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Foundation Bancorp Reports Operational Profits of $334,000 in First Quarter, Non-Interest Bearing Demand Deposits Increase 22%, Core Deposits Represent 99% of Total Deposits

BELLEVUE, Wash., May 4, 2015 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCQB:FDNB), the holding company for Foundation Bank, today reported that it earned $334,000 in the first quarter of 2015 compared to $536,000 in the first quarter a year ago. Net income available to common shareholders after dividends for preferred stock was $320,000. Earnings were $0.06 per diluted share in the first quarter of 2015 compared to $0.15 per diluted share, in the first quarter of 2014. Book value per share was $9.61 at March 31, 2015, compared to $9.50 per share a year ago.

"Our first quarter profitability was less than it was in the year ago quarter, primarily due to one-time costs for problem asset workouts. These are legacy workouts that should be nearing resolution in 2015," said Diane Dewbrey, President and CEO. "Also, in the first quarter the Bancorp raised $15 million in new equity which will fund future growth. The equity was through a private placement of convertible preferred shares. As can be seen by our balance sheet, deposits continue to contribute to our increasing asset size. This will allow us continue to meet the growing needs of our existing and future clients in the business community."

First Quarter 2015 Highlights:

  • Raised $15 million of new capital to strengthen capital position.
  • Net income available to common shareholders was $320,000.
  • Core client deposits (which exclude wholesale deposits) increased over $62.2 million or 20.7% over the same quarter last year.
  • Allowance for loan losses remained strong at 1.94% of gross loans.
  • Total non-accrual loans were $13.6 million at March 31, 2015, compared to $15.9 million a year earlier.
  • Non-interest bearing demand deposits increased 22.4%, compared to a year ago and represent 42.4% of deposits.
  • Core deposits represent 98.5% of total deposits at March 31, 2015.
  • Book value per share increased to $9.61 per share at March 31, 2015, compared to $9.50 per share a year ago.
  • The ratio of tangible common equity to tangible assets was 7.9% at March 31, 2015.

Asset Quality

"With our non-accrual portfolio, several loans are secured by commercial property which is in excess of our value being carried on the books. Part of the resolution process for these types of loans is to liquidate the property without having to initiate a foreclosure which usually results in extended time for clearing. Thus, we believe over the course of this year, a few of these properties will liquidate and will result in noticeable reductions in the non-accrual portfolio. It has been the Bank's position to optimize collection of these loans which in some cases can result in extended timing for collection," said Dewbrey.

Foundation categorizes borrowers who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations as restructured loans. As of March 31, 2015, Foundation held $5.0 million in performing restructured loans that were paying as agreed but are included in non-accrual loans. Total non-accrual loans were $13.6 million at March 31, 2015, compared to $12.5 million three months earlier and $15.9 million a year earlier, representing a year-over-year decrease of 14.6%.

Non-performing assets (NPAs), consisting of non-accrual loans, Other Real Estate Owned (OREO), Other Property Owned (OPO) and past due loans over 90 days, were $21.7 million, or 5.0% of total assets at March 31, 2015 compared to $19.8 million, or 5.0% of total assets at December 31, 2014 and $22.6 million, or 6.2% of total assets a year ago.

Foreclosed assets including OREO and OPO totaled $8.1 million at March 31, 2015, compared to $7.3 million at December 31, 2014, and $6.6 million at March 31, 2014. OREO consisted of seven properties at quarter end.

Foundation recorded no provision for loan losses in the first quarter, compared to a $772,000 provision in the preceding quarter and no provision in the first quarter a year ago.

Balance Sheet Review

Loan originations totaled $15.0 million in the first quarter of 2015, offset by an almost equal amount of loan payoffs and reductions. Consequently the loan portfolio was up only slightly at $282.6 million at March 31, 2015, compared to $280.0 million a year ago. Commercial real estate (CRE) loans totaled $174.4 million at March 31, 2015, 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 $48.9 million or 17.3% and construction and land loans represented 5.3%. The commercial and industrial (C&I) portfolio represented 35.0% of the total loan portfolio.

"Deposit growth has been robust as we are actively developing new client relationships to bring new accounts to the Bank and to expand existing product acceptance with our current customers," said Dewbrey. Total deposits increased 14.2% to $368.1 million at March 31, 2015, compared to $322.3 million a year earlier. Non-interest bearing demand deposits increased 22.4% compared to a year ago. Total transaction accounts represent 48.3%, money market and savings accounts represent 47.5%, and CDs comprise 4.1% of the total deposit portfolio at March 31, 2015.

Core deposits represent 98.5% of total deposits at March 31, 2015, compared to 90.1% of total deposits a year earlier.

Foundation's total stockholder equity increased to $49.2 million at March 31, 2015, compared to $33.5 million a year ago. Book value per share increased to $9.61 at March 31, 2015, compared to $9.50 a year ago and common equity to total assets (common equity ratio) remained strong at 7.9% at March 31, 2015.

Results of Operations

Foundation's first quarter net interest margin was 3.71%, compared to 3.89% in the preceding quarter and 3.91% in the first quarter a year ago. "The increase in on balance sheet liquidity from strong deposit growth has put temporary downward pressure on our margin," noted Diane. "As we deploy this into investments and loans, the margin should show improvement." First quarter net interest income before provision for loan losses was $3.3 million, which was nearly unchanged compared to the first quarter a year ago. Non-interest income was $171,000 in the first quarter compared to $262,000 in the first quarter a year ago. The decline was largely due to a decrease in SBA loan premium income.

First quarter total non-interest expense decreased to $3.0 million, compared to $3.4 million in the preceding quarter but increased when compared to $2.7 million in the first quarter one year ago. The increase is partially attributable to higher costs associated with foreclosed assets and personnel changes with additional focus on sales.

Capital

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

Mar 31, 2015 Dec 31, 2014 Mar 31, 2014
Tier 1 Leverage (to average assets) 10.88% 9.54% 10.50%
Tier 1 risk-based (to risk-weighted assets) 12.93% 12.78% 12.97%
Tier 1 Common Capital (CET1) 12.93% -- --
Total risk-based (to risk-weighted assets) 14.19% 14.04% 14.22%

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. Foundation Bancorp 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)
March 31, 2015 December 31, 2014 March 31, 2014
Assets
Cash and Due from Banks $ 11,668 $ 11,245 $ 12,762
Interest-Bearing Deposits in Banks 58,045 33,976 31,713
Investments 60,292 60,720 33,051
Loans 282,564 283,173 279,958
Allowance for Loan Losses (5,488) (5,615) (5,093)
Loans, net 277,076 277,558 274,865
Leaseholds and Equipment, net 617 640 787
Foreclosed Assets 8,105 7,280 6,581
Bank Owned Life Insurance 10,045 -- --
Accrued Interest Receivable and Other Assets 5,851 6,729 6,640
Total Assets $ 431,699 $ 398,148 $ 366,399
Liabilities
Noninterest-Bearing Demand Deposits $ 156,198 $ 140,460 $ 127,627
Interest-Bearing Checking and Savings Accounts 22,076 37,515 23,312
Money Market Accounts 174,560 149,367 139,387
Certificates of Deposit 15,248 15,251 31,938
Total Deposits 368,082 342,593 322,264
Borrowings 9,143 17,341 8,521
Other Liabilities 5,294 3,851 2,133
Total Liabilities 382,519 363,785 332,918
Stockholders' Equity
Preferred Stock (1) 15 -- --
Common Stock (2) 3,556 3,530 3,526
Additional Paid-in Capital 52,996 38,921 38,763
Retained Earnings (Deficit) (7,739) (8,060) (8,581)
Accumulated Other Comprehensive (Loss) Income 352 (28) (227)
Total Stockholders' Equity 49,180 34,363 33,481
Total Liabilities and Stockholders' Equity $ 431,699 $ 398,148 $ 366,399
(1) $1 Par Value, Shares Authorized 1,000,000, issued and outstanding 15,000, 0 and 0 respectively.
(2) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,555,976, 3,529,976 and 3,526,264 respectively.
Book Value per Share, Common Stock $ 9.61 $ 9.73 $ 9.50
Common Equity Ratio 7.9% 8.6% 9.1%
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (dollars in 000's, except per share amounts) For the Quarter Ended
March 31, 2015 December 31, 2014 March 31, 2014
Interest Income
Loans, Including Fees $ 3,338 $ 3,778 $ 3,366
Investments 301 295 182
Other 28 23 13
Total Interest Income 3,667 4,096 3,561
Interest Expense
Deposits 204 213 206
Borrowings 125 137 69
Total Interest Expense 329 350 275
Net Interest Income Before Provision 3,338 3,746 3,286
Provision for Loan Losses -- (772) --
Net Interest Income
After Provision for Loan Losses 3,338 2,974 3,286
Noninterest Income
Service Fees 116 122 108
Bank Owned Life Insurance 45 -- --
OTTI on Investments -- (5) --
Gain on Sale of Loans 2 6 144
Gain on Sale of Securities -- 53 --
Other Noninterest Income 8 6 10
Total Noninterest Income 171 182 262
Noninterest Expense
Salaries and Employee Benefits 1,568 1,401 1,435
Occupancy and Equipment 211 320 325
Data Processing 187 182 176
Legal 238 167 117
Professional 22 31 36
Loan Expenses 82 65 47
FDIC/State Assessments 140 135 119
Foreclosed Assets, Net 63 454 (67)
Insurance 57 57 60
City and State Taxes 63 80 63
Other 388 488 412
Total Noninterest Expense 3,019 3,380 2,723
Income (Loss) Before Provision for Income Tax 490 (224) 825
Provision for Income Tax 156 (93) 289
NET INCOME (LOSS) $ 334 $ (131) $ 536
Preferred dividends 14 -- --
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ 320 $ (131) $ 536
Return on average equity 3.71% -1.48% 6.51%
Return on average assets 0.31% -0.13% 0.60%
Net interest margin 3.47% 3.89% 3.91%
Efficiency ratio 86.15% 87.30% 84.76%
Diluted earning (loss) per avg. share $ 0.06 $ (0.04) $ 0.15
Weighted avg dilutive shares outstanding 5,106,649 3,665,973 3,542,152
Loan to deposit ratio 74.89% 82.59% 86.80%
SELECTED INFORMATION Quarter Ended
Mar 31, Dec 31, Sept 30, June 30, Mar 31,
2015 2014 2014 2014 2014
Bank Only
Risk Based Capital Ratio 14.19% 14.04% 13.88% 13.97% 14.22%
Leverage Ratio 10.88% 9.54% 9.94% 10.32% 10.50%
C&I Loans to Loans 35.05% 35.96% 35.05% 35.89% 33.20%
Real Estate Loans to Loans 61.73% 60.75% 61.67% 61.45% 64.38%
Consumer Loans to Loans 0.15% 0.19% 0.17% 0.14% 0.15%
Allowance for Loan Losses (000's) $ 5,488 $ 5,615 $ 5,258 $ 5,030 $ 5,093
Allowance for Loan Losses to Loans 1.94% 1.98% 1.84% 1.80% 1.82%
Total Noncurrent Loans to Loans 4.80% 4.43% 4.11% 5.45% 5.73%
Nonperforming assets to assets 5.59% 5.60% 6.44% 6.65% 5.89%
Net Charge-Offs (Recoveries) (000's) $ 128 $ (415) $ (228) $ 63 $ 165
Net Charge-Offs in Qtr to Avg Total Loans 0.05% -0.15% -0.08% 0.02% 0.06%

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