Albina Community Bancorp Reports First Quarter Results; Net Interest Margin Continues To Improve

PORTLAND, Ore., April 30, 2010 (GLOBE NEWSWIRE) -- Albina Community Bancorp (OTCBB:ACBC), Portland's only certified community development bank today reported that after provisioning $900,000 for loan losses, it lost $867,000, or $0.66 per share, for the first quarter of 2010, compared to a net loss of $1.1 million, or $1.06 per share, in the same quarter a year ago when the provision for loan losses was $1.8 million.

"Although we are disappointed in our results for the first quarter, we are making progress in deleveraging our balance sheet, improving our deposit mix and enhancing net interest margin," said Robert McKean, president and chief executive officer. "In fact, we have achieved steady growth in our net interest margin (NIM), with an increase of 41 basis points in the quarter and 78 basis points year-over-year. This healthy growth in NIM was driven by the reduced level of high cost brokered deposits and the declining reversals of non interest income." The reversal of previously booked interest income during the quarter totaled $124,000, or 0.31% of margin, compared to the preceding quarter of $492,949, or 1.08% of margin, and $505,723, or 1.11% of margin for the first quarter of 2009.

"We are also making progress in reducing the levels of nonperforming assets and our exposure to real estate construction loans," added McKean. "Although we did not finalize any sales during the first quarter, we have several projects in the pipeline giving all indications that sales from within our portfolio of other real estate owned (OREO) and nonperforming loans are expected to close in the second quarter of 2010.

"While we continue to work through our nonperforming asset challenges, we are focused on our capital raising program and we are in active discussions with several institutional investors," said McKean. "We are also encouraged by the new federal programs designed to provide capital to community development banks such as Albina.  At the same time, we are working with our financial advisors, but recognize that there are no assurances that new funds will, in fact, become available; and there is no question we, like many banks, need additional capital."

First Quarter 2010 Financial Highlights: (for the quarter ended March 31, 2010)

• The net interest margin for the first quarter increased to 3.67% up from 2.89% for the first quarter of 2009.
   
• Nonperforming assets decreased 5% to $17.6 million from $18.4 million a year ago
   
• Deposits were down 15% year-over-year to $154.1 million from $180.7 million, reflecting the $37.5 million decrease in high cost brokered certificates of deposit.
   
• Total assets declined 20% to $185.6 million from $231.8 million a year ago.
   
• Gross loans decreased 12% to $139.3 million, compared to $158.5 million a year ago.
   
• Albina continues to be one of the top producers of SBA loans in the Portland District.
   
• Allowance for loan losses stands at $3.8 million, or 2.72% of total loans.

Following the recent year-end audit, subsequent loan downgrades were taken. Consequently, Albina took an additional $2 million loan loss provision expense, resulting in an adjusted net loss of $3.9 million, or $2.95 per share, in the fourth quarter ended December 31, 2009. 

"In February of this year, the administration rolled out the Community Development Capital Initiative for community development banks to encourage lending in their communities," commented McKean. "If Albina is fortunate enough to be able to secure additional capital from this program, it would allow us to continue to reach out to the greater Portland neighborhoods and fulfill our unique mission of serving the needs of those low-to-moderate income individuals and small business owners, as well as a broad range of customers."

"Albina is a home-town bank and is recognized in our neighborhoods for the contributions our dedicated team makes to the quality of life in Portland," said McKean. "We have a loyal group of employees who continue to reach out in their communities and volunteer their free time. We do have a profound impact on the communities we serve and business comes as a result of this community involvement through referrals. 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

At March 31, 2010, capital ratios for Albina Bank had fallen below the level to be considered adequately capitalized with Tier 1 leverage at 4.1%, Tier 1 risk-based at 5.1 and Total risk-based capital at 6.4%.

"Our investment portfolio consists entirely of investment grade agency securities that have an average life of less than 1.4 years," said Jim Schlotfeldt, Chief Financial Officer. "Excess liquidity is invested in securities until the underlying time deposits mature or loan originations increase. We maintain high 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."  The investment securities portfolio totaled $28.8 million at end of the first quarter March 31, 2010. 

Shareholder equity totaled $2.6 million, which after allocation to preferred shareholders equates to a tangible book value of $2.01 per common share at March 31, 2010, compared to $3.6 million, or tangible book value of $2.76 per common share at December 31, 2009.

Credit Quality

Nonperforming assets totaled $17.6 million, or 9.47% of total assets at March 31, 2010, an improvement from $18.4 million, or 7.95% or total assets at March 31, 2009. Net charge-offs during the first quarter were $1.1 million compared to $1.5 million in the first quarter a year ago. The allowance for loan losses stood at $3.8 million, or 2.72% of total loans at March 31, 2010, up from $3.1 million, or 1.98% of total loans a year ago. Nonperforming assets (NPAs) consist of nonperforming loans, OREO, and loans delinquent 90 days or more. 

"We continue to be diligent about writing down problem loans to current market value and are making progress with our borrowers to resolve any potential problems as quickly as possible," said McKean.  Nonperforming loans declined to $14.8 million, or 10.6% of total loans at March 31, 2010, compared to $17.9 million, or 11.3% of total loans a year ago.

Balance Sheet Results

Total assets were $185.6 million at March 31, 2010, compared with $231.8 million at March 31, 2009. Loans, net of reserves, were $135.5 million at quarter-end compared to $155.3 million a year ago.  

Consumer loan participations declined 28% year-over-year standing at $9.9 million. Commercial loan participations were down 4% year-over-year to $19.4 million. Consumer and commercial loan participations provide additional earnings and diversification for the portfolio and account for approximately 21% of the total loan portfolio. More than 43% of Albina's commercial real estate loans are owner-occupied and another 16% 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." Over 75% of the portfolio is secured by real estate, both residential and commercial. 

At March 31, 2010, total deposits were $154.1 million compared to $180.7 million a year ago. Noninterest bearing deposits accounted for 18% of total deposits; interest bearing and savings deposits accounted for 31% of total deposits and time certificates were 51% of total deposits at quarter end.  Brokered certificate deposits accounted for 31% of Albina's time certificate deposits. The ratio of loans to deposits was 88% at March 31, 2010, compared with 86% a year earlier.

"We believe local community banks are gaining ground in the banking sector, scooping up small business customers that are feeling underserved by bigger institutions. As a small business ourselves, we feel we can better connect with other small businesses in our community as we understand their financial needs," said McKean. "As we continue to shrink our balance sheet, we continue to show growth in our local core deposits and become less reliant on brokered CDs."

Operating Results

Net interest income before the provision for loan losses was $1.5 million for both the first quarter of 2010 and in the preceding quarter, compared to $1.3 million in the first quarter a year ago. After the $900,000 provision for loan losses, first quarter 2010 net interest income was $585,000 compared to a net interest loss of $522,000 in the first quarter a year ago, which included a provision for loan losses of $1.8 million. 

Non-interest income was $405,000 for the first quarter, up from $364,000 in the first quarter of 2009. The 11% increase in the first quarter was due in part to the gain on sale of investment securities totaling $34,000.

Albina's net interest margin for the first quarter was 3.67% compared to 3.26% in the preceding quarter and 2.89% in the first quarter a year ago. "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." Reversal of previously accrued interest from nonperforming assets reduced net interest margin by 0.31% in the first quarter. 

Non-interest expense increased 11% to $1.9 million for the first quarter 2010 compared to $1.7 million for the first quarter a year ago. "The increase in non-interest expense for the first quarter reflects the elevated legal, professional and other expenses associated with managing the loan portfolio, and the higher ongoing FDIC insurance premiums," added Schlotfeldt. "Non-interest expense associated with loans and OREO declined 60% from last year." The efficiency ratio for the quarter was 98.25%, down from 99.11% in the first 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 $160,169 in the first 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." 

Other Relevant News

As previously announced, Albina Community Bank entered into a consent agreement with the Federal Deposit Insurance Corporation (FDIC) and the Oregon Division of Finance and Corporate Securities (DFCS), effective March 2, 2010. The agreement requires the bank to improve its capital position and increase its Tier 1 Capital to maintain a minimum leverage capital ratio of 10% and total risk-based capital ratio of 12%, as well as the development of a contingency plan if those ratios are not attained in a timely manner. The bank is working to bring in additional capital to meet the 10% regulatory requirement, in accordance with the terms of the agreement; however, no reassurances can be made that it will be successful in this regard.   Albina Community Bancorp (the Holding Company), expects to receive a similar regulatory order from the Federal Reserve Bank of San Francisco and Oregon Division of Finance and Corporate Securities, its principal regulators. In addition, the significant reduction in capital levels over the past year has resulted in both the holding company and our subsidiary bank to be considered "undercapitalized" and has been issued a "going concern" qualification by its independent auditors.  

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.