ALBINA COMMUNITY BANCORP
1130 N.E. Alberta St.
Portland, Oregon 97211
Telephone: 503-287-7537
100,000 SHARES OF CLASS A COMMON STOCK
All of the shares of Class A Common Stock, without par value, ("Common
Stock") offered hereby are newly issued shares of Albina Community Bancorp (the
"Company"). Prior to this Offering there has been no public market for the
capital stock of the Company, and no active public market is anticipated
following the offering. The offering price ($10.00 per share) was set by the
Company at the price at which the initial shares of Common Stock were offered
and sold in a private offering closed in December, 1995. The offering price
represents solely a decision by the Company as to the price for which the
securities may be successfully offered. The book value per share as of March
31, 1996, was $9.23. The Offering is a continuous offering being done on a
best-efforts basis by means of irrevocable subscriptions. The Offering will
continue until all shares are sold unless terminated earlier by the Company in
its sole discretion. No assurances can be made as to the number of shares
that will actually be sold, or the amount of proceeds the Company will receive
from the Offering.
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THE SHARES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE BANK INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SECURITIES INVOLVES A SUBSTANTIAL DEGREE OF RISK.
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SEE "CERTAIN RISK FACTORS" ON PAGE 4 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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Underwriting Proceeds to
Price to Public Commissions (1) Company (2)(3)
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Per Share . . . . . . . . . . . . . . $ 10.00 $.30 $ 9.70
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Total (maximum of 100,000 shares) $1,000,000.00 $ 30,000 $970,000.00
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(1) This offering is not underwritten. The Company has, however, retained
Pacific Crest Securities Inc. to act as a placement agent in connection
herewith. Commissions apply only to shares actually sold by Pacific Crest.
(2) Before deducting expenses payable by the Company in connection with this
offering, estimated to be $60,000.
(3) Assumes the sale of all 100,000 shares offered hereby, and that all shares
are sold by Pacific Crest Securities Inc. The Company is using its best
efforts to sell the securities offered hereby, but no assurance can be made
that the Company will receive the proceeds
indicated above.
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A maximum of 100,000 shares of Common Stock is being offered by the
Company, subject to prior sale and subject to the Company's right to accept or
reject any subscription therefor, in whole or in part. There is no minimum
offering amount. Subscriptions will be accepted when received by the Company
together with payment therefor. Subscriptions are irrevocable when made.
Delivery of the Common Stock will be made at the office of the Company as
subscriptions are received and accepted by the Company. See "Plan of
Distribution".
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The date of this Prospectus is , 1996
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[INSIDE FRONT COVER OF PROSPECTUS]
ALBINA COMMUNITY BANCORP
[COMPANY LOGO]
The Company will provide to shareholders quarterly reports containing
unaudited financial statements and annual reports containing financial
statements audited by the Company's independent public accountants. In
addition, the Company will furnish annual reports on Form 10-KSB and quarterly
reports on Form 10-QSB free of charge to shareholders who so request in writing
addressed to the Secretary of the Company.
Prior to this Offering, the Company has not been subject to the reporting
requirements of, and has not filed any reports pursuant to, the Securities
Exchange Act of 1934.
[OUTSIDE BACK COVER OF PROSPECTUS]
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
TABLE OF CONTENTS
Prospectus Summary........................................................... 1
Certain Risk Factors......................................................... 3
Dilution..................................................................... 5
Plan of Distribution......................................................... 6
Use of Proceeds.............................................................. 7
Dividends.................................................................... 7
Market for the Common Stock.................................................. 8
Capitalization............................................................... 9
Description of Business...................................................... 10
Legal Proceedings............................................................ 15
Supervision and Regulation................................................... 16
Management................................................................... 22
Significant Shareholder.......................................................26
Principal Shareholders....................................................... 27
Description of Capital Stock................................................. 28
Experts...................................................................... 29
Transfer Agent............................................................... 29
Securities and Exchange Commission Policy on Indemnification................. 30
Other Information............................................................ 30
UNTIL __________, 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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100,000 Shares
ALBINA COMMUNITY BANCORP
Class A Common Stock
----------------------------
PROSPECTUS
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PACIFIC CREST SECURITIES INC.
, 1996
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION FOUND ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY DOES NOT PURPORT
TO BE COMPLETE, AND SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS AS A
WHOLE.
THE COMPANY
Albina Community Bancorp (the "Company") is an Oregon business corporation
organized in 1993 by a group of concerned community and corporate citizens to
promote community development services in North and Northeast Portland, Oregon,
to benefit the low- and moderate-income residents and to support and finance
private-sector redevelopment projects in the area. The Company intends to
promote investment and development in the Albina district through its wholly-
owned subsidiary community development bank, Albina Community Bank (the "Bank").
Although the Company's primary objective is to generate profits for its
shareholders, in view of its unique mission, the Company may from time to time
make decisions which are motivated by considerations other than maximizing
profits. See "Description of Business -- Albina Community Bancorp" and
"Description of Business -- Business Plan".
In a private offering completed in December, 1995, the Company sold 165,670
shares of Common Stock at a price of $10.00 per share. That offering was
intended to raise capital for the purpose of organizing the Bank. Concurrent
with that offering the Company issued 16,300 shares of its Series A Preferred
Stock to the Northeast Portland Community Development Trust (the "Trust") at a
price of $140.25 per share, and sold 8,518 shares of its Series B Preferred
Stock at $100 per share to certain public charities and private foundations that
desired to support the Company and its mission. Further, the Company sold
4,570 shares of Series C Preferred Stock at $100 per share to Federal National
Mortgage Association. See "Description of Capital Stock" and "Significant
Shareholder". The Company's paid-in capital from the sale of securities, after
pre-opening expenses, totaled approximately $4.6 million. Substantially all of
the initial capital ($4.5 million) was used to capitalize the Bank. The Bank
commenced operations on December 19, 1995.
The Company currently has no operations separate from the Bank. Although
the Company has no current plans to do so, it may consider opportunities in the
future to acquire one or more existing banks which may be positioned to further
the Company's mission. Further, the Company anticipates promoting redevelopment
through a real estate development company to be organized as a separate, wholly-
owned subsidiary of the Company (the "Development Company"). The Development
Company has not yet been organized, and it is not known when or whether it will
be organized. Substantially all of the assets of the Company are invested in
the Bank, and it is expected that the Development Company will not be organized
unless and until additional capital is available. No assurances can be made
that the Development Company will be organized, and if organized, that it will
contribute to the income of the Company.
THE BANK
Albina Community Bank is a commercial bank organized under Oregon law, the
deposits of which are insured by the Federal Deposit Insurance Corporation
("FDIC"). The Bank conducts its business from its temporary facilities located
at 1130 N.E. Alberta St., Portland, Oregon. The Bank expects to move to its
permanent office being constructed at 2002 N.E. Martin Luther King, Jr.
Boulevard, Portland, Oregon, during the late summer of 1996. The Bank was
organized with the intention of qualifying as a Community Development Bank under
federal law, so as to be eligible for federal assistance in accordance with the
Community Development Banking and Financial Institutions Act of 1994 (the
"Community Development Banking Act"). The Company has filed an application for
assistance from the Community Development Financial Institutions Fund (the "CDFI
Fund") which was created by the Community Development Banking Act, but no
assurances can be given as to what, if any, assistance from the Fund will be
available to the Bank or the Company. At the present time, the Bank is
adequately capitalized, and Management does not believe that receipt of any
assistance from the Fund or proceeds from this Offering is necessary for the
Bank to operate successfully.
The Bank's lending programs are focused on residential loans, for
acquisition and rehabilitation and home improvement, and commercial loans to
small businesses, some of which may be guaranteed by the federal Small
1
Business Administration. The Bank's primary deposits include large time
deposits by governmental entities, corporations, socially responsible local
citizens, and program-related investors. The Bank does not intend to establish
a branch network, but rather maintains a small retail staff at its main office
to accommodate needs of the local residents and business owners.
The Bank believes it is competitive with other financial institutions in
its relevant market area as a result of the unique focus of its business. In
addition, the absence of a costly branch system, a lower cost of capital
resulting from the settlement money invested by the Trust, and by various
charitable foundations, and possible additional low-cost capital through federal
funding, should contribute to higher profitability of the Bank than would be the
case without such funding. Moreover, the Bank believes the services of
experienced banking professionals at all levels of the Bank enhance productivity
and are important in the development of non-interest income from fee-based
services.
THE DEVELOPMENT COMPANY
The Development Company, if and when organized, would undertake to partner
with existing non-profit and for-profit developers to expand their respective
development capacities. The Development Company may also initiate development
projects for its own account to stimulate development activity in the area. The
Development Company has not been organized, and its business plan has not yet
been established. Further, the Company does not anticipate organizing the
Development Company until the Company has sufficient capital to support the
activities of the Development Company in addition to those of the Bank. It is
anticipated that approximately $750,000 would be needed for the Development
Company to be organized and to commence operations. A decision by the Company
to establish the Development Company would, however, depend on the performance
of the Bank and a determination that capital could be directed to the
Development Company without adversely affecting the safety and soundness of the
Bank. No assurances can be made that the Development Company will eventually be
organized or when in the future the organization may occur.
THE OFFERING
COMMON STOCK
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Common Stock offered
by the Company...............................................100,000 shares
Common Stock to be outstanding
after the Offering...........................................265,670 shares
MINIMUM INVESTMENT..................................................$250.00
USE OF PROCEEDS: The net proceeds of the Offering will be used as
additional working capital of the Company and possibly
to fund the Development Company. If there are less
than $750,000 in net proceeds from the Offering, the
Company will utilize the proceeds for general working
capital, which may include contributing some or all of
the funds to the Bank as additional capital.
2
CERTAIN RISK FACTORS
GEOGRAPHIC CONCENTRATION AND ECONOMIC CONDITIONS OF MARKET AREA
A majority of the Company's operations are concentrated in the Albina
district in North/Northeast Portland, Oregon. This has historically been an
economically distressed community, suffering from high unemployment and lower
average household income levels than state and national averages. The area has
experienced significant population decline since 1960, when the population was
95,592, compared to the 1990 population of 73,457. The exodus of higher-income
residents to suburban areas spurred development of regional shopping malls which
drew retail consumers away from local commercial shopping centers. The loss of
population and commercial vitality in the area undermined neighborhood
stability, contributing to job losses, rise in crime rates, and decline in
property values. Bank's market area comprises mostly moderate-income
neighborhoods, with median household income in 1990 ranging between 63% and 88%
of median household income for the Portland metropolitan area. The most
distressed neighborhoods in the Target Area had a 1990 median household income
of approximately 45% of median income for the metropolitan area. The
demographic trends have contributed to the physical deterioration of the area.
The success of the Company is dependent on the Bank's ability to attract credit-
worthy borrowers, and to finance viable commercial enterprises and property
development to restore economic vitality to the community.
LACK OF OPERATING HISTORY
The Company is a new enterprise with a limited track record, having
commenced operations in December, 1995. While similar enterprises have shown
success in other cities, no assurance can be given that, despite the
community support for the Company's mission, financial success will be achieved.
As of December 31, 1995, and March 31, 1996, the Company had an accumulated
deficit of $633,558 and $901,045, respectively. Profitable operations are not
anticipated initially and no assurances can be given that the Company will be
profitable in the future.
NEED FOR ADDITIONAL CAPITAL
As a new enterprise, the Company is expected to experience losses during
its initial phase of operations, and possibly for the first two or three years.
Although the Company and the Bank will strive to keep such losses at a minimum,
a significant decline in capital could have a material adverse impact on the
Bank's ability to make loans and increase its portfolio of interest-earning
assets. Consequently, if the Company is unable to achieve profitability,
additional capital may be required to fund operations. No assurances can be
given that the Company will be able to raise additional capital if needed.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will depend on the services of Leon C. Smith,
President of the Company and the Bank. The loss of services of Mr. Smith could
adversely affect the Company's ability to achieve the objectives of its business
plan. The Company does not maintain key employee life insurance on Mr. Smith.
CONTROL BY AFFILIATES
The Trust, through its ownership of all of the shares of the Company's
Series A Preferred Stock, is deemed to be an affiliate of the Company, and is
itself a registered bank holding company. As the holder of the Series A
Preferred Stock, the Trust is entitled to elect 25% of the directors, and in any
event, not fewer than two directors. Directors elected by the Trust, in
addition to their fiduciary duties to the Company and all shareholders, may be
expected to attempt to influence the board of directors in making decisions
affecting the Company and the Bank based on considerations deemed by the
trustees to be important to the community. Such decisions may be different from
or directly conflict with normal business considerations of maximizing profits.
See "Significant Shareholder".
LACK OF MARKET FOR THE SHARES
There is currently no active public market for the Company's Common Stock,
and the Company does not anticipate that an active market for the shares will
develop or be maintained following the Offering, and no
3
assurances can be made in that regard. Even if an active market for the Common
Stock does develop, the market price could be subject to significant
fluctuations in response to variations in quarterly operating results of the
Company, general conditions of the banking industry and other factors. If an
active market in the shares does not develop, the price of the shares may
fluctuate substantially as a result of the effect of supply and demand in a
limited market. Investors should be prepared to hold their investment for an
indefinite period of time.
OFFERING PRICE
The price of the shares offered hereby was determined solely by the
Company's directors. There can be no assurance that the offering price
necessarily indicates the actual value of the Common Stock, or that investors
will be able to sell the shares purchased in this Offering at or above the
offering price.
DIVIDENDS
No dividends are anticipated. The Company has no operating history and
earnings can not be assured. Even if earnings are achieved, there is no plan to
institute a cash dividend policy as any income will likely be retained to fund
further growth of the Company. Further, as the Company is dependent on
dividends from the Bank for income, the availability of funds with which to make
dividends to Company shareholders is limited by regulatory constraints on
dividends by the Bank. The Bank is currently unable to pay dividends to the
Company as a result of the lack of retained earnings. It is not known when,
if ever, the Bank will be able to pay such "upstream" dividends. See
"Supervision and Regulation -- Dividends".
CREDIT RISKS
The greatest risk facing lenders is credit risk, which is the risk of
losing principal and interest as a result of customers' failure to perform in
accordance with their loan obligations. The market area of the Company is
concentrated in an economically distressed part of the city of Portland, which
area has historically experienced high unemployment and low income levels. The
financial success of the Bank and the Company is dependent on the ability of
borrowers to make timely payments, and on the positive impact of community
development efforts on property values in the market area. See "Description of
Business."
EMPHASIS ON COMMUNITY DEVELOPMENT
The Company and the Bank were organized for the purpose of providing
credit to residents of an economically disadvantaged community, and to
support the rehabilitation and redevelopment of that community. Accordingly,
the evaluation of borrowers and the decisions regarding the extension of
credit may be influenced by factors other than considerations of maximizing
profitability or avoidance of risk. For example, the Bank's loan committee
gives substantial weight to geographic location of properties or businesses
for which loans are requested, giving preferences to those borrowers located
within the target market area. Despite the availability of investment or
lending opportunities elsewhere in the Portland metropolitan area which may
provide greater profit potential, visibility or security, the Bank has
determined that its mission dictates that consideration of the needs of its
constituent market outweigh such benefits. Consequently, the Bank may from
time to time choose to participate in transactions in which the perceived
benefit to the community outweighs the considerations of maximizing profits
for the Bank.
COMPETITION
The Company operates in a small area in the city of Portland, and competes
with a number of larger, well-established banks, credit unions and other
financial and non-financial institutions for loans to businesses located in that
area. With the increased attention given by banking regulations to compliance
with the federal Community Reinvestment Act which requires insured depositories
to make credit available to all segments of their market area, the major
financial institutions serving the greater Portland market area have increased,
or are expected to increase, their efforts to find and fund eligible borrowers
in the North/Northeast Portland community. The Bank anticipates that it can
offer financial services on a competitive basis with such institutions, but no
assurance can be given that customers who represent the best credit risk can be
attracted to the Bank. The Bank does not expect to maintain a branch office
system, and the lack of branches could hamper the growth of the Bank. The Bank
will, however, actively seek to continue to build its deposit base, primarily
through local residents and businesses, and large time deposits from
governmental entities, corporations, socially responsible citizens, and program-
related investors. The unavailability of sources of such deposits in the
amounts and on the terms anticipated may have a material adverse effect on the
growth of the Bank.
IMPACT OF CHANGES IN INTEREST RATES
The Bank's earnings are largely derived from net interest income, which is
interest income and fees earned on loans and investment income less interest
expense paid on deposits and other borrowings. As interest rates change, net
interest income is affected. With fixed rate assets (such as fixed rate loans)
and liabilities (such as certificates of deposit), the rate at which this change
occurs depends on the maturity of the asset or liability. The differences
between the amounts of interest-sensitive assets and interest-sensitive
liabilities, measured over various time periods, are referred to as sensitivity
gaps. Although management will strive to minimize risk through asset/liability
management policies, from time to time maturities may not be balanced. During
such periods, a rapid decrease or increase in interest rates could have an
adverse effect on the spreads between the interest rates earned on assets and
the rates of interest paid on liabilities, and therefore on the results of
operations of the Bank.
4
Interest rates are highly sensitive to many factors which are beyond the
control and financial condition of the Company or the Bank. The results of the
operations of the Company and its subsidiaries may be materially and adversely
affected by changes in prevailing economic conditions, including changes in
interest rates and the monetary and fiscal policies of the federal government.
During 1992 and 1993, the banking industry in general witnessed a surge in
profitability, in large part as a consequence of declining interest rates, which
in turn lowered banks' cost of funds and increased net interest spreads and
margins. During 1994 and 1995, interest rates generally increased and earnings
moderated. Although interest rates remain at relatively low levels, compared
with rates experienced in the past ten years, any increase in rates would likely
increase the cost of funds for banks, and may negatively impact potential
profits. In addition, increases in interest rates could have a negative impact
on economic activity. An economic downturn could adversely affect employment
rates and development activity in the market area, which in turn could have a
detrimental effect on the value of collateral and borrowers' ability to repay
loans.
BANK REGULATION AND RELATED UNCERTAINTIES
Banking is a highly regulated industry. Regulatory agencies have the
authority to limit or prohibit certain activities which may affect the safety
and soundness of the Bank. From time to time legislation is proposed or enacted
that has the effect of increasing the cost of doing business, limiting or
expanding permissible activities or affecting the competitive balance between
banks and other financial and non-financial institutions. Proposals to change
the laws and regulations governing the operations and taxation of banks and
other financial institutions are frequently made in Congress, the Oregon state
legislature and before various state and federal bank regulatory agencies. Most
recently, legislation authorizing interstate branching has been enacted into law
by Congress and the Oregon Legislature. The effects these changes may have on
the competitive position of the Company or the Bank and the likelihood of
additional changes cannot be accurately predicted. The Company has applied for
assistance from the CDFI Fund, created by the Community Development Banking Act
of 1994 to provide federal assistance to entities committed to community
development efforts. The Company and the Bank are expected to qualify for such
federal assistance, but no assurance can be given that such federal funds will
be available to the Company or the Bank. See "Supervision and Regulation -
Community Development Banking Legislation."
DILUTION
The net tangible book value of the Company at March 31, 1996 was
$4,300,513, or $9.23 per share of Common Stock. Net tangible book value per
share of Common Stock is determined by subtracting the liquidation preferences
o f any outstanding preferred stock from the net tangible book value of the
Company, and dividing the result by the sum of the number of outstanding shares
of Common Stock plus the common stock equivalent liquidation participation
interests of participating preferred stock up to the maximum total liquidation
amount applicable to such preferred stock. After giving effect to the issuance
and sale of 100,000 shares of Common Stock being offered by the Company at an
offering price of $10.00 per share, and after deducting underwriting commissions
and offering costs, the net tangible book value per share at March 31, 1996
would have been $9.18. This represents an immediate decrease in the net
tangible book value of $0.05 per share to the existing shareholders, and an
immediate dilution of $0.82 per share to new investors.
The following table illustrates the per share dilution in net tangible book
value:
Offering Price $10.00
Net tangible book value before Offering $9.23
Decrease attributable to sale of Common Stock by
the Company to new investors 0.05
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Pro forma net tangible book value after Offering(1) 9.18
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Dilution to new investors(2) $0.82
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(1) After deduction of underwriting commissions and anticipated offering
expenses to be paid by the Company.
(2) Dilution is determined by subtracting net tangible book value per share
after the Offering from the amount of cash paid by a new investor for a
share of Common Stock.
5
PLAN OF DISTRIBUTION
The Company is offering up to 100,000 shares of Common Stock at a price of
$10.00 per share. The Company intends to distribute the shares offered hereby
by means of stock subscription agreements executed by prospective purchasers.
This Offering is not underwritten. The Company has, however, engaged Pacific
Crest Securities as a placement agent in connection with the sale of shares, for
which Pacific Crest will receive a commission of 3% for all shares it sells,
plus an advisory fee of 1% of the total proceeds of the Offering. The Company
is also offering the Common Stock through its officers and directors, who will
not be entitled to receive any discounts or commissions for selling such shares.
Such persons may, however, be reimbursed for reasonable expenses incurred in
connection with the sale of shares. Pacific Crest Securities will not receive
commissions with respect to shares sold by or through the Company's officers and
directors but will receive a fee of 1% of the total proceeds of the Offering
regardless of whether the shares are sold by Pacific Crest Securities or by
others.
The Offering is undertaken by the Company in part to give residents and
businesses in the Company's market area an opportunity to invest in the Company
and, indirectly, the Bank. The probable success of the Bank is believed to be
enhanced if residents and businesses in the Company's market area have an
ownership interest in the Company. It is also believed that shareholders are
more likely to do business with and make referrals to the Bank, thereby
increasing the Bank's business opportunities.
OFFERING PERIOD
The Offering is a continuous offering beginning at the time the
registration statement filed with the Securities and Exchange Commission in
connection therewith is declared effective by the Commission and will terminate
upon the acceptance by the Company of subscriptions for all 100,000 shares
offered (the "Offering Period"). The Company may, in its sole discretion
terminate the Offering at any time without regard to the number of shares
subscribed for or sold.
DETERMINATION OF OFFERING PRICE
The public offering price of $10.00 per share has been determined solely by
the directors of the Company. Such offering price should not necessarily be
considered an indication of the market value of the Common Stock of the Company
after the Offering, and there can be no assurance that the market will sustain
the initial public offering price or that the initial public offering price will
represent the actual value of the Common Stock.
MINIMUM INVESTMENT
The minimum investment in the Offering is $250.00, or 25 shares. There is
no maximum investment in the Offering. The Company, however, reserves the right
to accept or reject any subscription in its sole discretion, and intends to
ensure that shares will be available to residents and businesses in the
Company's market area who desire to invest in the shares.
SUBSCRIPTION FOR SHARES
Persons wishing to purchase shares may subscribe by delivering a completed
and signed form of stock subscription agreement ("Subscription") to the Company
at its head office, currently at 1130 N.E. Alberta, Portland, Oregon 97211.
Copies of the Subscription form, if not included with this Prospectus, are
available from the Company. Investors must subscribe for the minimum
investment. Subscriptions will generally be accepted by the Company on a first-
come, first-accepted basis until the termination of the Offering. Investors
should indicate the number of shares desired, subject to the limitations set
forth above. No Subscription is binding on the Company until accepted by it,
and the Company reserves the right to accept or reject any Subscription in whole
or in part, in its sole discretion. None of the Company's directors, officers
or significant shareholders are expected to subscribe for shares in the
Offering.
A Subscription constitutes a continuing offer by the subscriber until such
time as it is accepted or notice of rejection is given by the Company. A
Subscription is irrevocable once made. If any material change, with
6
respect to any aspect of the Offering, the Company, the Bank, the business and
financial condition of either the Company or the Bank, or any other information
contained in this Prospectus, occurs after submission of a Subscription, but
prior to acceptance by the Company, the subscriber's funds will be returned, and
the subscriber will be provided with additional information with respect to such
material change and be given an opportunity to re-subscribe for shares, subject
to prior sale or termination of the Offering.
Subscriptions generally must be accompanied by payment for the full price
of all shares which the subscriber desires to purchase. Payment may be made by
personal check, cashier's check, wire transfer or money order. Personal checks
are accepted subject to collection. The Company may, in its sole discretion,
accept Subscriptions with an irrevocable commitment to pay the subscription
price upon call by the Company. Funds submitted with a Subscription will not be
held in escrow. The Company will accept or reject Subscriptions as they are
received, and funds relating to Subscriptions that are rejected in whole or in
part will be promptly returned to the subscriber.
SHARE CERTIFICATES
A certificate representing shares of Common Stock of the Company duly
authorized and paid for, will be issued to each subscriber as soon as
practicable after acceptance of the Subscription therefor.
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of Common Stock
offered hereby are expected to be $910,000 after deduction of commissions and
fees payable to Pacific Crest Securities Inc., and other expenses payable by the
Company. The net proceeds will be available to the Company to increase its
working capital and possibly fund the organization of the Development Company.
It is expected that the Development Company will require approximately $750,000
in initial capital. If less than $750,000 in net proceeds from this Offering
are received by the Company, some or all of the net proceeds may be contributed
to the Bank as additional capital, or may be retained by the Company for general
working capital. Even if all of the shares being offered in this Offering are
sold, however, a decision by the Company to establish the Development Company
would depend on the performance of the Bank and a determination that capital
could be directed to the Development Company without adversely affecting the
safety and soundness of the Bank. Such a decision or determination by the
Company may be postponed until the Bank's operations have stabilized and
earnings and cash flow trends are identified. In addition, the organization of
the Development Company may be delayed until other funding, if any, were to
become available, such as assistance from the CDFI Fund. Pending the
application of the net proceeds to the above uses, the Company intends to invest
the net proceeds in investment securities. It is estimated that the expenses
and costs of the Offering, including fees, will total approximately $90,000.
The Company and the Bank currently exceed all regulatory capital
requirements and are therefore not required to raise additional capital to
comply with such requirements. After the Offering, the Company expects to
continue to exceed all regulatory requirements.
DIVIDENDS
The Company does not have, nor intend to establish, a cash dividend policy
with respect to the Common Stock. Notwithstanding such dividends as may be
declared and payable on any or all series of Preferred Stock outstanding, it is
anticipated that net income from the operations of the subsidiaries will be
retained for use by those subsidiaries as working capital to further the
objectives of the Company. Further, as the Company is dependent on dividends
from the Bank for income, the availability of funds with which to make dividends
to Company shareholders is limited by regulatory constraints on dividends by the
Bank. See "Supervision and Regulation -- Dividends".
7
MARKET FOR THE COMMON STOCK
There is currently no active public market for the Common Stock. The
Company does not anticipate, and no assurances can be made, that such a market
in the Common Stock will develop or be maintained following the Offering. The
Company does not intend to apply to any national or regional stock exchange for
listing of the Common Stock. If a market for the Common Stock does develop, the
market price could nonetheless be subject to significant fluctuations in
response to variations in quarterly operating results of the Company, general
conditions of the banking industry and other factors. If an active market in
the shares does not develop, the price of the shares may fluctuate substantially
as a result of the effect of supply and demand in a limited market. Investors
should be prepared to hold their investment for an indefinite period of time.
8
CAPITALIZATION
The following table presents the capitalization of the Company as of March
31, 1996, and the pro forma capitalization as of completion of the Offering, and
the receipt of the estimated net proceeds therefrom, to account for the issuance
of 100,000 shares of common stock offered hereby at $10.00 per share:
Historical Pro Forma
---------- ---------
SHAREHOLDERS' EQUITY
Preferred Stock (without par value);
1,000,000 shares authorized
Series A 1% Preferred Stock;
30,000 shares designated, 16,300
outstanding $2,236,058 $2,236,058
Series B 1% Preferred Stock;
10,000 shares designated,
8,518 outstanding 851,800 851,800
Series C 10% Convertible
Preferred Stock;
10,000 shares designated,
4,570 outstanding 457,000 457,000
Common Stock
Class A Common Stock (without
par value); 3,000,000 authorized,
165,670 outstanding at
December 31, 1995 1,656,700
265,670 outstanding
after Offering 2,566,700(1)
Class B Common Stock (without
par value), 1,000,000 authorized,
none outstanding -0- -0-
Accumulated Deficit Attributable to:
Preferred Stock (2) (773,023) (773,023)
Common Stock (128,022) (128,022)
---------- ----------
Retained Earnings (deficit) (901,045) (901,045)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY $4,300,513 $5,210,513
---------- ----------
---------- ----------
(1) Assumes all shares offered hereby are sold by Pacific Crest Securities
Inc., for total net proceeds of $910,000.
(2) The Series A and Series B Preferred Stock, after consideration of the $1.00
per share liquidation preference, participates in any loss of shareholder
equity, at the rate of $10 per share of Preferred Stock for each $1 per
share of Common Stock, if the total amount to which such Preferred Stock is
entitled upon liquidation less than $100.
9
DESCRIPTION OF BUSINESS
BACKGROUND
In 1991, PacifiCorp, an electric utility holding company serving the
Northwest, settled a class-action lawsuit brought by certain ratepayers. The
settlement agreement ("Settlement Agreement") provided that instead of giving
rebates to its customers, PacifiCorp would make grants totalling approximately
$5.1 million to various community-oriented or charitable causes. As part of the
Settlement Agreement, PacifiCorp agreed to grant $1.7 million, plus interest, to
the Oregon Community Foundation ("OCF") to fund a community development project
(the "Project") for the express purpose of creating a self-sustaining, private
institution with the primary mission of financing private-sector redevelopment
projects to benefit low- and moderate-income residents in all or part of
PacifiCorp's electric service territory in North and Northeast Portland, Oregon.
The Settlement Agreement further provided that PacifiCorp would grant an
additional $300,000, plus interest, in matching funds on a 1:3 basis, as a
challenge to raise additional capital for the Project from third-party
investors.
At the time of the settlement, the OCF retained Shorebank Advisory Services
("SAS"), a consulting subsidiary of South Shore Bancorp, a community development
bank holding company in Chicago, Illinois, to investigate and report on the
feasibility of the Project. Pursuant to a Funding Pledge Agreement, by which
PacifiCorp conveyed the funds to the OCF, the Neighborhood Partnership Fund
("NPF"), a designated fund of the OCF, was given authority to oversee the
Project, and, in its discretion, authority to delegate the oversight to another
entity.
At the recommendation of SAS, the NPF, through an organizing group,
established Albina Community Bancorp (the "Company"), for the purpose of
becoming a holding company of a community development bank and a real estate
development company. The Northeast Portland Community Development Trust (the
"Trust"), a non-profit, limited-life charitable trust was also established to
receive the balance of the settlement funds after paying expenses incurred by
OCF and the organizing group, and the organizational expenses of the Company and
the subsidiary bank.
The Company commenced a private offering in September, 1994, to meet the
challenge grant and raise additional capital for investment in the Bank. The
Company was successful in placing 165,670 shares of Common Stock with investors,
which raised approximately $1.65 million. The Company raised an additional
$815,800 from the sale of shares of Series B Preferred Stock to certain
charitable organizations that desired to make "program-related" investments to
support the Company's mission, and $457,000 from the sale of Series C Preferred
Stock to Federal National Mortgage Association. The Trust, upon capitalization
of the Company and authorization of the subsidiary bank to conduct business,
invested substantially all of the remaining settlement funds ($1,630,000) in
shares of the Company's Series A Preferred Stock, bringing the initial
capitalization of the Company to approximately $4.6 million. See "Significant
Shareholder" and "Description of Capital Stock."
ALBINA COMMUNITY BANCORP
Albina Community Bancorp is an Oregon business corporation which was
organized in 1993 as Northeast Community Bancorp. The Company's primary mission
is to serve the commercial credit needs of North/Northeast Portland, Oregon,
area of Albina (the "Target Area") by promoting community development services
to benefit the low- and moderate-income residents and by supporting and
financing private-sector redevelopment projects in the area. The boundaries of
the Target Area are the same as those used by the City of Portland in its
"Albina Community Plan," which encompasses 19 square miles and 15 neighborhoods
in North and Northeast Portland.
The Target Area has historically been a port of entry for newcomers to the
Portland area, particularly for minorities. The population is diverse, but is
disproportionately represented by African-Americans, Native-Americans,
Hispanics, and Asian immigrants, with, for example, 77% of all of Portland's
African-American population living in the area. The area has experienced
significant population decline since 1960, and can be characterized generally as
an area of high unemployment and low income levels. In 1990, the population in
the Target Area was 73,457, representing a 9% decline from 1980, continuing a
trend which began in 1960 when the population was 95,592. The construction of
Interstate 5 accelerated an exodus of higher-income residents to suburban areas,
spurring development of regional shopping malls. These malls drew retail
consumers away from
10
local commercial shopping centers. The loss of population and commercial
vitality in the area undermined neighborhood stability, contributing to job
losses, rise in crime rates, and loss in property values. Consequently,
conventional financial institutions became reluctant to invest or make loans in
the area.
Most of the neighborhoods in the Target Area are moderate-income
neighborhoods, with 1990 median household income ranging between $19,250 and
$26,800, compared to 1990 median household income of $30,625 for the Portland
metropolitan area. The most distressed neighborhoods in the Target Area had a
1990 median household income of $13,900, or approximately 45% of median income
for the metropolitan area. Population in these neighborhoods is approximately
70% African-American, representing the highest concentration of African-
Americans in the state. Over 50% of households in the most distressed
neighborhoods are headed by single females living below the poverty line. The
demographic trends have contributed to the physical deterioration of the Target
Area.
The Company believes that, despite the current challenges facing the Target
Area, there are significant opportunities for investment which could benefit the
residents of the Area in accordance with the purpose of the Project and provide
a reasonable return to the Company. The Area is well situated geographically
with excellent public transportation available. The Area enjoys close proximity
to Portland's downtown, a nearby regional shopping mall, and several major
public facilities, including Memorial Coliseum and the Rose Garden, Portland's
new sports arena and home of the Portland Trailblazers National Basketball
Association franchise.
The Target Area has seen some increase in property values resulting from
interest of investors and small redevelopment companies. The Company is
concerned that gentrification of the Area will raise the cost of living to
current residents, removing the availability of affordable housing from the
area, forcing many to relocate. By encouraging investment by existing residents
in rehabilitation projects or other entrepreneurial ventures, the existing
residents may realize the economic benefits of the community redevelopment
taking place, while maintaining the availability of affordable housing.
BUSINESS PLAN
OVERVIEW
The Company's business plan was created in consultation with Shorebank
Advisory Services, a subsidiary of South Shore Bancorp in Chicago, Illinois, the
parent holding company of South Shore Bank, one of the first community
development banks in the United States. Community development banks, as well as
other community development financial institutions, tailor specific loan
products to meet the needs of low-income and minority communities, and have been
innovators in the creation of non-standard transactions which have sometimes
been adopted by mainstream lending institutions. These institutions have also
been successful in promoting community revitalization by providing a presence
that is known and trusted within communities which have become disconnected from
the mainstream social and economic system. Moreover, these institutions provide
a wide array of services intended to build the capacity of borrowers and
community institutions and to promote revitalization efforts. The success of
these institutions is due in part to the focus of lending decisions on the
collective benefit to entire communities, rather than on the benefit to the
institution of discreet transactions.
The business plan is intended to implement the Company's stated mission of
promoting redevelopment and reinvestment in the Target Area, through credit
assistance for renovation and rehabilitation of existing residences, stimulation
of the rehabilitation industry and small business enterprises, and by attracting
capital from outside investors. Although the Company's primary objective is to
generate profits for its shareholders, in view of its unique mission, the
Company may from time to time make decisions which are motivated by
considerations other than maximizing profits.
MARKET FOCUS
The business plan initially calls for making credit available to
residents of the Target Area for acquisition and rehabilitation of residential
properties, small business financing, and consumer loans. The Bank will
participate with other financial institutions in loans which exceed the Bank's
lending limit, or which are originated by other institutions and present
opportunities for the Bank to deploy its capital within the market area at an
appropriate level
11
of risk. Over time there will be more emphasis on business development and
housing development within the Target Area. The Company believes that by
focusing its resources on a concentrated area, the perception of outside
investors and entrepreneurs will improve, attracting additional capital,
business development, and employment prospects.
The activities of the Company and its subsidiaries are intended to
participate in, and give support to, the nascent reversal of the trend of
disinvestment in the Target Area by encouraging active involvement in the
community through investments by the development company subsidiary in local
businesses, and by linking residents, local government and financial resources
in a coherent renewal effort. As a holding company of a community development
bank, the Company may be capable of managing higher-risk investments, by
conducting some of its activities through the Development Company subsidiary,
than might be considered appropriate for the Bank.
RISK MANAGEMENT
As the Bank is devoted to community redevelopment, it has the unique
advantage of significant capacity and commitment to underwrite non-standard
loans. This capacity is in part due to low-cost capital invested by the Trust
in the Series A Preferred Stock, and the risk and return expectations of the
investors, charitable organizations and foundations who have invested in the
Company's Series B Preferred Stock, and have been or are expected to be sources
of deposits for the Bank. Further, the Bank intends to extensively use
government guarantee programs to enhance the credit-worthiness of many
borrowers. In addition, the Company expects to qualify with as a Community
Development Financial Institution under the Community Development Banking and
Financial Institutions Act of 1994 (see "Description of Business -- Community
Development Banking Legislation"). This program may be an important source of
capital for the Bank, permitting the Company to devote resources to other
related subsidiaries in furtherance of the Project, although no assurances can
be made that this source of capital will be available to the Bank or the
Company.
CAPITAL RESOURCES
The Company currently has no operations separate from the Bank. The Bank
commenced operations on December 19, 1995, following the private offering of the
Company which raised approximately $4.6 million.
The Company believes that proceeds of the Offering, together with existing
capital will satisfy the cash requirements of the Company for at least the first
twelve months of operation. It is anticipated that the Company's cash
requirements will not exceed $1.5 million during that period, and it will not be
necessary to raise additional capital. Nonetheless, the Company is seeking
additional capital through assistance from the CDFI Fund, which assistance, if
any, would likely be in the form of an investment in shares of the Company's
Series B Preferred Stock. See "Description of Capital Stock." It is
anticipated that substantially all of the funds from this source would be
contributed to the Bank as additional capital, permitting the Company to utilize
the proceeds of this Offering to capitalize the Development Company. Any
additional contribution to the Bank's capital would be expected to enhance the
Bank's business prospects and flexibility in fulfilling its business objectives.
Although funds are currently available to successful applicants to the CDFI
Fund, no assurances can be given that the Company will be successful in
obtaining assistance from the Fund, and no assurance can be given that Congress
will continue to appropriate funds to the Fund. Consequently, no assurances can
be made that this source of additional capital will be available to the Bank or
the Company.
Although the Company has no current plans to do so, it may consider
opportunities in the future to acquire one or more existing banks which may be
positioned to further the objectives of the Company, and may consider prudent
business opportunities outside the Target Area.
ALBINA COMMUNITY BANK
The Bank is a commercial bank organized under Oregon law, the deposits of
which are insured by the FDIC. The Bank's lending programs are focused on
residential loans for acquisition, rehabilitation, and home improvement,
including federally guaranteed loans. In addition, the Bank offers commercial
loans to small businesses, including inventory and working capital financing,
and loans guaranteed by the federal Small Business
12
Administration. The Bank's primary deposit base includes large time deposits by
governmental entities, corporations, socially responsible local citizens, and
program-related investors. The Bank does not intend to establish a branch
network, but rather expects to continue to maintain a small retail staff at its
main office to accommodate needs of the local residents and business owners.
The Bank may consider branch banking opportunities in the future, if such
opportunities are consistent with the objectives of the Bank.
The Bank believes it is competitive with other financial institutions in
its relevant market area as a result of the unique focus of its business. In
addition, the absence of a costly branch system, the lower cost of capital
resulting from the investments by the Trust in the Series A Preferred Stock, and
the program-related investments by the OCF and other private foundations in the
Series B Preferred Stock, and possible additional low-cost capital through
federal funding, should contribute to higher profitability than would otherwise
be obtained. Profitable operations are not anticipated initially and no
assurances can be given that the Company will be profitable in the future.
CREDIT RISK
The most significant risk to the Bank is that of losses resulting from
defaults on loans. The market area of the Company is concentrated in an
economically highly distressed part of the city of Portland, which area has
historically experienced high unemployment and low income levels. The financial
success of the Bank and the Company is dependent on the ability of borrowers to
make timely payments, and on the positive impact of community development
efforts on property values in the market area. Although the Bank will establish
a reserve for possible loan losses, if its loss experience is high, the charge
to income to cover such losses could eliminate any profits of the Company, and
could jeopardize the Bank's capital and ongoing operations. As the Bank intends
to make many loans which other commercial lenders have not made, or are
unwilling to make, the underwriting criteria utilized by the Bank, and the
credit risk assessment made by its management team, become particularly critical
to limiting potential loan losses.
Management believes it can limit such losses to an acceptable level by the
use of government guarantees when available, retaining adequate security for
loans, and by becoming more familiar with the borrowers and the Community than
other lenders have been able to do.
INTEREST RATE RISK
It is the Bank's business to borrow funds from depositors and other
sources, and to lend those funds to borrowers or invest in interest-bearing
securities. Net interest income, the Bank's primary source of income, is
determined by the difference between the cost of deposits or other funds and the
interest earned on loans or investment securities. Consequently, the Bank could
suffer significant losses if its cost of funds were to rise and the additional
costs could not be passed on to borrowers. Similar interest rate risks apply if
the Bank invests in long-term fixed rate securities.
The Bank strives to ameliorate such risk in two ways: First, the Bank
offers loans with variable interest rates, which permit the Bank to increase the
interest rate, periodically, to reflect changes in the prevailing cost of funds.
However, many borrowers are not prepared or able to accept variable rate loans,
and such loans frequently carry significantly lower rates than fixed-rate loans
of similar maturities.
The second way the Bank attempts to reduce the effects of interest rate
changes is to match, to the extent possible, the maturities of the interest-
bearing liabilities (such as time certificates of deposit) and fixed-rate loans
or investment securities (such as U.S. Treasury bonds) it has purchased. In
this way, as loans or investments are paid off or mature, a like or similar
amount of deposits also matures, and loans can be matched with deposits to
establish an acceptable interest rate spread over the maturity of the loan.
Although management strives to minimize risk through asset/liability management
policies, from time to time maturities may not be balanced. During such
periods, a rapid decrease or increase in interest rates could have an adverse
effect on the spreads between the interest rates earned on assets and the rates
of interest paid on liabilities, and therefore on the results of operations of
the Bank.
13
RESULTS OF RECENT OPERATIONS
The Company has no operations separate from the Bank. The Bank commenced
operations in December, 1995, and its activities have primarily consisted of
gathering deposits and writing loans, as well as installing internal operating
systems. At March 31, 1996, the Bank had total assets of approximately $8.8
million, total loans of approximately $1.2 million, and total deposits of $4.4
million. The Bank experienced a loss of $267,500 for the three month period
ended March 31, 1996, primarily as a result of high payroll expenses
attributable to retaining more employees than a community bank of its size would
typically do. In order to attract deposits, the Bank hired a deposit
development officer which causes the Bank to incur significant payroll costs
which are not covered by the level of interest income currently being generated.
Further, additional costs are attributable to salaries for loan officers in the
process of initiating loans, the fees and interest income from which has yet to
be fully realized. It is believed that employing additional personnel to
achieve profitability as early as possible is important to the ultimate success
of the Bank, notwithstanding the attendant decline of capital which is expected
to be temporary. It is anticipated that as the deposits and loans continue to
grow, the rate of losses will decline. Moreover, it is hoped that as the
lending officers gain experience with lending in the Bank's target market, the
level of loan production will increase, and the payroll expenses as a percent of
revenue will decline. It is not known, and cannot be accurately predicted at
this time if or when the Bank will achieve profitability.
DEPOSITS
The following table sets forth the average deposit liabilities of and the
rates paid by the Bank for the three months ended March 31, 1996:
Average Balance Average Rate Paid
--------------- -----------------
Non Interest-bearing demand $ 25,037 n/a
Interest-bearing demand 48,978 1.50%
Savings 177,977 2.60%
Time 2,769,710 4.92%
-----------
Total deposits 3,021,702
-----------
-----------
Of the time deposits listed above, the deposits of $100,000 or more had the
following times remaining to maturity:
Balance at
March 31, 1996
--------------
Remaining maturity:
less than 3 months 330,414
3-6 months 100,822
6-12 months 1,713,970
over 12 months -
----------
Total deposits $100,000 or more $2,145,206
----------
----------
LOANS
Interest earned on the loan portfolio is the primary source of income for
the Bank. Net loans represent 13.8% of total assets as of March 31, 1996. The
Bank makes substantially all of its loans to customers located within the Bank's
service area. The Bank has no loans defined as highly leveraged transactions by
the Federal Reserve Board, and has no loan losses as of March 31, 1996. The
following table sets forth the composition of the loan portfolio at March 31,
1996:
14
March 31, 1996
--------------
Commercial $ 49,725
Residential Real Estate 1,101,566
Installment 61,427
-----------
Total loans 1,212,718
Reserve for loan losses (6,206)
Net loans 1,206,512
-----------
-----------
INVESTMENT PORTFOLIO
The investment portfolio at March 31, 1996, consisted entirely of United
States Treasury Bills maturing in one year or less, with an aggregate cost of
$3,424,788 and weighted average maturity of 5.24%.
THE DEVELOPMENT COMPANY
The Development Company is expected to be a for-profit corporation focusing
on rehabilitation of high-quality, affordable housing in concentrated areas,
emphasizing rental property, lease-to-own transition strategies, and for-sale
rehab properties. It is expected that a significant amount of development will
be done in partnership with existing housing developers. The Development
Company is also expected to initiate projects in the commercial sector, either
for its own account, or in partnership with other public, non-profit, or private
developers. The capitalization and implementation of the Development Company
may be delayed until management is satisfied that sufficient capital can be
directed toward the organization and operation of the Development Company
without causing a material adverse impact on the operations or financial
condition of the Bank.
PROPERTIES
The Company currently maintains its executive offices at the temporary
offices of the Bank at 1130 N.E. Alberta St., Portland, Oregon, which it leases
on a short-term lease at the rate of $2,000 per month. The Company will
maintain its permanent main office, located at the permanent office of the Bank
to be located at 2000 N.E. Martin Luther King Jr. Boulevard, Portland, Oregon.
The office, currently under construction, will comprise 5,347 square feet of
space in a mixed-use development pursuant to a lease agreement, dated May 6,
1996, which lease is for a term of 10 years at a monthly cost to the Bank of
$4,015. It is anticipated that such space will be adequate for the Company's
needs including the needs of the Bank and the Development Company, if organized.
The Bank is not financing the construction of the permanent office facility.
EMPLOYEES
As of March 31, 1996, the Bank had a total of 15.5 employees, 14 of which
were full-time-equivalent employees. The Company has no employees other than
those of the Bank.
LEGAL PROCEEDINGS
As of the date of this Prospectus, there were no legal proceedings pending
or threatened against the Company, the Bank, or any of their affiliates, which
would materially affect the ability of the Company or the Bank to conduct
business, or to complete this Offering.
15
SUPERVISION AND REGULATION
GENERAL
The Company and the Bank are extensively regulated under federal and state
law. These laws and regulations are intended to protect depositors, not
shareholders. To the extent that the following information describes statutory
or regulatory provisions, it is qualified in its entirety by reference to the
particular statutory or regulatory provisions. Any change in applicable laws or
regulations may have a material effect on the business and prospects of the
Company and the Bank. The operations of the Company and the Bank may be
affected by legislative changes and by the policies of various regulatory
authorities. The Company is unable to predict the nature or the extent of the
effects on its business and earnings that fiscal or monetary policies, economic
control or new federal or state legislation may have in the future.
The Company, as a corporation organized under Oregon law, is subject to
certain limitations and restrictions of state law. Such limitations and
restrictions relate to such corporate matters as indemnification of directors,
distributions to shareholders, transactions with officers or directors, proper
maintenance of books and records, and procedural requirements with respect to
directors' and shareholders' meetings.
Securities of the Company are subject to the registration requirements of
the Securities Act of 1933, and applicable state securities laws, unless an
exemption from registration is available. Following registration of the Common
Stock in this Offering, the Company will be required to file periodic reports
with the Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, as amended. Such periodic reports can be inspected and
copied at, or obtained from, the Washington, D.C. office of the SEC.
FEDERAL BANK HOLDING COMPANY REGULATION
The Company is a bank holding company within the meaning of the Bank
Holding Company Act (the "BHCA"), and as such, it is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). The Company is required to file annual reports
with the Federal Reserve and to provide the Federal Reserve such additional
information as the Federal Reserve may require.
The BHCA requires every bank holding company to obtain the prior approval
of the Federal Reserve before (i) acquiring, directly or indirectly, ownership
or control of any voting shares of another bank or bank holding company, after
such acquisition, if it would own or control more than 5% of such shares (unless
it already owns or controls the majority of such shares); (ii) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(iii) merging or consolidating with another bank holding company. The Federal
Reserve will not approve any acquisition, merger or consolidation that would
have a substantial anti-competitive result, unless the anti-competitive effects
of the proposed transaction are clearly outweighed by a greater public interest
in meeting the convenience and needs of the community to be served. The Federal
Reserve also considers capital adequacy and other financial and managerial
factors in reviewing acquisitions or mergers.
With certain exceptions, BHCA also prohibits a bank holding company from
acquiring or retaining direct or indirect ownership or control of more than 5%
of the voting shares of any company which is not a bank or bank holding company,
or from engaging directly or indirectly in activities other than those of
banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by Federal Reserve regulation or order,
have been identified as activities closely related to the business of banking or
of managing or controlling banks. In making this determination, the Federal
Reserve considers whether the performance of such activities by a bank holding
company can be expected to produce benefits to the public such as greater
convenience, increased competition or gains in efficiency in resources, which
can be expected to outweigh the risks of possible adverse effects such as
decreased or unfair competition, conflicts of interest or unsound banking
practices. Community redevelopment entities are among the activities deemed
permissible by the Federal Reserve.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to the
bank holding company or its subsidiaries, on investments in their securities and
on the use of their securities as collateral for loans to any borrower. These
regulations and
16
restrictions may limit the Company's ability to obtain funds from the Bank for
its cash needs, including funds for payment of dividends, interest and operating
expenses. Further, under the Federal Reserve Act and certain regulations of the
Federal Reserve, a bank holding company and its subsidiaries are prohibited from
engaging in certain tying arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services. For example, the
Bank may not generally require a customer to obtain other services from the Bank
or the Company, and may not require that the customer promise not to obtain
other services from a competitor, as a condition to an extension of credit to
the customer.
FEDERAL AND STATE BANK REGULATION
The Bank, as a state chartered bank with deposits insured by the Federal
Deposit Insurance Corporation ("FDIC") that is not a member of the Federal
Reserve System, is subject to the supervision and regulation of the Director of
the Oregon Department of Consumer and Business Services, administered through
the Division of Finance and Corporate Securities (the "Oregon Director"), and to
the supervision and regulation of the FDIC. These agencies may prohibit the
Bank from engaging in what they believe constitute unsafe or unsound banking
practices.
As of July 1, 1989, Oregon has permitted out-of-state banking institutions
to acquire banks or holding companies that have been in existence for a period
of no fewer than three years. Generally, such acquisitions are subject to the
approval of the Federal Reserve Board and the Oregon Director. As a result of
1993 Oregon legislation and 1995 federal law changes, Oregon banks may merge
with out-of-state national or state banks, and out-of-state national and state
banks may acquire Oregon branches or may merge with or acquire branches of
Oregon or federal savings associations. Initial acquisitions must involve
institutions which have been engaged in banking in Oregon for at least three
years, but once such an acquisition is made, the resulting bank may add
additional branches.
The Community Reinvestment Act (the "CRA") requires that, in connection
with examinations of financial institutions within their jurisdiction, the
Federal Reserve or the FDIC evaluates the record of the financial institutions
in meeting the credit needs of their local communities, including low- and
moderate-income neighborhoods, consistent with the safe and sound operation of
those banks. These factors are also considered in evaluating mergers,
acquisitions and applications to open a branch or facility. The provisions of
the CRA may be enforced by private citizens and interest groups as well as
federal banking regulators, who conduct regular CRA examinations. A
satisfactory rating means the Bank has adequately met the needs of the
community, consistent with safe and sound banking practices. Although the Bank
has not yet been subjected to a CRA examination, it is anticipated that the Bank
will consistently receive more than satisfactory ratings on its CRA performance,
as a result of its particular focus on meeting such credit needs.
The Bank is also subject to certain restrictions imposed by the Federal
Reserve Act on extensions of credit to executive officers, directors, principal
shareholders or any related interest of such persons. Extensions of credit (i)
must be made on substantially the same terms, including interest rates and
collateral as, and following credit underwriting procedures that are not less
stringent than, those prevailing at the time for comparable transactions with
persons not covered above and who are not employees, and (ii) must not involve
more than the normal risk of repayment or present other unfavorable features.
The Bank is also subject to certain lending limits and restrictions on
overdrafts to such persons. A violation of these restrictions may result in the
assessment of substantial civil monetary penalties on the Bank or any officer,
director, employee, agent or other person participating in the conduct of the
affairs of the Bank, the imposition of a cease and desist order, and other
regulatory sanctions.
Under the Federal Deposit Insurance Corporation Improvement Act ("FDICIA"),
each Federal banking agency is required to prescribe, by regulation, non-capital
safety and soundness standards for institutions under its authority. These
standards are to cover internal controls, information systems and internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, fees and benefits, such other operational and managerial
standards as the agency determines to be appropriate, and standards for asset
quality, earnings and stock valuation. An institution which fails to meet these
standards must develop a plan acceptable to the agency, specifying the steps
that the institution will take to meet the standards. Failure to submit or
implement such a plan may subject the institution to regulatory sanctions. The
Company believes that the Bank already meets
17
substantially all the standards which have been or are likely to be adopted, and
therefore does not believe that the implementation of these regulatory standards
will materially affect the Company's business operations.
DEPOSIT INSURANCE
As an FDIC member institution, the deposits of the Bank are currently
insured to a maximum of $100,000 per depositor through the Bank Insurance Fund
("BIF"), administered by the FDIC. The Bank is required to pay semi-annual
deposit insurance premium assessments to the FDIC.
The FDICIA includes provisions to reform the Federal deposit insurance
system, including the implementation of risk-based deposit insurance premiums.
The FDICIA also permits the FDIC to make special assessments on insured
depository institutions in amounts determined by the FDIC to be necessary to
give it adequate assessment income to repay amounts borrowed from the U.S.
Treasury and other sources or for any other purpose the FDIC deems necessary.
Pursuant to the FDICIA, the FDIC implemented a transitional risk based insurance
premium system on January 1, 1993. Generally, under this system, banks are
assessed insurance premiums according to how much risk they are deemed to
present to BIF. Banks with higher levels of capital and a low degree of
supervisory concern are assessed lower premiums than banks with lower levels of
capital or involving a higher degree of supervisory concern. The Bank's current
FDIC premium rate is $.00 per $100 of domestic deposits. The premium range is
from $.00, for the highest-rated institutions (subject to a statutory minimum
assessment of $2,000) to $.27 per $100 of domestic deposits.
DIVIDENDS
The principal source of the Company's cash revenues is dividends received
from the Bank. Under the Oregon Act, the Bank is subject to restrictions on its
payment of cash dividends to the Company. The Bank may not pay cash dividends
if that payment would reduce the amount of its capital below that necessary to
meet minimum applicable regulatory capital requirements. In addition, the
amount of the dividend may not be greater than its net undivided profits then on
hand, after first deducting (i) all losses; (ii) all bad debts, unless the debts
are well-secured, (a) on which interest for a period of one year is past due and
unpaid, and (b) upon which final judgment has been obtained, but for more than
one year the judgment has been unsatisfied and interest has not been paid; (iii)
all assets or depreciation charged off as required by the Oregon Director; and
(iv) all accrued expenses, interest and taxes of the Bank.
In addition, the appropriate regulatory authorities are authorized to
prohibit banks and bank holding companies from paying dividends which would
constitute an unsafe or unsound banking practice. The Bank and the Company are
not currently subject to any regulatory restrictions on their dividends other
than those noted above. The Bank is currently unable to pay dividends to the
Company as a result of the lack of retained earnings. It is not known when, if
ever, the Bank will be able to pay such "upstream" dividends.
CAPITAL ADEQUACY
The federal bank regulatory agencies use capital adequacy guidelines in
their examination and regulation of bank holding companies and banks. If the
capital falls below the minimum levels established by these guidelines, the bank
holding company or bank may be denied approval to acquire or establish
additional banks or non-bank businesses or to open facilities.
The FDIC and Federal Reserve have adopted risk-based capital guidelines for
banks and bank holding companies. The risk-based capital guidelines are
designed to make regulatory capital requirements more sensitive to differences
in risk profile among banks and bank holding companies, to account for off-
balance sheet exposure and to minimize disincentives for holding liquid assets.
Assets and off-balance sheet items are assigned to broad risk categories, each
with appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items. The
guidelines are minimums, and the Federal Reserve has noted that bank holding
companies contemplating significant expansion programs should not allow
expansion to diminish their capital ratios and should maintain ratios well in
excess of the minimum. The current guidelines require all bank holding
companies and federally-regulated banks to maintain a minimum risk-based total
capital ratio equal to 8%, of which at least 4% must be Tier 1 capital.
18
Tier 1 capital for bank holding companies includes common shareholders'
equity, qualifying perpetual preferred stock (up to 25% of total Tier 1 capital,
if cumulative; under a Federal Reserve rule, redeemable perpetual preferred
stock may not be counted as Tier 1 capital unless the redemption is subject to
the prior approval of the Federal Reserve) and minority interests in equity
accounts of consolidated subsidiaries, less intangibles except as described
above. Tier 2 capital includes: (i) the allowance for loan losses of up to
1.25% of risk-weighted assets; (ii) any qualifying perpetual preferred stock
which exceeds the amount which may be included in Tier 1 capital; (iii) hybrid
capital instrument; (iv) perpetual debt; (v) mandatory convertible securities
and (vi) subordinated debt and intermediate term preferred stock of up to 50% of
Tier 1 capital. Total capital is the sum of Tier 1 and Tier 2 capital less
reciprocal holdings of other banking organizations, capital instruments and
investments in unconsolidated subsidiaries.
Banks' and bank holding companies' assets are given risk-weights of 0%,
20%, 50%, and 100%. In addition, certain off-balance sheet items are given
credit conversion factors to convert them to asset equivalent amounts to which
an appropriate risk-weight will apply. These computations result in the total
risk-weighted assets.
Most loans are assigned to the 100% risk category, except for first
mortgage loans fully secured by residential property, which carry a 50% rating.
Most investment securities are assigned to the 20% category, except for
municipal or state revenue bonds, which have a 50% risk-weight, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have 0% risk-weight. In converting off-
balance sheet items, direct credit substitutes, including general guarantees and
standby letters of credit backing financial obligations, are given 100%
conversion factor. The transaction related contingencies such as bid bonds,
other standby letters of credit and undrawn commitments, including commercial
credit lines with an initial maturity of more than one year, have a 50%
conversion factor. Short-term, self-liquidating trade contingencies are
converted at 20%, and short-term commitments have a 0% factor.
The Federal Reserve also has implemented a leverage ratio, which is Tier 1
capital as a percentage of total assets less intangibles, to be used as a
supplement to risk-based guidelines. The principal objective of the leverage
ratio is to place a constraint on the maximum degree to which a bank holding
company may leverage its equity capital base. The Federal Reserve requires a
minimum leverage ratio of 3%. However, for all but the most highly rated bank
holding companies and for bank holding companies seeking to expand, the Federal
Reserve expects an additional cushion of at least 1% to 2%.
For bank holding companies with less than $150 million in consolidated
assets, the guidelines are applied on a bank-only basis unless the holding
company is engaged in a non-bank activity involving significant leverage or has
a significant amount of outstanding debt that is held by the general public. As
of March 31, 1996, the Company was in compliance with applicable capital
requirements.
The FDICIA also created a statutory framework of supervisory actions
indexed to the capital level of the individual institution. Under regulations
adopted by the FDIC, an institution is assigned to one of five capital
categories depending on its total risk-based capital ratio, Tier 1 risk-based
capital ratio, and leverage ratio, together with certain subjective factors.
Institutions which are deemed to be "undercapitalized" depending on the category
to which they are assigned are subject to certain mandatory supervisory
corrective actions. The Company does not anticipate that these regulations will
have any material effect on the Bank.
Under Oregon law, shares of the Bank may be assessable under certain
circumstances. If the capital of the Bank becomes impaired, shareholders of the
Bank (i.e. the Company) may be required to contribute additional capital.
Shareholders of the Company will not be called upon for such a contribution.
EFFECTS OF GOVERNMENT MONETARY POLICY
The earnings and growth of the Bank, and its existing and future
activities, are affected not only by general economic conditions, but also by
the fiscal and monetary policies of the federal government, particularly the
Federal Reserve. The Federal Reserve can and does implement national monetary
policy for such purposes as curbing inflation and combating recession, but its
open market operations in U.S. government securities, control of the discount
rate applicable to borrowings from the Federal Reserve, and establishment of
reserve requirements against certain deposits, influence growth of bank loans,
investments and deposits, and also affect interest rates charged on
19
loans or paid on deposits. The nature and impact of future changes in monetary
policies and their impact on the Company cannot be predicted with certainty.
CHANGING REGULATORY STRUCTURE OF THE BANKING INDUSTRY
The laws and regulations affecting banks and bank holding companies are
currently undergoing significant changes. Bills are now pending or expected to
be introduced in the United States Congress that contain proposals for altering
the structure, regulation, and competitive relationships of the nation's
financial institutions. If enacted into law, these bills could have the effect
of increasing or decreasing the cost of doing business, limiting or expanding
permissible activities (including activities in the insurance and securities
fields), or affecting the competitive balance among banks, savings associations,
and other financial institutions. Some of these bills would reduce the extent
of federal deposit insurance, broaden the powers or the geographical range of
operations of bank holding companies, modify interstate branching restrictions
applicable to banks, regulate bank involvement in derivative securities
activities, and realign the structure and jurisdiction of various financial
institution regulatory agencies. Whether or in what form any such legislation
may be adopted or the extent to which the business of the Company might be
affected thereby cannot be predicted with certainty.
Of particular note is legislation which has been recently been enacted by
Congress, as referred to above, permitting interstate banking and branching,
which would allow banks to expand nationwide through acquisition, consolidation
or merger. Under this law, an adequately capitalized bank holding company may
acquire banks in any state if permitted by state law. In addition, banks may
acquire branches of out-of-state banks through merger followed by conversion of
the acquired bank branches into branches of the resulting bank. Further, banks
may establish and operate branches in any state subject to the restrictions of
applicable state law. Under Oregon law, an out-of-state bank or bank holding
company may merge with or acquire an Oregon state-chartered bank or bank holding
company if the Oregon bank, or in the case of a bank holding company, the
subsidiary bank, has been in existence for a minimum of three years, and the law
of the state in which the acquiring bank in located permits such merger.
COMMUNITY DEVELOPMENT BANKING LEGISLATION
Of particular importance to the Bank and the Company is legislation
recently passed by Congress which provides for federal assistance of community
development banks. The Community Development Banking and Financial Institutions
Act of 1994 (the "Community Development Banking Act"), created the Community
Development Financial Institutions Fund (the "CDFI Fund"), an agency within the
Department of the Treasury, to promote economic development of distressed
communities by providing financial and technical assistance to new and existing
Community Development Financial Institutions ("CDFI"). A CDFI must have a
primary mission of promoting community development, serve an investment area or
targeted population, provide development services and equity investments or
loans, and maintain accountability (through representation on its governing
boards or otherwise) to residents of its investment area/target population.
The Community Development Banking Act authorizes the appropriation of
federal funds to provide assistance to CDFIs. Assistance may be in the form of
equity investments, deposits, loans, grants, or direct or indirect technical
assistance. Equity investments by the Fund may not exceed 50% of the total
equity of the institution, and are limited to transferrable, nonvoting
securities, provided however, that such investments may be convertible to voting
securities upon transfer by the Fund. The Fund may not control the operations
of a CDFI. A particular CDFI, together with its affiliates, may not receive
more than $2 million of assistance in any one year, and no more than $5 million
in any three-year period.
To qualify for assistance, an institution must meet the criteria of a CDFI,
and must have a comprehensive strategic plan, including a five-year business
plan demonstrating the institution's capacity for future independent viability,
which describes the needs of the community for such assistance, the use of the
proceeds consistent with existing economic and community development plans
applicable to the area, and a plan of coordination with other sources of
financial assistance. Assistance is contingent on, and must be matched dollar-
for-dollar by, funds raised from other sources, such as charitable contributions
and capital investments. The Act provides for "Community Partnerships" wherein
the CDFI may apply for assistance together with an affiliated entity, which may
be a bank holding company, provided that such assistance is directed only to the
CDFI, and not to other affiliates.
20
It is believed that the Bank qualifies as a CDFI, and has filed an
application for assistance from the CDFI Fund for the purpose of obtaining
additional capital through an equity investment by the Fund. Such an investment
would be expected to have a material positive impact on the business of the Bank
and the Company. As of the date of this Prospectus, no action has been taken by
the Fund with respect to the Company's application, and no assurances can be
made that the Company will be successful in obtaining assistance from the Fund.
The success of the Company is, however, not believed to be dependent upon the
availability of funds from the CDFI Fund.
INITIAL VISITATION
On March 5, 1996, the Oregon Division of Finance and Corporate Securities
conducted an informal visitation of the Bank, as is routinely done within the
first three months of operation of a new bank. During this visit, several
deficiencies were identified and recommendations were made relating to the
operations of the Bank. Of particular concern to the examiners were the absence
of a current general ledger, the inability of the Bank to produce a daily
balance sheet and the failure to produce statements which could be certified
internally on a periodic basis. Management believes that these deficiencies
were primarily caused by delays in installing and implementing technical and
operational systems, and the initial training of bank personnel. Management
believes that these problems have been resolved and will have no material impact
on the ongoing operations of the Bank. Management anticipates banking
regulators will continue to monitor the Bank's operations, but does not expect
any further action by regulatory authorities.
21
MANAGEMENT
OFFICERS AND DIRECTORS
The following table sets forth information about the officers and directors
of the Company and the Bank. Unless otherwise indicated, the respective
individuals hold positions in both corporations.
NAME AGE POSITION PRINCIPAL OCCUPATION
- -------------------- ---- ---------------------- --------------------
Roger S. Ahlbrandt 54 Director Dean, Portland State
University School of
Business
James R. Bradshaw 38 Director of Bank Investment Banker,
Pacific Crest
Securities Inc.
Graham C. Bryce 54 Director of Bank Real Estate Investor
Bernard V. Foster 53 Director of Company Publisher, The
Skanner Newspapers
Ted K. Gilbert 44 Director of Company Real Estate
Developer
Avel Louise Gordly 48 Director of Company State Representative
Michael C. Henderson 49 Chairman of the Board President,
PacifiCorp Financial
Services
Sheila D. Holden 41 Director of Company District Manager,
PacifiCorp
Deborah E. Kennedy 42 Director of Company Managing Director,
Cole & Weber
James E. May 43 Director of Company President and CEO,
Legacy Portland
Hospitals
Deborah Saweuyer-Parks 42 Director of Bank President and CEO,
Oregon Corporation
of Affordable
Housing
Howard M. Shapiro 64 Vice Chairman of Consultant
the Board
Leon C. Smith 48 Director, President,
Chief Executive
Officer Banker
Robert L. Thome 64 Senior Lending Officer
of Bank Banker
Jeana M. Woolley 43 Director of Company Consultant
For both the Company and the Bank, directors serve or will serve staggered
terms of office so that approximately one-third of the directorship positions
are voted upon each year and are elected to three year terms. Directors have
not yet been assigned to classes for the purposes of determining the directors
whose terms will expire in the next one, two or three years. It is expected
that such assignments will be made in connection with the election of directors
at the next annual meeting of shareholders. The executive officers are Leon C.
Smith, President and Chief Executive Officer, and Robert L. Thome, Senior
Lending Officer of the Bank. No director or executive officer of the Company or
the Bank has a direct family relationship with another director or executive
officer of the Company or the Bank. Margaret Cheek, Controller of the Company
and Cashier of the Bank resigned as of May 23, 1996, for personal reasons.
Candidates to fill those positions are being interviewed, and nominations are
under review by state and federal banking regulators. A successor has not yet
been selected. Carl E. Peres, a retired banker with over 20 years of banking
experience, primarily with First Interstate Bank, is acting Chief Accounting
Officer in the interim.
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the business experience of the directors and
executive officers for the past five years:
22
ROGER S. AHLBRANDT is Dean of Portland State University School of Business
Administration, a position he has held since 1993. Prior to that time, Dr.
Ahlbrandt was a professor and Associate Dean of the Graduate School of Business
at the University of Pittsburgh, positions he held from 1982 to 1993. Dr.
Ahlbrandt has extensive experience in housing and economic development, and is a
member of the Advisory Committee of the Neighborhood Partnership Fund of the
Oregon Community Foundation. He also serves as a director for ESCO Corporation
and the Ellwood Group, Inc., steel and heavy equipment manufacturers.
JAMES R. BRADSHAW, is a Vice President at Pacific Crest Securities Inc., a
Portland-based investment banking firm, where he has been employed since 1992 as
an investment research analyst focusing on financial institutions. Pacific
Crest Securities is the Placement Agent for this Offering. Prior to joining
Pacific Crest Securities, Mr. Bradshaw was a senior bank examiner for the State
of California and was also a consultant involved in the liquidation of a failed
California thrift.
GRAHAM C. BRYCE has served as President of QG Investment Company, a real
estate investment company, since 1986. Mr. Bryce has extensive prior
experience in the banking and financial services industry, holding positions as
an officer at Mellon Bank, Wells Fargo Bank and Orbanco Financial Services. He
also served as a director of Sprouse-Reitz Stores, Inc., which was liquidated in
bankruptcy in 1994. Mr. Bryce holds a Masters degree in Finance from
Northwestern University.
BERNARD V. FOSTER is owner and publisher of The Skanner Newspapers and is
President of the West Coast Black Publishers Association, representing 22
newspapers in 18 markets throughout western United States. Mr. Foster is
actively involved in many community organizations and activities which serve the
needs of the minority youth and disadvantaged of the Portland area, including
sponsorship of the Northeast Neighborhood Fun Run, The Skanner Music Awards,
Thanksgiving and Christmas food drives, and the annual Minority Business
Enterprise Awards. Mr. Foster is also a member of the Metropolitan Exposition-
Recreation Commission, a regional policy-making board.
TED K. GILBERT serves as President of Baron Equities And Resources, Inc., a
firm specializing in real estate acquisition and development, and has been
actively involved in real estate investment and management since 1973. Mr.
Gilbert also has experience in creating affordable and low income housing, with
an emphasis on north and northeast Portland's inner city neighborhoods. He is
Chairman of HOST Development, Inc., a non-profit developer of affordable home
ownership.
AVEL LOUISE GORDLY serves as an elected State Representative. Appointed in
1991 to fill a vacant position, she has been twice elected to serve her
district, first 1992 and again 1994. For more than 20 years she has been active
in community and social programs, most recently serving as Program Director for
the Portland Housing of Umoja (1991) and Associate Executive Secretary
(Director) of the Pacific Northwest Region American Friends Service Committee in
the Portland, Oregon office (1987-1990).
MICHAEL C. HENDERSON has been President and Chief Operating Officer of
PacifiCorp Holdings Company, a subsidiary of PacifiCorp which controls all of
the non-utility operations of PacifiCorp, since 1995. Prior to that time, he
served, from 1991 to 1995, as President and Chief Executive Officer of
PacifiCorp Financial Services, one of the non-utility subsidiaries, a $1.3
billion diversified financial services company with investments in aviation,
real estate, computer leasing and manufacturing, and middle-market loan and
lease portfolios. Mr. Henderson is a Certified Public Accountant and a
Certified Management Consultant, and has more than 16 years of experience as a
partner in a major accounting firm. He is active in, and has served on the
boards of, several community organizations. Mr. Henderson currently serves as
Chairman of the Board of Directors of the Company and the Bank.
SHEILA D. HOLDEN has been employed by PacifiCorp since 1985, and currently
serves a district manager of community relations for Pacific Power & Light
Company, a subsidiary of PacifiCorp, a position she has held since 1991. She
has been actively involved in organizations which assist low-income residents
with energy-related issues.
DEBORAH E. KENNEDY is Managing Director of Cole & Weber, a Portland
advertising agency. Prior to joining Cole & Weber in 1990, Ms. Kennedy was
Director of Tourism for the State of Oregon for 3 years, and
23
previously International Advertising Manager for Nike, Inc. She is a member of
the board of directors of the Northwest Business Committee for the Arts and the
Oregon Independent College Foundation. Ms. Kennedy is also the founder of Cycle
Oregon, an annual 450-mile bicycle tour of rural Oregon.
JAMES E. MAY is President and Chief Executive Officer of Legacy Portland
Hospitals and Chief Operating Officer of Managed Healthcare Northwest, positions
he has held since 1991 and 1994, respectively. Mr. May holds an M.B.A. in
Finance and Health Administration from the University of Chicago, and has more
than 15 years of experience in hospital management. Mr. May is actively
involved in several community organizations serving the Portland area, including
the American Red Cross, Needy Kids Fund, North/Northeast Business Association,
and Home Ownership a Street at a Time.
DEBORAH SAWEUYER-PARKS is the President and Chief Operating Officer of the
Oregon Corporation for Affordable Housing, a position she has held since its
formation in July, 1993. Prior to the formation of the OCAH, she served as the
Low-Income Tax Credit Program Manager for the Oregon Housing and Community
Services Department. Ms. Saweuyer-Parks graduated from the University of Oregon
and has taken graduate courses toward her MBA at the College of William and
Mary.
HOWARD M. SHAPIRO is an independent business consultant specializing in
management, marketing, fund raising and organizational restructuring. Mr.
Shapiro holds a degree in Business Administration, and serves on the boards of
several charitable and community organizations.
LEON C. SMITH is President and Chief Executive officer of the Company and
the Bank. Prior to joining the Company in January, 1994, Mr. Smith was a Senior
Vice President for Bank of Boston, Connecticut, a position he held from 1992 to
1994, and was previously Chief Executive Officer of Emerald City Bank in
Seattle, Washington from 1991 to 1992. Mr. Smith has also had extensive
experience with community organizations and redevelopment lending projects. He
holds an MBA from the University of Chicago and a law degree from Northwestern
University.
ROBERT L. THOME is the Bank's Senior Lending Officer. Mr. Thome has over
10 years of experience in lending as Vice President of The Money Store
Investment Corporation, a position he has held since 1985. Prior to that time,
Mr. Thome served for over 20 years as Assistant District Director for Finance
and Investment for the Small Business Administration.
JEANA M. WOOLLEY is President and principal of JM Woolley & Associates, a
planning and development consulting firm she has owned and operated since 1991.
Ms. Woolley has over 20 years of experience in public- and private-sector
organizations, including management positions in technology and real estate
businesses. Ms. Woolley also serves as the Chairperson and Trustee of the
Northeast Portland Development Trust, the Company's largest shareholder.
REMUNERATION OF OFFICERS AND DIRECTORS
The following sets forth the aggregate remuneration of the highest paid
executive officer during the past fiscal year. As the Bank commenced operations
in late December, 1995, no other executive officers received significant
remuneration in 1995. Directors do not receive compensation for service or for
participation in meetings of the board of directors.
Name of Individual Capacity in which
or Identity of Group Remuneration was received Aggregate Remuneration
- --------------------- ------------------------- ----------------------
Leon C. Smith President, Chief Executive $125,000
Officer
EMPLOYMENT AGREEMENTS
As of February 1, 1994, the Company and Leon C. Smith entered into an
employment agreement, pursuant to which Mr. Smith is to serve as President and
Chief Executive Officer for a term of two years, extendable for
24
one year at the Company's option. The agreement provides for an annual salary
of $110,000 in 1994, and $125,000 in 1995, and provides for equity participation
through a stock option plan to be established by the Company following the
chartering and funding of the Bank. The agreement further provides for
severance pay of $31,250 in the event the option to extend the agreement is not
exercised, or $125,000 in the event his employment is terminated as a result of
a change of control of the Company by reason of merger, acquisition or
otherwise. The agreement has been extended for one year at an annual salary of
$125,000 for 1996. The parties are in discussions with respect to further
extension or renewal of the current agreement, or possibly a new agreement. A
stock option plan has not been established as of the date hereof, although a
plan may be established in the future, subject to approval by the shareholders.
The Bank entered into an employment contract, dated December 26, 1995, with
Robert L. Thome, pursuant to which agreement Mr. Thome is to serve as senior
vice president for a term of two years at a salary of $72,000 per year. The
agreement provides for an pager/cellular phone and automobile allowances in
aggregate of $400 per month.
EMPLOYEE BENEFIT PLANS
As of the date of this Prospectus, the Company had no established employee
benefit plans generally available to all employees. The Company intends to
establish a health insurance plan and other benefits for officers and other
employees, typical of community banks.
CERTAIN TRANSACTIONS
Certain officers or directors may engage in transactions with the Company
or any of its affiliates, including the Bank, in the ordinary course of the
business of the Company or such affiliates. It is expected that the terms and
conditions of such transactions will be substantially the same as similar
transactions with unrelated parties.
James R. Bradshaw, a director of the Bank, is a Vice President of Pacific
Crest Securities Inc., the Placement Agent for this Offering.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Leon C. Smith, President and Chief Executive Officer of the Company served
twenty-two months as President and Chief Executive Officer of Emerald City Bank,
a Washington state bank, which failed approximately eight months after Mr. Smith
had left the bank. Mr. Smith had been appointed at a time when the bank was
already a very troubled institution and was subject to an FDIC-imposed consent
decree. During Mr. Smith's tenure, the bank significantly decreased its
operating losses, increased the loan portfolio, and decreased the level of
classified assets. Despite Mr. Smith's success in restoring the institution's
balance sheet, the lack of necessary additional capital resulted in the failure
of the bank and the appointment of the FDIC as receiver.
Graham C. Bryce, director of the Bank, served from 1990 to 1994 as a
director of the Sprouse, Inc. ("Sprouse"), an operator of retail variety stores.
Sprouse filed for protection under chapter 11 of the Federal Bankruptcy Code in
1992, and again in 1993. Sprouse was liquidated in a proceeding under Chapter 7
of the Bankruptcy Code in 1994.
25
SIGNIFICANT SHAREHOLDER
NORTHEAST PORTLAND COMMUNITY DEVELOPMENT TRUST
The Northeast Portland Community Development Trust (the "Trust"), a non-
profit, limited-life charitable trust, was created by the NPF on December 1,
1993, for the purpose of receiving the balance of the settlement funds after
payment of expenses incurred by OCF and the organizing group, and the
organizational expenses of the Company and the subsidiary bank, including
expenses incurred in connection with raising the initial capital of the Company.
The Trust, although a limited-life, charitable trust, is a registered bank
holding company pursuant to the Bank Holding Company Act of 1956, as amended, as
a consequence of its ownership of all of the Company's Series A Preferred Stock,
which carries special voting rights.
The Trust is entitled to elect up to 25% of the directors of the Company,
and in any event, at least two directors, starting with the Company's next
annual meeting of shareholders scheduled to be held on mid-year, 1996, after the
Bank occupies its new head office. Currently one of the trustees, Jeana
Woolley, serves as a director of the Company, and another trustee, Gretchen
Kafoury, serves as an advisory director. The directors elected by the Trust
need not be Trustees of the Trust, but are expected to be persons who live or
work in the North/Northeast Community, or otherwise represent an interest in
such area. However, no specific qualifications will be imposed upon the
selection of such directors except the age limitation applicable to all
directors. The Trust has not made any determination as to who it will elect at
the 1996 annual meeting of shareholders.
The Declaration of Trust appoints four Trustees who are elected at each
annual meeting of the Board of Trustees. Trustees are elected by all currently
serving trustees. The current Trustees of the Trust and their addresses are
listed below:
Mary A. Anderson, Executive Director Lolenzo T. Poe, Jr.
Black United Fund of Oregon 1401 N.E. 68th Ave.
P.O. Box 12406 Portland, Oregon 97213
Portland, Oregon 97212
Gretchen M. Kafoury, Commissioner Jeana M. Woolley
City of Portland 5006 N.E. Mallory
1220 S.W. Fifth Ave., Room 211 Portland, Oregon 97211
Portland, Oregon 97204
26
PRINCIPAL SHAREHOLDERS
The following table sets forth the security ownership of the highest paid
executive officer, all directors officers as a group, and principal shareholders
of the Company as of June 10, 1996, and as of the close of the Offering. It is
not anticipated that any of the shareholders listed below will purchase any
significant additional shares in this Offering.
AMOUNT OWNED AMOUNT OWNED PERCENT OF CLASS
TITLE OF CLASS NAME AND ADDRESS OF OWNER BEFORE OFFERING AFTER OFFERING(1) AFTER OFFERING (1),(2)
- --------------- ------------------------- --------------- ----------------- -----------------------
Class A Common Leon C. Smith 2,000 2,000 *
1130 N.E. Alberta
Portland, Oregon 97211
Class A Common ALL OFFICERS AND DIRECTORS 51,070(3) 51,070(3) 19.22%
AS A GROUP
Class A Common James E. May/Legacy Emanuel Hospital 25,250(1) 25,250(3) 9.50%
2801 North Gatenbein
Portland, Oregon 97227
Series A Preferred Northeast Portland Community 16,300 16,300 100.0%
Development Trust
5006 N.E. Mallory
Portland, Oregon 97211
Series B Preferred Oregon Community Foundation 4,110 4,110 48.25%
621 S.W. Morrison, Ste. 720
Portland, Oregon 97205
Series B Preferred The Collins Foundation 1,000 1,000 11.74%
1618 S.W. First Ave., Ste. 305
Portland, Oregon 97201
Series B Preferred Meyer Memorial Trust 2,000 2,000 23.48%
1515 S.W. Fifth Ave., Ste. 500
Portland, Oregon 97201
Series C Preferred Federal National Mortgage Association 4,570 4,570 100.0%(1)
3900 Wisconsin Ave NW
Washington, D.C. 20016
Attn: Wendell L. Johns
* less than 1.0%
- -------------------
1. Assumes no purchases of shares in this Coffering by which shareholder or
members of the group.
2. Assumes sale of all shares offered in this offering.
3. Includes 25,000 shares held by Legacy Emanuel Hospital, of which Mr. May
is President. Also includes250 shares held by Mr. May jointly with his
spouse.
4. Represents 29,500 shares of Class A Common Stock (9.999% of Class A Common
then outstanding) and 16,200 shares of Clas B Common Stock (100% of Class B
Common then outstanding) if all 4,570 shares were converted to Common
Stock.
28
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock sets forth the
material aspects of each class. This description is qualified by reference to
the relevant provisions of the Company's articles of incorporation and bylaws.
The authorized capital stock consists of 5,000,000 shares divided into
4,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. All
issued and outstanding shares are, and all shares of Common Stock to be issued
in this Offering will be, fully paid and non-assessable. The Board of Directors
is authorized to issue or sell additional capital stock of the Company, at its
discretion and for fair value, and to issue future cash or stock dividends,
without shareholder approval.
COMMON STOCK
The authorized Common Stock consists of 3,000,000 shares without par value
of Class A Voting Common Stock ("Common Stock") and 1,000,000 shares without par
value of Class B Non-Voting Common Stock ("Class B Common Stock"). As of the
date of this Prospectus, there were 165,670 shares of the Common Stock
outstanding, and no shares of the Class B Common Stock outstanding. Other than
as set forth below, shares of the Common Stock and Class B Common Stock each
have the same rights to the assets of the Company upon liquidation, subject to
any liquidation preference of any Preferred Stock which may be outstanding.
There are no preemptive rights to acquire additional securities that the Company
may issue.
Each share of Common Stock is entitled to one vote on all matters presented
for shareholder vote, including the election of directors, subject to the
special voting rights of the holders of the Series A Preferred Stock.
Shareholders do not have the right to accumulate votes in the election of
directors.
Shares of Class B Common Stock have no voting rights other than as required
by law, but are otherwise in all respects identical to shares of Common Stock.
Under Oregon law, shareholders who are not otherwise entitled to vote are
nevertheless entitled to vote on any amendment to the articles of incorporation
which may adversely affect their rights as shareholders by, for example,
authorizing additional shares of the same class, altering the par value,
dividend or liquidation preferences, creating a class of shares with dividend or
liquidation preferences equal or senior to shares of that class, or
reclassifying shares of that class into shares of another class.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared by the Board of Directors out of funds legally available for
such purpose. Rights to receive dividends on the Common Stock are subject to
the prior rights of shares of Preferred Stock then outstanding, if any.
PREFERRED STOCK
The Company is currently authorized to issue up to 1,000,000 shares of
Preferred Stock (without par value). The Board of Directors has the authority
to issue Preferred Stock in one or more series, and to designate the
preferences, limitations and relative rights of the shares of any such series
without any further vote or action of the shareholders. The Board also has the
authority to determine the liquidation and dividend rights of any Preferred
Stock that may be issued, including the priority of such rights over the
liquidation and dividend rights of holders of the Common Stock.
SERIES A 1% PREFERRED STOCK.
As of June 10, 1996, there were 20,000 shares of Preferred Stock designated
as Series A 1% Preferred Stock ("Series A Preferred"), of which 16,300 shares
are issued and outstanding. The Series A Preferred carries a liquidation
preference of $1.00 per share, and liquidation participation rights at ten times
the amount distributable on liquidation with respect to the Common Stock up to a
maximum of $100.00 per share of Series A Preferred. The Series A Preferred thus
participates with the Common Stock and the Series B Preferred Stock in any loss
of shareholder equity if the amount to which it would be entitled upon
liquidation is less than $100.00. The Series A Preferred is entitled to a non-
cumulative annual dividend of $1.00 per share, when and as declared by the Board
of Directors, which must be paid in any year a cash dividend on the Common Stock
is declared.
29
The Articles of Incorporation provide that the holder of the Series A
Preferred has the right to elect directors representing 25% of the total number
of directors to be elected, disregarding any fraction, but in any event, no
fewer than two directors. With respect to such board positions, only holders of
Series A Preferred shall be entitled to vote for nominees or their replacements.
All directors, including those elected by the holders of the Series A Preferred,
will serve staggered three-year terms of office, although initially, directors
will serve terms of one, two or three years. Holders of the Series A Preferred
have no other voting rights except as otherwise provided by Oregon law. As of
the date of this Prospectus, all of the Series A Preferred was held by the
Trust.
SERIES B 1% NON-VOTING PREFERRED STOCK.
The Articles of Incorporation designate 10,000 shares of the Preferred
Stock as Series B 1% Non-Voting Preferred Stock ("Series B Preferred"). The
Series B Preferred has no voting rights except as provided by Oregon law, but is
in all other respects identical to and on parity with the Series A Preferred.
As of June 10, 1996, there were 8,518 shares of Series B Preferred outstanding.
SERIES C 10% NON-VOTING CONVERTIBLE PREFERRED STOCK.
The Articles of Incorporation designate 10,000 shares of the Preferred
Stock as Series C 10% Non-Voting Convertible Preferred Stock ("Series C
Preferred"), of which 4,570 shares were outstanding as of June 10, 1996. The
Series C Preferred has a liquidation preference of $100.00 which is on parity
with the liquidation preferences of the Series A and Series B Preferred, and
prior to the liquidation participation of the Series A and Series B Preferred
with the Common Stock liquidation rights, but otherwise has no liquidation
participation. The Series C Preferred is entitled to a non-cumulative annual
dividend of $10.00 per share, when and as declared by the Board of Directors,
which must be paid in any year a cash dividend on the Common Stock is declared.
The Series C Preferred has no voting rights except as provided by Oregon law.
Each share of the Series C Preferred is convertible into ten shares of Common
Stock, up to a maximum of 4.99% of the Common Stock then outstanding. To the
extent the conversion of shares of Series C Preferred would result in the
issuance in aggregate of more than 4.99% of the then outstanding Common Stock,
shares of Class B Common Stock will be issued.
LEGAL MATTERS
For purposes of this Offering the following has acted as Special Counsel to
the Company:
Foster Pepper & Shefelman
101 S.W. Main St. 15th Floor
Portland, Oregon 97204
EXPERTS
The consolidated financial statements of Albina Community Bancorp and
subsidiaries at and for the year ended December 31, 1995, have been included in
this Prospectus in reliance on the reports of KPMG Peat Marwick LLP, independent
certified public accountants, given on the authority of said firm as experts in
auditing and accounting.
TRANSFER AGENT
The Transfer Agent for the Common Stock of the Company is Albina Community Bank,
its subsidiary.
30
SECURITIES AND EXCHANGE COMMISSION POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the Company's Articles of Incorporation,
contractual agreements, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission ("SEC") such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
OTHER INFORMATION
The Company has filed a registration statement on Form SB-1 with the SEC
under the Act with respect to the Common Stock being offered hereby. As
permitted by the rules and regulations of the SEC, this Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, which may be obtained
from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20459. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete and, in such instance, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
31
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
ALBINA COMMUNITY BANCORP
Page
----
Report of Independent Auditors F-1
Consolidated Balance Sheets at March 31, 1996 (unaudited)
and at December 31, 1995 and 1994 F-2
For the Three Months Ended March 31, 1996 and 1995 (unaudited) and
for the Years Ended December 31, 1995, 1994, and 1993:
Consolidated Statements of Operations F-3
Consolidated Statements of Changes in Shareholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Albina Community Bancorp:
We have audited the accompanying consolidated balance sheets of Albina Community
Bancorp and subsidiary (collectively a development stage enterprise) as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for the years then
ended and for the period from August 18, 1993 (inception) through December 31,
1993 and for the period from August 18, 1993 (inception) through December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Albina Community
Bancorp and subsidiary as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for the years then ended and for the period from
August 18, 1993 (inception) through December 31, 1993 and for the period from
August 18, 1993 (inception) through December 31, 1995 in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
March 5, 1996, except note 10 as to
which the date is May 6, 1996
F-1
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31,
------------------- ---------
ASSETS 1995 1994 1996
---- ---- ----
(UNAUDITED)
Cash and cash equivalents:
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 223,457 $ 42,044 $ 386,607
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100,000 - 3,540,000
----------- ----------- -----------
Total cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . 2,323,457 42,044 3,926,607
----------- ----------- -----------
Investment securities - held to maturity (note 4). . . . . . . . . . . . . . . . . . 3,380,443 - 3,424,788
Loans receivable, net (notes 5 and 6). . . . . . . . . . . . . . . . . . . . . . . . - - 1,206,512
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,277 - 168,665
Prepaid insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,949 - 18,575
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,107 - 11,136
----------- ----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,875,233 $ 42,044 $ 8,756,283
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposit liabilities:
Deposits (note 7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173,500 - 4,397,419
----------- ----------- -----------
Total deposit liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 1,173,500 - 4,397,419
----------- ----------- -----------
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,572 14,062 14,532
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,161 129 43,819
----------- ----------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,307,233 14,191 4,455,770
----------- ----------- -----------
Shareholders' equity (notes 2 and 3):
Preferred stock, authorized 1,000,000, without par value.
29,388 shares issued and outstanding:
Series A, 1%; $1.00 per share liquidation preference;
non-cumulative; 20,000 shares designated, 16,300
shares issued and outstanding at December 31, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,236,058 - 2,236,058
Series B, $1.00 per share liquidation preference;
non-cumulative; 10,000 shares designated, 8,518
shares issued and outstanding at December 31, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851,800 - 851,800
Series C, 10%, $100.00 per share liquidation preference;
non-cumulative; convertible; 10,000 shares designated,
4,570 shares issued and outstanding at December 31, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,000 - 457,000
Common stock:
Class A common stock, without par value. Authorized
3,000,000 shares; 165,670 shares issued and outstanding. . . . . . . . . . . . 1,656,700 - 1,656,700
Class B common stock, without par value. Authorized
1,000,000 shares; none issued or outstanding . . . . . . . . . . . . . . . . . - - -
Contributed capital (note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . - 331,646 -
Deficit accumulated in the development stage ($612,614 and
$773,023 allocable to Series A and B preferred stock and
$20,944 and $128,022 allocable to common stock at
December 31, 1995 and March 31, 1996, respectively). . . . . . . . . . . . . . . (633,558) (303,793) (901,045)
----------- ----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 4,568,000 27,853 4,300,513
----------- ----------- -----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . $ 5,875,233 $ 42,044 $ 8,756,283
----------- ----------- -----------
----------- ----------- -----------
See accompanying notes to consolidated financial statements.
F-2
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
AUGUST 18, AUGUST 18,
1993 1993
(INCEPTION) (INCEPTION) THREE MONTHS
THROUGH YEAR ENDED YEAR ENDED THROUGH ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, -------------------
1993 1994 1995 1995 1995 1996
---- ---- ---- ---- ---- ----
(UNAUDITED)
Interest income:
Interest from subscriptions. . . . . . . . $ - $ - $ 27,383 $ 27,383 $ - $ -
Interest from loans. . . . . . . . . . . . - - - - - 6,274
Interest on federal funds sold . . . . . . - - 8,721 8,721 - 39,370
Interest on investment securities. . . . . - - 4,845 4,845 - 44,345
--------- --------- --------- --------- --------- ---------
Total interest income. . . . . . . . - - 40,949 40,949 - 89,989
--------- --------- --------- --------- --------- ---------
Interest expense:
Time deposits (note 7) . . . . . . . . . . - - 2,069 2,069 - 37,327
--------- --------- --------- --------- --------- ---------
Total interest expense . . . . . . . - - 2,069 2,069 - 37,327
--------- --------- --------- --------- --------- ---------
Net interest income. . . . . . . . . - - 38,880 38,880 - 52,662
Provision for loan losses (note 6) . . . . . - - - - - 6,206
--------- --------- --------- --------- --------- ---------
Net interest income after
provision for loan losses. . . . . - - 38,880 38,880 - 46,456
--------- --------- --------- --------- --------- ---------
Noninterest income:
Fees and services charges. . . . . . . . . - - - - - 2,412
--------- --------- --------- --------- --------- ---------
Total noninterest income . . . . . . - - - - - 2,412
--------- --------- --------- --------- --------- ---------
Noninterest expense:
Salaries and related benefits. . . . . . . - 158,183 210,516 368,699 48,875 231,562
Occupancy expense (note 9) . . . . . . . . - - 2,000 2,000 - 11,801
Furniture and equipment expense. . . . . . - - 4,390 4,390 - 11,516
Professional services. . . . . . . . . . . 37,205 82,198 84,329 203,732 10,157 4,362
Other expenses . . . . . . . . . . . . . . - 26,207 67,410 93,617 2,180 57,114
--------- --------- --------- --------- --------- ---------
Total noninterest expense. . . . . . 37,205 266,588 368,645 672,438 61,212 316,355
--------- --------- --------- --------- --------- ---------
Net loss . . . . . . . . . . . . . . $ (37,205) $ (266,588) $ (329,765) $ (633,558) $ (61,212) $ (267,487)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
See accompanying notes to consolidated financial statements.
F-3
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK
----------------------- ----------------------
NUMBER OF NUMBER OF CONTRIBUTED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ------- ------- -----
Balance, August 18, 1993
(inception). . . . . . . . . - $ - - $ - $ - $ - $ -
Contributed capital. . . . . . - - - - 37,205 - 37,205
Net loss . . . . . . . . . . . - - - - - (37,205) (37,205)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, December 31, 1993 . . - - - - 37,205 (37,205) -
Contributed capital. . . . . . - - - - 294,441 - 294,441
Net loss . . . . . . . . . . . - - - - - (266,588) (266,588)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 . . - - - - 331,646 (303,793) 27,853
Contributed capital. . . . . . - - - - 324,412 - 324,412
Proceeds from sale of stock
(note 3) . . . . . . . . . . 29,388 3,544,858 165,670 1,656,700 (656,058) - 4,545,500
Net loss . . . . . . . . . . . - - - - - (329,765) (329,765)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 . . 29,388 3,544,858 165,670 1,656,700 - (633,558) 4,568,000
Net loss (unaudited) . . . . . - - - - - (267,487) (267,487)
------- ----------- ------- ---------- ---------- ---------- ----------
Balance, March 31, 1996
(unaudited). . . . . . . . . 29,388 $ 3,544,858 165,670 $ 1,656,700 $ - $ (901,045) $ 4,300,513
------- ----------- ------- ---------- ---------- ---------- ----------
------- ----------- ------- ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements.
F - 4
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
AUGUST 18, AUGUST 18,
1993 1993
(INCEPTION) (INCEPTION)
THROUGH YEAR ENDED YEAR ENDED THROUGH THREE MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
1993 1994 1995 1995 1995 1996
---- ---- ---- ---- ---- ----
(UNAUDITED)
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . $ (37,205) $ (266,588) $ (329,765) $ (633,558) $ (61,212) $ (267,487)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Depreciation expense . . . . . . . - - - - - 9,395
Provision for loan loss. . . . . . - - - - - 6,206
(Increase) decrease in prepaid
insurance. . . . . . . . . . . . - - (21,949) (21,949) - 3,374
Increase in other assets . . . . . - - (3,107) (3,107) - (8,029)
Increase (decrease) in accrued
liabilities. . . . . . . . . . . - 14,062 104,510 118,572 - (104,040)
Increase in other liabilities. . . - 129 15,032 15,161 - 28,658
---------- ---------- ---------- ---------- ---------- ----------
Net cash used in operating
activities . . . . . . . . . . (37,205) (252,397) (235,279) (524,881) (61,212) (331,923)
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchase of investment securities. . . - - (3,380,443) (3,380,443) - (44,345)
Additions to premises and equipment. . - - (146,277) (146,277) - (31,783)
Loan originations. . . . . . . . . . . - - - - - (1,212,718)
---------- ---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities . . . . . . . . . . - - (3,526,720) (3,526,720) - (1,288,846)
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Net increase in deposit liabilities. . - - 1,173,500 1,173,500 - 3,223,919
Proceeds from contributed capital. . . 37,205 294,441 324,412 656,058 80,000 -
Proceeds from stock issuance . . . . . - - 4,545,500 4,545,500 - -
---------- ---------- ---------- ---------- ---------- ----------
Net cash provided by
financing activities . . . . . 37,205 294,441 6,043,412 6,375,058 80,000 3,223,919
---------- ---------- ---------- ---------- ---------- ----------
Net increase in cash and
cash equivalents . . . . . . . - 42,044 2,281,413 2,323,457 18,788 1,603,150
Cash and cash equivalents at
beginning of period. . . . . . . . . . - - 42,044 - 42,044 2,323,457
---------- ---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at
end of period. . . . . . . . . . . . . $ - $ 42,044 $ 2,323,457 $ 2,323,457 $ 60,832 $ 3,926,607
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements.
F - 5
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION OF COMPANY
Albina Community Bancorp (the Company) was incorporated on
August 18, 1993 as an Oregon bank holding company, in connection
with PacifiCorp's (a Northwest Portland electric utility holding
company) settlement of certain ratepayer litigation. This
settlement provided for a contributed cash grant in the amount of
approximately $2 million (plus interest) for the investigation
and implementation of a community development financial
institution. The Company was formed to organize, through the
investment of the grant from a community trust (Northeast
Portland Community Development Trust, "the Trust"), a Federal
Deposit Insurance Corporation insured state chartered community
development bank (the Bank) and, at a later time, a real estate
development company (the Development Company). The Company will
conduct business through these two wholly owned subsidiaries.
During the organizational phase, the Company's operations focused
primarily on organizing its subsidiaries, developing business
strategies and market analyses, preparing applications for
regulatory approval, planning for capital raising, and recruiting
personnel.
In November of 1995, the Company received conditional regulatory
approvals to commence banking operations which were dependent
upon the completion of capital raising efforts. On December 15,
1995 the Company completed its initial capital raising efforts
and invested $4.5 million into Albina Community Bank (the Bank).
On December 19, 1995, after receiving approval for Federal
Deposit Insurance Corporation insurance, the Bank opened its
Portland, Oregon office. The Bank plans to specialize in home
mortgages and small business loans primarily to moderate and
lower income residents in North and Northeast Portland.
(b) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Albina Community Bancorp (the Company), a bank
holding company, and its wholly-owned subsidiary, the Bank.
Significant intercompany accounts and transactions have been
eliminated in consolidation.
(Continued)
F-6
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(c) BASIS OF FINANCIAL STATEMENT PREPARATION
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the balance sheet and
revenues and expenses for the period. Actual results could
differ significantly from those estimates.
(d) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and Federal funds
sold. Generally, Federal funds are sold for one-day periods.
(e) INVESTMENT SECURITIES
Investment securities are classified as either available for sale or
held to maturity. Investment securities purchased are recorded as of
their trade date. Investment securities held to maturity are stated
at cost, adjusted for amortization of premiums and accretion of
discounts. Securities available for sale are stated at market value.
Accretion of discounts and amortization of premiums arising at
acquisition of investment securities are included in income using
methods approximating the interest method. Realized gains or losses
on sales of investment securities available for sale, if any, are
determined based on the specific identification method. Net
unrealized gain or loss on securities available for sale are included,
net of tax, as a component of shareholders' equity.
(f) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is charged to expense over the estimated
useful lives of the assets.
(g) INCOME RECOGNITION
Interest is accrued on a level yield basis. The accrual of
interest on loans is discontinued when in management's judgment,
the future collectibility of interest or principal is in serious
doubt.
Loan origination and commitment fees, net of certain direct loan
origination costs, are generally recognized over the life of the
related loan as an adjustment of the yield.
(Continued)
F-7
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(h) RESERVE FOR LOAN LOSSES
The reserve for loan losses represents management's recognition
of the assumed risks of extending credit and its evaluation of
the quality of the loan portfolio. The reserve is maintained at
a level considered adequate to provide for potential loan losses
based on management's assessment of various factors affecting the
loan portfolio, including a review of problem loans, business
conditions, loss experience and an overall evaluation of the
quality of the portfolio. The reserve is increased by provisions
charged to operations and reduced by loans charged off, net of
recoveries. Uncollectible interest on loans is charged off or an
allowance established by a charge to income equal to all interest
previously accrued and interest is subsequently recognized only
to the extent cash payments are received until delinquent
interest is paid in full and, in management's judgment, the
borrower's ability to make periodic interest and principal
payments is back to normal in which case the loan is returned to
accrual status.
(i) ORGANIZATIONAL COSTS
Costs incurred in the start-up of the Company and its business
have been expensed as incurred.
(j) INCOME TAXES
The Company accounts for income taxes using the asset and
liability method. Under the asset and liability method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
(k) UNAUDITED INTERIM FINANCIAL DATA
The interim financial data at March 31, 1996 and for the
three-month periods ended March 31, 1996 and 1995, included
herein, are unaudited and, in the opinion of management, reflect
all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of the financial position and
the results of operations and cash flows for such interim
periods.
(Continued)
F-8
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(2) CONTRIBUTED CAPITAL
In accordance with the terms of the Funding Pledge Agreement dated
June 12, 1991, the $2 million contributed grant, as discussed in
note 1, consisted of a $1,792,554 absolute grant and an additional
fund-raising challenge grant of $316,333 to raise additional capital
from third party investors ($1 of this challenge grant would be
available for each $3 of third party funds contributed). These grants
were set aside in a fund (the Settlement Fund) to be used as needed
for the investigation and implementation of a community development
financial institution.
Payments and funding requests have been made from the Settlement Fund
to assist in the formation of the Company as well as to obtain
necessary regulatory approvals, raise capital, and recruit senior
officers. Interest accumulates on the Settlement Fund balance
monthly. At December 31, 1994, the remaining balance of the
Settlement Fund (original contributed grant plus interest less
expenditures and funding requests) was $1,875,070.
Although the Company may have requested funding from the Settlement
Fund, the Settlement Fund balance, including the accumulated interest
income, was never controlled by the Company and therefore it is not
recorded in the accompanying financial statements. In December 1993,
a non-profit, limited life charitable trust (the Trust) was formed to
receive the balance of the Settlement Fund remaining upon the
capitalization and authorization of the Company to carry on business
through the Bank. On December 15, 1995, the Settlement Fund balance
was transferred to the Trust for investment in the Company and
substantially all of the balance of the Settlement Fund ($1,630,000)
and amounts previously contributed to the Company from the Settlement
Fund ($656,058) were used to purchase shares of the Company's Series A
1% preferred stock. (See note 3.)
(Continued)
F-9
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(3) SHAREHOLDERS' EQUITY
Through December 15, 1995 all organization and pre-opening costs and
expenses were being paid from proceeds of the Settlement Fund.
To be entitled to the balance of the Settlement Fund, meet the
$316,333 challenge grant, and raise capital for the funding of the
Bank, the Company commenced a private placement offering (the
Offering) consisting of up to 500,000 shares of Class A common stock
of the Company at a price of $10 per share. Closing of the Offering
was conditioned on the Company raising a minimum of $4.5 million in
total capital, including subscriptions pursuant to the Offering or any
other offering or source of funds and funds to be received from the
Settlement Trust in connection with the issuance of the Series A
preferred stock. In addition, closing of the Offering was contingent
on receipt by the Company of regulatory approvals from the Oregon
Division of Finance and Corporate Securities, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal
Reserve System. On December 15, 1995, $2,965,500 was raised from the
private placement to investors in common and preferred stock. In
addition, preferred stock was issued to the Trust in exchange for
$1,630,000 in cash and $656,058 of earlier advances from the
Settlement Fund which had been recorded as contributed capital.
Expenses associated with the offerings of all shares issued, totaling
approximately $50,000 were netted against the proceeds of the Series A
preferred stock shares. The Company then invested $4,500,000 in the
Bank as described in note 1. In November of 1995 the Bank received
all required regulatory approvals.
The authorized capital stock consists of 5,000,000 shares divided into
4,000,000 shares of common stock and 1,000,000 shares of preferred
stock:
(a) PREFERRED STOCK
The Company is currently authorized to issue up to 1,000,000
shares of preferred stock. The Board of Directors of the Company
has the authority to issue preferred stock in one or more series,
and to designate the preferences, limitations and relative rights
of the shares of any such series. The Board of Directors also
has the authority to determine the liquidation and dividend
rights on any preferred stock that may be issued, including the
priority of such rights over the liquidation and dividend rights
of holders of the common stock.
(Continued)
F-10
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
There are 20,000 shares of preferred stock designated as Series A
1% preferred stock (Series A Preferred) with a liquidation
preference of $1.00 per share, and liquidation participation
rights at ten times the amount distributable on liquidation with
respect to the common stock up to a maximum of $100 per share.
The Series A Preferred thus fully participates (after the $1.00
liquidation preference) with the Series B Preferred and the
common stock in any gain or loss in shareholder equity if the
amount to which the Series A Preferred would be entitled upon
liquidation is less than $100 per share. This stock is entitled
to a non-cumulative annual dividend of $1 per share, when and as
declared by the Board of Directors, which must be paid in any
year a cash dividend on the common stock is declared. Series A
Preferred has the right to elect directors representing 25% of
the total number of directors to be elected. Holders of the
Series A Preferred will have no other voting rights except for
matters which directly affect the rights of that class of stock.
10,000 shares of preferred stock are designated as Series B 1%
non-voting preferred stock (Series B Preferred). These shares
are identical to the Series A Preferred except that the Series B
Preferred has no voting rights with respect to the election of
the Board of Directors, and has no other voting rights, except as
required by law.
10,000 shares of preferred stock are designated as Series C 10%
non-voting convertible preferred stock (Series C Preferred). The
Series C Preferred is on even parity with the Series A and Series
B Preferred with respect to dividend rights, however there is a
$100.00 per share liquidation preference for the Series C
Preferred. The Series C Preferred is entitled to a
non-cumulative annual dividend of $10.00 per share, when and as
declared by the Board of Directors, which must be paid in any
year a cash dividend on the common stock is declared. The Series
C Preferred is convertible at the option of the holder into
common stock at the rate of ten shares of Class A common stock
for each share of Series C Preferred up to a maximum of 4.99% of
the shares of Class A common stock outstanding at the time of
conversion. Any shares of common stock in excess of 4.99% of
Class A common stock issued upon the conversion of Series C
Preferred would be shares of Class B non-voting common stock.
The Series C Preferred has no voting rights except as required by
law. Under certain circumstances, the holders of the Series C
Preferred are entitled to have such shares (of the Class A common
stock into which such shares are exchanged) registered under
applicable securities law for resale.
(Continued)
F-11
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(b) COMMON STOCK
The authorized common stock consists of 3,000,000 shares without
par value of Class A voting common stock and 1,000,000 shares
without par value of Class B non-voting common stock. None of
the Class B non-voting common stock is outstanding. Shares of
the common stock each have the same rights to the assets of the
Company upon liquidation, subject to any liquidation preference
of preferred stock which may be outstanding. There are no
preemptive rights to acquire additional securities that the
Company may issue. The holders of common stock are entitled to
receive dividends, if any, as may be declared by the Board of
Directors. Rights to receive dividends on the common stock are
subject to the prior rights of shares of preferred stock then
outstanding.
Each share of the Class A common stock is entitled to one vote on
all matters presented for shareholder vote, including the
election of directors, subject to special voting rights of the
holders of the Series A preferred stock. Shareholders do not
have the right to accumulate votes in the election of the
directors.
Shares of Class B common stock have no voting rights other than as
required by law, but are otherwise in all respects identical to shares
of Class A common stock.
(4) INVESTMENT SECURITIES - HELD TO MATURITY
The Bank has invested in zero-coupon U.S. treasury securities. The
book value of these securities approximates market at December 31,
1995 and March 31, 1996 as the securities were purchased near the end
of the period. The entire investment portfolio matures within one
year.
(Continued)
F-12
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(5) LOANS
Major categories of loans at March 31, 1996 included in the portfolio
are as follows:
Commercial. . . . . . . . . . . . . . . . . . . . $ 49,725
Residential real estate . . . . . . . . . . . . . 1,101,566
Installment . . . . . . . . . . . . . . . . . . . 61,427
----------
Total loans. . . . . . . . . . . . . . . . . 1,212,718
Reserve for loan losses . . . . . . . . . . . . . (6,206)
----------
Net loans. . . . . . . . . . . . . . . . . . $1,206,512
----------
----------
There were no loans on nonaccrual status at March 31, 1996.
The Bank has no commitments to extend additional credit on loans which
are renegotiated, nonaccrual or impaired at March 31, 1996.
The Bank's lending activities are concentrated in Northeast Portland,
Oregon.
(6) RESERVE FOR LOAN LOSSES
Transactions on the reserve for loan losses for the three months ended
March 31, 1996 were as follows:
Balance, beginning of period . . . . . . . . . . . . . $ -
Provision for loan losses. . . . . . . . . . . . . . . 6,206
Loans charged off. . . . . . . . . . . . . . . . . . . -
Recoveries of loans previously charged off . . . . . . -
--------
Balance, end of period . . . . . . . . . . . . . . . . $ 6,206
--------
--------
(Continued)
F-13
ALBINA COMMUNITY BANCORP
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 (UNAUDITED)
(7) TIME DEPOSITS
Time certificates of deposit in excess of $100,000 aggregated
approximately $2,145,000 and $500,000 at March 31, 1996 and
December 31, 1995, respectively. Interest expense on these
certificates amounted to approximately $955 for the year ended
December 31, 1995 and $26,400 for the three-month period ended
March 31, 1996.
(8) INCOME TAXES
At March 31, 1996 and December 31, 1995 and 1994, the Company has
deferred tax assets of approximately $342,000, $241,000 and $115,000,
respectively, resulting primarily from capitalized operating costs for
tax purposes and has recorded a valuation allowance for all such
deferred tax assets. The Company has no provision for income taxes
for any of the periods through December 31, 1995. The Company's
expected tax expense using the U.S. federal statutory rate differs
from the actual rate due to the increase in the Company's valuation
allowance.
(9) RELATED PARTY TRANSACTIONS
PacifiCorp provided office space, utilities and certain furniture at
no cost to the Company from inception through December 1995.
(10) COMMITMENTS AND CONTINGENCIES
The Company has entered into a lease dated May 6, 1996 for the
permanent office of the Bank. The lease is for a term of ten years
with two options to renew for additional five-year periods. The base
rent during the original term of the lease will be approximately
$4,000 per month and will increase or decrease every other year based
on inflation. The Company will incur costs of approximately $500,000
to complete tenant improvements in and furnishings for the Bank. The
facility is expected to be available mid-1996. The Company has
entered a lease for its temporary quarters at another location.
Monthly rent for this short-term tenancy is $2,000 and the lease is
noncancelable through June of 1996.
F-14