SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
--------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------ -------------------
For Quarter Ended March 31, 1995 Commission file number 0-17719
-------------------- ---------------
AUBURN BANCORP
---------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2827787
------------------------------ ------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
540 WALL STREET, AUBURN, CALIFORNIA 95603
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (916) 888-8405
--------------------
------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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_X_. No___.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes___. No___.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock - Issued and outstanding 1,041,776 shares at March 31, 1995.
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
Form 10-Q
For the Quarter Ended March 31, 1995
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
Following are the financial statements of Auburn Bancorp and subsidiary as of
and for the three month periods ended March 31, 1995 and 1994. The financial
statements are unaudited. However, in the opinion of management, all adjustments
have been made for a fair presentation of the financial condition and results of
operations of Auburn Bancorp and subsidiary.
2
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and Due from Banks ........................ $ 6,487,022 $ 5,404,454
Federal Funds Sold ............................. 4,600,000 6,200,000
Loans Held for Sale ............................ 4,037,935 2,173,423
Investment Securities (Note 2) ................. 6,629,500 6,529,500
Loans, Less Allowance for Loan Losses of
$741,042 at March 31, 1995 and $741,323
at December 31, 1994 (Note 3) ................ 44,000,769 42,846,549
Bank Premises and Equipment, Net ............... 3,335,151 3,409,874
Goodwill and Other Intangibles ................. 506,979 524,479
Accrued Interest Receivable and
Other Assets ................................. 2,497,968 2,339,272
------------ ------------
$ 72,095,324 $ 69,427,551
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-Interest Bearing ......................... $ 12,982,427 $ 13,816,423
Interest Bearing ............................. 50,737,293 47,253,089
------------ ------------
Total Deposits ........................ 63,719,720 61,069,512
Long-Term Debt ................................. 579,542 586,893
Accrued Interest Payable and
Other Liabilities ............................ 423,134 296,000
------------ ------------
Total Liabilities ..................... 64,722,396 61,952,405
------------ ------------
Commitments (Note 4)
Stockholders' Equity:
Preferred stock - no par value;
10,000,000 shares authorized;
none issued
Common stock - no par value;
10,000,000 shares authorized;
1,041,776 shares and 1,041,053
shares issued and outstanding
in 1995 and 1994, respectively ............... 5,528,818 5,525,420
Retained Earnings .............................. 1,897,588 2,064,511
Unrealized Loss on
Available-for-Sale Investment
Securities, Net of Taxes (Note 2) ............ (53,478) (114,785)
------------ ------------
Total Stockholders' Equity .............. 7,372,928 7,475,146
------------ ------------
$ 72,095,324 $ 69,427,551
============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Interest Income:
Interest and Fees on Loans ................. $ 1,176,293 $ 801,403
Interest on Investment Securities .......... 108,621 64,570
Interest on Federal Funds Sold ............. 47,855 46,236
Interest on Loans Held for Sale ............ 105,447 66,748
------------ ------------
Total Interest Income .................. 1,438,216 978,957
------------ ------------
Interest Expense:
Interest on Deposits ....................... 360,246 226,639
Interest on Long-Term Debt ................. 12,420 13,017
------------ ------------
Total Interest Expense ................. 372,666 239,656
------------ ------------
Net Interest Income .................... 1,065,550 739,301
Provision for Loan Losses (Note 3) ........... 0 0
------------ ------------
Net Interest Income After
Provision for Loan Losses ............ 1,065,550 739,301
------------ ------------
Non-Interest Income:
Service Charges ............................... 160,859 124,711
Gain on Sale of Loans ......................... 119,285 273,876
Gain on Sale of Investment Securities ......... 173,444
Other ......................................... 17,999 3,414
------------ ------------
Total Non-Interest Income ................... 298,143 575,445
------------ ------------
Other Expenses:
Salaries and Employee Benefits (Note 6) ........ 594,435 494,914
Occupancy Expense .............................. 62,633 60,093
Equipment ...................................... 109,842 85,776
Other .......................................... 330,790 305,207
------------ ------------
Total Other Expenses ....................... 1,097,700 945,990
------------ ------------
Income Before Income Taxes ................. 265,993 368,756
Income Taxes ..................................... 120,600 157,500
------------ ------------
Net Income ................................. $ 145,393 $ 211,256
============ ============
Earnings Per Share ............................... $ .14 $ .20
============ ============
Weighted Average Number of Shares Outstanding .... 1,066,297 1,065,844
============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended March 31, 1995
and Year Ended December 31, 1994
<TABLE>
<CAPTION>
Unrealized
Loss on
Available-
for-Sale
Common Stock Retained Investment
Shares Amount Earnings Securities Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance,
January 1, 1994 1,041,053 $ 5,525,420 $ 1,537,345 $ 7,062,765
Cash Dividend
$.28 per share (291,495) (291,495)
Net Income 818,661 818,661
Unrealized Loss on
Available-for-Sale
Investment Securities,
Net of Taxes $ (114,785) (114,785)
------------ ------------ ------------ ------------ ------------
Balance,
December 31, 1994 1,041,053 5,525,420 2,064,511 (114,785) 7,475,146
Cash Dividend
$.30 per share (312,316) (312,316)
Net income 145,393 145,393
Issuance of
Common Stock Under
Stock Option Plan and
Related Tax Benefit 723 3,398 3,398
Net Decrease in
Unrealized Loss on
Available-for-Sale
Investment Securi-
ties, Net of Taxes 61,307 61,307
------------ ------------ ------------ ------------ ------------
Balance,
March 31, 1995 1,041,776 $ 5,528,818 $ 1,897,588 $ (53,478) $ 7,372,928
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Month Periods Ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ..................................... $ 145,393 $ 211,256
Adjustments to Reconcile Net
Income to Net Cash (Used in)
Operating Activities:
Depreciation and Amortization .............. 114,794 96,018
Decrease in Deferred Loan
Origination Fees and Costs, Net .......... (23,054) (10,333)
Net Increase in Unamortized Discount on
Retained Portion of Sold Loans ........... 1,304 93,507
Net Increase in the Present Value of
Future Servicing Income .................. (7,533) (57,463)
Gain on Sale of Available-for-Sale
Investment Securities .................... (173,444)
Gain on Sale of Assets, Net ................ (998)
Net Increase in Loans Held for Sale ........ (1,864,512) (3,419,004)
Decrease (Increase) in Interest
Receivable and Other Assets .............. 32 (14,545)
Increase in Interest Payable and
Other Liabilities ........................ 137,677 111,095
------------ ------------
Net Cash Used in
Operating Activities ................... (1,495,899) (3,163,911)
------------ ------------
Cash Flows From Investing Activities:
Net (Increase) Decrease in Loans ............... (1,336,082) 501,187
Proceeds from Sale of Assets ................... 1,000
Additions to Bank Premises and
Equipment .................................... (19,390) (78,401)
Proceeds from Sale of Available-
for-Sale Investment Securities ............... 2,204,400
------------ ------------
Net Cash (Used in) Provided
by Investing Activities ................ (1,355,472) 2,628,186
------------ ------------
</TABLE>
(Continued)
6
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
Three Month Periods Ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Financing Activities:
Net (Decrease) Increase in Demand,
Interest Bearing and Savings Deposits .... $ (514,086) $ 5,177,325
Net Increase (Decrease) in Time Deposits ... 3,164,294 (36,412)
Principal Payments on Long-Term Debt ....... (7,351) (6,754)
Proceeds from Exercise of Stock Options .... 3,398
Payments of Cash Dividends ................. (312,316) (291,495)
------------ ------------
Net Cash Provided by
Financing Activities ................... 2,333,939 4,842,664
------------ ------------
(Decrease) Increase in Cash
and Cash Equivalents ................... (517,432) 4,306,939
Cash and Cash Equivalents at Beginning
of Year .................................... 11,604,454 10,888,597
------------ ------------
Cash and Cash Equivalents at End of Period ... $ 11,087,022 $ 15,195,536
============ ============
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for:
Interest Expense ......................... $ 275,814 $ 229,770
Income Taxes ............................. $ 62,045 $ 22,279
Non-Cash Investing Activities:
Real Estate Acquired through
Foreclosure .............................. $ 203,611
Unrealized (Loss) Gain on Available-
for-Sale Investment Securities ........... $ (92,203) $ 40,820
</TABLE>
The accompanying notes are an integral
part of these financial statements.
7
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Auburn Bancorp (the Company) was incorporated on December 31, 1981 and
obtained approval of the Board of Governors of the Federal Reserve System
to be a bank holding company. The Company received approval from the
Comptroller of the Currency on August 10, 1982 to organize Auburn Bank of
Commerce, N.A., which opened for business on February 7, 1983. The name of
the subsidiary was changed to The Bank of Commerce, N.A. (the Bank) during
1988.
The accounting and reporting policies of the Company and its subsidiary
conform with generally accepted accounting principles and prevailing
practices within the banking industry.
Certain reclassifications have been made to prior years' balances to
conform to classifications used in 1995.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and subsidiary, which is wholly-owned. All material intercompany balances
and transactions have been eliminated in consolidation.
LOANS HELD FOR SALE
Loans held for sale consist of mortgage and Small Business Administration
(SBA) guaranteed loans and are carried at the lower of cost or market
value. Loans held for sale subsequently transferred to the loan portfolio
are transferred at the lower of cost or market value at the date of
transfer. Any difference between the carrying amount of the loan and its
outstanding principal balance is recognized as an adjustment to yield by
the interest method. Unrealized gains or losses on loans held for sale are
included in other expense. Realized gains or losses are determined on the
specific identification method and are reflected in non-interest income or
expense.
INVESTMENT SECURITIES
The Company adopted Statement of Financial Accounting Standards (SFAS) 115,
Accounting for Certain Investments in Debt and Equity Securities on January
1, 1994. SFAS 115 requires that investments be classified into one of the
three following categories:
* Trading securities which are reported at fair value, with unrealized
gains and losses included in earnings. Trading securities are bought
and held principally for the purpose of selling within a short period
of time.
* Available-for-sale securities which are reported at fair value, with
unrealized gains and losses excluded from earnings and reported, net
of taxes, as a separate component of stockholders' equity.
* Held-to-maturity securities which are reported at amortized cost,
adjusted for the accretion of discounts and amortization of premiums.
8
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVESTMENT SECURITIES (Continued)
Management determines the appropriate classification of its investments at
the time of purchase and accounts for the transfer of a security from
available-forsale to held-to-maturity at fair value.
Gains or losses on the sale of securities are computed on the specific
identification method. Interest earned on investment securities is reported
in interest income, net of applicable adjustments for accretion of
discounts and amortization of premiums. In addition, unrealized losses that
are other than temporary are recognized in earnings for all investments.
LOANS
Loans are stated at principal balances outstanding, except for loans
transferred from the loans held for sale account which are carried at the
lower of principal balance or market value at the date of transfer,
adjusted for accretion of discounts. Interest is accrued daily based upon
outstanding loan balances. However, when, in the opinion of management, the
future collectibility of interest and principal is in serious doubt, loans
are placed on nonaccrual status and the accrual of interest income is
suspended. Any interest accrued but unpaid is charged against income.
Payments received are applied to reduce principal to the extent necessary
to eliminate such doubt. Subsequent payments on these loans, or payments
received on nonaccrual loans for which the ultimate collectibility of
principal is not in doubt, are applied first to earned but unpaid interest
and then to principal.
Substantially all loan origination fees, commitment fees, direct loan
origination costs and purchase premiums and discounts on loans are deferred
and recognized as an adjustment of yield, to be amortized to interest
income over the contractual term of the loan. The unamortized balance of
deferred fees and costs is reported as a component of net loans.
The Company adopted SFAS 114, Accounting by Creditors for Impairment of a
Loan and SFAS 118, Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures as of January 1, 1995. These Statements require
that impaired loans be measured based on present value of expected future
cash flows or, as a practicable matter, at the loan's observable market
price or the fair value of collateral if the loan is collateral dependent.
SALES AND SERVICING OF SBA LOANS
Included in loans held for sale are loans which are 70% to 90% guaranteed
by the Small Business Administration (SBA). The guaranteed portion of these
loans may be sold to a third party, with the Bank retaining the
unguaranteed portion. The Bank generally receives a premium in excess of
the adjusted carrying value of the loan at the time of sale. In addition,
the Bank receives a fee to service the loan represented by the difference
between the rate paid by the borrower to the Bank and the rate paid by the
9
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
SALES AND SERVICING OF SBA LOANS (Continued)
Bank to the purchaser. Any excess of this fee over the normal cost of
servicing the loan is recorded as additional gain (excess servicing fees).
The Bank's investment in an SBA loan is allocated between the retained
portion of the loan, the excess servicing fee, and the sold portion of the
loan based on their relative fair values on the date the loan is sold. The
gain on the sold portion of the loan is recognized as income at the time of
sale. The carrying value of the retained portion of the loan is discounted
based on the estimated value of a comparable non-guaranteed loan. The
excess servicing fee is included in accrued interest receivable and other
assets in the financial statements and is amortized over the estimated life
of the related loan. Significant future prepayments of these loans will
result in the recognition of additional amortization of related excess
servicing fees.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained to provide for losses that can
be expected to occur in the normal course of business. The allowance is
based on the character of the loan portfolio, management's analysis of the
portfolio, and business and economic conditions in the Bank's service area.
The allowance is established through a provision for loan losses which is
charged to expense.
OTHER REAL ESTATE
Other real estate includes real estate acquired in full or partial
settlement of loan obligations. When property is acquired, any excess of
the Company's recorded investment in the loan balance and accrued interest
income over the estimated fair market value of the property is charged
against the allowance for loan losses. Subsequent gains or losses on sales
or writedowns are recorded in other income or expense as incurred. In the
financial statements, other real estate is included in accrued interest
receivable and other assets.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost, including interest costs
for the construction of Bank premises. No interest costs were capitalized
in 1995 or 1994. Depreciation is determined using the straight-line method
over the useful lives of the related assets. The useful lives of Bank
premises are estimated to be twenty to forty years. The useful lives of the
improvements to Bank premises, furniture and equipment are estimated to be
two to ten years. When assets are sold or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized in income for the period. The cost of
maintenance and repairs is charged to expense as incurred.
10
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES
The Company accounts for income taxes using an asset and liabilities
approach. Under this approach, deferred tax assets and liability are
recognized for the tax consequences of temporary differences between the
financial statement and tax basis of existing assets and liabilities. On
the balance sheet, net deferred tax assets are included in accrued interest
receivable and other assets.
CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers cash
and due from banks and Federal funds sold to be cash equivalents.
Generally, Federal funds are sold for one day periods.
EARNINGS PER SHARE
Earnings per share are calculated using the weighted average number of
shares of common stock and common stock equivalents outstanding during the
year. The dilutive effect of stock options outstanding from the application
of the treasury stock method has been considered in the computation of
common stock equivalents.
LOANS SERVICED FOR OTHERS
Loans with unpaid balances of approximately $48,192,200 and $47,644,400
were being serviced for others at March 31, 1995 and December 31, 1994,
respectively.
11
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
2. INVESTMENT SECURITIES
The amortized cost and market value of investment securities at March 31,
1995 and December 31, 1994 consisted of the following:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE:
1995
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Government
agencies $ 3,499,906 $ (46,906)$ 3,453,000
Obligations of states
and political sub-
divisions 3,081,280 $ 2,240 (47,520) 3,036,000
------------ ------------ ------------ ------------
$ 6,581,186 $ 2,240 $ (94,426)$ 6,489,000
============ ============ ============ ============
HELD-TO-MATURITY:
1995
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
Federal Reserve Bank
stock $ 140,500 $ - $ - $ 140,500
============ ============ ============ ============
</TABLE>
Net unrealized losses on available-for-sale securities in the amount of
$92,186 were recorded net of $38,708 in taxes as a separate component of
stockholders' equity. There were no sales of investment securities in 1995.
12
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
2. INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE:
1994
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Government
agencies $ 3,499,922 $ (89,922)$ 3,410,000
Obligations of states
and political sub-
divisions 3,084,443 $ 460 (105,903) 2,979,000
------------ ------------ ------------ ------------
$ 6,584,365 $ 460 $ (195,825)$ 6,389,000
============ ============ ============ ============
HELD-TO-MATURITY:
1994
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
Federal Reserve Bank
stock $ 140,500 $ - $ - $ 140,500
============ ============ ============ ============
</TABLE>
Net unrealized losses on available-for-sale investment securities totaling
$195,365 were recorded net of $80,580 in tax benefits as a separate
component of stockholders' equity. Proceeds and gross realized gains from
the sale of available-for-sale investment securities for the year ended
December 31, 1994 totaled $2,204,400 and $173,444, respectively.
13
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
2. INVESTMENT SECURITIES (Continued)
The amortized cost and estimated market value of debt securities at March
31, 1995 by contractual maturity are shown below. Expected maturities will
differ from contractual maturities because the issuers of the securities
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
March 31, 1995
---------------------------------------------------
Available-for-Sale Held-to-Maturity
------------------------- -------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Due in one year
or less $ 500,000 $ 502,000
Due after one
year through
five years 4,499,906 4,446,000
Due after five
years through
ten years 1,581,280 1,541,000
Federal Reserve Bank
stock $ 140,500 $ 140,500
------------ ------------ ------------ ------------
$ 6,581,186 $ 6,489,000 $ 140,500 $ 140,500
============ ============ ============ ============
</TABLE>
14
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
3. LOANS
Outstanding loans at March 31, 1995 and December 31, 1994 are summarized
below:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Commercial................................. $ 7,387,067 $ 6,857,703
Real estate - mortgage..................... 32,193,831 31,795,561
Real estate - construction................. 2,753,075 2,871,406
Installment................................ 2,513,547 2,191,965
------------- ------------
44,847,520 43,716,635
Deferred loan fees......................... (105,709) (128,763)
Allowance for loan losses.................. (741,042) (741,323)
------------- ------------
$ 44,000,769 $ 42,846,549
============ ============
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31, December 31,
--------------------------- -------------
1995 1994 1994
------------- ------------- -------------
<S> <C> <C> <C>
Balance, beginning of
year $ 741,323 $ 792,514 $ 792,514
Provision charged to
operations
Losses charged to
allowance (1,479) (79,143)
Recoveries 1,198 500 27,952
------------- ------------- -------------
Balance, end of
period $ 741,042 $ 793,014 $ 741,323
============= ============= =============
</TABLE>
During the first quarter of 1995, the Bank held one loan totaling $465,300
which was considered to be impaired under SFAS 114. The related allowance
for credit losses for this loan is $71,800. For the quarter ended March 31,
1995, the Bank did not recognize any interest income on impaired loans.
15
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(Continued)
4. COMMITMENTS
At March 31, 1995 and December 31, 1994, the Bank had outstanding loan
commitments and letters of credit totaling $6,419,429 and $5,892,284,
respectively.
5. RELATED PARTY TRANSACTIONS
During the normal course of business, the Bank enters into transactions
with related parties, including Directors and affiliates. These
transactions include borrowings from the Bank with substantially the same
terms, including rates and collateral, as loans to unrelated parties.
Aggregate related party borrowings totaled $1,182,541 and $1,218,857 at
March 31, 1995 and December 31, 1994, respectively.
6. PROFIT SHARING PLAN
Effective January 1, 1987, the Bank adopted The Bank of Commerce, N.A.,
401(k) Profit Sharing Plan and Trust. The Plan is available to employees
meeting certain service requirements. The Bank's contribution to the Plan
is discretionary and is allocated in the same ratio as each participant's
compensation bears to total compensation of all participants. Contributions
to the profit sharing plan for the three months ended March 31, 1995 and
1994 totaled $19,000 each period.
16
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended March 31, 1995
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FINANCIAL CONDITION
Total assets increased by 3.9% to $72.1 million at March 31, 1995, from $69.4
million at December 31, 1994. Total deposits increased by 4.3% to $63.7 million
at March 31, 1995 from $61.1 million at December 31, 1994. This increase in
deposits, which provides the major source of funds for the Bank, resulted in the
corresponding increase in total assets. The increase in deposits was primarily
in Certificates of Deposit. Within total assets, the funds from these increased
deposits were invested in portfolio loans and loans held for sale.
Net loans totaled $44.0 million at March 31, 1995, representing a 69% loan to
deposit ratio, compared to net loans of $42.8 million at December 31, 1994,
representing a 70% loan to deposit ratio. Loans are expected to grow during the
remainder of 1995. In Management's opinion, the allowance for loan losses,
totaling $741,042 at March 31, 1995, adequately provides for possible loan
losses. This allowance represents 1.7% of gross loans outstanding at the end of
the first quarter.
The Company declared a cash dividend of $.30 per share on January 18, 1995,
which was paid on February 28, 1995 to shareholders of record on February 10,
1995.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
established the following capital levels for determining that a bank meets the
highest capital standards and is determined to be a "well capitalized"
institution:
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Total Risk-Based Capital Ratio
Regulatory Requirement 10.0% 10.0% 10.0%
Bank Ratio 12.8% 13.7% 13.4%
Tier 1 Risk-Based Capital Ratio
Regulatory Requirement 6.0% 6.0% 6.0%
Bank Ratio 11.6% 12.5% 12.2%
Leverage Ratio
Regulatory Requirement 5.0% 5.0% 5.0%
Bank Ratio 9.3% 10.3% 9.0%
</TABLE>
As noted in the above schedule, The Bank of Commerce, N.A. meets all the
regulatory capital requirements of a "well capitalized" institution.
17
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended March 31, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS
Interest income increased 46.9% to $1,438,216 for the three month period ended
March 31, 1995 from $978,957 for the three month period ended March 31, 1994.
The increased interest income on loans and investments was primarily due to an
increase in average loans outstanding and investment securities during the
quarter. Interest income on loans held for sale also increased substantially as
loans were being held longer prior to sale. In addition, interest rates on loans
were higher during the first quarter of 1995 as compared to the first quarter of
1994.
Interest expense increased 55.5% to $372,666 for the three month period ended
March 31, 1995 from $239,656 for the three month period ended March 31, 1994.
The increase in interest expense was the result of interest rates on interest
bearing deposits being higher in the first quarter of 1995 as compared to the
first quarter of 1994 and a significant increase in Certificates of Deposit.
The following table reflects repricing options that are included in the balance
sheet that are sensitive to changes in interest rate. At March 31, 1995, the
cumulative one-year gap was a negative $17.9 million, representing 29.9% of
earning assets. This means that $17.9 million of earning assets will reprice
after the sources of funds reprice. During a period of rising interest rates the
Bank's negative gap position should result in a decrease in its net interest
margin.
<TABLE>
<CAPTION>
1-90 days 91-365 days 1-5 years 5-10 years 10+ years
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earning Assets 40,280 2,405 12,607 3,275 1,494
Net sources 52,024 8,645 3,050 0 580
Incremental gap (11,744) (6,240) 9,557 3,275 914
Cumulative gap (11,744) (17,984) (8,427) (5,152) (4,238)
% of earning assets (19.6) (29.9) (14.0) (8.6) (7.1)
</TABLE>
Non-interest income decreased 48.2% to $298,143 for the first three months of
1995 from $575,445 for the first three months of 1994. A decrease of 56.4% on
the gain on sale of loans reflects managements decision to hold SBA loans for
longer periods prior to sale and a decrease in mortgage loan activity in 1995
over the same period during 1994. An investment security was sold during the
first quarter of 1994 in order to take advantage of favorable market conditions.
The sale resulted in a pre-tax gain of $173,444. There were no sales of
securities during the first quarter of 1995 and management does not anticipate
any sales during 1995.
There was no allocation to the Provision for Loan Losses for the first three
months of 1995 and 1994. Net charge-offs for the three month period ended March
31, 1995 totaled $281 as compared to net recoveries which totaled $500 for the
same period in 1994. Based upon the limited growth in loans and charge-offs
experienced, in addition to the detailed quarterly evaluation of the risk in the
loan portfolio, it was Management's opinion that no provision to the allowance
for loan losses was required for the first quarter of 1995.
18
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended March 31, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS (Continued)
Other expenses increased 16.0% to $1,097,700 for the first three months of 1995
from $945,990 for the three month period ended March 31, 1994. These expenses
represent the operational and administrative expenses of the Company.
Net income for the three months ended March 31, 1995 totaled $145,393 as
compared to net income of $211,256 for the three months ended March 31, 1994.
This decrease in income was primarily the result of a $173,444 gain from the
sale of an investment security in the first quarter of 1994 as compared to no
security sales in 1995. In addition, the gain on sale of loans was $119,285 in
the first quarter of 1995 as compared to $273,876 for the first quarter of 1994.
19
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended March 31, 1995
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
No legal proceedings have occurred relating to Auburn Bancorp or its subsidiary.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter ended March 31, 1994.
20
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended March 31, 1995
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.
Date: May 12, 1995
AUBURN BANCORP
By /s/ JOHN G. BRINER
----------------------------------
JOHN G. BRINER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
By /s/ THOMAS L. WALKER
----------------------------------
THOMAS L. WALKER
SENIOR VICE PRESIDENT AND
CONTROLLER AND
CHIEF FINANCIAL OFFICER
21
<PAGE>
