×

Foundation Bancorp Earns $761,000 in Second Quarter 2016, and $1.5 Million Year-To-Date

BELLEVUE, Wash., July 22, 2016 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCPink:FDNB), (Foundation or Company), the holding company for Foundation Bank, today reported earnings of $761,000 in the second quarter of 2016, compared to net income of $743,000 in the preceding quarter. In the second quarter a year ago, Foundation lost $1.5 million following a $3.0 million total increase to its provision for loan losses. In the first six months of 2016, Foundation earned $1.5 million, compared to a net loss of $1.1 million in the first six months of 2015.

“On April 26, 2016, we announced that Foundation Bancorp had entered into a definitive merger agreement with Pacific Continental Corporation,” said Duane Woods, Vice Chair and Interim CEO. “Pacific Continental Bank is one of the most successful and well-regarded community business banks in the Pacific Northwest. We know our clients and employees will thrive in the culture and business environment Pacific Continental has created for over 40 years.”

Regulatory approvals have been received from the FDIC and Oregon State Department of Consumer and Business Services. The merger is expected to be completed during the third quarter of 2016.

After preferred dividends, net income available to common shareholders for the second quarter was $508,000, or $0.15 per diluted share, compared to net income of $490,000, or $0.15 per diluted share in the preceding quarter and a net loss of $1.7 million, or $0.48 per share, in the second quarter of 2015.

In August 2015, the Company announced the discovery of fraudulent activity by one of its Washington-based customers. The borrower used falsified financial statements and bank statements to qualify for the loan. The fraudulent documents were discovered approximately 60 days after the loan was originated. Foundation has filed a claim with its insurance company seeking a full recovery. At this time, the former customer has been arrested and charged with bank fraud.

Second Quarter 2016 Highlights:

  • Earnings per diluted share were $0.15 in the second quarter of 2016.
  • Allowance for loan losses was 1.94% of gross loans.
  • Total non-accrual loans decreased 12.5% to $9.4 million at June 30, 2016 compared to $10.8 million at quarter-end a year earlier. Excluding performing restructured loans, non-accrual loans were $5.9 million, or 2.0% of total loans, at June 30, 2016.
  • Non-interest bearing demand deposits increased 6.7% compared to a year ago, and represent 43.7% of deposits.
  • Core client deposits represent 100% of total deposits at June 30, 2016.
  • The ratio of tangible common equity to tangible assets (common equity ratio) was 7.3% at June 30, 2016.

Asset Quality

Foundation categorizes borrowers who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations as restructured loans. As of June 30, 2016, Foundation held $3.5 million in performing restructured loans that were paying as agreed, but are included in non-accrual loans. Total non-accrual loans decreased 13.5% to $9.4 million at June 30, 2016, compared to $10.8 million one year earlier but increased compared to $7.4 million three months earlier. Excluding performing restructured loans, non-accrual loans were $5.9 million, or 2.0% of total loans at June 30, 2016.

At June 30, 2016, there were $911,000 in foreclosed assets, including Other Real Estate Owned (OREO) and Other Property Owned (OPO), compared to foreclosed assets of $8.1 million a year ago. At March 31, 2016 there were no foreclosed assets on the books. “Our OREO balance increased during the current quarter but the fair market value is twice the carrying value that we have it for on the books, so no loss is expected,” noted Randy Cloes, CFO.

Non-performing assets (NPAs), consisting of non-accrual loans, OREO, OPO and past due loans over 90 days, was $10.3 million, or 2.3% of total assets at June 30, 2016 compared to $7.4 million, or 1.7% of total assets, at March 31, 2016 and decreased 45.6% compared to $18.9 million, or 4.4% of total assets a year ago.

Balance Sheet Review

Total assets were $444.9 million at June 30, 2016, compared to $435.0 million a year earlier and $422.4 million at March 31, 2016. The total loan portfolio, excluding loans held for sale, was up 3.9% to $298.1 million at June 30, 2016, compared to $286.8 million a year ago, and was down modestly compared to $299.3 million three months earlier. Commercial real estate (CRE) loans totaled $116.5 million at June 30, 2016, and comprise 39.1% of total loans. 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 $53.2 million or 17.8% and construction and land loans represented 8.2% at June 30, 2016. The commercial and industrial (C&I) portfolio represented 31.9% of the total loan portfolio at June 30, 2016.

Foundation’s total deposits were $388.9 million at June 30, 2016 compared to $367.5 million at March 31, 2016, and $378.5 million a year earlier. Core client deposits represented 100% of total deposits at quarter-end. Non-interest bearing demand deposits increased 6.7% compared to a year ago. Total transaction accounts represent 52.3%, money market and savings accounts represent 45.7%, and certificates of deposits (CDs) represent only 1.9% of the total deposit portfolio at June 30, 2016. The ratio of loans to deposits was 76.3% at June 30, 2016.

Total stockholder equity was $47.5 million at June 30, 2016, compared to $47.2 million a year ago. Book value per share for the common shareholder was $9.10 at June 30, 2016, compared to $9.04 a year ago. The common equity ratio remained strong at 7.3% at June 30, 2016.

Results of Operations

Foundation’s first quarter net interest margin was 3.74%, a 16 basis point improvement compared to the preceding quarter and a 15 basis point improvement compared to the second quarter a year ago. In the first six months of 2016, the net interest margin was 3.62% compared to 3.50% in the first six months of 2015.

Second quarter net interest income before provision for loan losses increased 7.6% to $3.9 million, compared to $3.6 million in the second quarter a year ago. In the first six months of the year, net interest income increased 10.4% to $7.6 million compared to $6.9 million in the first six months of 2015. Non-interest income was $199,000 in the second quarter compared to $499,000 in the second quarter a year ago. In the first six months of the year, non-interest income was $673,000 compared to $670,000 in the same period a year earlier.

“We maintained tight control over our operating expenses during the quarter, but had $400,000 in M&A legal expenses due to the pending merger,” said Cloes. Foundation’s second quarter total non-interest expense was $2.9 million, compared to $3.2 million in the preceding quarter and $3.4 million in the second quarter one year ago. In the first six months of 2016 non-interest expense was $6.1 million compared to $6.4 million in the first six months of 2015.

Capital

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

Jun 30, 2016 Mar 31, 2016 Jun 30, 2015
Tier 1 Leverage (to average assets) 10.75% 10.35% 10.01%
Tier 1 Risk-Based (to risk-weighted assets) 12.87% 12.31% 12.37%
Tier 1 Common Capital (CET1) 12.87% 12.31% 12.37%
Total Risk-Based (to risk-weighted assets) 14.12% 13.57% 13.64%

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 except per share amounts)
June 30, 2016
December 31, 2015
June 30, 2015
Assets
Cash and Due from Banks$ 8,480 $ 8,819 $ 10,459
Interest-Bearing Deposits in Banks 33,225 45,540 40,192
Investments 91,662 85,647 76,253
Loans Held for Sale - 407 -
Loans 298,067 287,769 286,795
Allowance for Loan Losses (5,796) (5,774) (5,580)
Loans, net 292,271 281,995 281,215
Leaseholds and Equipment, net 439 532 622
Foreclosed Assets 911 3,861 8,086
Bank Owned Life Insurance 11,512 11,330 11,134
Accrued Interest Receivable and Other Assets 6,442 8,411 7,008
Total Assets $ 444,942 $ 446,542 $ 434,969
Liabilities
Noninterest-Bearing Demand Deposits$ 170,100 $ 174,735 $ 159,387
Interest-Bearing Checking
and Savings Accounts 34,398 34,037 46,947
Money Market Accounts 176,942 172,327 161,261
Certificates of Deposit 7,427 9,100 10,951
Total Deposits 388,867 390,199 378,546
Borrowings 6,186 7,246 7,215
Other Liabilities 2,341 3,938 2,049
Total Liabilities 397,394 401,383 387,810
Stockholders' Equity
Preferred Stock (1) 15 15 15
Common Stock (2) 3,577 3,560 3,556
Additional Paid-in Capital 52,620 52,520 53,144
Retained Earnings (Deficit) (9,518) (10,516) (9,441)
Accumulated Other Comprehensive (Loss) Income 854 (420) (115)
Total Stockholders’ Equity 47,548 45,159 47,159
Total Liabilities and Stockholders’ Equity $ 444,942 $ 446,542 $ 434,969
(1) $1 Par Value, Shares Authorized 1,000,000, issued and outstanding 15,000, 15,000 and 15,000 respectively.
(2) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,576,738, 3,559,738, and 3,555,976 respectively.
Book Value per Share, Common Stock$ 9.10 $ 8.47 $ 9.04
Common Equity Ratio 7.3% 6.8% 7.4%

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (dollars in 000's, except perFor the Quarter Ended
For the Six Months Ended
share amounts)June 30, 2016
March 31, 2016
June 30, 2015
June 30, 2016
June 30, 2015
Interest Income
Loans, Including Fees$ 3,564 $ 3,471 $ 3,504 $ 7,035 $ 6,841
Investments 476 480 312 956 614
Other 27 46 32 73 60
Total Interest Income 4,067 3,997 3,848 8,064 7,515
Interest Expense
Deposits 170 170 206 340 410
Borrowings 38 39 56 77 181
Total Interest Expense 208 209 262 417 591
Net Interest Income Before Provision 3,859 3,788 3,586 7,647 6,924
Provision for Loan Losses - - (2,996) - (2,996)
Net Interest Income
After Provision for Loan Losses 3,859 3,788 590 7,647 3,928
Noninterest Income
Service Fees 83 103 119 186 235
OTTI on Investments (4) - - (4) -
Bank Owned Life Insurance 90 92 89 182 134
Gain on Sale of Loans 2 73 74 75 76
Gain on Sale of Securities - - 211 - 211
Other Noninterest Income 28 206 6 234 14
Total Noninterest Income 199 474 499 673 670
Noninterest Expense
Salaries and Employee Benefits 1,374 1,654 1,610 3,027 3,177
Occupancy and Equipment 255 259 264 514 476
Data Processing 171 186 187 357 375
Legal 465 132 434 596 671
Professional 18 21 20 39 42
Loan Expenses 16 81 82 96 164
FDIC/State Assessments 160 161 152 321 301
Foreclosed Assets, Net - 17 87 17 150
Insurance 58 58 57 116 115
City and State Taxes 73 67 66 140 129
Other 346 533 410 881 788
Total Noninterest Expense 2,936 3,169 3,369 6,104 6,388
Income (Loss) Before Provision
(Benefit) for Income Tax 1,122 1,093 (2,280) 2,216 (1,790)
Provision (Benefit) for Income Tax 361 350 (831) 711 (675)
NET INCOME (LOSS)$ 761 $ 743 $ (1,449) $ 1,505 $ (1,115)
Preferred dividends 253 253 253 506 267
NET INCOME (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS
$ 508 $ 490 $ (1,702) $ 999 $ (1,382)
Return on average equity 6.34% 6.27% -19.51% 6.31% -7.88%
Return on average assets 0.47% 0.44% -1.60% 0.45% -0.66%
Net interest margin 3.74% 3.58% 3.59% 3.62% 3.50%
Efficiency ratio 72.46% 79.88% 88.66% 76.14% 87.46%
Basic earning (loss) per avg. share$ 0.14 $ 0.14 $ (0.48) $ 0.28 $ (0.39)
Diluted earning (loss) per avg. share (1)$ 0.15 $ 0.15 $ - $ 0.29 $ -
Weighted avg common shares outstanding 3,576,738 3,571,133 3,555,976
Weighted avg dilutive shares outstanding 5,110,103 5,113,499 5,112,665
Loan to deposit ratio 76.28% 80.86% 74.54%
(1) Common stock equivalents are not included if there is a loss to common shareholders as the shares were antidilutive.

SELECTED INFORMATION Quarter Ended
June 30 Mar 31 Dec 31 Sept 30 June 30
2016 2016 2015 2015 2015
Bank Only
Risk Based Capital Ratio 14.12% 13.57% 13.33% 13.22% 13.64%
Leverage Ratio 10.75% 10.35% 9.74% 9.70% 10.01%
C&I Loans to Loans 31.92% 35.20% 36.53% 37.55% 37.75%
Real Estate Loans to Loans 65.15% 62.01% 60.93% 60.29% 59.57%
Consumer Loans to Loans 0.13% 0.14% 0.22% 0.08% 0.08%
Allowance for Loan Losses (000's) $ 5,796 $ 5,737 $ 5,774 $ 5,692 $ 5,580
Allowance for Loan Losses to Loans 1.94% 1.92% 2.01% 1.91% 1.95%
Total Noncurrent Loans to Loans 3.15% 2.46% 2.61% 3.70% 3.78%
Nonperforming assets to assets 2.83% 2.29% 3.09% 4.34% 4.93%
Net Charge-Offs (Recoveries) (000's) $ (59) $ 38 $ (83) $ (112) $ 2,904
Net Charge-Offs (Recoveries) in Qtr
to Avg Total Loans -0.02% 0.01% -0.03% -0.04% 1.02%


Randy Cloes, EVP & CFO 425 691 5014 www.foundationbank.com

Source:Foundation Bancorp