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Foundation Bancorp Earns $363,000, or $0.10 Per Diluted Share, in Third Quarter 2013

BELLEVUE, Wash., Nov. 1, 2013 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported it earned $363,000, or $0.10 per diluted share, in the third quarter of 2013, compared to $696,000, or $0.20 per diluted share, in the third quarter a year ago. In the first nine months of the year, Foundation's earnings increased 15.5% to $1.9 million, or $0.53 per diluted share, compared to $1.6 million, or $0.47 per diluted share, in the first nine months a year ago. In the current quarter, Foundation booked a $700,000 provision for loan losses to offset charge-offs. This compares to no provision for loan losses in the preceding quarter or the third quarter a year ago.

"For the third quarter we had solid top line growth, and our core business is continuing to improve, particularly in the composition of our deposit portfolio, increasing total transaction account balances and adding new customer relationships. Operating efficiencies are also improving as we work to effectively manage controllable operating expenses," said Diane Dewbrey, President and CEO. "Our business outlook continues to improve as the local economic recovery takes hold and our loan pipeline is active. We remain proactive in substantially reducing legal costs and other expenses related to repossessed properties as we continue to work our way through this difficult credit cycle."

Third Quarter 2013 Highlights:

  • Net income was $363,000 in the third quarter of 2013 compared to $696,000 in the third quarter a year ago.
  • Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets, was $23.5 million, or 6.4% of total assets, at September 30, 2013 compared to $26.2 million, or 7.5% of total assets, three months earlier.
  • Net interest margin was 4.00% in the third quarter, the same as in the preceding quarter and compared to 3.81% in the third quarter a year ago.
  • Total non-interest expense decreased 5.6% to $2.6 million in the third quarter of 2013, compared to $2.8 million in the third quarter a year ago.
  • Gross loans were $281.2 million at September 30, 2013 compared to $284.8 million a year ago.
  • Non-interest bearing demand deposits increased 20.3% compared to a year ago and represent 39.3% of total deposits at September 30, 2013.
  • Return on average equity was 5.18% for the quarter and 9.18% for the first nine months of 2013.

Asset Quality

Total non-accrual loans declined modestly to $16.8 million at September 30, 2013 compared to $16.9 million three months earlier and $18.1 million a year earlier. Of the $16.8 million in loans classified as non-accrual, 57%, or $9.6 million of these loans are performing as agreed under revised payment schedules. "Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans," said Dewbrey. At September 30, 2013, Foundation held $9.6 million in performing restructured loans that were included in nonaccrual loans.

Non-performing assets (NPAs), consisting of non-accrual loans, OREO and performing trouble debt restructured, were $23.5 million, or 6.4% of total assets at September 30, 2013 compared to $26.2 million, or 7.5% of total assets at June 30, 2013 and $31.0 million, or 8.8% of total assets, a year ago. Of the non-performing assets, foreclosed assets (Other Real Estate Owned (OREO) and Other Property Owned (OPO)) accounted for $7.4 million at September 30, 2013, compared to $7.2 million at June 30, 2013. "OREO balances [without OPO] were $6.1 million, and consist of 7 properties. A single property located on Lake Washington accounts for 60% of the total and is currently under contract for sale and expected to close in 2014," said Dewbrey. Of the total amount in OREO, Foundation is receiving rent/lease payments on $3.8 million.

The overall credit quality of the loan portfolio continued to show steady improvements year-over-year and assets classified as performing, but internally risk rated special mention and substandard, also continued to improve.

"During the third quarter we had charge-offs of $1.2 million. Most of the charged off amount was for non-accrual loans that we are still receiving payments for," Dewbrey said. "As a result of these net charge-offs, we booked a loan loss provision of $700,000 for the quarter. This compares to no loan loss provision recorded during either the preceding or year ago quarters."

Balance Sheet Review

Gross loans were $281.2 million at September 30, 2013 compared to $284.8 million a year ago. Commercial real estate (CRE) loans totaled $164.3 million at September 30, 2013 and comprise 58.4% of the total loan portfolio. Business loans secured by the property on which the business operates are classified as owner occupied CRE. Owner occupied CRE loans comprised $47.6 million or 29.0% of the total CRE portfolio. Construction and land loans represented 5.5% of the total loan portfolio and the C&I portfolio represented 37.2% of the total loan portfolio.

Total deposits increased 3.6% to $325.6 million at September 30, 2013, compared to $314.3 million at September 30, 2012. Non-interest-bearing demand deposits increased 20.3% compared to a year ago. Total transaction accounts represent 45.0%, money market and savings accounts represent 40.0% and CDs comprise 15.0% of the total deposit portfolio at September 30, 2013.

Core deposits, (which exclude time deposits) represent 84.8% of total deposits at September 30, 2013, compared to 81.2% of total deposits a year earlier.

Total shareholder equity increased 7.3% to $27.6 million at September 30, 2013, compared to $25.8 million a year ago. Book value per share was $7.84 at the end of September compared to $7.31 at September 30, 2012. Foundation's tangible common equity ratio was 7.6% at September 30, 2013.

Results of Operations

Foundation's third quarter net interest income before provision for loan losses increased 5.1% to $3.4 million, compared to $3.3 million in the third quarter a year ago. In the first nine months of 2013, Foundation's net interest income before provision was $9.9 million, the same as in the first nine months of 2012.

"Our net interest margin contracted slightly year-to-date compared to the third quarter a year ago due to the continued downward pressure on loan yields," said Dewbrey. Net interest margin in the third quarter was 4.00%, the same as in the preceding quarter and compared to 3.81% in the third quarter a year ago.

Non-interest income was $241,000 in the third quarter of 2013, up compared to $196,000 in the third quarter a year ago. In the first nine months of the year, non-interest income was $565,000 compared to $812,000 in the first nine months of 2012.

Foundation's total non-interest expense decreased 5.6% to $2.6 million in the third quarter, compared to $2.8 million in the third quarter a year ago. Year-to-date, non-interest expense declined 12.9% to $7.9 million compared to $9.0 million in the same period a year earlier. The decrease in non-interest expense both for the quarter and for the year-to-date period was primarily due to lower legal expenses and lower costs associated with foreclosed assets.

Capital

Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:

Sep 30, 2013 Jun 30, 2012 Sep 30, 2012
Tier 1 Leverage (to average assets) 10.11% 10.38% 9.38%
Tier 1 risk-based (to risk-weighted assets) 12.51% 12.50% 11.14%
Total risk-based (to risk-weighted assets) 13.77% 13.76% 12.41%

About the Company

Foundation Bancorp (FDNB) is a bank holding company based in Bellevue, Washington, that operates Foundation Bank, a locally-owned, full service, state chartered commercial bank. Foundation Bank has been serving the greater Puget Sound region since 2000.

Safe Harbor Statement. This release contains comments or information that constitutes forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices; levies and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; and other factors, including risk factors. The Company undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited) (dollars in 000's)
September 30, 2013 December 31, 2012 September 30, 2012
Assets
Cash and Due from Banks $ 16,000 $ 12,657 $ 13,384
Interest-Bearing Deposits in Banks 32,292 33,965 20,245
Investments 30,094 25,050 29,876
Loans Held for Sale 545 192 --
Loans 281,154 288,895 284,803
Allowance for Loan Losses (4,911) (9,373) (9,087)
Loans, net 276,243 279,522 275,716
Leaseholds and Equipment, net 891 609 573
Foreclosed Assets 7,437 9,163 10,255
Accrued Interest Receivable and Other Assets 1,714 3,149 3,449
Total Assets $ 365,216 $ 364,307 $ 353,498
Liabilities
Noninterest-Bearing Demand Deposits $ 128,077 $ 111,135 $ 106,501
Interest-Bearing Checking and Savings Accounts 17,218 27,892 22,567
Money Market Accounts 130,686 128,243 125,993
Certificates of Deposit 49,625 58,223 59,230
Total Deposits 325,606 325,493 314,291
Borrowings 9,344 9,875 10,143
Other Liabilities 2,659 2,644 3,301
Total Liabilities 337,609 338,012 327,735
Stockholders' Equity
Common Stock (1) 3,522 3,522 3,522
Additional Paid-in Capital 38,719 38,703 38,702
Retained Earnings (Deficit) (14,341) (16,217) (16,768)
Accumulated Other Comprehensive (Loss) Income (293) 287 307
Total Stockholders' Equity 27,607 26,295 25,763
Total Liabilities and Stockholders' Equity $ 365,216 $ 364,307 $ 353,498
(1) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,522,359, 3,522,341 and 3,522,341 respectively.
Book Value per Share 7.84 7.47 7.31
Tangible Common Equity Ratio 7.6% 7.2% 7.3%
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (dollars in 000's) For the Three Months Ended For the Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Interest Income
Loans, including Fees $ 3,571 $ 3,441 $ 3,446 $ 10,391 $ 10,334
Investments 137 128 194 400 799
Other 19 13 19 47 47
Total Interest Income 3,727 3,582 3,659 10,838 11,180
Interest Expense
Deposits 227 231 310 708 1,025
Borrowings 78 80 95 243 300
Total Interest Expense 305 311 405 951 1,325
Net Interest Income Before Provision 3,422 3,271 3,254 9,887 9,855
Provision for Loan Losses (700) -- -- (700) --
Net Interest Income
After Provision for Loan Losses 2,722 3,271 3,254 9,187 9,855
Noninterest Income
Deposit Account and Service Fees 61 62 70 194 201
OTTI on Investments -- -- (14) (6) (14)
Gain on Sale of Loans 108 -- 82 164 86
Gain on Sale of Securities -- -- -- -- 361
Other Noninterest Income 72 121 58 213 178
Total Noninterest Income 241 183 196 565 812
Noninterest Expense
Salaries and Employee Benefits 1,352 1,491 1,287 4,255 3,868
Occupancy and Equipment 248 230 218 695 638
Data Processing 232 220 159 630 470
Legal 61 257 265 391 1,041
Professional 109 124 157 351 574
Loan Expenses 107 33 38 232 239
FDIC/State Assessments 94 186 189 467 540
Foreclosed Assets, Net (4) (24) 108 (270) 608
Insurance 60 56 35 171 191
City and State Taxes 70 78 86 228 240
Other 271 282 212 719 628
Total Noninterest Expense 2,600 2,933 2,754 7,869 9,037
Income Before Provision for Income Tax 363 521 696 1,883 1,630
Provision for Income Tax -- -- -- -- --
NET INCOME $ 363 $ 521 $ 696 $ 1,883 $ 1,630
Return on average equity 5.18% 7.58% 10.92% 9.18% 8.71%
Return on average assets 0.40% 0.61% 0.79% 0.73% 0.64%
Net Interest Margin 4.00% 4.00% 3.81% 3.99% 4.04%
Efficiency Ratio 73.58% 86.25% 82.55% 79.81% 89.85%
Diluted Earning Per Avg. Share $ 0.10 $ 0.15 $ 0.20 $ 0.53 $ 0.47
Loan to deposit ratio 86.13% 90.84% 90.10%
Book value per share $ 7.84 $ 7.72 $ 7.31
SELECTED INFORMATION Quarter Ended
Sept 30, June 30, Mar 31, Dec 31, Sept 30,
2013 2013 2013 2012 2012
Bank Only
Risk Based Capital Ratio 13.77% 13.76% 13.31% 12.66% 12.41%
Leverage Ratio 10.11% 10.38% 10.13% 9.56% 9.38%
C&I Loans to Loans 37.30% 34.24% 32.54% 33.91% 37.13%
Real Estate Loans to Loans 59.42% 62.82% 66.13% 64.67% 61.33%
Consumer Loans to Loans 0.25% 0.24% 0.36% 0.28% 0.33%
Allowance for Loan Loss Reserves (000's) $ 4,911 $ 5,388 $ 9,385 $ 9,373 $ 9,087
Allowance for Loan Loss Reserves to Loans 1.74% 1.92% 3.28% 3.24% 3.19%
Total Noncurrent Loans to Loans 6.15% 6.01% 7.69% 6.08% 6.34%
Nonperforming assets to assets 6.44% 7.53% 9.25% 8.33% 8.78%
Texas Ratio 59.25% 64.79% 72.33% 69.88% 73.13%
Net Charge-Offs (Recoveries) (000's) $ 1,177 $ 3,997 $ (12) $ (286) $ 372
Net Charge-Offs in Qtr to Avg Total Loans 0.42% 1.42% 0.00% -0.10% 0.13%

CONTACT: Randy Cloes, EVP & CFO 425 691 5014 www.foundationbank.comSource:Foundation Bancorp