<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 September 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 September 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 September 30, 1995.
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
Form 10-Q
For the Quarter Ended September 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 nine months ended September 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>
September 30, December 31,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Cash and Due from Banks ....................... $ 5,268,964 $ 5,404,454
Federal Funds Sold ............................ 9,400,000 6,200,000
Loans Held for Sale ........................... 4,852,793 2,173,423
Investment Securities (At Market Value)(Note 2) 6,241,399 6,529,500
Loans, Less Allowance for Loan Losses of
$731,463 at September 30, 1995 and $741,323
at December 31, 1994 (Notes 3 and 5) ........ 44,645,570 42,846,549
Bank Premises and Equipment, Net .............. 3,168,696 3,409,874
Goodwill and Other Intangibles ................ 471,977 524,479
Accrued Interest Receivable and
Other Assets ................................ 2,603,416 2,339,272
------------- -------------
Total Assets ......................... $ 76,652,815 $ 69,427,551
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-Interest Bearing ........................ $ 14,164,451 $ 13,816,423
Interest Bearing ............................ 53,924,918 47,253,089
------------- -------------
Total Deposits ....................... 68,089,369 61,069,512
Long-Term Debt ................................ 564,363 586,893
Accrued Interest Payable and
Other Liabilities ........................... 527,567 296,000
------------- -------------
Total Liabilities .................... 69,181,299 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 ........................ 15,123 (114,785)
Retained Earnings ........................... 2,348,892 2,064,511
------------- -------------
Total Stockholders' Equity ........... 7,471,516 7,475,146
------------- -------------
Total Liabilities and
Stockholder's Equity ............... $ 76,652,815 $ 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 Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans ...... $ 1,200,058 $ 930,841 $ 3,553,804 $ 2,548,838
Interest on Investment Securities 105,642 105,093 322,884 230,200
Interest on Federal Funds Sold .. 114,922 71,908 231,655 185,738
Interest on Loans Held for Sale . 162,248 145,425 407,282 368,984
----------- ----------- ----------- -----------
Total Interest Income ......... 1,582,870 1,253,267 4,515,625 3,333,760
----------- ----------- ----------- -----------
Interest Expense:
Interest on Deposits ............ 430,018 279,646 1,195,747 767,942
Interest on Long-Term Debt ...... 12,102 12,724 36,784 38,613
----------- ----------- ----------- -----------
Total Interest Expense ........ 442,120 292,370 1,232,531 806,555
----------- ----------- ----------- -----------
Net Interest Income ........... 1,140,750 960,897 3,283,094 2,527,205
Provision for Loan Losses (Note 3) 30,000 40,000
----------- ----------- ----------- -----------
Net Interest Income After
Provision for Loan Losses ... 1,110,750 960,897 3,243,094 2,527,205
----------- ----------- ----------- -----------
Non-Interest Income:
Service Charges ................. 132,327 64,904 302,931 196,746
Loan Servicing Income ........... 84,249 75,867 251,773 205,483
Gain on Sale of Loans ........... 122,040 174,206 356,574 690,299
Gain on Sale of Investment
Securities .................... 173,443
Other ........................... 15,982 35,969 48,159 46,855
----------- ----------- ----------- -----------
Total Non-Interest Income ..... 354,598 350,946 959,437 1,312,826
----------- ----------- ----------- -----------
Other Expenses:
Salaries and Employee
Benefits (Note 6) ............. 595,286 536,628 1,690,369 1,543,696
Occupancy ....................... 65,214 70,337 198,303 193,164
Equipment ....................... 96,546 92,506 311,862 265,969
Other ........................... 256,779 297,548 935,099 948,298
----------- ----------- ----------- -----------
Total Other Expenses .......... 1,013,825 997,019 3,135,633 2,951,127
----------- ----------- ----------- -----------
Income Before Income Taxes .... 451,523 314,824 1,066,898 888,904
Income Taxes ...................... 192,000 132,300 470,200 384,000
----------- ----------- ----------- -----------
Net Income .................... $ 259,523 $ 182,524 $ 596,698 $ 504,904
=========== =========== =========== ===========
Earnings Per Share ................ $ .26 $ .17 $ .59 $ .48
=========== =========== =========== ===========
Weighted Average Number of Shares . 1,010,120 1,062,120 1,010,120 1,062,120
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Nine Months Ended September 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 ............... 596,698 596,698
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 ................ 129,908 129,908
----------- ----------- ----------- ----------- -----------
Balance,
September 30, 1995 ... 985,498 $ 5,107,501 $ 2,348,892 $ 15,123 $ 7,471,516
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Month Periods Ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ..................................... $ 596,698 $ 504,904
Adjustments to Reconcile Net
Income to Net Cash Used in
Operating Activities:
Depreciation and Amortization .............. 341,600 298,761
Provision for Loan Losses .................. 40,000
Decrease in Deferred Loan
Origination Fees and Costs, Net .......... (48,968) (963)
Net Increase in Unamortized Discount on
Retained Portion of Sold Loans ........... 24,387 184,777
Net Increase in the Present Value of
Future Servicing Income .................. (685) (134,349)
Gain on Sale of Investment Securities ...... (173,443)
Gain on Sale of Assets ..................... (12,176)
Increase in Loans Held for Sale ............ (2,679,370) (2,542,983)
Increase (Decrease) in Accrued Interest
Receivable and Other Assets .............. 44,910 (791,086)
Increase in Accrued Interest
Payable and Other Liabilities ............ 232,396 79,030
----------- -----------
Net Cash Used in Operating
Activities ............................. (1,449,032) (2,587,528)
----------- -----------
Cash Flows From Investing Activities:
Proceeds from Matured Investment Securities .... 500,000 500,000
Proceeds from Sale of Available-for-Sale
Investment Securities ........................ 2,204,400
Purchase of Available-for-Sale
Investment Securities ........................ (4,591,943)
Net Increase in Loans .......................... (2,214,340) (6,117,942)
Proceeds from Sale of Fixed Assets ............. 3,795 18,248
Purchases of Bank Premises and
Equipment .................................... (42,174) (323,780)
----------- -----------
Net Cash Used in
Investing Activities ....................... (1,752,719) (8,311,017)
----------- -----------
</TABLE>
(Continued)
6
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
Nine Month Periods Ended September 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 ............. $ 3,952,458 $12,491,866
Net Increase (Decrease) in Time Deposits ... 3,067,399 (118,271)
Principal Payments on Long-Term Debt ....... (22,530) (20,700)
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 ................... 6,266,261 12,061,401
------------- -------------
Increase in Cash and
Cash Equivalents ....................... 3,064,510 1,162,856
Cash and Cash Equivalents at Beginning
of Year .................................... 11,604,454 10,888,597
------------- -------------
Cash and Cash Equivalents at End of Period ... $ 14,668,964 $ 12,051,453
============= =============
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for:
Interest Expense ......................... $ 1,012,188 $ 772,428
Income Taxes ............................. $ 467,045 $ 310,845
Non-Cash Investing Activities:
Real Estate Acquired through
Foreclosure .............................. $ 399,901
Net Change in Unrealized Gain
(Loss) on Available-for-Sale
Investment Securities .................... $ 129,908 $ (57,694)
</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 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 liability
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 $53,311,500 and $47,644,400
were being serviced for others at September 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
September 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 ................ $ 3,499,873 $ 3,163 $ (4,442) $ 3,498,594
Obligations of states
and political sub-
divisions ............... 2,574,952 27,353 2,602,305
Federal Reserve Bank
stock ................... 140,500 140,500
----------- ----------- ----------- -----------
$ 6,215,325 $ 30,516 $ (4,442) $ 6,241,399
=========== =========== =========== ===========
</TABLE>
Net unrealized gains on available-for-sale securities in the amount of
$26,074 were recorded net of $10,951 in tax benefits 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 $173,443, 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
September 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>
September 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 ................. $ 4,499,873 $ 4,499,904
Due after five
years through
ten years ............... 1,574,952 1,600,995
Federal Reserve
Bank stock .............. 140,500 140,500
----------- ----------- ----------- -----------
$ 6,215,325 $ 6,241,399 $ - $ -
=========== =========== =========== ===========
</TABLE>
13
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
3. LOANS
Outstanding loans at September 30, 1995 and December 31, 1994 are
summarized below:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Commercial ................................... $ 7,830,748 $ 6,857,703
Real estate - mortgage ....................... 32,617,205 31,795,561
Real estate - construction ................... 2,257,332 2,871,406
Installment .................................. 2,751,543 2,191,965
----------- -----------
45,456,828 43,716,635
Deferred loan fees ........................... (79,795) (128,763)
Allowance for loan losses .................... (731,463) (741,323)
----------- -----------
$44,645,570 $42,846,549
=========== ===========
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30, December 31,
--------------------------- -----------
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of
year ..................... $ 741,323 $ 92,514 $ 792,514
Provision charged to
operations ............... 40,000
Losses charged to
allowance ................ (54,493) (7) (79,143)
Recoveries ................. 4,633 3,500 27,952
----------- ----------- -----------
Balance, end of
period ............. $ 731,463 $ 788,657 $ 741,323
=========== =========== ===========
</TABLE>
At September 30, 1995, the recorded investment in loans that were
considered to be impaired under SFAS 114 was $674,874. Included in this
amount is $674,874 of impaired loans for which the related allowance for
credit losses is $50,100. The average recorded investment in impaired loans
during the quarter and nine month period ended September 30, 1995 was
approximately $674,874 and $754,391, respectively. For the quarter and nine
month period ended September 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 September 30, 1995 and December 31, 1994, the Bank had outstanding loan
commitments and letters of credit totaling $8,014,878 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 $1,213,012 and $1,218,857 at
September 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 nine months ended September 30, 1995 and
1994 totaled $58,607 and $55,190 respectively.
15
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended September 30, 1995
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FINANCIAL CONDITION
Total assets increased by 10.5% to $76.7 million at September 30, 1995, from
$69.4 million at December 31, 1994. Total deposits increased by 11.5% to $68.1
million at September 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 $44.6 million at September 30, 1995, representing a 66% 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 $731,463 at September 30, 1995, adequately provides for possible loan
losses. This allowance represents 1.6% of gross loans outstanding at the end of
the third 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>
September 30, September 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 .................... 12.5% 13.1% 13.4%
Tier 1 Risk-Based Capital Ratio
Regulatory Requirement ........ 6.0% 6.0% 6.0%
Bank Ratio .................... 11.2% 11.9% 12.2%
Leverage Ratio
Regulatory Requirement ........ 5.0% 5.0% 5.0%
Bank Ratio .................... 8.7% 9.1% 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 September 30, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Interest income increased 26.3% to $1,582,870 for the quarter ended September
30, 1995 from $1,253,267 for the quarter ended September 30, 1994. The increased
interest income was primarily due to an increase in loans outstanding and
Federal Funds sold during the quarter ended September 30, 1995.
Interest expense increased 51.2% to $442,120 for the quarter ended September 30,
1995 from $292,370 for the quarter ended September 30, 1994. The increase in
interest expense was the result of interest rates on interest bearing deposits
being higher in the third quarter of 1995 as compared to the third quarter of
1994. In addition, there was a significant increase in Certificates of Deposit
in 1995.
Non-interest income increased 1.0% to $354,598 for the quarter ended September
30, 1995 from $350,946 for the quarter ended September 30, 1994. Service charges
increased 103.9% to $132,327 for the quarter ended September 30, 1995 from
$64,904 for the quarter ended September 30, 1994. In addition, loan servicing
income increased 11.0% to $84,249 for the quarter ended September 30, 1995 from
$75,867 for the quarter ended September 30, 1994 due to continued growth in the
servicing portfolio of SBA loans. A decrease of 29.9% on the gain on sale of
loans reflects management's decision to hold SBA loans for longer periods prior
to sale and a decrease in SBA and mortgage loan activity in 1995 over the same
period during 1994.
The allocation to the Provision for Loan Losses for the third quarter of 1995
was $30,000. There was no allocation for the third quarter of 1994. Net
charge-offs for the quarter ended September 30, 1995 totaled $4,010 as compared
to net recoveries of $1,491 for the same period in 1994.
Other expenses increased 1.7% to $1,013,825 for the quarter ended September 30,
1995 from $997,019 for the quarter ended September 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 September 30, 1995 totaled $259,523 as compared
to net income of $182,524 for the quarter ended September 30, 1994. This
increase in income was primarily the result of a 28.9% increase in interest and
fees on loans and corresponding 18.7% increase in net interest income.
17
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended September 30, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Interest income increased 35.5% to $4,515,625 for the nine month period ended
September 30, 1995 from $3,333,760 for the nine month period ended September 30,
1994. The increased interest income was primarily due to an increase in average
loans outstanding and investment securities during the first nine months of
1995. Interest income on loans held for sale also increased as loans were being
held longer prior to sale. In addition, interest rates on loans were higher
during the first nine months of 1995 as compared to the first nine months of
1994.
Interest expense increased 52.8% to $1,232,531 for the nine month period ended
September 30, 1995 from $806,555 for the nine month period ended September 30,
1994. The increase in interest expense was the result of interest rates on
interest bearing deposits being higher in the first nine months of 1995 as
compared to the first nine months of 1994. In addition, there was a significant
increase in Certificates of Deposit during the first nine months of 1995.
The following table reflects repricing options that are included in the balance
sheet that are sensitive to changes in interest rate. At September 30, 1995, the
cumulative one-year gap was a negative $16.6 million, representing 25.3% of
earning assets. This means that $16.6 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 a slight decrease in its net
interest margin. The Bank's net interest margin at September 30, 1995 was 6.9%
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 45,184 5,273 9,315 3,878 1,991
Net sources 58,234 8,825 1,030 0 564
Incremental gap (13,050) (5,552) 11,123 4,271 478
Cumulative gap (13,050) (16,602) (8,317) (4,439) (3,012)
% of earning assets (19.9) (25.3) (12.7) (6.8) (4.6)
</TABLE>
Non-interest income decreased 26.9% to $959,437 for the first nine months of
1995 from $1,312,826 for the first nine months of 1994. Service charges
increased 54.0% to $302,931 for the first nine months of 1995 from $196,746 for
the first nine 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 22.5% to $251,773 for the first nine
months of 1995 from $205,483 for the first nine months of 1994 due to continued
growth in the servicing portfolio of SBA loans. A decrease of 48.3% on the gain
on sale of loans reflects management's decision to hold SBA loans for longer
periods prior to sale and a decrease in SBA and 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 $173,443. There were no sales of
securities during the first nine 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 September 30, 1995
PART I - FINANCIAL INFORMATION (Continued)
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (CONTINUED)
The allocation to the Provision for Loan Losses for the first nine months of
1995 was $40,000. There was no allocation for the first nine months of 1994. Net
charge-offs for the nine month period ended September 30, 1995 totaled $49,860
as compared to net charge-offs which totaled $3,848 for the same period in 1994.
Other expenses increased 6.3% to $3,135,633 for the first nine months of 1995
from $2,951,127 for the nine month period ended September 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 nine months ended September 30, 1995 totaled $596,698 as
compared to net income of $504,904 for the nine months ended September 30, 1994.
This increase in income was primarily the result of a 39.4% increase in interest
and fees on loans and corresponding 29.9% increase in net interest income.
19
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended September 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:
<TABLE>
<CAPTION>
Nominee For Office Shares For Shares Against
or Withheld
<S> <C> <C>
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
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter ended September 30,
1995.
20
<PAGE>
AUBURN BANCORP AND SUBSIDIARY
FORM 10-Q
(Continued)
For the Quarter Ended September 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: November 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
`
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,268,964
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,241,399
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 50,229,826
<ALLOWANCE> 731,463
<TOTAL-ASSETS> 76,652,815
<DEPOSITS> 68,089,369
<SHORT-TERM> 0
<LIABILITIES-OTHER> 527,567
<LONG-TERM> 564,363
<COMMON> 5,107,501
0
0
<OTHER-SE> 2,364,015
<TOTAL-LIABILITIES-AND-EQUITY> 76,652,815
<INTEREST-LOAN> 3,961,086
<INTEREST-INVEST> 554,539
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,515,625
<INTEREST-DEPOSIT> 1,195,747
<INTEREST-EXPENSE> 1,232,531
<INTEREST-INCOME-NET> 3,283,094
<LOAN-LOSSES> 40,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,135,633
<INCOME-PRETAX> 1,066,898
<INCOME-PRE-EXTRAORDINARY> 1,066,898
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 596,698
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<YIELD-ACTUAL> 6.69
<LOANS-NON> 225,052
<LOANS-PAST> 68,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 741,323
<CHARGE-OFFS> 54,493
<RECOVERIES> 4,633
<ALLOWANCE-CLOSE> 731,463
<ALLOWANCE-DOMESTIC> 731,463
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
