×

Foundation Bancorp Earns $304,000, or $0.09 per Diluted Share, in Third Quarter 2014, Non-Interest Bearing Demand Deposits Increase 10%, Core Deposits Represent 96% of Total Deposits

BELLEVUE, Wash., Oct. 21, 2014 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCQB:FDNB), the holding company for Foundation Bank, today reported that it earned $304,000, or $0.09 per diluted share in the third quarter of 2014, compared to $363,000, or $0.10 per diluted share in the third quarter of 2013. In the first nine months of 2014, Foundation earned $1.2 million, or $0.34 per diluted share compared to $1.9 million, or $0.53 per diluted share in the first nine months of 2013. Earnings in the third quarter and first nine months of 2014 included a provision for income taxes which was not required previously and reduced net earnings.

"Our strong core deposit program continued at a robust pace which will allow us to fund future loan growth," said Diane Dewbrey, President and CEO. "We continue to see opportunities for both loan and deposit growth in the near future."

Third Quarter 2014 Highlights:

  • Net income was $304,000, or $0.09 per diluted share in the third quarter of 2014, compared to $363,000, or $0.10 per diluted share in the third quarter a year ago.
  • Third quarter net interest margin saw a slight decrease quarter-over-quarter at 3.61%, compared to 3.69% in the preceding quarter and 4.00% in the third quarter a year ago.
  • Allowance for loan losses improved to 1.84% of gross loans compared to 1.80% three months earlier.
  • Total non-accrual loans were $11.8 million at September 30, 2014, which were nearly unchanged compared to three months earlier and decreased 29.9% compared to $16.8 million a year earlier.
  • Non-interest bearing demand deposits increased 10.0% compared to a year ago.
  • Core deposits (which exclude time deposits) represent 95.6% of total deposits at September 30, 2014.
  • Book value per share increased 23.9% to $9.71 per share at September 30, 2014, compared to $7.84 per share a year ago.
  • The ratio of tangible common equity to tangible assets improved to 8.7% at September 30, 2014, compared to 7.6% a year ago.

Asset Quality

"As we continue to manage asset quality, we have made substantial progress over the past year, and we expect that our credit quality metrics will continue to stabilize," said Dewbrey. "As a result of current reserves already in place, representing 1.84% of total loans, as well as declining net charge-offs, we did not record a provision for loan losses for the third quarter of 2014." Foundation recorded no loan loss provision in the preceding quarter and recorded a $700,000 provision for loan losses in the third quarter a year ago. Additionally, there were no charge-offs recorded in the third quarter of 2014, compared to charge-offs of $63,000 in the preceding quarter and charge-offs of $1.2 million in the third quarter a year ago.

Foundation categorizes borrowers who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations as restructured loans. As of September 30, 2014, Foundation held $3.7 million in performing restructured loans that were paying as agreed but are included in non-accrual loans. Total non-accrual loans were $11.8 million at September 30, 2014, which were nearly unchanged compared to three months earlier and decreased 29.9% when compared to $16.8 million a year earlier.

Non-performing assets (NPAs), consisting of non-accrual loans, Other Real Estate Owned (OREO) and past due loans over 90 days, decreased to $21.4 million, or 5.4% of total assets at September 30, 2014 compared to $25.3 million, or 6.6% of total assets at June 30, 2014 and $23.4 million, or 6.4% of total assets a year ago.

Foreclosed assets including OREO and Other Property Owned (OPO) totaled $10.5 million at September 30, 2014, compared to $11.0 million at June 30, 2014, and $7.4 million at September 30, 2013. "As we work our way through this credit cycle, we continue to shift loans out of non-accrual status and into OREO, which is the reason for the balance increase compared to a year ago," said Dewbrey. "OREO consists of seven properties, with one single property located on Lake Washington accounting for 39.6% of the total. This property is currently under contract for sale and expected to close sometime during the fourth quarter." Of the total amount in OREO, Foundation is receiving rent/lease payments on $3.8 million.

Balance Sheet Review

Foundation's gross loans were $286.3 million at September 30, 2014, compared to $281.2 million a year ago. Commercial real estate (CRE) loans totaled $176.6 million at September 30, 2014, and comprise 61.7% of the total loan portfolio. Business loans secured by the property on which the business operates are classified as owner occupied CRE. Of the total loan portfolio, owner occupied CRE loans comprised $48.0 million or 16.8% and construction and land loans represented 7.2%. The commercial and industrial (C&I) portfolio represented 35.1% of the total loan portfolio.

"Our focus over the last several quarters has been to grow our core deposit base, and our progress in developing new client relationships demonstrates the hard work, dedication and teamwork of our employees," said Dewbrey. Total deposits increased 7.3% to $349.4 million at September 30, 2014, compared to $325.6 million a year earlier. Non-interest bearing demand deposits increased 10.0% compared to a year ago. Total transaction accounts represent 50.6%, money market and savings accounts represent 45.0% and CDs comprise 4.4% of the total deposit portfolio at September 30, 2014.

Core deposits (which exclude time deposits) represent 95.6% of total deposits at September 30, 2014, compared to 83.0% of total deposits a year earlier.

Total shareholder equity increased 24.0% to $34.2 million at September 30, 2014, compared to $27.6 million a year ago. Book value per share increased 23.9% to $9.71 at September 30, 2014, compared to $7.84 a year ago. Foundation's common equity to total assets (common equity ratio) remained strong at 8.7% at September 30, 2014.

Results of Operations

"As a result of the strong core client deposit growth, we have seen a reduction in net interest margin as loan yields have not kept pace with the large amount of cash balances we are accumulating," said Dewbrey. Foundation's third quarter net interest margin was 3.61%, compared to 3.69% in the preceding quarter and 4.00% in the third quarter a year ago. In the first nine months of 2014, Foundation's net interest margin was 3.73% compared to 3.99% in the first nine months of 2013.

Foundation's third quarter net interest income before provision for loan losses was $3.4 million, unchanged from the third quarter a year ago. In the first nine months of the year, net interest income was $9.9 million, the same as in the first nine months one year ago.

Foundation's total non-interest expense was up slightly to $3.0 million in the third quarter of 2014, compared to $2.9 million in the preceding quarter and $2.6 million in the third quarter one year ago. The increase is partially attributable to higher costs associated with foreclosed assets. Year-to-date, Foundation's total non-interest expense was $8.7 million, compared to $7.9 million in the same period a year earlier.

Capital

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

Sep 30, 2014 Jun 30, 2014 Sep 30, 2013
Tier 1 Leverage (to average assets) 9.94% 10.32% 10.11%
Tier 1 risk-based (to risk-weighted assets) 12.62% 12.71% 12.51%
Total risk-based (to risk-weighted assets) 13.88% 13.97% 13.77%

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, 2014 December 31, 2013 September 30, 2013
Assets
Cash and Due from Banks $ 8,805 $ 10,613 $ 16,000
Interest-Bearing Deposits in Banks 27,739 28,238 32,292
Investments 59,669 33,459 30,094
Loans Held for Sale -- 233 545
Loans 286,299 282,110 281,154
Allowance for Loan Losses (5,258) (5,258) (4,911)
Loans, net 281,041 276,852 276,243
Leaseholds and Equipment, net 703 836 891
Foreclosed Assets 10,468 7,268 7,437
Accrued Interest Receivable and Other Assets 6,612 7,191 1,714
Total Assets $ 395,037 $ 364,690 $ 365,216
Liabilities
Noninterest-Bearing Demand Deposits $ 140,830 $ 124,226 $ 128,077
Interest-Bearing Checking and Savings Accounts 37,350 15,900 17,218
Money Market Accounts 155,860 138,005 130,686
Certificates of Deposit 15,340 41,901 49,625
Total Deposits 349,380 320,032 325,606
Borrowings 8,723 9,595 9,344
Other Liabilities 2,692 2,578 2,659
Total Liabilities 360,795 332,205 337,609
Stockholders' Equity
Preferred Stock (1) -- -- --
Common Stock (2) 3,526 3,526 3,522
Additional Paid-in Capital 38,881 38,706 38,719
Retained Earnings (Deficit) (7,929) (9,118) (14,341)
Accumulated Other Comprehensive (Loss) Income (236) (629) (293)
Total Stockholders' Equity 34,242 32,485 27,607
Total Liabilities and Stockholders' Equity $ 395,037 $ 364,690 $ 365,216
(1) $1 Par Value, Shares Authorized 1,000,000, issued and outstanding 0.
(2) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,526,089, 3,526,064 and 3,522,359 respectively.
Book Value per Share 9.71 9.21 7.84
Common Equity Ratio 8.7% 8.9% 7.6%
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (dollars in 000's) For the Quarter Ended For the Nine Months Ended
September 30, 2014 June 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
Interest Income
Loans, Including Fees $ 3,376 $ 3,298 $ 3,571 $ 10,040 $ 10,391
Investments 228 196 137 606 400
Other 33 25 19 71 47
Total Interest Income 3,637 3,519 3,727 10,717 10,838
Interest Expense
Deposits 218 212 227 636 708
Borrowings 54 63 78 186 243
Total Interest Expense 272 275 305 822 951
Net Interest Income Before Provision 3,365 3,244 3,422 9,895 9,887
Provision for Loan Losses -- -- (700) -- (700)
Net Interest Income
After Provision for Loan Losses 3,365 3,244 2,722 9,895 9,187
Noninterest Income
Service Fees 119 123 108 350 342
OTTI on Investments -- -- -- -- (6)
Gain on Sale of Loans 2 45 108 191 164
Gain on Sale of Securities -- 43 -- 43 --
Other Noninterest Income 6 8 25 24 65
Total Noninterest Income 127 219 241 608 565
Noninterest Expense
Salaries and Employee Benefits 1,420 1,389 1,273 4,243 4,028
Occupancy and Equipment 311 323 319 947 897
Data Processing 181 178 185 547 499
Legal 110 136 61 363 391
Professional 20 81 62 137 198
Loan Expenses 58 64 107 169 232
FDIC/State Assessments 133 126 94 378 467
Foreclosed Assets, Net 113 (21) (4) 25 (275)
Insurance 60 60 60 180 171
City and State Taxes 89 62 70 214 228
Other 530 526 373 1,468 1,033
Total Noninterest Expense 3,025 2,924 2,600 8,671 7,869
Income Before Provision for Income Tax 467 539 363 1,832 1,883
Provision for Income Tax 163 188 -- 640 --
NET INCOME $ 304 $ 351 $ 363 $ 1,192 $ 1,883
Return on average equity 3.48% 4.13% 5.18% 4.68% 9.18%
Return on average assets 0.31% 0.38% 0.40% 0.42% 0.73%
Net interest margin 3.61% 3.69% 4.00% 3.73% 3.99%
Efficiency ratio 86.86% 86.83% 73.58% 86.15% 79.81%
Diluted earning per avg. share $ 0.09 $ 0.10 $ 0.10 $ 0.34 $ 0.53
Loan to deposit ratio 81.88% 82.42% 86.13%
Book value per share $ 9.71 $ 9.68 $ 7.84
SELECTED INFORMATION Quarter Ended
Sept 30, June 30, Mar 31, Dec 31, Sept 30,
2014 2014 2014 2013 2013
Bank Only
Risk Based Capital Ratio 13.88% 13.97% 14.22% 13.86% 13.77%
Leverage Ratio 9.94% 10.32% 10.50% 10.39% 10.11%
C&I Loans to Loans 35.05% 35.89% 33.20% 37.18% 37.30%
Real Estate Loans to Loans 61.67% 61.45% 64.38% 60.24% 59.42%
Consumer Loans to Loans 0.17% 0.14% 0.15% 0.15% 0.25%
Allowance for Loan Loss Reserves (000's) $ 5,258 $ 5,030 $ 5,093 $ 5,258 $ 4,911
Allowance for Loan Loss Reserves to Loans 1.84% 1.80% 1.82% 1.86% 1.74%
Total Noncurrent Loans to Loans 4.11% 5.45% 5.73% 5.90% 6.15%
Nonperforming assets to assets 6.44% 6.65% 5.89% 6.30% 6.44%
Net Charge-Offs (Recoveries) (000's) $ (228) $ 63 $ 165 $ 653 $ 1,177
Net Charge-Offs in Qtr to Avg Total Loans -0.08% 0.02% 0.06% 0.23% 0.42%

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