U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the quarterly period ended March 31, 2000
Transition report under Section 13 or 15(d) of the Exchange Act
- ---
For the transition period from to
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Commission file number 0-26003
ALASKA PACIFIC BANCSHARES, INC.
- ------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Alaska 92-0167101
- ------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2094 Jordan Avenue, Juneau, Alaska 99801
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(Address of Principal Executive Offices)
(907) 789-4844
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(Issuer's Telephone Number, Including Area Code)
NA
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(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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.
X Yes No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
655,415 shares outstanding on March 31, 2000
-------
Transitional Small Business Disclosure Format (check one):
Yes X No
--- ---
<PAGE>
Alaska Pacific Bancshares, Inc. and Subsidiary
Juneau, Alaska
INDEX
PART I. Page(s)
FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets (Unaudited) as of March 31, 2000 and
December 31, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income (Unaudited) for the three months
ended March 31, 2000 and 1999. . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows (Unaudited) for the three months
ended March 31, 2000 and 1999. . . . . . . . . . . . . . . . . . . . 3
Notes to (Unaudited) Consolidated Financial Statements. . . . . . . . 4
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
ITEM 1. Financial Statements
Alaska Pacific Bancshares, Inc. and Subsidiary
Consolidated Balance Sheets (Unaudited)
March 31, December 31,
(dollars in thousands) 2000 1999
- ------------------------------------------------------------------------------
Assets
Cash and due from banks $ 3,749 $ 4,343
Interest-earning deposits in banks 1,528 3,442
- ------------------------------------------------------------------------------
Total cash and cash equivalents 5,277 7,785
Investment securities available for sale,
at fair value (amortized cost: March 31,
2000 - $18,050; December 31, 1999 - $20,543) 17,253 19,849
Federal Home Loan Bank stock 1,383 1,361
Loans held for sale 643 1,359
Loans 89,971 86,366
Less allowance for loan losses 551 570
- ------------------------------------------------------------------------------
Loans, net 89,420 85,796
Accrued interest receivable 655 631
Premises and equipment 3,618 3,689
Repossessed assets 337 145
Other assets 999 927
- ------------------------------------------------------------------------------
Total Assets $119,585 $121,542
==============================================================================
Liabilities and Equity Capital
Deposits:
Noninterest-bearing demand $ 5,325 $ 6,210
Interest-bearing demand 24,961 26,704
Money market 15,406 16,552
Savings 18,094 18,427
Certificates of deposit 34,495 34,654
- ------------------------------------------------------------------------------
Total deposits 98,281 102,547
Federal Home Loan Bank advances 6,300 5,000
Advances from borrowers for taxes and
insurance 1,454 821
Accounts payable and accrued expenses 276 207
Accrued interest payable 559 367
Other liabilities 344 123
- ------------------------------------------------------------------------------
Total liabilities 107,214 109,065
Shareholders' Equity:
Common stock ($0.01 par value; 20,000,000
shares authorized; 655,415 shares issued
and outstanding, including 47,180
unearned shares held by ESOP) 7 7
Additional paid-in capital 5,850 5,850
Unearned ESOP shares (472) (472)
Retained earnings 7,783 7,786
Accumulated other comprehensive loss (797) (694)
- ------------------------------------------------------------------------------
Total shareholders' equity 12,371 12,477
- ------------------------------------------------------------------------------
Total Liabilities and Equity Capital $119,585 $121,542
==============================================================================
See notes to consolidated interim financial statements.
1
<PAGE>
Alaska Pacific Bancshares, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31,
---------------------------------
(dollars in thousands, except per share) 2000 1999
- ------------------------------------------------------------------------------
Interest Income
Loans $ 1,890 $ 1,635
Investment securities 338 249
Interest-bearing deposits with banks 25 104
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Total interest income 2,253 1,988
Interest Expense
Deposits 872 863
Federal Home Loan Bank advances 94 4
- ------------------------------------------------------------------------------
Total interest expense 966 867
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Net Interest Income 1,287 1,121
Provision for loan losses 15 15
- ------------------------------------------------------------------------------
Net interest income after provision
for loan losses 1,272 1,106
Noninterest Income
Mortgage servicing income 44 52
Service charges on deposit accounts 86 76
Other service charges and fees 27 27
Gain on sale of mortgage loans 26 6
- ------------------------------------------------------------------------------
Total noninterest income 183 161
Noninterest Expense
Compensation and benefits 735 641
Occupancy and equipment 319 260
Data processing 93 82
Professional and consulting fees 67 34
Marketing and public relations 45 32
Other 166 165
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Total noninterest expense 1,425 1,214
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Income before income tax 30 53
Income tax - -
- ------------------------------------------------------------------------------
Net Income $ 30 $ 53
==============================================================================
Earnings per share:
Basic $ 0.05 -
Diluted 0.05 -
==============================================================================
See notes to consolidated interim financial statements.
2
<PAGE>
Alaska Pacific Bancshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
---------------------------------
(in thousands) 2000 1999
- ------------------------------------------------------------------------------
Operating Activities
Net income $ 30 $ 53
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 15 15
Gain on sale of foreclosed properties - (9)
Depreciation and amortization 109 89
Federal Home Loan Bank stock dividends (22) (24)
Amortization of fees, discounts, and
premiums, net (6) (2)
Cash provided by changes in operating
assets and liabilities:
Accrued interest receivable (24) (42)
Loans held for sale 716 (40)
Other assets (72) (87)
Advances from borrowers for taxes
and insurance 633 622
Accrued interest payable 192 141
Accounts payable and accrued expenses 69 86
Other liabilities 221 193
- ------------------------------------------------------------------------------
Net cash provided by operating
activities 1,861 995
Investing Activities
Purchase of investment securities
available for sale - (3,000)
Maturities and principal repayments of
investment securities available for sale 2,490 3,821
Loan originations, net of principal
repayments (3,822) (4,855)
Proceeds from sale of foreclosed properties - 165
Purchase of premises and equipment (38) (322)
- ------------------------------------------------------------------------------
Net cash used in investing activities (1,370) (4,191)
Financing Activities
Net increase in Federal Home Loan Bank
advances 1,300 2,100
Net decrease in demand and savings deposits (4,107) (1,459)
Net decrease in certificates of deposit (159) (757)
Cash dividends paid (33) -
- ------------------------------------------------------------------------------
Net cash used in financing activities (2,999) (116)
- ------------------------------------------------------------------------------
Decrease in cash and cash equivalents (2,508) (3,312)
Cash and cash equivalents at beginning
of period 7,785 14,584
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,277 $ 11,272
==============================================================================
Supplemental information:
Cash paid for interest $ 774 $ 3,890
Loan repossessions 192 -
Net change in unrealized loss on
securities available for sale (103) 8
See notes to consolidated interim financial statements.
3
<PAGE>
Alaska Pacific Bancshares, Inc.
Notes to Consolidated Interim Financial Statements
(Unaudited)
Note 1 - Conversion to Stock Ownership
On July 1, 1999, Alaska Federal Savings Bank consummated its conversion from a
federally chartered mutual savings bank to a federally chartered stock savings
bank pursuant to a Plan of Conversion. Concurrent with the conversion, Alaska
Federal changed its name to Alaska Pacific Bank. Alaska Pacific Bancshares,
Inc. was formed for the purpose of becoming the holding company of the Bank
upon its conversion. The Company sold 655,415 shares in a subscription and
community offering during June 1999 which, after giving effect to offering
expenses of approximately $700,000, resulted in net proceeds of $5,854,000
($5,330,000 excluding purchases by the Employee Stock Ownership Plan). The
Company transferred approximately $4.6 million to the Bank in exchange for all
of its stock.
Note 2 - Basis of Presentation
While the accompanying financial statements of the Company are presented on a
consolidated basis with those of Alaska Pacific Bank, the Company did not yet
own any shares of the Bank and had no assets, liabilities, equity or
operations prior to July 1, 1999. Therefore, the consolidated statements of
income and cash flows for the three months ended March 31, 1999, presented
herein, include only the accounts and operations of Alaska Pacific Bank.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. They should be read
in conjunction with the Company's audited consolidated financial statements
for the year ended December 31, 1999 filed as part of its annual report on
Form 10-KSB. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for fair presentation have
been included. The results of operations for the interim periods ended March
31, 2000 and 1999 are not necessarily indicative of the results which may be
expected for an entire year or any other period.
Note 3 - Capital Compliance
At March 31, 2000, the Bank exceeded each of the three current minimum
regulatory capital requirements. The following table summarizes the Bank's
regulatory capital position and requirements at March 31, 2000:
(dollars in thousands)
- ------------------------------------------------------------------------------
Tangible Capital:
Actual $11,984 10.04%
4
<PAGE>
Required 1,791 1.50
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Excess $10,193 8.54%
==============================================================================
Core Capital:
Actual $11,984 10.04%
Required 3,582 3.00
- ------------------------------------------------------------------------------
Excess $ 8,402 7.04%
==============================================================================
Total Risk-Based Capital:
Actual $12,535 16.78%
Required 5,976 8.00
- ------------------------------------------------------------------------------
Excess $ 6,559 8.78%
Note 4 Earnings Per Share
Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding during the period less
unallocated and not yet committed to be released Employee Stock Ownership Plan
shares ("unearned ESOP shares"). Diluted EPS is calculated by dividing net
income by the weighted-average number of common shares used to compute basic
EPS plus the incremental amount of any potential common stock determined by
the treasury stock method. The Company currently has no such potential
shares.
Three Months Ended March 31, 2000
--------------------------------------
Net Average Earnings
Income Shares Per Share
- ------------------------------------------------------------------------------
Net income/average shares outstanding $30,000 655,415
Unearned ESOP shares - 47,180
- ------------------------------------------------------------------------------
Basic EPS 30,000 608,235 $0.05
Incremental shares under stock plans - -
- ------------------------------------------------------------------------------
Diluted EPS $30,000 608,235 $0.05
==============================================================================
Because the Company had no shares outstanding prior to July 1, 1999, earnings
per share is not presented for the three months ended March 31, 1999.
Note 5 Comprehensive Income
The Company's only item of comprehensive income other than net income is net
unrealized gains or losses on securities available for sale. Following is a
summary of accumulated other comprehensive income:
Year Ended
Three Months Ended March 31, December 31,
(in thousands) 2000 1999 1999
- ------------------------------------------------------------------------------
5
<PAGE>
Balance at beginning
of period $(694) $ (298) $ (298)
Change in net
unrealized gains and
losses on securities
available for sale (103) 8 (396)
- ------------------------------------------------------------------------------
Balance at end of period $(797) $ (290) $ (694)
==============================================================================
6
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
This discussion contains forward-looking statements which are based on
assumptions and describe future plans, strategies and expectations of the
Company. These forward-looking statements are generally identified by use of
the word "believe," "expect," "intend," anticipate," "estimate," "project," or
similar words. The Company's ability to predict results or the actual effect
of future plans or strategies is uncertain. Factors which could have a
material adverse effect on operations include, but are not limited to, changes
in interest rates, general economic conditions, legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including
policies of the U.S. Treasury and the Federal Reserve Board, the quality or
composition of the loan or investment portfolios, demand for loan products,
deposit flows, competition, demand for financial services in our market areas
and accounting principles and guidelines. You should consider these risks and
uncertainties in evaluating forward-looking statements and you should not rely
too much on these statements.
Comparison of Financial Condition at March 31, 2000 and December 31, 1999
Total assets of the Company were $119.6 million at March 31, 2000
compared to $121.5 million at December 31, 1999. The $1.9 million decrease
was the net result of maturing short-term investments and reductions in liquid
assets used to fund an increase in loans and a reduction in deposits.
Cash and cash equivalents were $5.3 million at March 31, 2000, compared
to $7.8 million at December 31, 1999. Investment securities available for
sale were $17.3 million at March 31, 2000, compared to $19.8 million at
December 31, 1999. These decreases primarily reflect the decrease in
liquidity resulting from increased loans and decreased deposits.
Loans, net, were $89.4 million at March 31, 2000 compared to $85.8
million at December 31, 1999, a 4.2% increase. This increase resulted
primarily from increased originations of both mortgage and nonmortgage loans.
Deposits were $98.3 million at March 31, 2000 compared to $102.5 million
at December 31, 1999, a 4.2% decrease. A moderate decline in deposit levels
is considered normal during the first quarter of the year due to seasonal
fluctuations in the local economy.
Advances from the Federal Home Loan Bank of Seattle increased to $6.3
million at March 31, 2000 from $5.0 million at December 31, 1999 to partially
fund loan demand and decreased deposits.
7
<PAGE>
Total shareholders' equity was $12.4 million at March 31, 2000, compared
with $12.5 million at December 31, 1999. The net change was the result of net
income of $30,000, cash dividends of $33,000 and an increase in unrealized
losses on securities of $103,000.
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
1999
Net Income. Net income for the first quarter of 2000 was $30,000
compared to $53,000 for the first quarter of 1999, a decrease of $23,000.
While net income remained near the breakeven level, the comparison is
characterized by increased net interest income and noninterest income offset
by increased noninterest expense. The changes reflect management's strategy,
concurrent with raising equity capital during 1999, of increasing the Bank's
investment in people and technology to facilitate long-term growth in assets
and revenues.
Net Interest Income. Net interest income increased $166,000, or 14.8%,
to $1.3 million for the first quarter of 2000, compared with $1.1 million for
the same period in 1999. The increase is primarily due to a 17.6% increase in
average loans outstanding to $87.9 million for the first quarter of 2000 from
$74.7 million for the first quarter of 1999.
Provision for Loan Losses. The provision for loan losses was $15,000 for
the first quarter of both 2000 and 1999. Net chargeoffs were $34,000 in the
first quarter of 2000, compared with $1,000 in the first quarter of 1999.
Noninterest Income. Noninterest income increased 13.7% to $183,000 for
the first quarter of 2000 compared with $161,000 for the first quarter of
1999. The increase is due primarily to gains on sale of mortgage loans, which
increased by $20,000, and service charges on deposit accounts, which increased
$10,000.
Noninterest Expense. Noninterest expense for the first quarter of 2000
increased $210,000, or 17.3%, to $1.4 million, compared with $1.2 million for
the first quarter of 1999. Compensation and benefits increased $94,000, or
14.7%, and occupancy and equipment expense increased $59,000, or 22.7%.
In addition to opening the new Auke Bay office in Juneau in August 1999,
which contributed approximately $52,000 to the total increase in noninterest
expense, the increase reflects expenditures for additional lending personnel,
new technology and service delivery equipment (including internet banking and
bill paying service which commenced in January 2000), and facilities
improvement, all intended to enhance growth in assets and revenues over the
coming years.
Management anticipates that the level of noninterest expense will not
increase during 2000 to the extent they have during 1999. Thus, while
quarter-to-quarter increases have averaged approximately 5.2% during 1999,
total noninterest expense increased 0.9% for the first quarter of 2000
compared with the fourth quarter of 1999.
8
<PAGE>
Income Taxes. No income tax expense was recognized for each of the
three-month periods ended March 31, 2000 or 1999 due to net operating loss
carryforwards, which expire in various years beginning in 2002 and through
018.
Nonperforming Assets
At March 31, 2000, the Bank had one nonperforming loan for $87,000,
compared with $70,000 at December 31, 1999. Repossessed assets at March 31,
2000, amounted to $337,000, compared with $145,000 at December 31, 1999. The
increase of $192,000 consisted of equipment repossessed on a commercial loan
with a guarantee by the Small Business Administration. The recorded value of
the repossessed equipment included the estimated amount of the SBA guarantee.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits and proceeds from
principal and interest payments on loans. While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition. The Company's primary investing activity
is loan originations. The Company maintains liquidity levels adequate to fund
loan commitments, investment opportunities, deposit withdrawals and other
financial commitments. The Office of Thrift Supervision requires a savings
institution to maintain an average daily balance of liquid assets, which are
cash and eligible investments, equal to at least 4.0% of the average daily
balance of its net withdrawable deposits and short-term borrowings. The
Bank's actual liquidity ratios were 23.3% and 27.6% at March 31, 2000 and
December 31, 1999, respectively. The Bank has consistently maintained
liquidity levels in excess of regulatory requirements. At March 31, 2000,
management had no knowledge of any trends, events or uncertainties that will
have or are reasonably likely to have material effects on the liquidity,
capital resources, or operations of the Company. Further, at March 31, 2000,
management was not aware of any current recommendations by the regulatory
authorities which, if implemented, would have such an effect.
The Company is not subject to any separate regulatory capital
requirements. The Bank exceeded all of its regulatory capital requirements
at March 31, 2000. See Note 3 of the Notes to Consolidated Interim Financial
Statements contained herein for information regarding the Bank's regulatory
capital position at March 31, 2000.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company and any subsidiaries may be a party to various
legal proceedings incident to its or their business. At March 31, 2000, there
were no legal proceedings to which the Company or any subsidiary was a party,
or to which any of their property was subject, which were expected by
management to result in a material loss.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
3.1 Articles of Incorporation of Alaska Pacific Bancshares, Inc.
(incorporated by reference to Exhibit 3.1 to the registrant's
Registration Statement of Form SB-2 (333-74827))
3.2 Bylaws of Alaska Pacific Bancshares, Inc. (incorporated by
reference to Exhibit 3.2 to the registrant's Registration
Statement on Form SB-2 (333-74827))
10.1 Employment Agreement with Craig E. Dahl
10.2 Severance Agreement with Roger K. White
10.3 Severance Agreement with Lisa Corrigan Bell
10.4 Severance Agreement with Thomas Sullivan
10.5 Severance Agreement with Cheryl Crawford
10.6 Severance Agreement with Patrick Wonser
10.7 Severance Agreement with Sheri Vidic
10.8 Severance Agreement with Tammi L. Knight
10.9 Alaska Federal Savings Bank 401(k) Plan (incorporated by
reference to Exhibit 10.11 to the registrant's Registration
Statement on Form SB-2 (333-74827))
10.10 Alaska Pacific Bancshares, Inc. Employee Stock Ownership Plan
10.11 Alaska Pacific Bancshares, Inc. Employee Severance
Compensation Plan
13 Annual Report to Stockholders
21 Subsidiaries of the Registrant
27 Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended March 31,
2000.
10
<PAGE>
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.
Alaska Pacific Bancshares, Inc.
Date: May 12, 2000 /s/Craig E. Dahl
-------------------------------
Craig E. Dahl
President and Chief Executive Officer
Date: May 12, 2000 /s/Roger K. White
-------------------------------
Roger K. White
Senior Vice President and
Chief Financial Officer
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 3749
<INT-BEARING-DEPOSITS> 1528
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17253
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 89971
<ALLOWANCE> 551
<TOTAL-ASSETS> 119585
<DEPOSITS> 98281
<SHORT-TERM> 1300
<LIABILITIES-OTHER> 2633
<LONG-TERM> 5000
0
0
<COMMON> 7
<OTHER-SE> 12364
<TOTAL-LIABILITIES-AND-EQUITY> 119585
<INTEREST-LOAN> 1890
<INTEREST-INVEST> 338
<INTEREST-OTHER> 25
<INTEREST-TOTAL> 2253
<INTEREST-DEPOSIT> 872
<INTEREST-EXPENSE> 966
<INTEREST-INCOME-NET> 1287
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1424
<INCOME-PRETAX> 30
<INCOME-PRE-EXTRAORDINARY> 30
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
<YIELD-ACTUAL> 4.66
<LOANS-NON> 87
<LOANS-PAST> 0
<LOANS-TROUBLED> 312
<LOANS-PROBLEM> 876
<ALLOWANCE-OPEN> 570
<CHARGE-OFFS> 35
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 551
<ALLOWANCE-DOMESTIC> 551
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
