Albina Community Bancorp Earns $0.08 per Share in Second Quarter 2011 and $0.20 per Share YTD; Asset Quality Improves and Net Interest Margin Remains High

PORTLAND, Ore., July 21, 2011 (GLOBE NEWSWIRE) -- Albina Community Bancorp (OTCBB:ACBC), the holding company of Portland's only certified community development bank today reported it earned $101,000, or $0.08 per diluted share, compared to $161,000, or $0.12 per diluted share, earned in the first quarter of 2011. In the second quarter a year ago, Albina lost $1.1 million, or $(0.80) per share. For the six months ended June 30, 2011, net income was $262,000,or $0.20 per share, compared to a net loss of $1.9 million or $(1.46) per share in the like period a year ago. Improving asset quality, lower cost of funds and a high net interest margin contributed to profits in the first and second quarter this year.

"This quarter's results mark the second consecutive profitable quarter, reflecting our improving operations," said Jim Schlotfeldt, Executive Vice President and Chief Financial Officer. "With credit quality improving on almost every metric and improving efficiencies, we are making significant progress on returning the bank to healthy profitability. Nonperforming assets decreased 62% from a year ago, and dropped 25% from the end of the first quarter this year.

"We continue to make progress in deleveraging our balance sheet. We are maintaining a solid base in our local core deposits and relying much less on brokered CDs," continued Schlotfeldt. "Net interest margin (NIM) has shown steady improvement as reversals from nonaccrual loans have declined. NIM declined from the immediate quarter, due to lower loan fee income. NIM remains high, expanding 40 basis points to 4.45% in the quarter from 4.05% a year ago. We continue to improve our financial condition and potential investors continue to express an interest in our efforts to raise new capital."

Financial Highlights: (for the period ended June 30, 2011)

• Earned $101,000, or $0.08 per diluted share for the quarter ended June 2011, marking two consecutive quarters of profitability.
• Net interest margin remained high at 4.45% in the second quarter, compared to 4.98% in the preceding quarter and 4.05% in the second quarter ended June 30, 2010.
• For the first six months of the year, NIM increased 87 basis points to 4.72% year-over-year.
• Asset quality improved substantially with nonperforming assets decreasing 25% to $5.5 million from $7.4 million in the preceding quarter, and down 62% from $14.6 million a year ago.
• Allowance for loan losses stands at $3.0 million, or 3.03% of total loans.
• Deposits totaled $123.3 million, compared to $146.1 million a year ago, as the level of wholesale funding continues to decline.
• Total assets decreased 20% to $135.7 million from $170.1 million a year ago.
• Gross loans were $98.3 million, down 22% from $126.6 million a year ago.

"Together with a diverse mix of loans and a deposit base supported by our local communities, we have a sound customer base," said Cheryl Cebula, President and Chief Executive Officer of Albina Community Bank. "Albina is a true community bank focused on the needs of a broad range of customers, especially low-to-moderate income individuals and small business owners in the greater Portland neighborhoods. In addition, we have a loyal group of employees who continue to reach out in their communities and volunteer their free time. You are invited to track our community involvement by viewing our scorecard at: www.albinabank.com/company/scorecard.cfm." 

Credit Quality

Nonperforming assets (NPAs) declined to $5.5 million, or 4.07% of total assets at June 30, 2011, from $14.6 million, or 8.55% of total assets at June 30, 2010. At March 31, 2011, NPAs totaled $7.4 million, or 5.35% of total assets. "It should be noted that $3.3 million of the $5.5 million of NPAs continue to be current on payments but are classified as nonaccrual due to cash flow deficiencies for the projects, which the borrowers are supplementing from other sources. In addition to the significant improvement in our credit quality from the prior quarter and from a year ago, we had no real estate construction loans on our books at the end of June, compared to $7.7 million a year ago," said Schlotfeldt. "And, we are still seeing a considerable slowdown in new problem loans."  

Nonperforming loans (NPLs) decreased by $4.4 million year-over-year to $4.7 million, representing 4.81% of total loans, compared to $9.2 million, or 7.24% of total loans, at the end of the second quarter a year ago. At March 31, 2011, NPLs totaled $4.7 million, or 4.53% of total loans. "We continue to diligently work with our borrowers to meet the loan requirements or to convert NPLs to other real estate owned (OREO)," said Schlotfeldt.   NPLs have declined 48% since June 30, 2010.

Other real estate owned (OREO), as a result of foreclosures, dropped to $795,000 at June 30, 2011, compared to $2.7 million at March 31, 2011, and from $5.4 million a year ago. "During the second quarter we sold three properties from OREO and recognized a small gain on sales," added Schlotfeldt.

Net charge-offs declined 11% during the second quarter of 2011 to $42,000, or 0.04% of average loans, from $371,000, or 0.33% of average loans in the preceding quarter, and fell 97% from $1.6 million, or 1.17% of average loans, in the second quarter of 2010. Recoveries of previously charged off loans totaled $189,000 during the quarter.

The allowance for loan and lease losses (ALLL) remained stable at $3.0 million, or 3.04% of total loans at June 30, 2011, compared to $3.0 million or 2.91% of total loans at March 31, 2011, and $3.1 million, or 2.45% of total loans a year ago.

Balance Sheet Results

Albina's total assets decreased 1% to $135.7 million at June 30, 2011, from $137.8 million in the preceding quarter and declined 20% from $170.5 million in the second quarter a year ago.

The investment securities portfolio totaled $17.9 at June 30, 2011, an increase of 29% from $13.9 million in the preceding quarter and down 7% from June 30, 2010. "We maintain strong liquidity by holding liquid securities and through our available lines of credit at the Federal Home Loan Bank and the Federal Reserve Bank," said Schlotfeldt. "Excess liquidity is invested in securities until the underlying time deposits mature or loan originations increase." The investment portfolio consists entirely of investment grade agency securities that have an average life of 1.4 years.

Loans, net of reserves, declined to $95.4 million at quarter end, compared to $101.0 million at March 31, 2011, and $123.5 million at June 30, 2010. The decline in loans during the quarter reflects Albina's exit from the real estate construction market and other loan concentrations that presented elevated risk. "Despite the present weak loan demand, Albina remains committed to doing our part to assist local businesses," added Schlotfeldt. For the second year in a row, the SBA presented the Oregon Community Bank of the Year Award to Albina Community Bank for our commitment to the local small business community. Lenders play a critical role in the health of the American economy and are especially vital to small businesses. 

The loan portfolio remains well-diversified with a wide variety of borrowers and collateral. Over 70% of the portfolio is secured by real estate, both residential and commercial. More than 48% of Albina's commercial real estate (CRE) loans are owner-occupied and another 20% are partially occupied by owners with the remainder of the building leased to other businesses. The following table shows the changes in the loan portfolio in each category (6/30/2011 compared to 3/31/2011 and 6/30/2010):

Albina participates in loans with other banks to increase its reach and provide additional earnings and diversification for the portfolio. Consumer and commercial loan participations account for approximately 13% of the total loan portfolio. Consumer loan participations declined 26% year-over-year to $6.7 million. Commercial loan participations dropped 62% year-over-year to $6.4 million. 

Noninterest bearing deposits increased 4% year-over-year and accounted for 24% of total deposits; interest bearing and savings accounts represented 37% of total deposits, and time certificates dropped 31% year-over-year representing 39% of total deposits at the end of the second quarter 2011. Deposits totaled $123.3 million at June 30, 2011, compared to $125.6 million at the end of March and $146.1 million a year ago. 

"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 their local community bank," said Cebula. "We continue to be much less reliant on brokered CDs, and with the support of the members of our community we are making a positive impact in our neighborhoods." The ratio of loans to deposits was 77% at June 30, 2011, compared with 84% a year earlier.   

Operating Results

Net interest income, before the provision for loan losses, was $1.4 million in the second quarter of 2011, compared to $1.6 million three months earlier and $1.5 million in second quarter a year ago. Because of the improving credit metrics, there was no provision for loan losses in the second quarter of 2011. The provision in the first quarter was $100,000 and $900,000 in the second quarter a year ago. Net interest income for the six months ended June 30, 2011 was $2.9 million, after a loan loss provision of $100,000, compared to $1.2 million, with a loan loss provision of $1.8 million, for the six months ended June 30, 2010. Net interest income was adversely impacted by a decrease in loan balances and lower yields available in investment securities.

The net interest margin (NIM) increased 40 basis points to 4.45% for the second quarter of 2011, from 4.05% for the second quarter a year ago, but was down from the first quarter of the year. Primarily as a result of lower loan fee income in the second quarter, the NIM declined 53 basis points from the first quarter. The NIM remained high, however, in part due to a lower cost of deposits. For the first six months of 2011, the NIM increased 87 basis points to 4.72%, compared to 3.85% for the first six months of 2010, primarily as a result of maturing certificates of deposits and the run-off of high cost wholesale certificates of deposits which reduced funding costs substantially in the second quarter.

"The decline in total non-interest expense for the second quarter reflects a decrease in legal and professional fees and expenses related to managing the loan portfolio and OREO," added Schlotfeldt. "FDIC assessments also dropped by half and we cut our marketing expenses compared to a year ago." Non-interest, or operating, expense declined 21% to $1.7 million in the quarter, from $2.1 million in the second quarter a year ago. 

For the first six months of 2011, the efficiency ratio improved to 90.15% compared to 102.78% for the first six months of 2010.

Due to the capital structure of the company, preferred shareholders participated in the per share loss during 2009 and 2010. "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. "Having lost money over the past two years, however, our retained earnings have fallen below their earnings participation threshold. Consequently, the earnings per share allocated to common shareholders was lower by $.01 in the second quarter of 2011 and $.03 in the first quarter of 2011. Loss per share allocated to common shareholders was lower by $.63 for the year ended December 31, 2010. On a pro rata basis, future earnings or losses will continue to be allocated between preferred and common shareholders until preferred shareholders reach the $100 per preferred share liquidation preference." 

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.