Albina Community Bancorp Reports Second Quarter Results; Losses Decline and Net Interest Margin Continues To Improve

PORTLAND, Ore., July 30, 2010 (GLOBE NEWSWIRE) -- Albina Community Bancorp (OTCBB:ACBC), Portland's only certified community development bank today reported the company lost $1.1 million, or $0.80 per share, for the second quarter of 2010, following a $900,000 provision for loan losses, compared to a net loss of $1.7 million, or $1.29 per share, in the same quarter a year ago when the provision for loan losses was $2.3 million. The net loss for the first quarter this year was $867,000, or $0.66 per share, when its provision was $900,000. Year-to-date, Albina has recorded a total provision for loan losses of $1.8 million contributing to a net loss of $1.9 million, or $1.46 per share, compared to a loss of $2.8 million, or $2.15 per share, in the like period a year ago, with a loan loss provision of $4.1 million.

"While we navigate through this prolonged challenging economic environment in the Portland area, we continue to make progress in deleveraging our balance sheet," said Robert McKean, president and chief executive officer. "We are demonstrating solid growth in our local core deposits, as we become less reliant on brokered CDs, which has contributed to the expansion of our net interest margin (NIM) during the second quarter. The NIM increased 38 basis points in the quarter and 120 basis points year-over-year. The reversals of interest income during the quarter totaled $4,200 and only $128,000 year-to-date, which lowered net interest margin 16 basis points in the first half of the year." 

"During the second quarter, we converted three nonperforming loans into other real estate owned (OREO), enabling us to actively market and liquidate these properties. Upon selling two of the OREO properties, we realized a net loss of $25,000," added McKean. "Net loan charge-offs totaled $2.9 million, a decrease of $756,000 from a year ago. Nonperforming assets declined $3.0 million from the preceding quarter, and dropped $748,000 from the year ago quarter, to $14.6 million at June 30, 2010."

"Our team is doing an exceptional job strengthening our loan portfolio, while we remain focused on our capital raising and continue to work with our financial advisors," said McKean. "We persist in active discussions with several institutional investors. That being said, we recognize there are no assurances that new funds will become available, but we remain optimistic and continue to be encouraged by the federal programs designed to provide capital to community development banks like Albina."

Second Quarter 2010 Financial Highlights: (for the quarter ended June 30, 2010)

• The net interest margin for the second quarter expanded to 4.05% from 2.85% for the second quarter of 2009.
   
• Nonperforming assets declined 5% to $14.6 million from $15.3 million a year ago.
   
• Total deposits were down 18% year-over-year to $146.1 million from $178.7 million, reflecting the $42.5 million reduction in high cost brokered certificates of deposit.
   
• Total assets declined 25% to $170.5 million from $225.8 million a year ago.
   
• Gross loans decreased 18% to $126.6 million, compared to $158.4 million a year ago.
   
• Allowance for loan losses stands at $3.1 million, or 2.45% of total loans.
   
• Albina continues to be one of the top producers of SBA loans in the Portland District.

"We have a meaningful impact on the communities we serve and business comes as a result of this community involvement through referrals," said McKean. "Albina is a home-town bank and is recognized in our neighborhoods for the contributions our dedicated team make to the quality of life in Portland. We have a loyal group of employees who continue to reach out in their communities and volunteer their free time. We track our community involvement in terms of volunteer hours, jobs created and supported, housing financed and developed and many other important benefits. You are invited to review our scorecard at: www.albinabank.com/company/scorecard.cfm. Albina Community Bancorp has received CDFI funding from the U.S. Department of Treasury in 9 of the past 10 years, as a result of our success in building economic vibrancy in the greater Portland area."

Capital Adequacy and Liquidity

Shareholder equity totaled $1.4 million, which after allocation to preferred shareholders equates to a tangible book value of $1.09 per common share at June 30, 2010, compared to $2.6 million, or a tangible book value of $2.01 per common share at March 31, 2010. Albina Community Bank had capital ratios as follows:  Tier 1 leverage of 3.9%, Tier 1 risk-based of 5.4% and Total risk-based capital of 6.6% at June 30, 2010.

The investment securities portfolio totaled $19.2 million at June 30, 2010. "Strong core deposit growth and a reduction in the loan portfolio have led to increased on-balance sheet liquidity," said Jim Schlotfeldt, Chief Financial Officer. "We continue to maintain sizeable levels of liquidity by holding liquid securities and through our available lines of credit at the Federal Home Loan Bank and the Federal Reserve Bank. Our investment portfolio consists entirely of investment grade agency securities that have an average life of less than 1.4 years. Excess liquidity is invested in securities until the underlying time deposits mature or loan originations increase."

Credit Quality

Nonperforming assets totaled $14.6 million, or 8.55% of total assets at June 30, 2010, an improvement from $15.3 million, or 6.79% of total assets at June 30, 2009. Net charge-offs during the second quarter were $1.6 million compared to $2.0 million in the second quarter a year ago. The allowance for loan losses stood at $3.1 million, or 2.45% of total loans at June 30, 2010, compared to $3.4 million, or 2.19% of total loans a year ago. Nonperforming assets (NPAs) consist of nonperforming loans, OREO, and loans delinquent 90 days or more. 

Nonperforming loans and loans delinquent 90 days or more declined to $9.2 million, or 7.2% of total loans at June 30, 2010, compared to $13.4 million, or 8.7% of total loans a year ago. "We are making progress writing down problem loans as quickly as possible to current market value, and we continue to work with our borrowers to resolve any potential problems as quickly as possible," said McKean.

Balance Sheet Results

Total assets decreased 25% to $170.5 million at June 30, 2010, compared with $225.8 million at June 30, 2009. Loans, net of reserves, declined 18% from a year ago to $123.5 million at quarter-end compared to $151.4 million a year ago.  

Gross loans decreased from a year ago as Albina aggressively reduced its real estate construction loan concentration by over 50%. Total loans declined 18%, or $28.3 million, on a year-over-year basis to $126.6 million at June 30, 2010.

The following table shows the changes in the loan portfolio in each category (6/30/2010 compared to 3/31/10 and 6/30/09):

Consumer loan participations were down 28% year-over-year standing at $9.1 million. Commercial loan participations declined 17% year-over-year to $16.8 million. Consumer and commercial loan participations provide additional earnings and diversification for the portfolio and account for approximately 20% of the total loan portfolio. More than 43% of Albina's commercial real estate loans are owner-occupied and another 13% are partially occupied by owners with the remainder of the building leased to other businesses. "Management continues to actively monitor the loan portfolio in order to minimize any loan losses and identify impairment where prudent," McKean added. "We continue to maintain a well-diversified loan portfolio with a wide variety of borrowers and collateral." More than 77% of the portfolio is secured by real estate, both residential and commercial.     

"We are encouraged with the support we are seeing from our neighboring communities, as our local core deposits continue to grow," said McKean. "As Portland's only certified community development bank, we pride ourselves on understanding the financial needs of the small businesses in the communities we serve, and we look forward to continuing to being a major part of their lives as local community banks continue to gain ground in the banking sector."

Total deposits, reflecting the run-off of $42.5 million of brokered CDs, were $146.0 million at June 30th, compared to $178.7 million a year ago. Noninterest bearing deposits accounted for 19% of total deposits; interest bearing and savings deposits accounted for 33% of total deposits and time certificates were 48% of total deposits at quarter end. Brokered certificate deposits now account for 22% of Albina's total deposits. The ratio of loans to deposits was 85% for both the second quarter and a year ago. 

Operating Results

Net interest income before the provision for loan losses was $1.5 million for both the first and second quarter of 2010, compared to $1.4 million in the second quarter a year ago. After the $900,000 provision for loan losses, second quarter 2010 net interest income was $628,000 compared to a net interest loss of $933,000 in the second quarter a year ago, which included a provision for loan losses of $2.3 million. 

Non-interest income was $469,000 for the second quarter, up from $353,000 in the second quarter of 2009. The 33% increase in the second quarter was due, in part, to the gain on sale of investment securities totaling $96,000.

"Our net interest margin improved during the quarter as a result of reduced dependence on high cost brokerage deposits and the declining reversals of non-interest income," said Schlotfeldt. "We expect our cost of funds to continue to decline as we replace high cost time deposits with core non-maturing deposits." Albina's net interest margin for the second quarter improved to 4.05% compared to 3.67% in the preceding quarter and 2.85% in the second quarter a year ago.

Non-interest expense increased 9% to $2.1 million for the second quarter 2010 compared to $2.0 million for the second quarter a year ago. "The increase in total non-interest expense for the second quarter reflects the higher ongoing FDIC insurance premiums and the additional legal and professional expenses associated with managing the portfolio of other real estate owned," added Schlotfeldt. The efficiency ratio for the quarter was 107%, down from 114% in the second quarter a year ago.

Due to the capital structure of the company, preferred shareholders participated in the per share loss during the quarter and year-to-date periods. "Our original shareholders, owners of the Preferred A and B series, had reached their maximum participation in our earnings stream in prior years," said Schlotfeldt. "With the recent losses, however, our retained earnings have fallen below their earnings participation threshold. Consequently, the loss per share allocated to common shareholders was lower by $195,000 in the second quarter 2010. On a pro rata basis, future losses will continue to be allocated between preferred and common shareholders and future earnings will be reduced until preferred shareholders reach the $100 per preferred share liquidation preference." Total common shares outstanding at June 30, 2010 were 1,073,310.

Other Relevant News

Albina Community Bancorp also announced today the appointment of banking veteran, Graham C. Bryce as Chairperson of Albina Community Bancorp. Mr. Bryce also serves as Chairperson of Albina Community Bank. Bryce replaces James Bradshaw who served as Chairperson of the Bancorp and recently retired from the boards of directors for personal reasons. 

"Jim Bradshaw served on the Board for over 14 years and has made an enormous contribution," said Bryce. "His leadership and expertise in banking, accounting and corporate finance have been a tremendous resource, and one that will be missed. We wish him the very best."

Graham Bryce has served on the Albina bank board for 15 years and has extensive experience in the financial services industry, as a senior officer at Mellon Bank, Wells Fargo and Orbanco Financial Services. He has also served as President of QG Investment Company, a real estate investment firm, since 1986.

About Albina Community Bancorp

Albina Community Bank is a locally owned, full-service, independent commercial bank committed to investing in individuals, families, businesses and local neighborhoods. The bank promotes community development by providing products and services and banking solutions that are directed towards improving the social or economic conditions of underserved peoples or residents of distressed communities. Albina offers a wide range of competitive banking solutions, while also maintaining its mission to promote jobs, growth of small businesses, and wealth in our local Portland neighborhoods.

Albina Community Bank opened in December 1995 as the sole subsidiary of Albina Community Bancorp. Albina is one of approximately 60 commercial banks across the United States certified by the U.S. Treasury Department's Community Development Financial Institutions Fund as a community development financial institution. Albina is the only CDFI-certified commercial bank headquartered in Oregon. Albina operates from five local Portland locations including offices at: 2002 Northeast Martin Luther King Jr. Boulevard; 8040 North Lombard in the St. Johns neighborhood of North Portland; 4020 Northeast Fremont Street in the Beaumont neighborhood; 5636 Northeast Sandy Boulevard in the Rose City Park neighborhood of the International District; and 430 Northwest 10th Avenue in Portland's Pearl District; and a remote ATM at New Columbia in North Portland. For more information about Albina Community Bank, please call 503-287-7537 or visit www.albinabank.com.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995, including statements concerning the continued financial performance of the company and its plans and opportunities for future growth. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially than those expected. Specific risks include, but are not limited to, general business and economic conditions, competitive factors, pricing pressures, further interest rate changes, and other factors listed from time to time in Albina Community Bancorp's regulatory reports.