Albina Community Bancorp Reports Third Quarter 2010 Results; With Improving Asset Quality and Strong Liquidity

PORTLAND, Ore., Oct. 29, 2010 (GLOBE NEWSWIRE) -- Albina Community Bancorp (OTCBB:ACBC), Portland's only certified community development bank, today reported it lost $1.7 million, or $1.53 per share, for the third quarter of 2010, following a $1.1 million provision for loan losses, compared to a net loss of $2.8 million, or $2.09 per share, in the same quarter a year ago when the provision for loan losses was $2.9 million. In the second quarter this year following a $900,000 provision, Albina lost $1.1 million, or $0.80 per share. Year-to-date, Albina has recorded a total provision for loan losses of $2.9 million contributing to a net loss of $3.6 million, or $2.99 per share, compared to a loss of $5.6 million, or $4.23 per share, in the like period a year ago, with a loan loss provision of $7.1 million.

"The progress we are making to return the balance sheet to health and the operations of the bank to profitability is slow but steady. The balance sheet deleveraging has reduced assets by 25% year-over-year and we are maintaining 18% of total assets in highly liquid investments or cash equivalents," said Robert McKean, president and chief executive officer. "We are continuing to build local core deposits and reduce reliance on higher cost brokered CDs. This shift in the deposit mix boosted our net interest margin (NIM) from a year ago."

"Our team continues to work to strengthen our loan portfolio, and we are still working with our advisors to raise new capital," said McKean. "While the process is slower than we would like, we remain optimistic."

Third Quarter 2010 Financial Highlights: (for the quarter ended September 30, 2010)

• The net interest margin for the third quarter expanded to 3.85% from 3.17% for the third quarter of 2009.
• Nonperforming assets declined 17% to $14.0 million from $16.9 million a year ago.
• Total deposits were down 19% year-over-year to $144.9 million from $179.9 million, reflecting the $49.5 million reduction in high cost brokered certificates of deposit.
• Total assets declined 25% to $163.6 million from $218.7 million a year ago.
• Gross loans decreased 19% to $122.6 million, compared to $151.3 million a year ago.
• The mix of loans in the portfolio continues to improve with residential construction loans down to 3.5% of total loans from 10.4% of loans a year ago. Commercial business loans have increased to 21.1% of total loans from 15.3% a year ago.
• Albina Community Bank's total risk-based capital ratio was 5.49%, Tier 1 to risk-weighted assets ratio was 4.23% and Tier 1 leverage ratio was 3.25%.
• Allowance for loan losses stands at $3.0 million, or 2.45% of total loans.
• Albina continues to be one of the top producers of SBA loans in the Portland District.

"Our involvement in the greater Portland area continues to provide important services and support to the many small businesses and consumers that are struggling in these tough economic times," said McKean. "We believe Albina makes an important contribution in both access to capital, business expertise and volunteers. 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." 

Credit Quality

Nonperforming assets totaled $14.0 million, or 8.54% of total assets at September 30, 2010, an improvement from $16.9 million, or 7.72% of total assets at September 30, 2009. Net charge-offs year-to-date were $3.8 million compared to $6.1 million during the first nine months a year ago. The allowance for loan losses stood at $3.0 million, or 2.45% of total loans at September 30, 2010, compared to $3.7 million, or 2.45% 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 $11.0 million, or 8.9% of total loans at September 30, 2010, compared to $15.4 million, or 10.2% of total loans a year ago. "Of the $9.1 million in non-accrual loans, one $2.5 million condo project continues to be current on its payments, but was moved to nonaccrual status due to a drop in value of the property," said Jim Schlotfeldt, Chief Financial Officer. "We continue working with the borrower to facilitate repayment of this loan. Similarly, we have made significant progress in reducing our exposure to construction loans, which still make up more than 40% of nonperforming loans, but now only account for 4% of our total loan portfolio."

Balance Sheet Results

Total assets decreased 25% to $163.6 million at September 30, 2010, compared with $218.7 million at September 30, 2009. Gross loans declined 19% from a year ago to $122.6 million at quarter-end compared to $151.3 million a year ago. Albina aggressively reduced its real estate construction loan concentration by over 70% and reduced commercial real estate concentrations by over 20%. Net loans declined 19%, or $28 million, on a year-over-year basis to $119.6 million at September 30, 2010. 

The following table shows the changes in the loan portfolio in each category (9/30/2010 compared to 6/30/10 and 9/30/09):

Consumer loan participations were down 28% year-over-year standing at $8.4 million. Commercial loan participations declined 29% year-over-year to $14.8 million. Consumer and commercial loan participations provide additional earnings and diversification for the portfolio and account for approximately 19% 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. "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," said McKean.

Total deposits, reflecting the planned run-off of $49.4 million of brokered CDs, were $144.9 million at September 30, 2010, compared to $179.9 million a year ago. Noninterest bearing deposits accounted for 21% of total deposits; interest bearing checking and savings deposits accounted for 32% of total deposits and time certificates were 47% of total deposits at quarter end. Brokered certificate deposits now account for 12% of Albina's total deposits. The ratio of loans to deposits was 83% for the third quarter compared to 82% a year ago. "The loyalty of our local customers is very much appreciated and we continue to build strong customer relationships in the community," added Schlotfeldt.  

The investment securities portfolio totaled $17.2 million at September 30, 2010.   "We continue to 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. 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," said Schlotfeldt.

Operating Results

Net interest income before the provision for loan losses was $1.4 million for the third quarter of 2010, compared to $1.5 million in both the prior and year ago quarters. After the $1.1 million provision for loan losses, third quarter 2010 net interest income was $324,000 compared to a net interest loss of $1.4 million in the third quarter a year ago, which included a provision for loan losses of $2.9 million. 

Non-interest income was $239,000 for the third quarter, down from $2.8 million in the third quarter of 2009, which included a $2.2 million government grant.

"Our net interest margin improved during the quarter as a result of reduced dependence on high cost brokered 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." The NIM increased 68 basis points to 3.85% in the quarter compared to 3.17% a year ago. Year-to-date, NIM was up 88 basis points to 3.85% from 2.97% a year ago. The reversals of interest income during the quarter totaled $84,000 and $212,000 year-to-date, which lowered net interest margin 19 basis points in the first nine months of the year. 

Non-interest expense was down 6% to $2.2 million for the third quarter 2010 compared to $2.4 million for the third quarter a year ago. "The reduced overhead expense for the third quarter reflects the ongoing efforts to control costs throughout the bank," added McKean.

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 McKean. "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 $21,000 in the third 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 September 30, 2010 were 1,073,310.  

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.