U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

     |X|  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(D)  OF THE  SECURITIES
EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 1996

     |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT

     For the transition period from ------------to-----------


     Commission file number                          333-3442

                            ALBINA COMMUNITY BANCORP
             (Exact Name of Registrant as Specified in Its Charter)

     Oregon  93-1129061  (State  or  Other  Jurisdiction  of  (I.R.S.   Employer
Identification No.) Incorporation or Organization)

     2002 N.E. Martin Luther King, Jr. Blvd., Portland, Oregon 97212 (Address of
Principal Executive Offices) (Zip Code)

     Issuer's telephone number 503-287-7537

     Securities registered under Section 12(b) of the Exchange Act:

     Title of each class Name of exchange on which registered

     None
     None

Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X  No

Check is there is no  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ X ]

State the issuer's revenues for the most recent fiscal year  $861,362

State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days.  (See  definition  of  affiliate  in  Rule  12b-2  of the  Exchange  Act).
$2,984,700

Note:  If  determining  whether  a  person  is  an  affiliate  will  involve  an
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

     At March 21, 1997,  there were 192,560  shares of Class A Common Stock,  no
par value, outstanding

     Transitional Small Business Disclosure Format (check one): Yes X   No


70065261.02

<PAGE>



                                     PART I

     Note:  Items 1 through 6 of this Part I correspond to Items 6 through 11 of
Model B of Form 1-A.

Item 1.           Description of Business.

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's activities are
focused on promoting  investment and development in the Albina district  through
its wholly-owned  subsidiary  community  development bank, Albina Community Bank
(the "Bank"). The Company currently has no operations separate from the Bank.

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  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 conducts its business from its office located at 2002 N.E.
Martin Luther King, Jr. Blvd, Portland, Oregon.

Plan of Operation

     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  North/Northeast  Portland,  Oregon
(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.

     The  business  plan 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  participates  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 of risk. Over
time it is expected  that there 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.


70065261.02
                                       -1-

<PAGE>



     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.

     Capital Resources

     The Company  currently has no operations  separate from the Bank.  The Bank
commenced  operations on December 19, 1995,  following a private offering of the
Company's  Class A Common Stock which raised  approximately  $4.75  million.  In
addition,  the Company filed a  registration  statement  with the Securities and
Exchange Commission, which became effective on June 26, 1996, in connection with
the offering of 100,000 shares of the Company's  Class A common stock at a price
per share of $10.00. The offering has not yet been completed, but is expected to
be completed in the second quarter of the current fiscal year.

     The Company  believes that proceeds of the public  offering,  together with
existing capital will satisfy the cash  requirements of the Company for at least
the next six months of operation.  It is  anticipated  that the  Company's  cash
requirements will not exceed $1.0 million during that period.

     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 has established
an allowance  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 may make  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. As of  December  31,  1996,  the Bank had
experienced no losses as a result of defaults on loans.

     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.

     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.


70065261.02
                                       -2-

<PAGE>




The  following  table  sets forth an  analysis  of the  sensitivity  of the loan
portfolio to changes in interest rates.
<TABLE>
<CAPTION>


                                   1st Qtr    2nd Qtr    3rd Qtr    4th Qtr   1st Half  2nd Half Full Year    Years     Beyond
                      REVOLVING      1997       1997       1997      1997       1998      1998      1999    2000-2001 Year 2001
===================================================================================================================================
<S>                     <C>         <C>       <C>        <C>       <C>    <C> <C>        <C>      <C>       <C>        <C>

ASSETS
Fed Fund Sold             429,000

Fixed Rate Securities                           547,000    499,000   501,000  1,000,000  503,000                       1,000,000
Floating Rate                                                                 2,040,000
Securities
Total Securities                                547,000    499,000   501,000  3,040,000  503,000                       1,000,000

Fixed Rate Loans                      25,000                          12,000    200,000  200,000    505,000 1,010,000  2,603,000
Floating Rate Loans     2,422,000    400,000    400,000    400,000   415,000                      3,000,000
Total Loans             2,422,000    425,000    400,000    400,000   427,000    200,000  200,000  3,505,000 1,010,000  2,603,000
Other Assets                                                                                                           1,698,000
Total Assets            2,851,000    425,000    947,000    899,000   928,000  3,240,000  703,000  3,505,000 1,010,000  5,301,000


LIABILITIES &
EQUITY
Non-Interest                                                                                                             986,000
  Bearing DDA
Interest Bearing DDA                                                                                                     778,000
Savings                                                                                                                1,058,000
Money Market            1,973,000
Fixed Rate                         1,046,000    409,000    409,000   409,000    181,000
CD's $100
Fixed Rate                         2,470,000    600,000    600,000   828,000    495,000
CD's $100
Fixed Rate                                    1,000,000              600,000  2,300,000
  Brokered CD's
Total Deposits          1,973,000  3,516,000  2,009,000  1,009,000 1,837,000  2,976,000                                2,822,000

Other Liabilities                                                                                                        152,000

Equity                                                                                                                 3,515,000

Total Liabilities &     1,973,000  3,516,000  2,009,000  1,009,000 1,873,000  2,976,000                                6,489,000
Equity

</TABLE>

<TABLE>
<CAPTION>



(continued)             REVOLVING      TOTALS
===============================================
<S>                    <C>          <C>

ASSETS
Fed Fund Sold             429,000      429,000

Fixed Rate Securities                4,050,000
Floating Rate                        2,040,000
Securities
Total Securities                     6,090,000

Fixed Rate Loans                     4,555,000
Floating Rate Loans     2,422,000    7,037,000
Total Loans             2,422,000   11,592,000
Other Assets                         1,698,000
Total Assets            2,851,000   19,809,000
LIABILITIES &
EQUITY
Non-Interest                           986,000
  Bearing DDA
Interest Bearing DDA                   778,000
Savings                              1,058,000
Money Market            1,973,000    l,973,000
Fixed Rate                           2,454,000
CD's $100
Fixed Rate                           4,993,000
CD's $100
Fixed Rate                           3,900,000
  Brokered CD's
Total Deposits          1,973,000   16,142,000
Other Liabilities                      152,000

Equity                               3,515,000
Total Liabilities &     1,973,000   19,809,000
Equity

</TABLE>
<TABLE>
<CAPTION>



                             1st Qtr     2nd Qtr     3rd Qtr    4th Qtr    1st Half    2nd Half   Full Year   Years      Beyond
               REVOLVING      1997        1997        1997       1997        1998        1998       1999    2000-2001   Year 2001
===================================================================================================================================
<S>         <C>      <C>          <C>        <C>          <C>           <C>         <C>     <C>        <C>       <C>

GAP $        878,000 (3,091,000) (1,062,000)   (110,000)  (909,000)     264,000     703,000 3,505,000  1,010,000 (1,188,000)
GAP/Total       4.4%      -15.6%       -5.4%       -0.6%      -4.6%        1.3%        3.5%     17.7%       5.1%       -6.0%
Assets
Cumulative   878,000 (2,213,000) (3,275,000) (3,385,000)(4,294,000) (4,030,000) (3,327,000)   178,000  1,188,000           -
GAP $
Cum             4.4%      -11.2%      -16.5%      -17.1%     -21.7%      -20.3%      -16.8%      0.9%       6.0%        0.0%
GAP/Total
Assets

Rate Shock
- $ Impact
if rates:
+1.00%         8,780    (22,130)    (32,750)    (33,850)   (42,940)    (40,300)    (33,270)     1,780     11,880           -
(annualized)
-1.00%       (8,870)     22,130      32,750      33,850     42,940      40,300      33,270   (1,780)   (11,880)            -
(annualized)

</TABLE>



<TABLE>
<CAPTION>

(continued)    REVOLVING     TOTALS
======================================
<S>         <C>               <C>

GAP $        878,000           -
GAP/Total       4.4%
Assets
Cumulative   878,000           -
GAP $
Cum             4.4%           -
GAP/Total
Assets

Rate Shock
- $ Impact
if rates:
+1.00%         8,780           -
(annualized)
-1.00%       (8,870)           -
(annualized)

</TABLE>



70065261.02
                                                                -3-

<PAGE>



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 December 31, 1996, the Bank had total assets of approximately $19.8
million, total loans of approximately $11.3 million, and total deposits of $15.8
million.  The Bank  experienced  a loss of  $1.16  million  for the  year  ended
December 31, 1996,  primarily as a result of operating costs exceeding  revenues
during the initial stages of operation.  It is anticipated  that as the deposits
and loans  continue to grow, the rate of losses will decline,  although  various
factors,  including adverse experience with credit risk and interest-rate  risk,
discussed below, may nonetheless result in losses. Moreover, as lending officers
gain  experience  with lending in the Bank's  target  market,  the level of loan
production  will  increase,  and the operating  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.  Typically,  a new  bank's
operating  expenses  will  exceed  operating  revenue for the first two or three
years of operations.

         Deposits

         The following table sets forth the average  deposit  liabilities of and
the rates paid by the Bank for the year ended December 31, 1996:
                                     Average Balance    Average Rate Paid

 Non interest-bearing demand         $311,897                n/a
 Interest-bearing demand             267,057                2.9%
 Savings                             1,220,393              4.4%
 Time                                5,898,973              5.3%
                                     ---------
 Total deposits                      $7,698,320

         Of the time deposits listed above, the deposits of $100,000 or more had
the following times remaining to maturity:

                                                              Balance at
                                                              December 31, 1996
         Remaining maturity:
                  less than 3 months                          2,470,292
                  3-6 months                                    914,588
                  6-12 months                                 1,113,665
                  over 12 months                                495,000
                                                              ----------
         Total deposits $100,000 or more                      $4,993,545
                                                              ==========


         Loans

         Interest  earned on the loan and investment  portfolios are the primary
source of income for the Bank. Net loans  represent  57.2% of total assets as of
December 31, 1996. The Bank makes the majority 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 charge-offs
as of December 31, 1996. The following  table sets forth the  composition of the
loan portfolio at December 31, 1996:

         Commercial - lines of credit                       $2,482,743
         Commercial - construction                             401,016
         Commercial - real estate                            4,790,122
         Residential Real Estate                             3,578,624
         Installment                                           335,518
         Other                                                   3,745
                                                            -----------
                  Total loans                               11,591,768
         Deferred loan fees, net                               (85,530)
         Allowance for loan losses                            (172,590)
                                                           ------------
                  Net loans                                $11,333,648

70065261.02
                                       -4-

<PAGE>






         Investment Portfolio

         The  investment  portfolio at December 31, 1996,  had an aggregate book
value of $6,090,352, as follows:

         US Government and Federal Agencies                   $3,046,499
         Mortgage Backed Securities                           3,043,853
                  Total Securities                            $6,090,352


         Employees

         As of December 31, 1996 the Bank had a total of 19 employees,  of which
16 were  permanent  full-time,  2 were  temporary  full-time and 1 was temporary
part-time. The Company has no employes other than those of the Bank.


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.

         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

70065261.02
                                       -5-

<PAGE>



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  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.

     70065261.02
                                       -6-

<PAGE>




         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  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 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.  The Bank's current
FDIC premium rate is $.01 per $100 of domestic deposits.

         Dividends

         The  principal  source of the  Company's  cash  revenues  is  dividends
received  from the Bank.  Under the  Oregon  Bank 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.  However,  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

70065261.02
                                       -7-

<PAGE>



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.

         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 December 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 would not be called upon for such a contribution.



70065261.02
                                       -8-

<PAGE>



         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 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.


70065261.02
                                       -9-

<PAGE>



Item 2.  Description of Property.

         The Company currently maintains its executive offices at the offices of
the Bank at 2002 N.E. Martin Luther King Jr. Boulevard,  Portland,  Oregon.  The
office comprises 5,357 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 $4,595.  It is anticipated that such space will
be adequate for the Company's needs including the needs of the Bank.


Item 3.  Directors, Executive Officers and Significant Employees.

         The following table sets forth certain information as to the directors,
executive officers and significant employees as of March , 1997.
<TABLE>
<CAPTION>


        Name            Age              Position                     Principal Occupation
<S>                     <C>          <C>                              <C>

Roger S. Ahlbrandt       54          Director of Company              Dean, Portland State University School
                                      and Bank                        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 of         President, PacifiCorp Financial
                                      Company and Bank                Services

Sheila D. Holden         41          Director of Company              District Manager, PacifiCorp

Deborah E. Kennedy       43          Director of Company              Managing Director, Cole & Weber

Deborah Saweuyer-Parks   42          Director of Bank                 President and CEO, Oregon
                                                                      Corporation of Affordable Housing

Howard M. Shapiro        64          Vice Chairman of the Board       Consultant
                                      of Company and Bank

Leon C. Smith            48          Director, President,             Banker
                                      Chief Executive Officer of
                                      Company and Bank

Ralph E. Wiita           47          Executive Vice President,        Banker
                                      Chief Financial Officer,
                                      and Secretary of Company,
                                      and the Bank

Jeana M. Woolley         43          Director of Company              Consultant

</TABLE>



         The executive officers are Leon C. Smith, President and Chief Executive
Officer, and Ralph E. Wiita,  Executive Vice President,  Chief Financial Officer
and Secretary of the Company and 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.



70065261.02
                                                       -10-

<PAGE>



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:

         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. 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 has served as an elected State  Representative since
1991.  For more  than 20 years  she has been  active  in  community  and  social
programs,  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  is  President  and Chief  Operating  Officer of
PacifiCorp  Holdings  Company,  a subsidiary of PacifiCorp which controls all of
the  non-utility  operations of  PacifiCorp,  a position he has held 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.


70065261.02
                                      -11-

<PAGE>



         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  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.

         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 development  lending  projects.  He
holds an MBA from the  University of Chicago and a law degree from  Northwestern
University.

         Ralph E. Wiita is Executive Vice President, Chief Financial Officer and
Secretary  of the Company and of the Bank.  Mr. Wiita joined the Bank in August,
1996.  From 1994 to 1996 Mr. Wiita was  President  and CEO of Visalia  Community
Bank, a $135 million full service commercial bank in Central  California.  While
at Visalia  Community  Bank he led the bank to  significant  market share in the
Hispanic  community and won a national award for the bank's  accomplishments  in
low-to-moderate  income  lending.  From  1992-1994 Mr. Wiita was Executive  Vice
President and Chief Financial Officers at Visalia.  Before moving to California,
Mr. Wiita spent 12 years with  Security  Pacific  Bank,  most recently as Senior
Vice President and Chief Financial  Officer at Security  Pacific Bank of Oregon.
Mr.  Wiita  holds  a MBA  from  Michigan  State  University  and a BS  from  the
University of Michigan.

         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 publicand  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.


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 in 1993  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.




70065261.02
                                      -12-

<PAGE>



Item 4.  Remuneration of Directors and Officers.

         The following sets forth the aggregate remuneration of the highest paid
executive  officer  during the past fiscal  year.  No other  executive  officers
received in excess of $100,000 in 1996.  Directors  do not receive  compensation
for service or for participation in meetings of the board of directors.

                            Capacity in which
Name of Individual     Remuneration was received          Aggregate Remuneration

Leon C. Smith          President, Chief Executive Officer           $125,000

Employment Agreements

         As of February 1, 1994,  the Company and Leon C. Smith  entered into an
employment  agreement,  pursuant to which Mr. Smith has served as President  and
Chief Executive  Officer of the Company and the Bank. The initial  agreement was
for a term of two years, and was extended for one year at the Company's  option.
The Company and Mr. Smith are currently negotiating an additional extention,  or
a new agreement,  the terms of which have not yet been  determined.  Until a new
agreement  is reached,  Mr.  Smith will  continue  to serve  under the  existing
agreement,  which  provides  for an annual  salary of  $125,000.  The  agreement
further  provides for severance  pay of $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.


Item 5.  Security Ownership of Management and Certain Securityholders.

         The  following  table  sets forth as of March 21,  1997,  the shares of
Common Stock beneficially  owned by all of the directors,  nominees for election
as directors,  and executive officers of the Company. As of that date there were
192,560 shares of the Company's Common Stock issued and outstanding.  All shares
are held directly unless otherwise indicated.

                              Number of Shares
       Name                  Beneficially Owned       Percent of Class

Roger S. Ahlbrandt                            1,000                  *
James R. Bradshaw                               150                  *
Graham C. Bryce                               1,000                  *
Bernard V. Foster                             3,000                1.6
Ted K. Gilbert                                7,500                3.9
Avel Louise Gordly                               20                  *
Michael C. Henderson                          2,500                1.3
Sheila D. Holden                                100                  *
Deborah Saweuyer-Parks                          100                  *
Howard M. Shapiro                             7,500                3.9
Leon C. Smith                                 2,000                1.0
Ralph E. Wiita                                  -0-                  *
Jeana M. Woolley                                100                  *

All Officers and Directors
as a Group                                  24,970               13.1%
                                       ------------             -----


---------------------------------
* less than 1.0%
     (1) The business  address of all directors and officers is 2002 N.E. Martin
Luther King, Jr. Blvd., Portland, Oregon 97212.



70065261.02
                                      -13-

<PAGE>



Item 6.  Interest of Management and Others in Certain Transactions.

         Various of the  directors  and officers of the Company and companies or
firms in which they had an interest were customers of and had transactions  with
the  Company  during  1996  in  the  ordinary  course  of  business.  Additional
transactions  are expected to take place in the  ordinary  course of business in
the future. All outstanding loans and commitments  included in such transactions
were  made on  substantially  the  same  terms,  including  interest  rates  and
collateral,  as those  prevailing at the time for comparable  transactions  with
other  persons  and did not,  in the opinion of  management,  involve  more than
normal risks of collectibility nor present other unfavorable features.



                           PART II. OTHER INFORMATION


     Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.

         There is currently no active public  market for the Common  Stock,  and
[transactions in the Common Stock have been sporadic].  Accordingly, there is no
reliable source of information regarding current market prices. The Company does
not  intend to apply to any  national  or  regional  stock  exchange,  or to any
inter-dealer quotation system, for listing of the Common Stock.

         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 Bank will be retained
for use by the Bank 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.



Item 2.  Legal Proceedings.

                  None.

Item 3.  Changes in and Disagreements with Accountants.

                  Not applicable.

Item 4.  Submission of Matters to a Vote of Securities Holders.

                  Not applicable.

Item 5. Compliance with Section 16(a) of the Exchange Act.

                  Not applicable.

Item 6.  Reports on Form 8-K.

                  None.




70065261.02
                                      -14-

<PAGE>



                                                     PART F/S

Independent Auditors' Report




The Board of Directors
Albina Community Bancorp:


We have audited the accompanying consolidated balance sheets of Albina Community
Bancorp  and  subsidiary  as of  December  31,  1996 and 1995,  and the  related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for the years then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these 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, 1996 and 1995,  and the results of
their  operations  and their cash  flows for the years then ended in  conformity
with generally accepted accounting principles.


March 7, 1997



70065261.02
                                                       -15-

<PAGE>

<TABLE>
<CAPTION>


                                                 ALBINA COMMUNITY BANCORP
                                                      AND SUBSIDIARY

                                                Consolidated Balance Sheets

                                                December 31, 1996 and 1995

                                             Assets                                           1996                 1995
                                             ------                                           ----                 ----
<S>                                          <C>                                       <C>                    <C>

Cash and cash equivalents:
         Cash and due from banks            $1,108,442                                     223,457
         Federal funds sold                                                                429,000            2,100,000
                                                                                           -------            ---------

                  Total cash and cash equivalents                                        1,537,442            2,323,457

Investment securities held to maturity (note 2)                                               -               3,380,443
Investment securities available for sale (notes 2 and 13)                                6,090,352                 -
Loans, net (notes 3, 4 and 10)                                                          11,333,648                 -
Premises and equipment (note 5)                                                            689,801              146,277
Other assets                                                                               175,251               25,056
                                                                                           -------             --------

                  Total assets                                                         $19,826,494            5,875,233
                                                                                        ==========            =========
</TABLE>
<TABLE>
<CAPTION>
                                    Liabilities and Shareholders' Equity
<S>                                                                                   <C>                    <C>

Liabilities:
         Demand, noninterest-bearing                                                       688,689                  500
         Demand, interest-bearing                                                          778,432                  -
         Savings accounts           1,057,809                                                  -
         Money market accounts                                                           1,972,870                  -
         Time deposits (note 6)                                                         11,346,410            1,173,000
                                                                                        ----------            ---------

                  Total deposits                                                        15,844,210            1,173,500

         Other liabilities                                                                 423,716              133,733
                                                                                           -------              -------

         Total liabilities                                                              16,267,926            1,307,233
                                                                                        ----------            ---------

Shareholders' equity (note 8):
         Preferred stock, authorized 1,000,000 shares, without par value; 29,388
           shares issued and outstanding at December 31, 1996 and 1995:
                  Series  A,  1%;  $1.00  per  share   liquidation   preference;
                    non-cumulative; 20,000 shares designated, 16,300 shares
                    issued and outstanding at December 31, 1996 and 1995                 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, 1996 and 1995                   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,
                    1996 and 1995                                                          457,000              457,000
         Common stock:
                  Class    A, without par value;  authorized  3,000,000  shares;
                           191,210 and 165,670 shares issued and outstanding at
                           December 31, 1996 and 1995, respectively                      1,839,532            1,656,700
                  Class B, without par value; authorized 1,000,000 shares;
                           none issued or outstanding at Decembr 31, 1996 and 1995             -                    -
         Accumulated deficit ($1,309,491 and $612,614 allocable to Series A
                  and B preferred stock and $488,513 and $20,944 allocable to
                  common stock at December 31, 1996 and 1995, respectively)            (1,798,004)            (633,558)
         Unrealized loss on available for sale securities                                 (27,818)                  -
                                                                                          -------             -------

                                    Total shareholders' equity                           3,558,568            4,568,000
                                                                                         ---------            ---------

                                    Total liabilities and shareholders' equity         $19,826,494            5,875,233
                                                                                        ==========            =========


See accompanying notes to consolidated financial statements.
</TABLE>

70065261.02
                                                           -16-

<PAGE>

<TABLE>
<CAPTION>


                                                 ALBINA COMMUNITY BANCORP
                                                      AND SUBSIDIARY

                                           Consolidated Statements of Operations

                                          Years ended December 31, 1996 and 1995




                                                                                                      1996             1995
                                                                                                      ----             ----
<S>                                                                                          <C>                 <C>

Interest income:
          Loans                                                                                   $434,879             -
          Investment securities - taxable                                                          217,498           4,845
          Federal funds sold                                                                       156,643           8,721
          Stock subscriptions                                                                           -           27,383
                                                                                                   -------          ------

               Total interest income                                                               809,020          40,949
                                                                                                   -------          ------

Interest expense:
          Deposits:
          Demand accounts                                                                            7,636              -
          Savings accounts                                                                           8,134              -
          Money market accounts                                                                     45,857              -
          Time deposits (note 6)                                                                   313,025           2,069
                                                                                                   -------           -----

               Total interest expense                                                              374,652           2,069
                                                                                                   -------           -----

               Net interest income                                                                 434,368          38,880

Provisions for loan losses (note 4)                                                                172,590              -
                                                                                                   -------          -----

               Net interest income after provision for
                  loan losses                                                                      261,778          38,880
                                                                                                   -------          ------

Other income:
          Service charges on deposit accounts                                                        6,636              -
          Gain on sale of mortgage loans                                                            13,384              -
          Sold real estate loan fees                                                                 7,918              -
          Other                                                                                     24,404              -
                                                                                                    ------         ------

               Total other income                                                                   52,342              -
                                                                                                    ------         ------

Other expense:
          Salaries and employee benefits                                                           939,910         210,516
          Occupancy and equipment                                                                  134,000           6,390
          Professional fees                                                                         88,896          84,329
          Promotion and advertising                                                                 86,812              -
          Data processing                                                                           65,762              -
          Other                                                                                    163,186          67,410
                                                                                                   -------          ------

               Total other expense                                                               1,478,566         368,645
                                                                                                 ---------         -------

               Loss before provision for income taxes                                          (1,164,446)       (329,765)

Provision for income taxes (note 9)                                                                     -               -
                                                                                               -----------        -------

               Net loss                                                                       $(1,164,446)       (329,765)
                                                                                                =========         =======

Common shares outstanding                                                                          191,210         165,670
                                                                                                   =======         =======

Net loss per share                                                                                 $(6.74)         (47.77)
                                                                                                    =====          ======

See accompanying notes to consolidated financial statements.

</TABLE>


70065261.02
                                      -17-

<PAGE>






<TABLE>
<CAPTION>

                                                 ALBINA COMMUNITY BANCORP
                                                      AND SUBSIDIARY

                                Consolidated Statements of Changes in Shareholders' Equity

                                          Years ended December 31, 1996 and 1995


                                Preferred stock           Common stock
                                                                                                         Unrealized
                            Number of                  Number of               Contributed  Accumulated    loss on
                             shares       Amount        shares       Amount      capital      deficit    securities      Total
<S>                          <C>        <C>             <C>         <C>         <C>          <C>         <C>           <C>

Balance, December 31, 1994           -      $     -              -  $       -       331,646    (303,793)           -       27,853
Contributed capital                  -            -              -          -       324,412           -            -      324,412
Proceeds from sale of stock
    (note 8)                    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
Proceeds from sale of stock
    (note 8)                         -            -         25,540    182,832          -            -              -      182,832
Net loss                             -            -              -          -          -     (1,164,446)           -   (1,164,446)
Unrealized loss on securities        -            -              -          -          -              -     (27,818)      (27,818)
                             --------- ------------     ---------- ------------  ----------  -----------    --------      --------
Balance, December 31, 1996      29,388    3,544,858        191,210  1,839,532         -      (1,798,004)    (27,818)    3,558,568
                               =======    =========        =======  =========    ==========   ==+=======      ======    ==========


         See accompanying notes to consolidated financial statements.

</TABLE>


70065261.02
                                      -18-

<PAGE>

<TABLE>
<CAPTION>

                                                 ALBINA COMMUNITY BANCORP
                                                      AND SUBSIDIARY

                                           Consolidated Statements of Cash Flows

                                          Years ended December 31, 1996 and 1995



<S>                                                                                  <C>               <C>

                                                                                          1996             1995
                                                                                          ----             ----

Cash flows from operating activities:
     Net loss                                                                        $(1,164,446)       (329,765)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                                                  48,879             -
           Provision for loan losses                                                     172,590             -
           Accretion of discount on investment securities
               held to maturity                                                         (119,556)
           Increase in other assets                                                     (150,195)        (25,056)
           Increase in other liabilities                                                 289,983         119,542
                                                                                         -------         -------

                  Net cash used in operating activities                                (922,745)        (235,279)
                                                                                       --------           --------

Cash flows from investing activities:
     Purchase of investment securities                                                (8,101,294)      (3,380,443)
     Proceeds freom sales of investment securities
        available for sale                                                             1,983,123            -
     Proceeds from maturities of investment securities
        held to maturity                                                               3,500,000
     Additions to premises and equipment                                               (592,403)         (146,277)
     Increase in loans                                                                 (11,506,238)         -
                                                                                        ----------      ---------

                  Net cash used in investing activities                                (14,716,812)    (3,526,720)
                                                                                        ----------      ---------
Cash flows from financing activities:
     Net increase in deposit liabilities                                               14,670,710       1,173,500
     Proceeds from contributed capital                                                    -               324,412
     Proceeds from stock issuance                                                         182,832       4,545,500
                                                                                       ----------       ---------

                  Net cash provided by financing activities                            14,853,542       6,043,412
                                                                                       ----------       ---------

                  Net (decrease) increase in cash and cash
                      equivalents                                                      (786,015)        2,281,413

Cash and cash equivalents at beginning of year                                         2,323,457           42,044
                                                                                       ---------        ---------

Cash and cash equivalents at end of year                                               $ 1,537,442      2,323,457
                                                                                    ===============     =========

Supplemental  disclosures  of cash flow  information:  Cash paid during the year
     for:
        Interest                                                                       $  340,470             -
        Income taxes                                                                           -              -

Supplemental disclosures of investing activities:
     Unrealized loss on investment securities available
        for sale                                                                          (27,818)            -


See accompanying notes to consolidated financial statements.

</TABLE>


70065261.02
                                                           -19-

<PAGE>



                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1996 and 1995




(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.

         Prior to 1996, the Company was in the development  stage and activities
         were  focused  primarily on  organizing  its  subsidiaries,  developing
         business strategies and market analyses, preparing applications for and
         obtaining regulatory approval,  raising capital,  recruiting personnel,
         and opening its first branch office.

         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.

         (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.

         Estimates that are  particularly  susceptible to significant  change in
         the  near-term  relate to the  determination  of the allowance for loan
         losses.  In connection with the determination of the allowance for loan
         losses,  management  obtains  independent  appraisals  for  significant
         properties.

         The Bank is located in Multnomah  County of Oregon.  A large portion of
         the Bank's assets are loans, which are collateralized by real estate in
         this geographic area and, accordingly,  the ultimate  collectibility of
         this portion of the Bank's loan  portfolio is susceptible to changes in
         the local market conditions. However, the loan portfolio is diversified
         and management  believes there is no  concentration  of loans exceeding
         10% for any particular  industry.  It is management's  opinion that the
         allowance  for losses on loans is adequate to absorb known and inherent
         risks  in  the  loan   portfolio.   While   management  uses  available
         information  to  recognize  losses on loans,  future  additions  to the
         reserve may be necessary  based on changes in economic  conditions.  In
         addition,  various  regulatory  agencies,  as an integral part of their
         examination  processes,  periodically  review the Bank's  allowance for
         losses on loans.  Such  agencies  may  require  the banks to  recognize
         additions to the reserve  based on their  judgments  about  information
         available to them at the time of their examinations.


70065261.02
                                      -20-

<PAGE>



                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements



         (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
         and  amortization.  Depreciation and amortization is charged to expense
         using the  straight-line  method over the estimated useful lives of the
         assets,  which  is five to ten  years  for  furniture,  equipment,  and
         software  and the  lesser of twenty  years or the life of the lease for
         leasehold improvements.

         (g) Income Recognition

         Interest is accrued on a level yield basis.  The accrual of interest on
         loans  is  discounted  when,  in  management's   judgment,  the  future
         collectibility of interest or principal is in serious doubt.  Loans are
         generally  placed on non-accrual  status when they are ninety days past
         due.

         Loan  origination  and  commitment  fees,  net of certain  direct  loan
         origination  costs, are recognized over the life of the related loan as
         an adjustment of yield.

         (h) 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 for
         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.

         (i)  Reclassifications

         Certain  reclassifications  have  been  made to the  1995  consolidated
         financial  statements  to  present  them in  conformity  with  the 1996
         consolidated financial statements.

         (j)  Net Income Per Share

         Net income per share is based on the weighted  average number of common
         shares  outstanding  during each year.  The weighted  average number of
         common shares  outstanding  were 172,746 and 6,903 at December 31, 1996
         and 1995, respectively.




70065261.02
                                      -21-

<PAGE>



                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




         (k) Allowance for Loan Losses

         The allowance 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  allowance  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  allowance  is  increased  by  provisions  charged  to
         operations  and  reduced  by  loans  charged  off,  net of  recoveries.
         Regulatory  examiners  may require the banks to recognize  additions to
         the allowances based upon their judgments about  information  available
         to them at the time of their  examination.  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.

         The Company  adopted  Statement of Financial  Accounting  Standards No.
         114,  "Accounting by Creditors for Impairment of a Loan", as amended by
         SFAS No. 118  (collectively  referred to as SFAS No. 114) on January 1,
         1995. SFAS No. 114 requires  entities to measure certain impaired loans
         based on the  present  value of future  cash  flows  discounted  at the
         loan's  effective  interest  rate, or at the loan's market value or the
         fair value of collateral  if the loan is secured.  A loan is considered
         impaired when, based on current  information and events, it is probable
         that the Company will be unable to collect all amounts due according to
         the  contractual  terms  of the  loan  agreement,  including  scheduled
         interest  payments.  If the  measurement  of the impaired loans is less
         than the recorded  investment in the loan,  impairment is recognized by
         creating or adjusting an existing  allocation of the allowance for loan
         losses.  All loans have been  evaluated  for  collectibility  under the
         provisions of these statements.


                                   (Continued)


70065261.02
                                      -22-

<PAGE>



                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements



(2)       Investment Securities

         The amortized  costs,  estimated  market values,  unrealized  gains and
         unrealized  losses of  investment  securities  at December 31, 1996 and
         1995 are summarized as follows:
<TABLE>
<CAPTION>

                                                                                          Estimated
                                                Amortized    Unrealized     Unrealized      market
                                                 cost          gains         losses         value
<S>                                          <C>                 <C>          <C>         <C>

1996:
    Available for sale:
       U.S. Government and
          Federal agencies                   $     3,046,859       1,232        (1,592)     3,046,499
       Mortgage-backed securities                  3,071,311         -__       (27,458)     3,043,853
                                                 -----------     -------        ------    -----------

             Total available for sale        $     6,118,170       1,232       (29,050)     6,090,352
-----                                            ===========     =======        ======    ===========

1995:
    Held to maturity:
       U.S. Government                             3,380,443         -__           -__      3,380,443
                                                 -----------     -------       -------    -----------

             Total held to maturity          $     3,380,443         -__           -__      3,380,443
-----                                            ===========     =======       =======    ===========
</TABLE>

     Proceeds  from sales of available  for sale  securities  for the year ended
     December  31,  1996  were  $1,983,123.  Gross  realized  gains  on sales of
     securities  available for sale for year ended December 31, 1996 were $1,463
     and gross  realized  losses  were $259.  There were no sales of  investment
     securities in 1995.

     Approximate  investment  portfolio  maturities  at December 31, 1996 are as
follows:

                                                              Estimated
                                            Amortized          market
                                              cost              value

 One year or less                     $      1,553,806        1,548,826
 After one year through five years           1,499,238        1,497,673
 After five years through ten years          3,065,126        3,043,853
                                          ------------     ------------

            Total                     $      6,118,170        6,090,352
-----                                      ============     ============

     Actual   maturities   for   mortgage-backed   securities  may  differ  from
     contractual  maturities  as  borrowers  have  the  right  to  prepay  their
     obligations.

     The  carrying  value of  securities  pledged to secure a line of credit and
     public  deposits as required or permitted by law and securities  sold under
     agreements  to  repurchase  at December 31, 1996 total  $1,050,952,  all of
     which relate to U.S. Government and Federal agency securities.


                                   (Continued)


70065261.02
                                      -23-

<PAGE>



                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




(3) Loans

     Major  categories  of loans at December 31, 1996  included in the portfolio
are as follows:

         Commercial - lines of credit            $       2,482,743
         Commercial - construction                         401,016
         Commercial - real estate                        4,790,122
         Residential - real estate                       3,578,624
         Installment                                       335,518
         Other                                               3,745
                                                    --------------

                    Total loans                         11,591,768

         Deferred loan fees, net                           (85,530)
         Allowance for loan losses                        (172,590)

                    Net loans                    $      11,333,648
-----                                                ==============

Approximate  loan  portfolio  maturities  on fixed rate loans and  repricing  on
variable rate loans at December 31, 1996 are as follows:
<TABLE>
<CAPTION>

                                                    Within           One to           After
                                                   one year        five years      five years          Total

         <S>                                 <C>                 <C>              <C>              <C>

         Commercial - lines of credit        $      1,790,559        567,899           124,285       2,482,743
         Commercial - construction                   401,016            -                 -            401,016
         Commercial - real estate                    220,728         757,282         3,812,112       4,790,122
         Residential - real estate                 1,614,818         389,787         1,574,019       3,578,624
         Installment                                  42,600         200,103            92,815         335,518
         Other                                         3,745           -                  -              3,745
                                                 -----------     -----------       -----------     -----------

                                             $     4,073,466       1,915,071         5,603,231      11,591,768
-----                                            ===========     ===========       ===========     ===========

     There were no impaired  loans or loans on nonaccrual  status as of December
31, 1996.

(4)  Allowance for Loan Losses

</TABLE>


     Transactions  in the allowance for loan losses for the year ended  December
31, 1996 were as follows:

         Balance, beginning of year                       $         -
         Provision for loan losses                              172,590
                                                             ----------

         Balance, end of year                             $     172,590
-----                                                        ==========


                                                            (Continued)

70065261.02
                                                       -24-

<PAGE>



                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(5) Premises and Equipment

     The composition of premises and equipment at December 31, 1996 and 1995 are
as follows:

                                                     1996           1995
                                                     ----           ----

         Leasehold improvements                 $     347,141           -
         Furniture and equipment                      346,118       106,050
         Software                                      45,421        40,226
                                                   ----------    ----------
                                                      738,680       146,276
         Less accumulated depreciation                 48,879           -__
                                                   ----------    ----------
                                                   $  689,801       146,276
---------                                             =======    ==========
(6)  Time Deposits

     Time   certificates  of  deposit  in  excess  of  $100,000   aggregated  to
     approximately  $4,993,545  and  $500,000  at  December  31,  1996 and 1995,
     respectively.   Interest   expense  on  these   certificates   amounted  to
     approximately  $147,481 and $955 for the years ended  December 31, 1996 and
     1995, respectively.

(7)  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 8.)

(8)  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.

70065261.02
                                                       -25-

<PAGE>



                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




     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.


     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 in which 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 in which
     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.

     (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.



70065261.02
                                                       -26-

<PAGE>






                            ALBINA COMMUNITY BANCORP
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




(9)  Regulatory Matters

     The  Company  is  subject  to  various  regulatory   capital   requirements
     administered  by the  federal  banking  agencies.  Failure to meet  minimum
     requirements  can  initiate  certain  mandatory,  and  possibly  additional
     discretionary,  actions by  regulators  that, if  undertaken,  could have a
     direct material effect on the Company's financial statements. Under capital
     adequacy  guidelines  and the  regulatory  framework for prompt  corrective
     action,  the Company must meet  specific  capital  guidelines  that involve
     quantitative  measures of the  Company's  assets,  liabilities  and certain
     off-balance-sheet   items  as  calculated   under   regulatory   accounting
     practices.  The  Company's  capital  amounts and  classifications  are also
     subject to qualitative  judgments by the regulators about components,  risk
     weightings and other factors.

     Quantitative  measures established by regulation to ensure capital adequacy
     require the Company to  maintain  minimum  amounts and ratios (set forth in
     the  following  table)  of total  and Tier 1  capital  (as  defined  in the
     regulations)  to risk  weighted  assets (as  defined) and Tier 1 capital to
     average assets (as defined).  Management believes, as of December 31, 1996,
     that the Company  meets all capital  adequacy  requirements  to which it is
     subject.

     The  Company's  actual  capital  amounts  and ratios are  presented  in the
following table:
<TABLE>
<CAPTION>

                                                                                               To be well
                                                                    For capital              capitalized under
                                                                     adequacy                prompt corrective
                                             Actual                    purposes               action provisions
                                      Amount       Ratio         Amount       Ratio         Amount        Ratio
         <S>                       <C>              <C>       <C>             <C>      <C>               <C>

         December 31, 1996:
           Total capital (to risk
               weighted assets)    $  3,681,000     33.5%     $    880,960     8.0%    $1,101,200        10.0%
           Tier 1 capital (to risk
               weighted assets)       3,543,000     32.3           440,480     4.0        660,720         6.0
           Tier 1 capital (to
               average assets)        3,543,000     20.5           692,560     4.0        865,700         5.0

</TABLE>

     The Bank, as a  state-chartered  bank with deposits  insured by the Federal
     Deposit  Insurance  Corporation  (FDIC) that are not members of the Federal
     Reserve  System,  is  subject  to the  supervision  and  regulation  of the
     Director  of the Oregon  Department  of  Consumer  and  Business  Services,
     administrated  through the  Division of Finance  and  Corporate  Securities
     (Oregon Director), and to the supervision and regulation of the FDIC.

     The Bank, as a state-chartered bank, is prohibited from declaring or paying
     any dividends in an amount greater than undivided profits.  At December 31,
     1996 and 1995, the Bank had no undivided  profits  available for payment of
     dividends.


(10)  Income Taxes

     At December  31, 1996 and 1995,  the  Company  has  deferred  tax assets of
     approximately $690,000 and $241,000, respectively, resulting primarily from
     capitalized  operating  costs and net  operating  loss  carryovers  for tax
     purposes and has recorded a valuation  allowance  for all such deferred tax
     assets.  The Company has no provision  for income taxes for the years ended
     December  31,  1996 and 1995.  The  Federal  and state net  operating  loss
     carryovers at December 31, 1996 are  approximately  $1,223,000 which expire
     in years 2010 and 2011.  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.



70065261.02
                                                       -27-

<PAGE>



(11)  Transactions with Related Parties

     Some of the Directors, executive officers and principal shareholders of the
     Company, and the companies with which they are associated, are customers of
     and have had banking  transactions  with the Company in the ordinary course
     of  business,  and the  Company  expects to have such  transactions  in the
     future.  All loans and  commitments  to loan included in such  transactions
     were made on  substantially  the same terms  (including  interest rates and
     collateral)  as those  prevailing at the time for  comparable  transactions
     with other persons and, in the opinion of the management of the Company, do
     not  involve  more than the normal  risk of  collectibility  or present any
     other unfavorable features.

     During the year  ended  December  31,  1996,  new loans to related  parties
     totaled  $2,297,  which  is also the  amount  outstanding  to such  related
     parties at December 31, 1996.  There was no related party lending  activity
     in 1995.

     PacifiCorp  provided  office space,  utilities and certain  furniture at no
cost to the Company during 1995.

(12)  Commitments

     The Bank is leasing its branch under an operating  lease.  The  approximate
     future minimum rental payments under this lease are as follows:

     Years ending December 31:
          1997                                        $        55,140
          1998                                                 55,140
          1999                                                 55,140
          2000                                                 55,140
          2001                                                 55,140
          Thereafter                                          794,935
                                                         ------------
                                                      $     1,070,635

     Rental  expense  for all  operating  leases was  approximately  $46,426 and
     $2,000 for the years ended December 31, 1996 and 1995, respectively.

(13)  Line of Credit

     The Bank has a $500,000  short-term  line of credit with its  correspondent
     bank. This facility will allow the Bank to borrow up to 80% of the value of
     U.S. Treasury securities pledged as collateral.  Securities with a carrying
     value of $547,889 were pledged at December 31, 1995. The line of credit was
     unsecured  at December  31, 1996.  There was no  outstanding  balance as of
     December 31, 1996.

(14)  Fair Value of Financial Instruments

     Financial  instruments  have been  construed  to  generally  mean cash or a
     contract that implies an  obligation  to deliver cash or another  financial
     instrument  to  another  entity.  The  fair  value of cash  equivalents  at
     December  31,  1996 and 1995  approximate  the  carrying  value  due to the
     short-term  nature  of  these  instruments.  The fair  value of  investment
     securities available for sale at December 31, 1996 approximate the carrying
     value as these  securities  are stated based on quoted market  prices.  The
     estimated fair values of investment securities held to maturity at December
     31, 1995 approximate the fair value as these securities were purchased near
     the end of the period. The fair value of loans and deposits at December 31,
     1996 and 1995 approximate  fair value as the majority of these  instruments
     were  issued  toward the latter  part of the period and as the Bank has not
     significantly  changed the rate at which it offers deposits or the rates at
     which it currently lends.

     The  Bank  did  not  hold  any  derivative  financial  instruments  in  its
     investment  portfolio  at or during the year ended  December  31,  1996 and
     1995.





70065261.02
                                                       -28-

<PAGE>



                                                     PART III


Item 1.  Index to Exhibits

         Exhibit

         2.1      Articles  of  Incorporation   of  Albina  Community   Bancorp,
                  incorporated  by reference to Exhibit 2.1 to the  registration
                  statement  on  Form  SB-1  (file  number  333-3442)   declared
                  effective June 27, 1996.

         2.2      Bylaws of Albina Community Bancorp,  incorporated by reference
                  to  Exhibit  2.2 to the  registration  statement  on Form SB-1
                  (file number 333-3442) declared effective June 27, 1996.

         6.1      Employment   Contract  of  Leon  C.  Smith,   incorporated  by
                  reference to Exhibit 6.1 to the registration statement on Form
                  SB-1 (file number 333-3442) declared effective June 27, 1996.

         6.2      Lease  Agreement,  dated May 6, 1996,  relating  to the Bank's
                  offices at 2002 N.E. Martin Luther King, Jr. Blvd.,  Portland,
                  Oregon,  incorporated  by  reference  to  Exhibit  6.4  to the
                  registration  statement  on Form SB-1 (file  number  333-3442)
                  declared effective June 27, 1996.

         27       Financial Data Schedule





70065261.02
                                                       -29-

<PAGE>



                                                    SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  the  registrant  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ALBINA COMMUNITY BANCORP


By:   /s/ Leon C. Smith
         Leon C. Smith
         President and Chief Executive Officer

Date:    March 27, 1997

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates stated:


     /s/ Ralph E. Wiita  Ralph E.  Wiita,  Vice  President  and Chief  Financial
Officer (Chief Accounting Officer) Date: March 28, 1997


         /s/ Michael C. Henderson           /s/ Howard M. Shapiro
Michael C. Henderson, Director, Chairman    Howard M. Shapiro, Director,
Date:  March 28, 1997                       Vice-Chairman
                                            Date:  March 28, 1997


         /s/  Roger S. Ahlbrandt               /s/ Bernard V. Foster
Roger S. Ahlbrandt, Director                 Bernard V. Foster, Director
Date:  March 28, 1997                        Date:  March 28, 1997



Ted K. Gilbert, Director                     Avel Louise Gordly, Director
Date:  March      , 1997                     Date:  March      , 1997



Sheila D. Holden, Director                   Deborah E. Kennedy, Director
Date:  March      , 1997                     Date:  March      , 1997


         /s/ Jeana M. Woolley                  /s/ Leon C. Smith
Jeana M. Woolley, Director                   Leon C. Smith, Director
Date:  March 28, 1997                        Date:  March 27, 1997





<PAGE>