Albina Community Bancorp Reports Fourth Quarter and Full Year 2009 Results; Asset Quality Begins to Improve and Net Interest Margin Expands

PORTLAND, Ore., Feb. 4, 2010 (GLOBE NEWSWIRE) -- Albina Community Bancorp (OTCBB:ACBC), Portland's only certified community development bank today reported that after a $2.0 million provision for loan losses, there was a loss of $1.8 million, or $1.33 per common share, for the fourth quarter ended December 31, 2009, compared to a $2.8 million loss, or $2.09 per common share in the preceding quarter, when the provision was $2.9 million. In the fourth quarter a year ago, the net loss totaled $60,000, or $0.06 per share, with a loan loss provision of $820,000. For the full year, Albina recorded a total provision for loan losses of $9.1 million contributing to a net loss of $7.3 million, or $5.56 per common share, compared to a loss of $927,000, or $0.87 per common share, a year ago. The loan loss provision for 2008 was $3.9 million.

"We are addressing the issues caused by the economic downturn and are making progress on returning to a healthy financial institution," said Robert McKean, President and Chief Executive Officer. "We are encouraged by our progress in reducing problem assets, in particular by the further reduction in our exposure to real estate construction loans, and the reduced provisioning expense in the quarter."

"Now, more than ever, the communities we serve need the access to credit and the banking services we offer as a community development bank," added McKean.  "We are reaching out to the greater Portland neighborhoods that have been deeply impacted by the current economic downturn and are fulfilling our mission to serve the needs of a broad range of customers, especially low-to-moderate income individuals and small business owners."

"We are recognized for the quality of our interactions with our neighborhoods and the contributions our dedicated team make to the quality of life in Portland," continued McKean. "Business comes as a result of referrals, community involvement and the fact that we stay close to our markets.  The impact we have on the communities we serve is profound in terms of volunteer hours, jobs created and supported, housing financed and developed and many other important benefits. We track our community involvement and invite you to review our scorecard on our website. Visit www.albinabank.com/company/scorecard.cfm .  Albina Community Bancorp has received CDFI funding from the U.S. Department of Treasury in 9 of the past 10 years, as a result of our success in building economic vibrancy in the greater Portland area."

Fourth Quarter 2009 Financial Highlights: (for the quarter ended December 31, 2009)

• Total deposits were $164.9 million, slightly lower from $167.1 million a year ago.
• Total assets declined 7% to $202.1 million from $216.4 million a year ago.
• Asset quality improved with nonperforming assets decreasing 17% to $13.8 million from $16.8 million in the prior quarter and up just 6% from $13.0 million a year ago.  
• Gross loans were $142.7 million, down 13% from $163.2 million a year ago.
• Albina is one of the top producers of SBA loans in the Portland District.
• Allowance for loan losses stands at $3.4 million, or 2.40%.

Capital Adequacy and Liquidity

At December 31, 2009, capital ratios for Albina Bank continued to exceed regulatory definitions for adequately capitalized banks with Tier 1 leverage at 5.1%, Tier 1 risk-based at 7.0% and Total risk-based capital at 8.3%. 

The investment securities portfolio more than doubled to $37.6 million from $17.7 million a year ago. "Our investment portfolio consists entirely of investment grade securities that have an average life of less than three years," said McKean. "Excess liquidity is invested in securities until the underlying time deposits mature or loan originations increase. We maintain high levels of liquidity by holding liquid securities and through our available lines of credit at the Federal Home Loan Bank and the Federal Reserve Bank."

Shareholder equity totaled $5.8 million, which after allocation to preferred shareholders equates to a tangible book value of $4.39 per common share, at year end compared to $12.5 million, or tangible book value of $9.35 per common share a year ago.

Credit Quality

Nonperforming assets (NPAs), consisting of nonperforming loans, other real estate owned (OREO), and loans delinquent 90 days or more, declined during the quarter to $13.8 million, or 6.85% of total assets, at December 31, 2009, from $16.7 million, or 7.72% of total assets in the preceding quarter, and up from $13.0 million, or 6.01% of assets a year ago. "Our credit quality is improving and classified loans are down. In fact, our real estate construction loans have come down substantially since last year and now account for less than 10% of the loan portfolio," commented McKean. 

Nonperforming loans (NPLs) decreased to $10.9 million, or 7.67% of total loans at December 31, 2009, compared to $15.4 million, or 10.18% of total loans, three months earlier, and $13.0 million, or 7.97% of total loans, a year ago.  "At year-end, the majority of our nonperforming loans were centered in nine troubled credits that have been charged down by more than $5 million and we are working with our borrowers to reach a satisfactory resolution. We are making progress but it will take time," said McKean.

Net charge-offs totaled $2.3 million, or 1.56% of average loans in the fourth quarter, compared to $2.6 million, or 1.71% of average loans in the preceding quarter, and $1.2 million, or 0.71% of average loans in the fourth quarter of 2008. For the year, net charge-offs totaled $8.4 million, or 5.40% of average loans, compared to $2.7 million, or 1.71% of average loans a year ago. The allowance for loan and lease losses (ALLL) totaled $3.4 million, or 2.40% of total loans at December 31, 2009, compared to $3.7 million or 2.45% of total loans at September 30, 2009, and $2.7 million, or 1.68% of total loans a year ago. "We have been very diligent about writing down our properties to current market value in the past three years and have charged off almost double the rate of net charge offs of our peers," said McKean.

Balance Sheet Results

Total assets were $202.1 million at December 31, 2009, compared with $216.4 million at December 31, 2008. Loans, net of reserves, were $139.2 million at year-end compared to $160.5 million a year ago.  

The loan portfolio is well-diversified with a wide variety of borrowers and collateral. Over 75% of the portfolio is secured by real estate, both residential and commercial.  Consumer loan participations were down 28% year-over-year standing at $10.7 million. Commercial loan participations declined 8% year-over-year to $18.4 million. Consumer and commercial loan participations provide additional earnings and diversification for the portfolio and account for approximately 21% of the total loan portfolio. More than 40% of Albina's commercial real estate loans are owner-occupied and another 20% are partially occupied by owners with the remainder of the building leased to other businesses.

"We sold a portion of our originated SBA loans this quarter, producing quality non-interest income for the bank," said McKean. "Albina is one if the top producers of SBA loans, and we continue to fund a good volume of relatively small dollar amount SBA loans.  Management continues to actively monitor the loan portfolio in order to minimize any loan losses and identify impairment where prudent." 

At December 31, 2009, total deposits were $164.9 million compared to $167.1 million a year ago. Noninterest bearing deposits accounted for 17% of total deposits, interest bearing and savings accounts accounted for 32% of deposits and time certificates were 51% of total deposits at year end.  "The support we are seeing in our home-grown deposits is encouraging and allows us to be less reliant on brokered CDs," said McKean. The ratio of loans to deposits was 84.4% at December 31, 2009 compared with 96.03% a year earlier.    

"People are responding to the home-town banking approach, and we are benefiting from the increasing movement of money to local community banks," said McKean. "Albina is well-known in our community, and customers are looking to develop and build solid relationships with us. With the support of the members of our community, we are making a positive impact in our neighborhoods."  

Operating Results

Net interest income before the provision for loan losses was $1.6 million in the fourth quarter of 2009, compared to $1.5 million in the preceding quarter and $1.7 million in the fourth quarter a year ago. After the $2.0 million provision for loan losses, fourth quarter 2009 net interest loss was $441,000, down from net interest income of $875,000 in the fourth quarter a year ago, which included a provision for loan losses of $820,000.

Non-interest income was $294,000 for the fourth quarter of 2009, compared to $603,000 for the fourth quarter of 2008. The decrease in the fourth quarter was due to the termination of an interest rate swap of $193,000, which was a one-time event. This loss was somewhat offset by the gain on sale of securities of $63,000 and the gain on sale of SBA loans of $50,000. For the year, non-interest income was $3.8 million, up 58% from $2.4 million in 2008. "Our initiatives to grow core deposits while building customer relationships continues to add to our franchise value," said Jim Schlotfeldt, Chief Financial Officer. 

Albina's net interest margin for the fourth quarter was 3.42% compared to 3.17% in the preceding quarter and 3.63% in the fourth quarter a year ago.  "Our non-accruals, while down by one-third from the last quarter, continue to impact our net interest margin," added Schlotfeldt. "As we replace high cost time deposits with core deposits, we expect our cost of funds to decline and our net interest margin will improve." Reversal of accrued interest from nonperforming assets reduced net interest margin 92 basis points in the fourth quarter and 92 basis points in the year.

Non-interest expense increased 10% to $1.7 million for the fourth quarter 2009 compared to $1.6 million for the fourth quarter a year ago. "The increase in total non-interest expense for the fourth quarter reflects higher ongoing FDIC insurance premiums and additional legal and professional expenses associated with managing the loan portfolio," added Schlotfeldt. "That being said, our salaries and employee benefits decreased 14% while our marketing expenses declined 27% from last year." The efficiency ratio for the quarter was 93.13% from 68.34% in the fourth quarter a year ago.

Due to the capital structure of the company, preferred shareholders participated in the per share loss during the quarter and year-to-date periods. "Our original shareholders, owners of the Preferred A and B series, had reached their maximum participation in our earnings stream in prior years," said Schlotfeldt. "With the recent losses, however, our retained earnings have fallen below their earnings participation threshold. Consequently, the loss per share allocated to common shareholders was lower by $0.30 in the fourth quarter and $01.29 in the year ended December 31, 2009. On a pro rata basis, future losses will continue to be allocated between preferred and common shareholders and future earnings will be reduced until preferred shareholders reach the $100 per preferred share liquidation preference." 

Other Relevant News

Albina Community Bancorp also announced today the appointments of banking veterans, James R. Bradshaw as a Chairperson of Albina Community Bancorp and Graham C. Bryce as Acting Chairperson of Albina Community Bank. Bradshaw and Bryce replace Michael C. Henderson who served as Chairperson of both boards and recently retired from the boards of directors because of health concerns. 

"As a founder of Albina, Henderson's contributions to the formation and growth of Albina have been enormous," said Bradshaw. "His guidance in areas of management, accounting and corporate finance have been invaluable. We wish him good health and an enjoyable retirement."

"With large shoes to fill, Jim Bradshaw and Graham Bryce are eminently suited to lead our franchise in the coming years," said McKean.  "Bradshaw is a recognized expert in community banking with many years of experience as an investment research analyst focusing on financial institutions and as a senior bank examiner for the State of California Banking Department." Bradshaw was also a senior vice present and senior research analyst at D.A. Davidson & Co. from 1999 to 2008 and a board member of D.A. Davidson & Co. 

Graham Bryce has served on the Albina bank board for 15 years and has extensive experience in the financial services industry, as a senior officer at Mellon Bank, Wells Fargo and Orbanco Financial Services.  He has also served as President of QG Investment Company, a real estate investment firm, since 1986.

About Albina Community Bancorp

Albina Community Bank is a locally owned, full-service, independent commercial bank committed to investing in individuals, families, businesses and local neighborhoods. The bank promotes community development by providing products and services and banking solutions that are directed towards improving the social or economic conditions of underserved peoples or residents of distressed communities. Albina offers a wide range of competitive banking solutions, while also maintaining its mission to promote jobs, growth of small businesses, and wealth in our local Portland neighborhoods.

Albina Community Bank opened in December 1995 as the sole subsidiary of Albina Community Bancorp. Albina is one of approximately 60 commercial banks across the United States certified by the U.S. Treasury Department's Community Development Financial Institutions Fund as a community development financial institution. Albina is the only CDFI-certified commercial bank headquartered in Oregon. Albina operates from five local Portland locations including offices at: 2002 Northeast Martin Luther King Jr. Boulevard; 8040 North Lombard in the St. Johns neighborhood of North Portland; 4020 Northeast Fremont Street in the Beaumont neighborhood; 5636 Northeast Sandy Boulevard in the Rose City Park neighborhood of the International District; and 430 Northwest 10th Avenue in Portland's Pearl District; and a remote ATM at New Columbia in North Portland.  For more information about Albina Community Bank, please call 503-287-7537 or visit www.albinabank.com.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995, including statements concerning the continued financial performance of the company and its plans and opportunities for future growth. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially than those expected. Specific risks include, but are not limited to, general business and economic conditions, competitive factors, pricing pressures, further interest rate changes, and other factors listed from time to time in Albina Community Bancorp's regulatory reports.