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 March 31, 1997
[ ]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 May 8, 1996
Common Stock, $.01 par value 263,086 shares
ALBION BANC CORP.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition
March 31, 1997 (unaudited)and December 31, 1996 1
Consolidated Statements of Income (unaudited)
Three months ended March 31, 1997 and 1996 2
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 1997 and 1996 3
Notes to Consolidated Financial Information 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-8
Part II. Other Information 9
Signatures 10
ALBION BANC CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
1997 1996
Assets (unaudited)
Cash and due from banks $ 1,365,341 $ 1,025,929
Fed funds sold 1,550,000 1,100,000
Investment securities:
Available for sale 3,764,310 3,945,700
Held to maturity 8,198,087 7,302,388
Loans held for sale 888,551 657,698
Loans receivable 47,405,153 47,487,035
Less-Allowance for loan losses (314,930) (305,900)
Net Loans 47,090,223 47,181,135
Accrued interest receivable 421,591 364,517
Federal Home Loan Bank stock 500,000 450,000
Premises and equipment, net 2,065,772 2,095,528
Other assets 472,547 462,215
Total Assets $66,316,422 $64,585,110
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 1,675,441 $ 1,585,086
Interest-bearing 48,630,482 46,906,933
Total deposits 50,305,923 48,492,019
FHLB advances and other borrowings 9,269,587 9,275,675
Advances from borrowers for taxes 615,005 823,620
Other liabilities 220,818 130,209
Total Liabilities $60,411,333 $58,721,523
Shareholders' equity:
Preferred stock, $.01 par value
500,000 shares authorized, none outstanding
Common stock, $.01 par value
3,000,000 shares authorized, 263,086
shares outstanding 2,631 2,631
Capital surplus 2,353,046 2,348,185
Retained earnings 3,786,873 3,749,459
Unearned ESOP shares (64,190) (70,708)
Unrealized gain on securities 48,324 55,615
Treasury stock at cost, 13,035 shares (221,595) (221,595)
Total shareholders' equity 5,905,089 5,863,587
Total Liabilities and Shareholders'
Equity $66,316,422 $64,585,110
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
March 31,
1997 1996
Interest income:
Interest and fees on loans $1,006,692 $ 938,231
Interest on investment securities 203,372 125,710
Interest on federal funds sold 15,662 15,658
Total interest income 1,225,726 1,079,599
Interest expense:
Interest on deposits 528,513 557,753
Interest on borrowed funds 146,520 44,652
Total interest expense 675,033 602,405
Net interest income 550,693 477,194
Provision for loan losses 8,650 9,000
Net interest income after
provision for loan losses 542,043 468,194
Noninterest income:
Gain on sale of mortgage loans and investments 0 0
Other noninterest income 113,695 88,245
Total noninterest income 113,695 88,245
Noninterest expense:
Salaries and employee benefits 238,534 223,701
Occupancy expenses 84,068 75,708
Deposit insurance premiums 11,125 29,662
Professional fees 32,619 34,730
Data processing fees 43,155 50,679
Other operating expenses 74,667 60,958
Total noninterest expense 484,168 475,438
Income before income taxes 171,570 81,001
Provision for income taxes 58,233 27,319
Net Income $ 113,337 $ 53,682
Earnings per common and common
equivalent share $0.45 $0.21
ALBION BANC CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net Income $ 113,337 $ 53,682
Depreciation, amortization and accretion 39,380 40,468
Provision for loan losses 8,650 9,000
Net gain on sale of real estate owned (34,476) (27,537)
ESOP expense 11,379 10,753
Changes in operating assets and liabilities-
Other assets (227,051) 5,977
Accrued income taxes and other liabilities 90,609 (96,019)
Net cash used by operating activities $ (249,099) $ (3,676)
Cash flows from investing activities:
Proceeds from the sale of foreclosed real estate 151,586 47,992
Purchases of investment securities held to maturity 1,009,965 0
Principal payments on mortgage-backed securities 301,636 306,580
Net (increase) decrease in loans receivable 82,262 (1,261,022)
Purchase of FHLB stock (50,000) 0
Net purchase of fixed assets (10,286) (30,791)
Net cash used in investing activities (484,767) (937,241)
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and money market accounts 90,355 (779)
Net (decrease) increase in time deposits 1,723,549 (82,778)
Repayment of borrowings (6,088) (5,594)
Net decrease in advances from borrowers for
taxes and insurance (208,615) (194,584)
Dividends paid (75,923) (77,055)
Net cash provided by financing activities 1,523,278 (360,790)
Net (decrease) increase in cash and cash equivalents 789,412 (1,301,707)
Cash and cash equivalents at beginning of period 2,125,929 2,397,018
Cash and cash equivalents at end of period $2,915,341 $1,095,311
Cash paid during the period for:
Interest $ 675,033 $ 602,405
Income taxes 0 11,000
ALBION BANC CORP.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 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, 1996, and in the opinion of management, contains all
adjustments necessary to present fairly the Company's financial position as
of March 31, 1997 and December 31, 1996, and its results of operations and
cash flows for the three month period ended March 31,1997 and 1996. 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:
The amortized cost and estimated market value of investment securities available
for sale are as follows:
March 31, 1997 December 31, 1996
Amortized Market Amortized Market
Cost Value Cost Value
Mortgage-backed securities $3,681,219 $3,764,310 $3,850,505 $3,945,700
The amortized cost and estimated market value of investment securities held to
maturity are as follows:
March 31, 1997 December 31, 1996
Amortized Market Amortized Market
Cost Value Cost Value
U.S. Treasury Securities $2,889,676 $2,888,600 $2,872,670 $2,875,100
State and political
subdivision securities 200,073 200,400 200,218 201,400
Mortgage-backed securities 5,008,402 4,910,500 4,129,590 4,106,600
Corporate obligations 99,936 100,200 99,910 100,700
$8,198,087 $8,099,700 $7,302,388 $7,283,800
NOTE 3 - LOANS RECEIVABLE:
Loans consist of the following:
March 31, December 31,
1997 1996
(Unaudited)
Real estate loans:
Secured by one-to-four family property $39,128,347 $38,734,967
Secured by other properties 2,191,320 2,234,372
Construction loans 141,400 578,318
41,461,067 41,547,657
Other loans:
Automobile loans 122,905 129,271
Home improvement loans 5,082,169 4,959,798
Other 1,033,300 1,106,331
6,238,374 6,195,400
Less:
Undisbursed portion of loans (319,377) (278,927)
Net deferred loan origination costs 25,089 22,905
Allowance for loan losses (314,930) (305,900)
(609,218) (561,922)
$47,090,223 $47,181,135
NOTE 4 - ALLOWANCE FOR LOAN LOSSES:
An analysis of changes in the allowance for loan losses is as follows:
Three-months ended
March 31,
1997 1996
Balance at beginning of period $305,900 $244,077
Provision expense 8,650 9,000
Recoveries (Charge-offs),net 380 (1,370)
Balance at end of period $314,930 $251,707
NOTE 5- 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 6 - 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 249,161 and 259,050 at March 31,
1997 and March 31, 1996, 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
MARCH 31, 1997
Financial Condition
Total assets of Albion Banc Corp. (the "Company") were 66.3 million as of
March 31, 1997, an increase of $1.7 million or 2.7% over total assets as of
December 31, 1996. Deposits, the Company's primary source of funds,
increased $1.8 million or 3.7% to $50.3 million at March 31, 1997. Borrowings
from the Federal Home Loan Bank of New York were $9.0 million at March 31,
1996,unchanged from the $9.0 million at December 31, 1996.
Investment securities available for sale, primarily adjustable rate mortgage-
backed securities, decreased from $3.9 million at December 31, 1996 to $3.8
million at March 31, 1997. 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 fixed-rate mortgage-backed
securities, U.S. Treasury Securities, Corporate Bonds and Municipal obligations,
increased from $7.3 million at December 31, 1996 to $8.2 million at March 31,
1997. This increase can be attributed to the purchase of $1.0 million of
fixed-rate mortgage-backed securities during the first quarter which was
primarily funded by deposit growth.
Total loans outstanding as of March 31, 1997 were $48.3 million, an increase
of $.2 million over total loans at December 31, 1996. Real estate loans
secured by one-to-four family property, including loans held for sale
increased by $.6 million over the respective balance at December 31, 1996.
Real estate loans secured by other properties, including construction loans
as of March 31, 1997, decreased by $.5 million during the period as these
loans converted to permanent mortgage loans.
Consumer loans increased $42,974 during the period. Home equity loans increased
$122,371 while other loans, primarily personal loans decreased $73,031. This
can be attributed to the normal origination and principal paydowns of these
loans.
Deposits increased $1.8 million or 3.7% from $48.5 million at December 31,
1996 to $50.3 million at March 31, 1997. This increase is attributable to
the Association offering attractive rates on certificate of deposit products
and growth in core deposits.
The Company's shareholders' equity increased $41,502 or .7%, from $5,863,587 at
December 31, 1996 to $5,905,089 at March 31, 1997. This increase is due
primarily to earnings in the first quarter and the resulting increase in
equity, offset by cash dividends on common stock of $76,000. The Company's
equity as a percentage of total assets at March 31, 1997 was 8.9% 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 March 31, 1997, Albion Federal's
liquidity ratio was 10.4%, exceeding the minimum required. Federal Funds
sold at March 31, 1997 amounted to $1,550,000. 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 Three Months Ended March 31, 1997 and
1996
Net Income. Net income of $113,337 for the three months ended March 31, 1997
represents an increase of $59,655 or 111.1% from the $53,682 earned in the
comparable period ended March 31, 1996.
Net Interest Income. Net interest income increased to $550,693 for the three
months ended March 31, 1997, up 15.4% from $477,194 earned during the three
month period ended March 31, 1996. This increase is primarily due to growth
in the balance sheet, primarily loans and investment securities held to
maturity. Total interest income increased 13.5% or $146,127 during the
period while total interest expense increased 12.1% or $72,628.
Provision for Loan Losses. The provision for possible loan losses, the
charge to earnings for potential credit losses associated with lending
activities, was $8,650 for the three months ended March 31, 1997, a decrease
of $350 from the comparable period in 1996. Management charges earnings for
an amount necessary to maintain the allowance for 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 conditions and other relevant factors. The allowance
for possible loan losses of the Association at March 31, 1997 was $314,930 or
.65% of total loans and represents and increase of 2.9% over the allowance at
December 31, 1996. The increase in the allowance for possible
loan losses was due primarily to management's quarterly analysis of the
Association's loan portfolio.
Noninterest Income. Noninterest income for the three month period ended
March 31, 1997 was $113,695 compared with $88,245 during the same period in
the prior year. This increase was attributable primarily to increased fee
income from depository transaction accounts and fee income from New Frontier
of Albion Corp. Included in both March 31, 1997 and March 31, 1996 was
nonrecurring loan recovery income related to profits on the sale of real
estate owned of $34,000 and $27,000 respectively.
Noninterest Expense. Noninterest expense for the three month period ended March
31, 1997 was $484,168 an increase of 1.8% over the $475,438 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 $14,833 or 6.6%;
occupancy expenses of $8,360 or 11.0%; and other operating expenses of
$13,709 or 22.5%. These increases are primarily the result of general
increases in overall business volume and expenses related to real estate
owned and were partially offset by a decrease in deposit insurance premiums
of $18,537 or 62.5% due to reduced premiums being charged as a result of the
prior year recapitalization of the Savings Association Insurance Fund.
New Accounting Pronouncement. SFAS No. 128, "Earnings per Share," was issued in
February 1997 and is effective for financial statements issued for periods
ending after December 15, 1997. This statement replaces the presentation of
primary earnings per share (EPS) previously required by Accounting Principles
Board (APB) Opinion No. 15, "Earnings per Share", with basic EPS. It also
requires dual presentation of basic EPS and diluted EPS on the face of the
income statement for all entities with complex capital structures. Diluted
EPS is computed similarly to fully diluted EPS pursuant to APB Opinion No. 15.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
The Company will adopt this Statement for its financial statements for the
period ending December 31, 1997. Had the Company computed earnings per share
pursuant to this Statement for the quarters ended March 31, 1997 and 1996,
the change in the EPS amounts would not have been material.
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: May 10, 1997 \s\Jeff S Rheinwald
Jeffrey S. Rheinwald
President and C.E.O.
Dated: May 10, 1997 \s\Mark F. Reed
Mark F. Reed
Vice President and C.F.O.