13,829 200,844
-------- ------ -------- -------
Total non-interest expense $ 86,189 $ 339,984 $ 223,518 $ 1,019,916
------ ------- ------- ---------
Income Tax - 239 - 239
------- -------- ------- --------
Net loss $(86,189) $(232,852) $(223,518) $(822,112)
====== ======= ======= =======
</TABLE>
-2-
<PAGE>
Albina Community Bancorp and Subsidiary
Consolidated Statements of Cash Flows
for the Three Months and Nine Months Ended
September 30, 1995 and 1996
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1995 1996 1995 1996
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net Loss (86,189) $(232,852) $(223,518) $(822,112)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation expense - 11,903 - 28,579
Provision for loan loss - 27,603 - 87,409
(Increase) decrease in prepaid insurance - 3,823 - 11,020
Increase in other assets - (74,569) - (145,296)
Increase (decrease) in accrued liabilities 6,042 (7,680) 6,042 (86,420)
Increase in other liabilities 1,319 (383,353) 1,319 57,988
------------ --------- ------------ ------
Net cash used in operating activities (78,828) (655,125) (216,157) (868,832)
Cash flows from investing activities:
Purchase of investment securities - (37,401) - (132,706)
Additions to premises and equipment - (442,192) - (549,273)
Loan originations - (1,627,011) - (6,393,207)
---------- --------- ----------
Net cash used in investing activities - (2,106,604) - (7,075,186)
Cash flows from financing activities:
Net increase in deposit liabilities - 2,988,973 - 9,393,463
Proceeds from contributed capital 80,000 - 240,000 -
------ ----------- ------- ----------
Net cash provided by financing 80,000 2,988,973 240,000 9,393,463
activities
Net increase in cash and cash
equivalents 1,172 227,244 23,843 1,449,445
Cash and cash equivalents at beginning of period $64,715 $3,545,658 $ 42,044 $2,323,457
------ --------- ------- ---------
Cash and cash equivalents at end of period $65,887 $3,772,902 $ 65,887 $3,772,658
====== ========= ======= =========
</TABLE>
-3-
<PAGE>
Albina Community Bancorp and Subsidiary
Notes to Consolidated Financial Statements
at and for the Nine Months Ended September 30, 1995 and 1996
Note 1. Presentation
In accordance with Item 310 of Regulation S-B promulgated by the Securities and
Exchange Commission, the financial statements and accompanying notes thereto do
not contain all disclosures required by generally accepted accounting
principles. These condensed financial statements and accompanying notes thereto
should be read in conjunction with the Company's audited financial statements
and notes thereto contained in the Company's registration statement on Form
SB-1, as amended, filed with the Securities and Exchange Commission on April 10,
1996.
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments necessary to present fairly its financial
position as of September 30, 1996, and the results of its operations for the
nine months ended September 30, 1995 and 1996, and changes in its financial
positions for the nine months ended September 30, 1995 and 1996. All adjustments
were of a normal recurring nature. Results for interim periods are not
necessarily indicative of those to be expected for the full year.
Note 2. 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.
Transactions on the reserve for loan losses for the nine months ended September
30, 1996 were as follows:
Balance, beginning of period $ 0
Provision for loan losses 87,409
Loans charged off 0
Recoveries of loans previously charged off 0
---------
Balance, end of period $ 87,409
=========
Note 3. Shareholders' Equity
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.
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
-4-
<PAGE>
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.
(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.
Note 4. Investment Securities - Held to Maturity
The Bank has invested in treasury securities. The book value of these securities
approximates market at September 30, 1996. The entire investment portfolio
matures within one year.
-5-
<PAGE>
Item 2. Plan of Operation
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 North/Northeast Portland, Oregon
(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.
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 of
risk. Over time it is expected that there 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.
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 filed a
registration statement with the Securities and Exchange Commission, which became
effective on June 26, 1996, in connection with the offering of 100,000 shares of
the Company's Class A common stock at a price per share of $10.00. The offering
has not yet been completed, but is expected to be completed before the end of
the fiscal year.
The Company believes that proceeds of the public offering, together with
existing capital will satisfy the cash requirements of the Company for at least
the next six months of operation. It is anticipated that the Company's cash
requirements will not exceed $1.0 million during that period, and it will not be
necessary to raise additional capital.
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 Administration. The Bank's
primary deposit base includes large time deposits by governmental entities,
corporations, socially responsible local citizens, and program-related
investors.
-6-
<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 September 30, 1996, the Bank had total assets of approximately $14.4
million, total loans of approximately $6.4 million, and total deposits of $10.6
million. The Bank experienced a loss of $822,112 for the nine month period ended
September 30, 1996. It is anticipated that as the deposits and loans continue to
grow, the rate of losses will decline. Moreover, as 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. Typically, a new bank's operating
expenses will exceed operating revenue for the first two or three years of
operations.
Deposits
The following table sets forth the average deposit liabilities of and
the rates paid by the Bank for the nine months ended September 30, 1996:
<TABLE>
<CAPTION>
Average Balance Average Rate Paid
<S> <C> <C>
Non Interest-bearing demand $148,828 n/a
Interest-bearing demand 126,208 2.65%
Savings 820,487 4.34%
Time 4,671,870 5.21%
---------
Total deposits $5,767,393
</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
September 30, 1996
<S> <C>
Remaining maturity:
less than 3 months 1,229,041
3-6 months 1,945,177
6-12 months 606,894
over 12 months 100,000
---------
Total deposits $100,000 or more $3,881,112
==========
</TABLE>
-7-
<PAGE>
Loans
Interest earned on the loan and investment portfolios are the primary
source of income for the Bank. Net loans represent 43.7% of total assets as of
September 30, 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 September 30, 1996. The following table sets forth the composition of the
loan portfolio at September 30, 1996:
<TABLE>
<CAPTION>
September 30, 1996
<S> <C>
Commercial $2,604,387
Residential Real Estate 3,511,888
Installment 276,932
-----------
Total loans 6,393,207
Reserve for loan losses 87,409
Net loans $6,305,798
</TABLE>
Investment Portfolio
The investment portfolio at September 30, 1996, consisted entirely of
United States Treasury securities maturing in one year or less, with an
aggregate book value of $3,513,149.
-8-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following exhibit is being filed herewith:
Exhibit 27 Financial Data Schedules
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: November 13, 1996.
ALBINA COMMUNITY BANCORP
By: /s/ Leon C. Smith
Leon C. Smith
President and Chief Executive Officer
-9-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information
extracted from the unaudited financial statements
for the nine months ended September 30, 1996.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 674,902
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,098,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 3,513,149
<LOANS> 6,393,207
<ALLOWANCE> 87,409
<TOTAL-ASSETS> 14,418,152
<DEPOSITS> 10,566,963
<SHORT-TERM> 0
<LIABILITIES-OTHER> 105,301
<LONG-TERM> 0
0
3,544,858
<COMMON> 3,745,888
<OTHER-SE> (1,455,670)
<TOTAL-LIABILITIES-AND-EQUITY> 14,418,152
<INTEREST-LOAN> 222,301
<INTEREST-INVEST> 147,939
<INTEREST-OTHER> 111,133
<INTEREST-TOTAL> 481,373
<INTEREST-DEPOSIT> 210,965
<INTEREST-EXPENSE> 211,447
<INTEREST-INCOME-NET> 269,926
<LOAN-LOSSES> 87,409
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,109,916
<INCOME-PRETAX> (821,873)
<INCOME-PRE-EXTRAORDINARY> (822,112)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (822,112)
<EPS-PRIMARY> (4.96)
<EPS-DILUTED> (4.96)
<YIELD-ACTUAL> 3.86
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 87,409
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 87,409
</TABLE>
