<PAGE>
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 June 30, 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 June 30, 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 985,498 shares at June 30, 1995.
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
Form 10-Q
For the Quarter Ended June 30, 1995
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
Following are the financial statements of Auburn Bancorp and subsidiary as
of and for the quarter and six months ended June 30, 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>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
Cash and Due from Banks ....................... $ 6,334,028 $ 5,404,454
Federal Funds Sold ............................ 8,400,000 6,200,000
Loans Held for Sale ........................... 5,464,756 2,173,423
Investment Securities (At Market Value)(Note 2) 6,746,570 6,529,500
Loans, Less Allowance for Loan Losses of
$705,473 at June 30, 1995 and $741,323
at December 31, 1994 (Notes 3 and 5) ........ 44,118,537 42,846,549
Bank Premises and Equipment, Net .............. 3,255,962 3,409,874
Goodwill and Other Intangibles ................ 489,478 524,479
Accrued Interest Receivable and
Other Assets ................................ 2,593,263 2,339,272
----------- ------------
$77,402,594 $ 69,427,551
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-Interest Bearing ........................ $16,791,990 $ 13,816,423
Interest Bearing ............................ 52,407,668 47,253,089
----------- -------------
Total Deposits ....................... 69,199,658 61,069,512
Long-Term Debt ................................ 572,033 586,893
Accrued Interest Payable and
Other Liabilities ........................... 417,755 296,000
----------- -------------
Total Liabilities .................... 70,189,446 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;
issued and outstanding 985,498 shares
in 1995 and 1,041,053 in 1994 ............. 5,107,501 5,525,420
Unrealized Gain(Loss) on
Available-for-Sale Investment Securities,
Net of Tax Benefit ........................ 16,278 (114,785)
Retained Earnings ........................... 2,089,369 2,064,511
----------- -------------
Total Stockholders' Equity ........... 7,213,148 7,475,146
----------- -------------
$77,402,594 $ 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 Six Months Ended
June 30, June 30,
------------------------- -------------------------
1995 1994 1995 1994
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans ...... $ 1,177,453 $ 816,594 $ 2,353,746 $ 1,617,997
Interest on Investment Securities 108,621 60,537 217,242 125,107
Interest on Federal Funds Sold .. 68,878 67,594 116,733 113,830
Interest on Loans Held for Sale . 139,587 156,811 245,034 223,559
----------- ----------- ----------- -----------
Total Interest Income ......... 1,494,539 1,101,536 2,932,755 2,080,493
----------- ----------- ----------- -----------
Interest Expense:
Interest on Deposits ............ 405,483 261,657 765,729 488,296
Interest on Long-Term Debt ...... 12,262 12,872 24,682 25,889
----------- ----------- ----------- -----------
Total Interest Expense ........ 417,745 274,529 790,411 514,185
----------- ----------- ----------- -----------
Net Interest Income ........... 1,076,794 827,007 2,142,344 1,566,308
Provision for Loan Losses (Note 3) 10,000 10,000
----------- ----------- ----------- -----------
Net Interest Income After
Provision for Loan Losses ... 1,066,794 827,007 2,132,344 1,566,308
----------- ----------- ----------- -----------
Non-Interest Income:
Service Charges ................. 95,739 66,747 170,604 131,842
Loan Servicing Income ........... 81,530 70,000 167,524 129,616
Gain on Sale of Loans ........... 115,249 242,217 234,534 516,093
Gain on Sale of Investment
Securities .................... 173,443
Other ........................... 14,177 7,471 32,176 10,886
----------- ----------- ----------- -----------
Total Non-Interest Income ..... 306,695 386,435 604,838 961,880
----------- ----------- ----------- -----------
Other Expenses:
Salaries and Employee
Benefits (Note 6) ............. 500,648 512,154 1,095,083 1,007,068
Occupancy Expense ............... 70,456 62,734 133,089 122,827
Equipment ....................... 105,474 87,687 215,316 173,463
Other ........................... 347,529 345,543 678,319 650,750
----------- ----------- ----------- -----------
Total Other Expenses .......... 1,024,107 1,008,118 2,121,807 1,954,108
----------- ----------- ----------- -----------
Income Before Income Taxes .... 349,382 205,324 615,375 574,080
Income Taxes ...................... 157,600 94,200 278,200 251,700
----------- ----------- ----------- -----------
Net Income .................... $ 191,782 $ 111,124 $ 337,175 $ 322,380
=========== =========== =========== ===========
Earnings Per Share ................ $ .19 $ .10 $ .33 $ .30
=========== =========== =========== ===========
Weighted Average Number of Shares . 1,010,120 1,069,340 1,010,120 1,069,340
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Six Months Ended June 30, 1995
and Year Ended December 31, 1994
<TABLE>
<CAPTION>
Unrealized
(Loss)Gain
on
Available-
Common Stock Retained for-Sale
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 Tax Benefit ..... (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 ......... (312,317) (312,317)
Redemption of Common Stock (56,278) (422,147) (422,147)
Net income ............... 337,175 337,175
Issuance of
Common Stock Under
Stock Option Plan and
Related Tax Benefit .... 723 4,228 4,228
Net Decrease in
Unrealized Loss on
Available-for-Sale
Investment Securi-
ties, Net of Tax
Benefit ................ 131,063 131,063
------------ ------------ ------------ ------------ ------------
Balance,
June 30, 1995 ........ 985,498 $ 5,107,501 2,089,369 $ 16,278 $ 7,213,148
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Month Periods Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ................................ $ 337,175 $ 322,380
Adjustments to Reconcile Net
Income to Net Cash Used in
Operating Activities:
Depreciation and Amortization ......... 231,278 193,945
Provision for Loan Losses ............. 10,000
Decrease in Deferred Loan
Origination Fees and Costs, Net ..... (45,173) (8,482)
Net Increase in Unamortized Discount on
Retained Portion of Sold Loans ...... 14,269 158,363
Net Increase in the Present Value of
Future Servicing Income ............. (1,957) (102,082)
Gain on Sale of Investment Securities . (173,443)
Gain on Sale of Assets ................ (998)
Increase in Loans Held for Sale ....... (3,291,333) (2,711,231)
Increase in Accrued Interest Receivable
and Other Assets .................... (354,944) (753,641)
Increase (Decrease) in Accrued Interest
Payable and Other Liabilities ....... 133,129 (71,207)
------------- -------------
Net Cash Used in Operating
Activities ........................ (2,967,556) (3,146,396)
------------- -------------
Cash Flows From Investing Activities:
Proceeds from Sale of Available-for-Sale
Investment Securities ................... 2,204,400
Purchase of Available-for-Sale
Investment Securities ................... (1,592,880)
Net Increase in Loans ..................... (1,251,087) (1,652,599)
Proceeds from Sale of Fixed Assets ........ 3,795 1,000
Purchases of Bank Premises and
Equipment ............................... (39,798) (170,144)
------------- -------------
Net Cash Used in
Investing Activities .................. (1,287,090) (1,210,223)
------------- -------------
</TABLE>
(Continued)
6
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
Six Month Periods Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash Flows from Financing Activities:
Net Increase in Demand, Interest
Bearing and Savings Deposits ......... $ 3,946,572 $ 10,299,267
Net Increase (Decrease) in Time Deposits 4,183,574 (259,083)
Principal Payments on Long-Term Debt ... (14,860) (13,654)
Payments to Redeem Common Stock ........ (422,147)
Proceeds from Exercise of Stock Options 3,398
Payments of Cash Dividends ............. (312,317) (291,494)
------------- -------------
Net Cash Provided by
Financing Activities ............... 7,384,220 9,735,036
------------- -------------
Increase in Cash and
Cash Equivalents ................... 3,129,574 5,378,417
Cash and Cash Equivalents at Beginning
of Year ................................ 11,604,454 10,888,597
------------- -------------
Cash and Cash Equivalents at End of Period $ 14,734,028 $ 16,267,014
============= =============
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for:
Interest Expense ..................... $ 586,887 $ 493,464
Income Taxes ......................... $ 316,045 $ 258,844
Non-Cash Investing Activities:
Real Estate Acquired through
Foreclosure .......................... $ 203,611
Unrealized Gain (Loss) on Available-
for-Sale Investment Securities ....... $ 131,063 $ (92,203)
</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 1994.
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 loans 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 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.
8
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVESTMENT SECURITIES
The Company adopted Statement of Financial Accounting Standards No. 115
(SFAS 115), Accounting for Certain Investments in Debt and Equity
Securities on January 1, 1994. SFAS 115 requires that the Company's
investment securities be classified into one of three categories as
follows:
o 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.
o 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.
o Held-to-maturity securities which are reported at amortized cost,
adjusted for the accretion of discounts and amortization of
premium.
Management determines the appropriate classification of its investments at
the time of purchase and accounts for the transfer of a security from
available-for-sale 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, a loan
is 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.
9
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOANS (Continued)
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 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.
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 Disclosure as of January 1, 1995. As a result of these
Statements, impaired loans are measured based on the 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. The amount of initial impairment and any subsequent
change in expected cash flows is recognized through the provision for loan
losses.
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
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 commercial
loan. The excess servicing fee is reflected as an asset and 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.
10
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
INCOME TAXES
The Company accounts for income taxes using an asset and liabilities
approach. Under this approach, deferred tax assets and liabilities 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 $49,614,770 and $47,644,400
were being serviced for others at June 30, 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 estimated market value of investment securities at
June 30, 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 $ 3,499,889 $ 6,093 $ (5,357) $ 3,500,625
Obligations of states
and political sub-
divisions 3,078,116 27,329 3,105,445
Federal Reserve Bank
stock 140,500 140,500
------------ ------------ ------------ ------------
$ 6,718,505 $ 33,422 $ (5,357) $ 6,746,570
============ ============ ============ ============
</TABLE>
Net unrealized gains on available-for-sale securities in the amount of
$28,065 were recorded net of $11,787 in taxes as a separate component of
stockholders' equity. There were no sales of investment securities in 1995.
<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
Federal Reserve Bank
stock 140,500 140,500
------------ ------------ ------------ ------------
$ 6,724,865 $ 460 $ (195,825) $ 6,529,500
============ ============ ============ ============
</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.
12
<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 June
30, 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>
June 30. 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 $ 500,960
Due after one
year through
five years ..................... 4,499,889 4,502,345
Due after five
years through
ten years ..................... 1,578,116 1,602,765
Federal Reserve
Bank stock ..................... 140,500 140,500
------------ ------------ ------------ ------------
$ 6,718,505 $ 6,746,570 $ $
============ ============ ============ ============
</TABLE>
13
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
3. LOANS
Outstanding loans at June 30, 1995 and December 31, 1994 are summarized
below:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Commercial ............... $ 8,018,272 $ 6,857,703
Real estate - mortgage ... 32,041,258 31,795,561
Real estate - construction 2,160,567 2,871,406
Installment .............. 2,687,503 2,191,965
------------ ------------
44,907,600 43,716,635
Deferred loan fees ....... (83,590) (128,763)
Allowance for loan losses (705,473) (741,323)
------------ ------------
$ 44,118,537 $ 42,846,549
============ ============
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, December 31,
------------------------- -----------
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of
year ............... $ 741,323 $ 792,514 $ 792,514
Provision charged to
operations ......... 10,000
Losses charged to
allowance .......... (48,234) (7,348) (79,143)
Recoveries ........... 2,384 2,000 27,952
----------- ----------- -----------
Balance, end of
$ 705,473 $ 787,166 $ 741,323
=========== =========== ===========
</TABLE>
At June 30, 1995, the recorded investment in loans that were considered to
be impaired under SFAS 114 was $1,123,944. Included in this amount is
$726,474 of impaired loans for which the related allowance for credit
losses is $46,811 and $397,470 for which there is no allowance for credit
losses. The average recorded investment in impaired loans during the
quarter and six month period ended June 30, 1995 was approximately
$1,123,000 and $795,000, respectively. For the quarter and six month period
ended June 30, 1995, the Bank did not recognize any interest income on
impaired loans.
14
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
4. COMMITMENTS
At June 30, 1995 and December 31, 1994, the Bank had outstanding loan
commitments and letters of credit totaling $7,527,950 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 $1,167,927 and $1,218,857 at
June 30, 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 six months ended June 30, 1995 and 1994
totaled $39,000 and $37,000 respectively.
15
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended June 30, 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 11.5% to $77.4 million at June 30, 1995, from $69.4
million at December 31, 1994. Total deposits increased by 13.3% to $69.2 million
at June 30, 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 primarily invested in Federal funds sold, loans held for sale and
portfolio loans.
Net loans totaled $44.1 million at June 30, 1995, representing a 64% 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 $705,473 at June 30, 1995, adequately provides for possible loan
losses. This allowance represents 1.6% of gross loans outstanding at the end of
the second 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>
June 30, June 30, December 31,
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Total Risk-Based Capital Ratio
Regulatory Requirement .............. 10.0% 10.0% 10.0%
Bank Ratio .......................... 12.9% 13.3% 13.4%
Tier 1 Risk-Based Capital Ratio
Regulatory Requirement .............. 6.0% 6.0% 6.0%
Bank Ratio .......................... 10.9% 12.0% 12.2%
Leverage Ratio
Regulatory Requirement .............. 5.0% 5.0% 5.0%
Bank Ratio .......................... 8.8% 9.6% 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.
16
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended June 30, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1995
Interest income increased 35.7% to $1,494,539 for the quarter ended June 30,
1995 from $1,101,536 for the quarter ended June 30, 1994. The increased interest
income on loans and investments was primarily due to an increase in loans and
investment securities outstanding during the quarter ended June 30, 1995.
Interest expense increased 52.2% to $417,745 for the quarter ended June 30, 1995
from $274,529 for the quarter ended June 30, 1994. The increase in interest
expense was the result of interest rates on interest bearing deposits being
higher in the second quarter of 1995 as compared to the second quarter of 1994.
In addition, there was a significant increase in Certificates of Deposit in
1995.
Non-interest income decreased 20.6% to $306,695 for the quarter ended June 30,
1995 from $386,435 for the quarter ended June 30, 1994. Service charges
increased 43.4% to $95,739 for the quarter ended June 30, 1995 from $66,747 for
the quarter ended June 30, 1994. In addition, loan servicing income increased
16.5% to $81,530 for the quarter ended June 30, 1995 from $70,000 for the
quarter ended June 30, 1994 due to continued growth in the servicing portfolio
of SBA loans. A decrease of 52.4% 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.
The allocation to the Provision for Loan Losses for the second quarter of 1995
was $10,000. There was no allocation for the second quarter of 1994. Net
charge-offs for the quarter ended June 30, 1995 totaled $45,569 as compared to
net charge-offs which totaled $5,848 for the same period in 1994.
Other expenses increased 1.6% to $1,024,107 for the quarter ended June 30, 1995
from $1,008,118 for the quarter ended June 30, 1994. These expenses represent
the operational and administrative expenses of the Company and increased in
proportion to the growth in assets.
Net income for the quarter ended June 30, 1995 totaled $191,782 as compared to
net income of $111,124 for the quarter ended June 30, 1994. This increase in
income was primarily the result of a 44.2% increase in interest and fees on
loans and corresponding 30.2% increase in net interest income.
17
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended June 30, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995
Interest income increased 41.0% to $2,932,755 for the six month period ended
June 30, 1995 from $2,080,493 for the six month period ended June 30, 1994. The
increased interest income on loans and investments was primarily due to an
increase in average loans outstanding and investment securities during the first
half of 1995. 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 half of 1995 as compared to
the first half of 1994.
Interest expense increased 53.7% to $790,411 for the six month period ended June
30, 1995 from $514,185 for the six month period ended June 30, 1994. The
increase in interest expense was the result of interest rates on interest
bearing deposits being higher in the first half of 1995 as compared to the first
half of 1994. In addition, there was a significant increase in Certificates of
Deposit during the first half of 1995.
The following table reflects repricing options that are included in the balance
sheet that are sensitive to changes in interest rate. At June 30, 1995, the
cumulative one-year gap was a negative $20.4 million, representing 31.2% of
earning assets. This means that $20.4 million of earning assets will reprice
after the sources of funds reprice. During 1995, a period of declining interest
rates, the Bank's negative gap position resulted in an increase in its net
interest margin. The Bank's net interest margin at June 30, 1995 was 7.2% as
compared to 7.0% at December 31, 1994.
<TABLE>
<CAPTION>
1-90 days 91-365 days 1-5 years 5-10 years 10+ years
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earning Assets 45,449 2,065 12,435 4,271 1,050
Net sources 60,170 7,718 1,312 0 572
Incremental gap (14,721) (5,653) 11,123 4,271 478
Cumulative gap (14,721) (20,374) (9,251) (4,980) (4,502)
% of earning assets (22.6) (31.2) (14.2) (7.6) (6.9)
</TABLE>
Non-interest income decreased 37.1% to $604,838 for the first six months of 1995
from $961,880 for the first six months of 1994. Service charges increased 29.4%
to $170,604 for the first six months of 1995 from $131,842 for the first six
months of 1994. The primary reason for this increase was an increase in the
service charge schedules for checking and savings accounts. In addition, loan
servicing income increased 29.2% to $167,524 for the first six months of 1995
from $129,616 for the first six months of 1994 due to continued growth in the
servicing portfolio of SBA loans. A decrease of 54.6% 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 six
months of 1995 and management does not anticipate any sales during the remainder
of 1995.
18
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended June 30, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1994 (Continued)
The allocation to the Provision for Loan Losses for the first six months of 1995
was $10,000. There was no allocation for the first six months of 1994. Net
charge-offs for the six month period ended June 30, 1995 totaled $45,850 as
compared to net charge-offs which totaled $5,348 for the same period in 1994.
Other expenses increased 8.6% to $2,121,807 for the first six months of 1995
from $1,954,108 for the six month period ended June 30, 1994. These expenses
represent the operational and administrative expenses of the Company and
increased in proportion to the growth in assets.
Net income for the six months ended June 30, 1995 totaled $337,175 as compared
to net income of $322,380 for the six months ended June 30, 1994. This increase
in income was primarily the result of a 45.5% increase in interest and fees on
loans and corresponding 36.8% increase in net interest income.
19
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended June 30, 1995
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No legal proceedings have occurred relating to Auburn Bancorp or it subsidiary.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Shareholders of the Company was held on April 19, 1995.
The only matter voted upon at the meeting was the election of Directors. The
results of the election were as follows:
Nominee For Office Shares For Shares Against
or Withheld
John G. Briner 798,759 4,662
Paul Brocker 798,759 4,662
D. Dwight Odom, M.D. 798,759 4,662
Thomas E. Propp 798,759 4,662
Donald L. Robinson 798,759 4,662
Harry E. Sands 798,759 4,662
Virgil R. Traynor, D.V.M. 796,097 7,324
Gary N. Weeks 798,759 4,662
H. Ray Yamasaki 798,759 4,662
Item 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter ended June 30, 1995.
20
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended June 30, 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: August 14, 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>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,334,028
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,746,570
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 50,288,766
<ALLOWANCE> 705,473
<TOTAL-ASSETS> 77,402,594
<DEPOSITS> 69,199,658
<SHORT-TERM> 0
<LIABILITIES-OTHER> 417,755
<LONG-TERM> 572,033
<COMMON> 5,107,501
0
0
<OTHER-SE> 2,105,647
<TOTAL-LIABILITIES-AND-EQUITY> 77,402,594
<INTEREST-LOAN> 2,598,780
<INTEREST-INVEST> 333,975
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,932,755
<INTEREST-DEPOSIT> 765,729
<INTEREST-EXPENSE> 790,411
<INTEREST-INCOME-NET> 2,142,344
<LOAN-LOSSES> 10,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,121,807
<INCOME-PRETAX> 615,375
<INCOME-PRE-EXTRAORDINARY> 615,375
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 337,175
<EPS-PRIMARY> .33
<EPS-DILUTED> 0
<YIELD-ACTUAL> 6.62
<LOANS-NON> 622,747
<LOANS-PAST> 367,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 741,323
<CHARGE-OFFS> 48,234
<RECOVERIES> 2,384
<ALLOWANCE-CLOSE> 705,473
<ALLOWANCE-DOMESTIC> 705,473
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
