SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
[ ]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 ot the latest practicable date.
Class Outstanding as of August 1, 1997
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
June 30, 1997 (unaudited)and December 31, 1996 1
Consolidated Statements of Income (unaudited)
Three months ended June 30, 1997 and 1996 2
Consolidated Statements of Income (unaudited) 3
Six months ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 1997 and 1996 4
Notes to Consolidated Financial Information 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
Part II. Other Information 10
Signatures 11
ALBION BANC CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
1997 1996
Assets (unaudited)
Cash and due from banks $ 1,734,035 $ 1,025,929
Fed funds sold 4,450,000 1,100,000
Investment securities:
Available for sale 3,607,800 3,945,700
Held to maturity 6,671,892 7,302,388
Loans held for sale 553,501 657,698
Net loans receivable 48,514,076 47,487,035
Less-Allowance for loan losses (266,747) (305,900)
Net Loans 48,247,329 47,181,135
Accrued interest receivable 378,483 364,517
Federal Home Loan Bank stock 500,000 450,000
Premises and equipment, net 2,160,064 2,095,528
Other assets 324,723 462,215
Total Assets $68,627,827 $64,585,110
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 2,318,723 $ 1,585,086
Interest-bearing 50,002,879 46,906,933
Total deposits 52,321,602 48,492,019
FHLB advances and other borrowings 9,263,367 9,275,675
Advances from borrowers for taxes 862,556 823,620
Other liabilities 189,618 130,209
Total Liabilities $62,637,143 $58,721,523
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
shares outstanding 2,631 2,631
Capital surplus 2,359,373 2,348,185
Retained earnings 3,836,997 3,749,459
Unearned ESOP shares (57,673) (70,708)
Unrealized gain on securities 70,951 55,615
Treasury stock at cost, 13,035 shares (221,595) (221,595)
Total shareholders' equity 5,990,684 5,863,587
Total Liabilities and Shareholders'
Equity $68,627,827 $64,585,110
The accompanying notes are an integral part of these consolidated financial
statements.
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
June 30,
1997 1996
Interest income:
Interest and fees on loans $1,019,868 $ 962,175
Interest on investment securities 196,407 115,017
Interest on federal funds sold 54,059 5,377
Total interest income 1,270,334 1,082,569
Interest expense:
Interest on deposits 554,371 530,054
Interest on borrowed funds 144,088 42,895
Total interest expense 698,459 572,949
Net interest income 571,875 509,620
Provision for loan losses 8,764 9,000
Net interest income after
provision for loan losses 563,111 500,620
Noninterest income:
Gain on sale of mortgage loans and investments 6,717 0
Other noninterest income 77,324 58,354
Total noninterest income 84,041 58,354
Noninterest expense:
Salaries and employee benefits 234,479 234,700
Occupancy expenses 83,377 73,871
Deposit insurance premiums 11,584 30,549
Professional fees 30,553 34,311
Data processing fees 52,801 50,832
Other operating expenses 126,504 75,555
Total noninterest expense 539,298 499,818
Income before income taxes 107,854 59,156
Provision for income taxes 57,730 20,785
Net Income $ 50,124 $ 38,371
Earnings per common and common
equivalent share $0.20 $0.15
The accompanying notes are an integral part of these consolidated financial
statements.
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Six Months Ended
June 30,
1997 1996
Interest income:
Interest and fees on loans $2,026,335 $1,900,508
Interest on investment securities 399,779 240,297
Interest on federal funds sold 69,722 21,464
Total interest income 2,495,836 2,162,269
Interest expense:
Interest on deposits 1,082,884 1,088,580
Interest on borrowed funds 290,608 86,173
Total interest expense 1,373,492 1,174,753
Net interest income 1,122,344 987,516
Provision for loan losses 17,414 18,000
Net interest income after
provision for loan losses 1,104,930 969,516
Noninterest income:
Gain on sale of mortgage loans and investments 6,717 0
Other noninterest income 191,246 145,897
Total noninterest income 197,963 145,897
Noninterest expense:
Salaries and employee benefits 473,013 458,402
Occupancy expenses 167,256 147,793
Deposit insurance premiums 22,709 60,211
Professional fees 60,972 65,730
Data processing fees 96,145 103,296
Other operating expenses 203,373 139,824
Total noninterest expense 1,023,468 975,256
Income before income taxes 279,425 140,157
Provision for income taxes 115,963 48,104
Net Income $ 163,462 $ 92,053
Earnings per common and common
equivalent share $0.65 $0.36
The accompanying notes are an integral part of these consolidated financial
statements.
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net Income $ 163,462 $ 92,053
Depreciation, amortization and accretion 79,019 72,438
Provision for loan losses 17,414 18,000
Net gain on sale of real estate owned (34,476) (27,537)
Net gain on sale of mortgage loans 6,717 0
ESOP expense 24,223 21,725
Changes in operating assets and liabilities-
Mortgage loans held for sale (402,373) 0
Other assets (117,628) (94,738)
Accrued income taxes and other liabilities 59,409 (82,863)
Net cash used in operating activities $ (204,233) $ (922)
Cash flows from investing activities:
Proceeds from the sale of foreclosed real estate 254,586 47,992
Proceeds from the sale of loans 506,570 0
Proceeds from maturities of investment securities
held to maturity 3,100,000 1,140,000
Purchases of investment securities held to maturity (2,624,738) (681,699)
Principal payments on mortgage-backed securities 523,805 630,580
Net (increase) decrease in loans receivable (1,083,608) (2,898,879)
Purchase of FHLB stock (50,000) 0
Net purchase of fixed assets (144,286) (51,162)
Net cash provided by (used in) investing activities 482,051 (1,813,168)
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and money market accounts 733,637 398,069
Net (decrease) increase in time deposits 3,095,946 548,555
Repayment of borrowings (12,308) (11,308)
Net decrease in advances from borrowers for
taxes and insurance 38,936 (40,712)
Purchase of treasury shares 0 (142,800)
Dividends paid (75,923) (77,055)
Net cash provided by financing activities 3,780,288 674,749
Net (decrease) increase in cash and cash equivalents 4,058,106 (1,139,341)
Cash and cash equivalents at beginning of period 2,125,929 2,397,018
Cash and cash equivalents at end of period $6,184,035 $1,257,677
Cash paid during the period for:
Interest $1,373,492 $1,174,753
Income taxes 68,000 26,000
The accompanying notes are an integral part of these consolidated financial
statements.
ALBION BANC CORP.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 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, 1996, and in the opinion of management, contains all adjustments
necessary to present fairly the Company's financial position as of June 30,
1997 and December 31, 1996, and its results of operations for the three and
six month periods ended June 30, 1997 and 1996 and cash flows for the six
month period ended June 30, 1997 and 1996. 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:
The amortized cost and estimated market value of investment securities available
for sale are as follows:
June 30, 1997 December 31, 1996
Amortized Market Amortized Market
Cost Value Cost Value
Mortgage-backed securities $3,489,666 $3,607,800 $3,850,505 $3,945,700
The amortized cost and estimated market value of investment securities held to
maturity are as follows:
June 30, 1997 December 31, 1996
Amortized Market Amortized Market
Cost Value Cost Value
U.S. Treasury Securities $ 599,275 $ 599,600 $2,872,670 $2,875,100
U.S. Agencies 1,000,308 999,700
State and political
subdivision securities 0 0 200,218 201,400
Mortgage-backed securities 4,972,347 4,956,400 4,129,590 4,106,600
Corporate obligations 99,962 100,200 99,910 100,700
$6,671,892 $6,655,900 $7,302,388 $7,283,800
NOTE 3 - LOANS RECEIVABLE:
Loans consist of the following:
June 30, December 31,
1997 1996
(Unaudited)
Real estate loans:
Secured by one-to-four family property $39,034,286 $38,734,967
Secured by other properties 2,187,724 2,234,372
Construction loans 0 578,318
41,222,010 41,547,657
Other loans:
Automobile loans 112,599 129,271
Home improvement loans 6,288,631 4,959,798
Other 922,682 1,106,331
7,323,912 6,195,400
Less:
Undisbursed portion of loans (64,500) (278,927)
Net deferred loan origination costs 32,654 22,905
Allowance for loan losses (266,747) (305,900)
(298,593) (561,922)
$48,247,329 $47,181,135
NOTE 4 - ALLOWANCE FOR LOAN LOSSES:
An analysis of changes in the allowance for loan losses is as follows:
Six months-ended
June 30,
1997 1996
Balance at beginning of period $305,900 $244,100
Provision expense 17,414 18,000
Recoveries (Charge-offs),net (56,567) (19,123)
Balance at end of period $266,747 $242,977
NOTE 5 - 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 250,166 and 255,267 for the six
month period ended June 30, 1997 and June 30, 1996, respectively and 251,170
and 251,285 for the three month period ended June 30, 1997 and June 30, 1996,
respectively. There is no material difference between primaryand fully
diluted earnings per share.
ALBION BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1997
Financial Condition
Total assets of Albion Banc Corp. (the "Company") were 68.6 million as of June
30, 1997, an increase of $4.0 million or 6.3% over total assets as of
December 31, 1996. Deposits, the Company's primary source of funds,
increased $3.8 million or 7.9% to $52.3 million at June 30, 1997. Borrowings
from the Federal Home Loan Bank of New York were $9.0 million at June 30,
1997,unchanged from the $9.0 million at December 31, 1996.
Investment securities available for sale, primarily adjustable rate mortgage-
backed securities, decreased from $3.9 million at December 31, 1996 to $3.6
million at June 30, 1997. This decrease can be attributed to normal
principal paydowns of mortgage-backed securities. Proceeds from principal
paydowns were reinvested primarily in consumer loans.
Investment securities held to maturity, primarily mortgage-backed securities,
U.S. Treasury and government agency securities, corporate bonds and municipal
obligations, decreased from $7.3 million at December 31, 1996 to $6.7 million at
June 30, 1997. This decrease can be attributed to normal maturities and
paydowns in the portfolio. Proceeds from the maturities and paydowns were
reinvested primarily in consumer loans.
Total loans receivable as of June 30, 1997 were $48.5 million, an increase of
$1.0 million over total loans at December 31, 1996. The majority of this
increase occurred in consumer loans, primarily home equity loans which
increased by $1.3 million over the respective balance at December 31, 1996.
Real estate loans secured by one-to-four family properties increased by $.3
million, while real estate loans secured by other properties, including
construction loans as of June 30, 1997, decreased by $.6 million during the
period.
Deposits increased $3.8 million or 7.9% from $48.5 million at December 31,
1996 to $52.3 million at June 30, 1997. This increase is attributable to the
Association offering attractive rates on certificate of deposit products and
growth in core deposits.
The Company's shareholders' equity increased $127,097 or 2.2%, from
$5,863,587 at December 31, 1996 to $5,990,684 at June 30, 1997. This
increase is due primarily to earnings in the first two quarters and the
resulting increase in equity, offset by cash dividends on common stock of
$76,000. The Company's equity as a percentage of total assets at June 30,
1997 was 8.7% 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 June 30, 1997, Albion Federal's
liquidity ratio was 12.4%, exceeding the minimum required. Federal Funds
sold at June 30, 1997 amounted to $4,450,000. These funds are available
immediately to meet upcoming obligations. For the six month periods
ending June 30, 1997 and 1996, respectively, 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 Six Months Ended June 30, 1997 and 1996
Net Income. Net income of $163,462 for the six months ended June 30, 1997
represents an increase of $71,409 or 77.6% from the $92,053 earned in the
comparable period ended June 30, 1996.
Net Interest Income. Net interest income increased to $1,122,344 for the six
months ended June 30, 1997, up 13.7% from $987,516 earned during the six month
period ended June 30, 1996. This increase is due primarily to growth in the
balance sheet, primarily loans and investment securities. Total interest income
increased 15.4% or $333,567 during the period, while total interest expense
increased 16.9% or $198,739.
Provision for Loan Losses. The provision for possible loan losses, the
charge to earnings for potential credit losses associated with lending
activities, was $17,414 for the six months ended June 30, 1997, a decrease of
$586 from the comparable period in 1996. Management charges earnings for an
amount necessary to maintain the allowance for 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 June 30, 1997 was $266,747 or .54% of total
loans, compared to $305,900, or .64% of total loans at December 31, 1996.
The decrease in the allowance for possible loan losses was due to a $40,000
write-down of three participation mortgage loan pools during the period. The
decrease in the allowance for possible loan losses was due primarily to
management's quarterly analysis of the Association's loan portfolio.
Noninterest Income. Noninterest income for the six month period ended June 30,
1997 was $191,246 compared with $145,897 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. Included in both June 30, 1997 and June 30, 1996 was nonrecurring loan
recovery income related to profits on the sale of real estate owned of
$34,000 and $27,000 respectively.
Noninterest Expense. Noninterest expense for the six month period ended June
30, 1997 was $1,023,468 an increase of 4.9% over the $975,256 recorded for
the same period in the prior year. This increase is a result of increases in
the following: salaries and employee benefits expense of $14,611 or 3.2%;
occupancy expenses of $19,463 or 13.2%; and other operating expenses of
$63,549 or 45.4%. These increases were primarily the result of general
increases in overall business volume and included a nonrecurring charge of
$41,642 for expenses related to the conversion to our in-house data
processing system. These increases were partially offset by a decrease in
deposit insurance premiums of $37,502 or 62.3% due to reduced premiums being
charged as a result of the prior year recapitalization of the Savings
Association Insurance Fund.
Comparison of Operating Results for the Three Months Ended June 30, 1997 and
1996
Net Income. Net income of $50,124 for the three months ended June 30, 1997
represents an increase of $11,753 or 30.6% from the $38,371 earned in the
comparable period ended June 30, 1996.
Net Interest Income. Net interest income increased to $571,875 for the three
months ended June 30, 1997, up 12.2% from $509,620 earned during the three month
period ended June 30, 1996. This increase is primarily due to growth in the
balance sheet, primarily loans and investments. Total interest income increased
17.3% or $187,765 during the period while total interest expense increased 21.9%
or $125,510.
Provision for Loan Losses. The provision for possible loan losses, the
charge to earnings for potential credit losses associated with lending
activities, was $8,764 for the three months ended June 30, 1997, a decrease
of $236 from the comparable period in 1996.
Noninterest Income. Noninterest income for the three month period ended June
30, 1997 was $84,041 compared with $58,354 during the same period in the
prior year. This increase was attributable primarily to increased fee income
from depository transaction accounts, fee income from New Frontier of Albion
Corp and gains on the sale of mortgage loans.
Noninterest Expense. Noninterest expense for the three month period ended
June 30, 1997 was $539,298 an increase of 7.9% over the $499,818 recorded for
the same period in the prior year. This increase is a result of increases in
the following: occupancy expenses of $9,506 or 12.9%; and other operating
expenses of $50,949 or 67.4%. These increases are primarily the result of
general increases in overall business volume and included a nonrecurring
charge of $41,642 for expenses related to the conversion to our in-house data
processing system. These increases were partially offset by a decrease in
deposit insurance premiums of $18,965 or 62.1% due to reduced premiums being
charged as a result of the prior year recapitalization of the Savings
Association Insurance Fund.
New Accounting Pronouncement. SFAS No. 128, "Earnings per Share," was issued in
February 1997 and is effective for financial statements issued for periods
ending after December 15, 1997. This statement replaces the presentation of
primary earnings per share (EPS) previously required by Accounting Principles
Board (APB) Opinion No. 15, "Earnings per Share", with basic EPS. It also
requires dual presentation of basic EPS and diluted EPS on the face of the
income statement for all entities with complex capital structures. Diluted
EPS is computed similarly to fully diluted EPS pursuant to APB Opinion No. 15.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
The Company will adopt this Statement for its financial statements for the
period ending December 31, 1997. Had the Company computed earnings per share
pursuant to this Statement for the quarters ended June 30, 1997 and 1996, the
change in the EPS amounts would not have been material.
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: August 1, 1997 \s\Jeff S. Rheinwald
Jeffrey S. Rheinwald
President and C.E.O.
Dated: August 1, 1997 \s\John S. Kettle
John S. Kettle
Senior Vice President
and Treasurer
Dated: August 1, 1997 \s\Mark F. Reed
Mark F. Reed
Vice President and C.F.O.
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