SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
[ ]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 1,1996
Common Stock, $.01 par value 260,714 shares
ALBION BANC CORP.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition
June 30, 1996 (unaudited)and December 31, 1995 1
Consolidated Statements of Income (unaudited)
Three months ended June 30, 1996 and 1995 2
Consolidated Statements of Income (unaudited) 3
Six months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows (unaudited) 4
Six months ended June 30, 1996 and 1995
Notes to Consolidated Financial Information 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II. Other Information 11
Signatures 12
ALBION BANC CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
1996 1995
Assets (unaudited)
Cash and due from banks $ 1,157,677 $ 1,047,018
Fed funds sold 100,000 1,350,000
Investment securities:
Available for sale, 3,480,500 4,137,800
Held to maturity 2,835,693 3,279,551
Loans 47,172,464 44,292,708
Less-Allowance for loan losses (242,977) (244,100)
Net Loans 46,929,487 44,048,608
Accrued interest receivable 369,233 384,237
Federal Home Loan Bank stock 475,000 475,000
Premises and equipment, net 2,162,375 2,191,147
Other assets 274,259 175,518
Total Assets $57,784,224 $57,088,879
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 1,484,670 $ 1,086,601
Interest-bearing 46,021,383 45,472,828
Total deposits 47,506,053 46,559,429
FHLB advances and other borrowings 3,287,474 3,298,782
Advances from borrowers for taxes 927,999 968,711
Other liabilities 89,974 172,837
Total Liabilities $51,811,500 $50,999,759
Shareholders' equity:
Preferred stock, $.01 par value
500,000 shares authorized, none outstanding
Common stock, $.01 par value
3,000,000 shares authorized,
260,714 shares outstanding 2,607 2,607
Capital surplus 2,315,259 2,305,975
Retained earnings 3,848,208 3,833,811
Treasury stock at cost (142,800) 0
Unearned ESOP shares (84,583) (97,617)
Unrealized gain on securities 34,033 44,344
Total shareholders' equity 5,972,724 6,089,120
Total Liabilities and Shareholders'
Equity $57,784,224 $57,088,879
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
June 30,
1996 1995
Interest income:
Interest and fees on loans $ 962,175 $ 939,407
Interest on investment securities 115,017 120,345
Interest on federal funds sold 5,377 74,091
Total interest income 1,082,569 1,133,843
Interest expense:
Interest on deposits 530,054 503,501
Interest on borrowed funds 42,895 133,937
Total interest expense 572,949 637,438
Net interest income 509,620 496,405
Provision for loan losses 9,000 9,000
Net interest income after
provision for loan losses 500,620 487,405
Noninterest income:
Gain on sale of mortgage loans and investments 0 33,500
Other noninterest income 58,354 44,355
Total noninterest income 58,354 77,855
Noninterest expense:
Salaries and employee benefits 234,700 211,226
Occupancy expenses 73,871 59,157
Deposit insurance premiums 30,549 22,373
Professional fees 34,311 46,737
Data processing fees 50,832 37,643
Other operating expenses 75,555 85,616
Total noninterest expense 499,818 462,752
Income before income taxes 59,156 102,508
Provision for income taxes 20,785 32,400
Net Income $ 38,371 $ 70,108
Earnings per common and common
equivalent share $0.15 $0.28
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Six Months Ended
June 30,
1996 1995
Interest income:
Interest and fees on loans $1,900,508 $1,890,742
Interest on investment securities 240,297 215,802
Interest on federal funds sold 21,464 87,567
Total interest income 2,162,269 2,194,111
Interest expense:
Interest on deposits 1,088,580 916,390
Interest on borrowed funds 86,173 275,635
Total interest expense 1,174,753 1,192,025
Net interest income 987,516 1,002,086
Provision for loan losses 18,000 18,000
Net interest income after
provision for loan losses 969,516 984,086
Noninterest income:
Gain on sale of loans and real estate owned 27,537 33,500
Other noninterest income 118,360 83,032
Total noninterest income 145,897 116,532
Noninterest expense:
Salaries and employee benefits 458,402 415,034
Occupancy expenses 147,793 115,599
Deposit insurance premiums 60,211 44,746
Professional fees 65,730 101,452
Data processing fees 103,296 70,114
Other operating expenses 139,824 156,932
Total noninterest expense 975,256 903,877
Income before income taxes 140,157 196,741
Provision for income taxes 48,104 64,500
Net Income $ 92,053 $ 132,241
Earnings per common and common
equivalent share $0.36 $0.52
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Net Income $ 92,053 $ 132,241
Depreciation, amortization and accretion 72,438 80,821
Provision for loan losses 18,000 18,000
Provision for deferred taxes 0 (7,600)
Net gain on sale of mortgage loans (33,500)
Net gain on sale of real estate owned (27,537) 0
ESOP expense 21,725 15,424
Changes in operating assets and liabilities-
Other assets (94,738) 44,502
Accrued income taxes and other liabilities (82,863) (14,873)
Net cash (used in) provided by operating activities $ (922) $ 235,015
Cash flows from investing activities:
Proceeds from the sale of foreclosed real estate 47,992 0
Proceeds from the sales of loans 0 1,859,291
Proceeds from maturities of investment securities 1,140,000 2,305,000
Purchases of investment securities (681,699) (4,384,488)
Purchases of mortgage-backed securities 0 (2,001,381)
Principal payments on mortgage-backed securities 630,580 178,391
Net (increase) decrease in loans receivable (2,898,879) 705,822
Redemption of FHLB stock 47,500
Net purchase of fixed assets (51,162) (321,611)
Net cash used in investing activities (1,813,168) (1,611,476)
Cash flows from financing activities:
Net increase in demand deposits, NOW accounts
and money market accounts 398,069 253,625
Net increase in time deposits 548,555 6,889,744
Repayment of borrowings (11,308) (2,485,391)
Net increase in advances from borrowers for
taxes and insurance (40,712) (58,595)
Dividends paid (77,055) (76,100)
Purchase of treasury shares (142,800) 0
Net cash (used in) provided by financing activities 674,749 4,523,283
Net (decrease) increase in cash and cash equivalents (1,139,341) 3,146,822
Cash and cash equivalents at beginning of period 2,397,018 660,261
Cash and cash equivalents at end of period $1,257,677 $3,807,083
Cash paid during the period for:
Interest $1,174,753 $1,192,025
Income taxes 26,000 45,081
ALBION BANC CORP.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 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, 1995, and in the opinion of management, contains all
adjustments necessary to present fairly the Company's financial position as of
June 30, 1996 and December 31, 1995, and its results of operations for the three
and six month periods ended June 30, 1996 and 1995 and cash flows for the six
month period ended June 30, 1996 and 1995. 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 AVAILABLE FOR SALE:
The amortized cost and estimated market value of investment securities are as
follows:
June 30, 1996 December 31, 1995
Amortized Market Amortized Market
Cost Value Cost Value
Federal Home Loan Mortgage $1,361,119 $1,378,100 $1,707,785 $1,727,500
Corporation
Federal National Mortgage 1,658,730 1,690,800 1,891,894 1,935,000
Association
Government National Mortgage 403,829 411,600 461,691 475,300
Association $3,423,678 $3,480,500 $4,061,370 $4,137,800
Note 3 - INVESTMENT SECURITIES HELD TO MATURITY:
The amortized cost and estimated market value of investment securities held to
maturity are as follows:
June 30, 1996 December 31, 1995
Amortized Market Amortized Market
Cost Value Cost Value
U.S. Treasury Securities $2,185,882 $2,187,600 $2,286,858 $2,300,300
State and political
subdivision securities 200,403 202,700 391,443 396,600
Corporate obligations 449,408 452,500 601,250 611,000
$2,835,693 $2,842,800 $3,279,551 $3,307,900
NOTE 4 - LOANS RECEIVABLE:
Loans consist of the following:
June 30, December 31,
1996 1995
(Unaudited)
Real estate loans:
Secured by one-to-four family property $38,888,631 $36,122,461
Secured by other properties 2,594,062 2,594,168
Construction loans 993,952 651,649
42,476,645 39,368,278
Other loans:
Automobile loans 174,563 228,544
Home improvement loans 4,053,276 3,996,860
Other 1,076,427 1,187,811
5,304,266 5,413,215
Less:
Undisbursed portion of loans (624,660) (487,913)
Net deferred loan origination fees 16,213 (872)
(608,447) (488,785)
$47,172,464 $44,292,708
NOTE 6 - ALLOWANCE FOR LOAN LOSSES:
An analysis of changes in the allowance for loan losses is as follows:
Six-months ended
June 30,
1996 1995
Balance at beginning of period $244,100 $224,000
Provision expense 18,000 18,000
Charge-offs 19,123 10,121
Balance at end of period $242,977 $231,879
NOTE 7- INCOME TAXES:
The Company files a consolidated federal income tax return. The provision for
income taxes is based on income as recorded in the consolidated financial
statements. This provision differs from amounts currently payable because of
temporary differences in the recognition of certain income and expense items for
financial and tax purposes. The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes". SFAS 109 requires that a deferred tax liability or asset be
adjusted for the effect of changes in tax laws or rates in the period of
enactment.
NOTE 8 - 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 255,267 and 253,702 for the six month period ended June
30, 1996 and June 30, 1995, respectively and 251,285 and 253,702 for the three
month period ended June 30, 1996 and June 30, 1995, respectively. There is no
material difference between primary and fully diluted earnings per share.
ALBION BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1996
Financial Condition
Total assets of Albion Banc Corp. (the "Company") were $57.8 million as of June
30, 1996, an increase of $.7 million or 1.2% over total assets as of December
31, 1995. Deposits, the Company's primary source of funds, increased $.9
million or 2.0% to $47.5 million at June 30, 1996. Borrowings from the Federal
Home Loan Bank of New York were $3.0 million at June 30, 1996,unchanged from the
$3.0 million at December 31, 1995.
Investment securities held for sale, primarily mortgage-backed securities,
decreased from $4.1 million at December 31, 1995 to $3.5 million at June 30,
1996. This decrease can be attributed to normal principal paydowns of mortgage-
backed securities. Proceeds from principal paydowns were reinvested primarily
in real estate loans.
Investment securities held to maturity, primarily U.S. Treasury Securities,
Corporate Bonds and Municipal obligations, decreased from $3.3 million at
December 31, 1995 to $2.8 million at June 30, 1996. This decrease can be
attributed to normal maturities in the portfolio. Proceeds from the maturities
were reinvested primarily in real estate loans.
Total loans outstanding as of June 30, 1996 were $47.2 million, an increase of
$2.9 million over total loans at December 31, 1995. The majority of this
increase occurred in real estate loans secured by one-to-four family property,
which increased by $2.8 million over the respective balance at December 31,
1995. Real estate loans secured by other properties, including construction
loans as of June 30, 1996, increased by $.3 million during the period.
Consumer loans, primarily home equity and personal loans decreased $108,949
during this period. This can be attributed to the normal principal paydowns of
these loans.
The Company's shareholders' equity decreased $116,396 or 1.9%, from $6,089,120
at December 31, 1995 to $5,972,724 at June 30, 1996. This decrease is due
primarily to the Company's repurchase of 8,400 common stock shares which reduced
shareholders' equity by $142,800. The Company's equity as a percentage of total
assets at June 30, 1996 was 10.3% 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, 1996, Albion Federal's liquidity ratio was 7.5%,
exceeding the minimum required. Federal Funds sold at June 30, 1996 amounted to
$100,000. These funds are available immediately to meet upcoming obligations.
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, 1996 and 1995
Net Income. Net income of $92,053 for the six months ended June 30, 1996
represents a decrease of $40,188 or 30.4% from the $132,241 earned in the
comparable period ended June 30, 1995.
Net Interest Income. Net interest income decreased to $987,516 for the six
months ended June 30, 1996, down 1.5% from $1,002,086 earned during the six
month period ended June 30, 1995. This decrease is due primarily to a decrease
in interest on federal funds sold of $66,103 which was offset however, by an
increase in interest and fees on loans and investment securities of $34,261.
Also, interest on deposits increased $172,190, however interest on borrowed
funds decreased $189,462. Total interest income decreased 1.5% or $31,842
during the period while total interest expense decreased 1.5% or $17,272.
Provision for Loan Losses. The provision for possible loan losses, the charge
to earnings for potential credit losses associated with lending activities, was
$18,000 for the six months ended June 30, 1996, the same as the comparable
period in 1995. Management charges earnings for an amount necessary to maintain
the allowance for possible 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 conditons and other
relevant factors. The allowance for possible loan losses of the Association at
June 30, 1996 was $242,977 or .52% of total loans. The increase in the
provision during the first six months 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,
1996 was $145,897 compared with $116,532 during the same period in the prior
year. This increase was attributable to increased fee income from depository
transaction accounts and fee income from New Frontier of Albion Corp. Also ,
the sale of real estate owned in the first quarter resulted in a net gain of
$27,500.
Noninterest Expense. Noninterest expense for the six month period ended June
30, 1996 was $975,256 an increase of 7.9% over the $903,877 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 $43,368 or 10.4%;
occupancy expenses of $32,194 or 27.8%; deposit insurance premiums of $15,465 or
34.6%; and data processing fees of $33,182 or 47.3%. These increases are
primarily the result of general increases in overall business volume and
operations and expenses associated with the operation of the new branch facility
in Clarkson, New York.
Comparison of Operating Results for the Three Months Ended June 30, 1996 and
1995
Net Interest Income. Net interest income increased to $509,620 for the three
months ended June 30, 1996, up 2.7% from $496,405 earned during the three month
period ended June 30, 1995. This increase is primarily due to increased
interest income and fees on loans and decreased interest expense on borrowed
funds. Total interest income decreased 4.5% or $51,274 during the period while
total interest expense decreased 10.1% or $64,489.
Provision for Loan Losses. The provision for possible loan losses, the charge
to earnings for potential credit losses associated with lending activities, was
$9,000 for the three months ended June 30, 1996, the same as the comparable
period in 1995.
Noninterest Income. Noninterest income for the three month period ended June
30, 1996 was $58,354 compared with $77,855 during the same period in the prior
year. This decrease was attributable primarily to a decrease in the number of
mortgage loans sold and therefore a decrease in gains on sales of mortgage
loans. This decrease was offset however, by increased fee income from depository
transaction accounts and fee income from New Frontier of Albion Corp.
Noninterest Expense. Noninterest expense for the three month period ended June
30, 1996 was $499,818 an increase of 8.0% over the $462,752 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 $23,474 or 11.1%; occupancy
expenses of $14,714 or 24.9%; deposit insurance premiums of $8,176 or 36.5%; and
data processing fees of $13,189 or 35.0%. These increases are primarily the
result of general increases in overall business volume and operations and
expenses associated with the operation of the new branch facility in Clarkson,
New York.
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, 1996 \s\Jeff S Rheinwald
Jeffrey S. Rheinwald
President and C.E.O.
Dated: August 1, 1996 \s\Mark F. Reed
Mark F. Reed
Vice President and C.F.O.