SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1996
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-60230
Albion Banc Corp.
(Exact name of registrant as specified in its charter)
Delaware 16-1435160
(State or other jurisdiction (IRS Employer
of incorporation or organization Identification No.)
48 North Main Street, Albion, New York 14411-0396
(Address of principal executive offices) (Zip Code)
(716) 589-5501
(Registrants telephone number, including area code)
(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 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.
X 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.
Class Outstanding as of November 1,1996
Common Stock, $.01 par value 263,086 shares
ALBION BANC CORP.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition
September 30, 1996 (unaudited)and December 31, 1995 1
Consolidated Statements of Income (unaudited)
Three months ended September 30, 1996 and 1995 2
Consolidated Statements of Income (unaudited) 3
Nine months ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows (unaudited) 4
Nine months ended June 30, 1996 and 1995
Notes to Consolidated Financial Information 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II. Other Information 11
Signatures 12
ALBION BANC CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, December 31,
1996 1995
Assets (unaudited)
Cash and due from banks $ 165,045 $ 1,047,018
Fed funds sold 3,000,000 1,350,000
Investment securities:
Available for sale, 3,855,122 4,137,800
Held to maturity 2,744,068 3,279,551
Loans 47,278,779 44,292,708
Less-Allowance for loan losses (309,224) (244,100)
Net Loans 46,969,555 44,048,608
Accrued interest receivable 403,640 384,237
Federal Home Loan Bank stock 370,800 475,000
Premises and equipment, net 2,125,769 2,191,147
Other assets 226,077 175,518
Total Assets $59,860,076 $57,088,879
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 1,285,925 $ 1,086,601
Interest-bearing 45,818,531 45,472,828
Total deposits 47,104,456 46,559,429
FHLB advances and other borrowings 6,281,637 3,298,782
Advances from borrowers for taxes 409,033 968,711
Other liabilities 298,246 172,837
Total Liabilities $54,093,372 $50,999,759
Shareholders' equity:
Preferred stock, $.01 par value
500,000 shares authorized, none outstanding
Common stock, $.01 par value
3,000,000 shares authorized, 263,086 and
260,714 shares outstanding, respectively 2,631 2,607
Capital surplus 2,343,785 2,305,975
Retained earnings 3,680,429 3,833,811
Treasury stock at cost, 13,035
and 0 shares, respectively (221,595) 0
Unearned ESOP shares (78,065) (97,617)
Unrealized gain on securities 39,519 44,344
Total shareholders' equity 5,766,704 6,089,120
Total Liabilities and Shareholders'
Equity $59,860,076 $57,088,879
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
September 30,
1996 1995
Interest income:
Interest and fees on loans $ 993,846 $ 907,646
Interest on investment securities 108,430 162,873
Interest on federal funds sold 11,747 60,337
Total interest income 1,114,023 1,130,856
Interest expense:
Interest on deposits 523,724 557,979
Interest on borrowed funds 56,138 110,918
Total interest expense 579,862 668,897
Net interest income 534,161 461,959
Provision for loan losses 76,764 9,000
Net interest income after
provision for loan losses 457,397 452,959
Noninterest income:
Gain on sale of loans and real estate owned 10,242 4,555
Other noninterest income 53,245 50,889
Total noninterest income 63,487 55,444
Noninterest expense:
Salaries and employee benefits 222,852 210,674
Occupancy expenses 76,752 60,312
Deposit insurance premiums 31,614 27,298
SAIF special assessment 274,921 0
Professional fees 34,064 56,545
Data processing fees 51,251 37,164
Other operating expenses 103,520 64,839
Total noninterest expense 794,974 456,832
Income before income tax (benefit) expense (274,090) 51,571
Income tax (benefit) expense (106,299) 18,300
Net (Loss) income $ (167,791) $ 33,271
Earnings per common and common
equivalent share ($.69) $0.13
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Nine Months Ended
September 30,
1996 1995
Interest income:
Interest and fees on loans $2,903,686 $2,781,852
Interest on investment securities 348,727 363,453
Interest on federal funds sold 33,211 163,126
Total interest income 3,285,624 3,308,431
Interest expense:
Interest on deposits 1,612,305 1,474,369
Interest on borrowed funds 142,311 386,553
Total interest expense 1,754,616 1,860,922
Net interest income 1,531,008 1,447,509
Provision for loan losses 94,764 27,000
Net interest income after
provision for loan losses 1,436,244 1,420,509
Noninterest income:
Gain on sale of loans and real estate owned 38,030 38,055
Other noninterest income 162,023 133,921
Total noninterest income 200,053 171,976
Noninterest expense:
Salaries and employee benefits 681,255 609,172
Occupancy expenses 224,534 175,911
Deposit insurance premiums 91,825 72,044
SAIF special assessment 274,921 0
Professional fees 97,594 157,995
Data processing fees 154,558 107,278
Other operating expenses 250,548 221,771
Total noninterest expense 1,775,235 1,344,171
Income before income tax (benefit) expense (138,938) 248,314
Income tax (benefit) expense (63,200) 82,800
Net (Loss) income $ (75,738) $ 165,514
Earnings per common and common
equivalent share ($.30) $0.65
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net Income (loss) $ (75,738) $ 165,514
Depreciation, amortization and accretion 108,408 64,750
Provision for loan losses 94,764 27,000
Provision for losses on foreclosed real estate 41,000 0
Unrealized gain on securites 17,984
Provision for deferred taxes 0 (7,600)
Net gain on sale of mortgage loans (5,948) (38,055)
Net gain on sale of real estate owned (32,082) 0
ESOP expense 32,479 26,802
Changes in operating assets and liabilities-
Other assets (226,232) 17,623
Accrued income taxes and other liabilities 125,409 (57,672)
Net cash provided by operating activities $ 62,060 $ 216,346
Cash flows from investing activities:
Proceeds from the sale of foreclosed real estate 153,158 0
Proceeds from the sales of loans 459,294 2,134,463
Proceeds from maturities of investment securities
held to maturity 1,240,000 2,405,000
Purchases of investment securities held to maturity (681,702) (3,381,062)
Purchases of investment securities
available for sale (497,372) (3,892,949)
Principal payments on mortgage-backed securities 758,226 424,882
Net (increase) decrease in loans receivable (3,469,057) 944,125
Redemption of FHLB stock 104,200 47,500
Net purchase of fixed assets (55,241) (788,869)
Net cash used in investing activities (1,988,494) (2,106,910)
Cash flows from financing activities:
Net increase in demand deposits, NOW accounts
and money market accounts 199,324 251,558
Net increase in time deposits 345,703 7,421,886
Proceeds from FHLBNY and other borrowings 2,982,855 (3,990,753)
Net increase in advances from borrowers for
taxes and insurance (559,678) (568,380)
Proceeds from exercise of stock options 24,907 0
Dividends paid (77,055) (76,100)
Purchase of treasury shares (221,595) 0
Net cash provided by financing activities 2,694,461 3,038,211
Net increase in cash and cash equivalents 768,027 1,147,647
Cash and cash equivalents at beginning of period 2,397,018 660,261
Cash and cash equivalents at end of period $3,165,045 $1,807,908
Cash paid during the period for:
Interest $1,754,616 $1,860,922
Income taxes 20,000 77,081
ALBION BANC CORP.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION:
The unaudited interim financial information includes the accounts of the
Company, the Association and New Frontier of Albion Corp. The financial
information has been prepared in accordance with the Summary of Significant
Accounting Policies as outlined in the Company's Annual Report for the year
ended December 31, 1995, and in the opinion of management, contains all
adjustments necessary to present fairly the Company's financial position as of
September 30, 1996 and December 31, 1995, and its results of operations for the
six and nine month periods ended September 30, 1996 and 1995 and cash flows for
the nine month period ended September 30, 1996 and 1995. All adjustments made
to the unaudited interim financial information were of a recurring nature.
Certain prior year balances have been reclassified to conform with the current
year presentation.
Note 2 - INVESTMENT SECURITIES AVAILABLE FOR SALE:
The amortized cost and estimated market value of investment securities available
for sale are as follows:
September 30, 1996 December 31, 1995
Amortized Market Amortized Market
Cost Value Cost Value
Federal Home Loan Mortgage $1,287,696 $1,309,186 $1,707,785 $1,727,500
Corporation
Federal National Mortgage 2,113,444 2,148,697 1,891,894 1,935,000
Association
Government National Mortgage
Association 388,191 397,239 461,691 475,300
$3,789,331 $3,855,122 $4,061,370 $4,137,800
Note 3 - INVESTMENT SECURITIES HELD TO MATURITY:
The amortized cost and estimated market value of investment securities held to
maturity are as follows:
September 30, 1996 December 31, 1995
Amortized Market Amortized Market
Cost Value Cost Value
U.S. Treasury Securities $2,193,663 $2,265,544 $2,286,858 $2,300,300
State and political
subdivision securities 200,363 202,078 391,443 396,600
Corporate obligations 350,042 351,188 601,250 611,000
$2,744,068 $2,818,810 $3,279,551 $3,307,900
NOTE 4 - LOANS RECEIVABLE:
Loans consist of the following:
September 30, December 31,
1996 1995
(Unaudited)
Real estate loans:
Secured by one-to-four family property $38,716,948 $36,122,461
Secured by other properties 2,448,973 2,594,168
Construction loans 1,242,100 651,649
42,408,021 39,368,278
Other loans:
Automobile loans 154,080 228,544
Home improvement loans 4,356,466 3,996,860
Other 1,098,821 1,187,811
5,609,367 5,413,215
Less:
Undisbursed portion of loans (759,179) (487,913)
Net deferred loan origination fees 20,570 (872)
(738,609) (488,785)
$47,278,779 $44,292,708
NOTE 6 - ALLOWANCE FOR LOAN LOSSES:
An analysis of changes in the allowance for loan losses is as follows:
Nine-months ended
September 30,
1996 1995
Balance at beginning of period $244,100 $224,000
Provision expense 94,764 27,000
Charge-offs 29,640 15,923
Balance at end of period $309,224 $235,077
NOTE 7- INCOME TAXES:
The Company files a consolidated federal income tax return. The provision for
income taxes is based on income as recorded in the consolidated financial
statements. This provision differs from amounts currently payable because of
temporary differences in the recognition of certain income and expense items for
financial and tax purposes. The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes". SFAS 109 requires that a deferred tax liability or asset be
adjusted for the effect of changes in tax laws or rates in the period of
enactment.
NOTE 8 - EARNINGS PER SHARE:
Earnings per share is determined by dividing income for the period by the
weighted average number of common and common equivalent shares. Stock options
are regarded as common stock equivalents, whereas ESOP shares not committed to
be released are not considered outstanding for purposes of calculating earnings
per share. The weighted average number of shares used in the computation of
earnings per share was 252,501 and 256,697 for the nine month period ended
September 30, 1996 and September 30, 1995, respectively and 242,498 and 253,948
for the three month period ended September 30, 1996 and September 30, 1995,
respectively. There is no material difference between primary and fully diluted
earnings per share.
NOTE 9 - RECENT REGULATORY DEVELOPMENTS
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the Act) was
signed into law. The Act authorizes the FDIC to impose a one-time special
assessment on SAIF-assessable deposits of depository institutions. The special
assessment, which is based on SAIF-assessable deposits at March 31, 1995, is
intended to recapitalize the SAIF. The one-time special assessment for the
Company totaled $274,921 and was accrued on September 30, 1996.
ALBION BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
Financial Condition
Total assets of Albion Banc Corp. (the "Company") were $59.9 million as of
September 30, 1996, an increase of $2.8 million or 4.9% over total assets as of
December 31, 1995. Deposits, the Company's primary source of funds, increased
$.5 million or 1.2% to $47.1 million at September 30, 1996. Borrowings from the
Federal Home Loan Bank of New York were $6.0 million at September 30, 1996,an
increase of $3.0 million from the $3.0 million at December 31, 1995.
Investment securities available for sale, primarily mortgage-backed securities,
decreased from $4.1 million at December 31, 1995 to $3.9 million at September
30, 1996. This decrease can be attributed to normal principal paydowns of
mortgage-backed securities. Proceeds from principal paydowns were reinvested
primarily in real estate loans.
Investment securities held to maturity, primarily U.S. Treasury Securities,
Corporate Bonds and Municipal obligations, decreased from $3.3 million at
December 31, 1995 to $2.7 million at September 30, 1996. This decrease can be
attributed to normal maturities in the portfolio. Proceeds from the maturities
were reinvested primarily in real estate loans.
Total loans outstanding as of September 30, 1996 were $47.3 million, an increase
of $3.0 million over total loans at December 31, 1995. The majority of this
increase occurred in real estate loans secured by one-to-four family property,
which increased by $2.6 million over the respective balance at December 31,
1995. Real estate loans secured by other properties, including construction
loans as of September 30, 1996, increased by $.4 million during the period.
Consumer loans, primarily home equity and personal loans increased $196,152
during this period.
The Company's shareholders' equity decreased $322,416 or 5.3%, from $6,089,120
at December 31, 1995 to $5,766,704 at September 30, 1996. This decrease is due
primarily to the Company's repurchase of 13,035 common stock shares which
reduced shareholders' equity by $221,595 and the net loss during the period of
$75,738. The Company's equity as a percentage of total assets at September 30,
1996 was 9.6% and exceeds all regulatory requirements.
Liquidity measures the ability of the Company to meet its maturing obligations
and existing commitments, to withstand fluctuations in deposit levels, to fund
its operations and to provide for customers credit needs. The Company's
principal sources of funds are customer deposits, advances from the Federal Home
Loan Bank of New York and principal and interest payments on loans, mortgage-
backed securities and investments. Under current federal regulations, Albion
Federal is required to maintain specified liquid assets in an amount equal to at
least 5% of its net withdrawable liabilities plus short-term borrowings. The
Company has generally maintained liquidity levels well above those required by
regulation. At September 30, 1996, Albion Federal's liquidity ratio was 13.0%,
exceeding the minimum required. Federal Funds sold at September 30, 1996
amounted to $3,000,000. These funds are available immediately to meet upcoming
obligations. The Company has not sold any investments prior to maturity and has
not transferred any securities between its available for sale and held to
maturity categories.
Comparison of Operating Results for the Nine Months Ended September 30, 1996 and
1995
Net Income. Net income (loss) of $(75,738) for the nine months ended September
30, 1996 represents a decrease of $241,252 or 145.8% from the $165,514 earned in
the comparable period ended September 30, 1995. This decline was primarily the
result of the one-time special assessment imposed by the Federal Deposit
Insurance Corporation (FDIC) on SAIF-assessable deposits and additional loan
loss provisions/real estate owned (REO) reserves. The special assessment of the
Company totaled $274,921 and was accrued during the quarter ended September 30,
1996. The additional provision for loan losses/REO reserves which totaled
$135,764 was the result of growth in the loan portfolio and the inherent risk
associated with such growth and three nonperforming participation mortgage loan
pools and two real estate foreclosures.
Net Interest Income. Net interest income increased to $1,531,008 for the nine
months ended September 30, 1996, up 5.8% or $83,499 from $1,447,509 earned
during the nine month period ended September 30, 1995. This increase is due
primarily to an increase in interest and fees on loans of $121,834 which was
offset however, by a decrease in interest and dividends on investment securities
of $144,641. Also, interest on deposits increased $137,936, however interest on
borrowed funds decreased $244,242. Total interest income decreased 0.7% or
$22,807 during the period while total interest expense decreased 5.7% or
$106,306.
Provision for Loan Losses. The provision for possible loan losses, the charge
to earnings for potential credit losses associated with lending activities, was
$94,764 for the nine months ended September 30, 1996, an increase of 251.0% or
$67,764 for the comparable period in 1995. Management charges earnings for an
amount necessary to maintain the allowance for possible loan losses at a level
considered adequate to absorb potential losses in the loan portfolio. The level
of the allowance is based on management's evaluation of individual loans, past
loan loss experience, the assessment of prevailing conditions and anticipated
economic conditions and other relevant factors. The allowance for possible loan
losses of the Association at September 30, 1996 was $309,224 or .65% of total
loans, compared to $244,100, or .55% of total loans at December 31, 1995. The
increase in the provision during the first nine months was due primarily to
management's quarterly analysis of the Association's loan portfolio, principally
driven by deterioration in the credit quality of three participation mortgage
loan pools.
Noninterest Income. Noninterest income for the nine month period ended
September 30, 1996 was $200,053 compared with $171,976 during the same period in
the prior year. This increase was attributable to increased fee income from
depository transaction accounts and fee income from New Frontier of Albion
Corp. Also , the sale of real estate owned resulted in a net gain of $32,100.
Noninterest Expense. Noninterest expense for the nine month period ended
September 30, 1996, was $1,775,235, an increase of 32.1% over the $1,344,171
recorded for the same period in the prior year. This increase in noninterest
expense resulted primarily from the one-time special assessment imposed by the
FDIC on SAIF-assessable deposits. The special assessment for the Association
totaled $274,921 and was accrued at September 30, 1996. The remainder of the
increase in noninterest expense is a result of increases in the following:
salaries and employee benefits expense of $72,083 or 11.8%; occupancy expenses
of $48,623 or 27.6%; deposit insurance premiums of $19,781 or 27.5%; data
processing fees of $47,280 or 44.1% and other noninterest expense of $28,777 or
13.0%. These increases are primarily the result of general increases in overall
business volume and operations and expenses associated with the operation of the
new branch facility in Clarkson, New York.
Comparison of Operating Results for the Three Months Ended September 30, 1996
and 1995
Net Interest Income. Net interest income increased to $534,161 for the three
months ended September 30, 1996, up 15.6% from $461,959 earned during the three
month period ended September 30, 1995. This increase is primarily due to
increased interest income and fees on loans and decreased interest expense on
deposits and borrowed funds. Total interest income decreased 1.5% or $16,833
during the period while total interest expense decreased 13.3% or $89,035.
Provision for Loan Losses. The provision for possible loan losses, the charge
to earnings for potential credit losses associated with lending activities, was
$76,764 for the three months ended September 30, 1996, an increase of 752.9% or
$67,764 over the $9,000 in the comparable period in 1995. This increase is
primarily the result of management's quarterly review of the loan portfolio,
principally driven by deterioration in the credit quality of three participation
mortgage loan pools.
Noninterest Income. Noninterest income for the three month period ended
September 30, 1996 was $63,487 compared with $55,444 during the same period in
the prior year. This increase was attributable primarily to increased fee
income from depository transaction accounts and fee income from New Frontier of
Albion Corp.
Noninterest Expense. Noninterest expense for the three month period ended
September 30, 1996 was $794,974 an increase of 74.0% or $338,142 over the
$456,832 recorded for the same period in the prior year. This increase in
noninterest expense resulted primarily from the one-time special assessment
imposed by the FDIC on SAIF-assessable deposits. The special assessment for the
Association totaled $274,921 and was accrued at September 30, 1996. The
remainder of the increase in noninterest expense is a result of increases in the
following: salaries and employee benefits expense of $12,178 or 5.8%; occupancy
expenses of $16,440 or 27.3%; deposit insurance premiums of $4,316 or 15.8%;
data processing fees of $14,087 or 37.9%; and other noninterest expense of
$38,681 or 60.0%. These increases are primarily the result of general increases
in overall business volume and operations and expenses associated with the
operation of the new branch facility in Clarkson, New York and writedowns of
foreclosed real estate.
PART II - OTHER INFORMATION
Item 1. Legal proceedings
Periodically, there have been various claims and lawsuits involving
the Company, mainly as a defendant, such as claims to enforce
liens, condemnation proceedings on properties in which the Company
holds security interests, claims involving the making and servicing
of real property loans and other issues incident to the Company's
business. The Company is not a party to any pending legal
proceedings that it believes would have a material adverse effect
on the financial condition or operation of the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
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 therunto duly authorized.
Albion Banc Corp.
(Registrant)
Dated: November 1, 1996 \s\Jeff S Rheinwald
Jeffrey S. Rheinwald
President and C.E.O.
Dated: November 1, 1996 \s\Mark F. Reed
Mark F. Reed
Vice President and C.F.O.
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] SEP-30-1996
[CASH] 165
[SECURITIES] 6,599
[RECEIVABLES] 47,279
[ALLOWANCES] 309
[INVENTORY] 0
[CURRENT-ASSETS] 3,000
[PP&E] 2,987
[DEPRECIATION] 861
[TOTAL-ASSETS] 59,860
[CURRENT-LIABILITIES] 47,104
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 3
[OTHER-SE] 5,764
[TOTAL-LIABILITY-AND-EQUITY] 5,767
[SALES] 0
[TOTAL-REVENUES] 3,486
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 3,530
[LOSS-PROVISION] 95
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (139)
[INCOME-TAX] (63)
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (76)
[EPS-PRIMARY] (.30)
[EPS-DILUTED] (.30)
</TABLE>
