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Foundation Bancorp Earns $551,000 in Fourth Quarter and $2.2 Million in 2012; Highlighted by Continued Credit Quality Improvements

BELLEVUE, Wash., Feb. 8, 2013 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported it earned $551,000, or $0.16 per diluted share, in the fourth quarter of 2012 compared to a net loss of $3.0 million, or ($0.89) per diluted share, in the fourth quarter a year ago. For all of 2012, Foundation Bancorp earned $2.2 million, or $0.62 per diluted share, compared to a net loss of $5.0 million, or ($1.48) per diluted share, in 2011.

Fourth Quarter 2012 Highlights:

  • Sixth consecutive quarterly reduction in non-performing assets (NPAs) with a year-over-year reduction of 29%.
  • Net interest margin increased to 3.91% for the fourth quarter and 4.01% for the year, compared to 3.87% and 3.72% for the respective periods a year ago.
  • Gross loans increased 10% year-over-year to $288.9 million, excluding the decrease in non-accrual loans, loans increased 16%.
  • Return on average equity of 8.28% for the fourth quarter and 8.59% for the year.
  • Non-interest bearing demand deposits increased 39% and total deposits increased 15% year-over-year.

"Foundation's performance has improved dramatically. We greatly improved our operating results while reducing the adverse effects of non-performing assets," said Diane Dewbrey, President and CEO. "In 2012 we improved net interest income by increasing lending activity and adding deposits, despite the continued pressure on loan yields. Profitability strengthened even further as we continued to substantially reduce legal costs and other expenses related to repossessed properties throughout the year. Another highlight of the year was gaining approval by the Financial Industry Regulatory Authority (FINRA) for trading our shares on the electronic OTC Markets. This proved to be an excellent strategic move for our shareholders and is already starting to add liquidity for the stock."

Asset Quality

Non-accrual loans were $17.6 million at December 31, 2012 compared to $18.1 million three months earlier and $29.8 million a year ago. Of the $17.6 million in loans classified as non-accrual, 71% or $12.5 million of these loans are paying as agreed on a revised schedule. Foreclosed Assets (include OREO and Other Property Owned) declined during the quarter to $9.2 million at year end, compared to $10.3 million at September 30, 2012. The OREO balance of $8.2 million consists of eight properties with one property accounting for 47% of the total. Of the total amount in OREO, $5.5 million is paying rent/lease payments.

Non-performing assets (NPAs), consisting of non-accrual loans and other real estate owned (OREO) were $25.8 million, or 7.08% of total assets, at December 31, 2012 compared to $36.4 million, or 11.40% of total assets, a year ago. 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 fourth quarter we reported net loan recoveries of $286,000, compared to net charge-offs of $371,000 in the preceding quarter and net charge-offs of $5.0 million in the fourth quarter a year ago," said Dewbrey.

Balance Sheet Review

"We are gaining traction and were successful in increasing lending activity," Dewbrey said. "Part of this is our focus on SBA lending which is gaining traction and can be seen in both new loans and increased SBA loan sale income."

Gross loans increased 10% to $288.9 million at December 31, 2012 compared to $262.6 million a year ago. Excluding the reduction in non-accrual loans, loans increased 16% year-over-year. Commercial real estate (CRE) loans totaled $182.0 million at December 31, 2012 compared to $161.7 million a year earlier and comprise 65.1% 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 $35.0 million or 19.2% of the total CRE portfolio. Construction and land loans decreased 14.1% while the financing of completed commercial buildings increased. As a percent of total loans, the C&I portfolio represented 36.9% of the total loan portfolio compared to 36.3% a year ago.

Total deposits increased $42.5 million, or 15% year-over-year. At December 31, 2012 total deposits were $325.5 million compared to $283.0 million a year ago. "We continue to grow low cost non-interest bearing demand deposits while letting higher cost CDs run off," said Dewbrey. And, non-interest bearing demand deposits increased 39% to $111.1 million at December 31, 2012 compared to $80.1 million a year ago.

Core deposits, defined as non-interest-bearing demand deposits, interest-bearing checking and savings accounts and money market accounts, improved and now represent 82% of total deposits at year end, compared to 75% of total deposits a year earlier. Certificates of deposit declined to $58.2 million at December 31, 2012 compared to $71.3 million a year ago.

Boosted by earnings and the $6.9 million capital raise completed in the first quarter of 2012, total shareholder equity increased 11% to $26.3 million at December 31, 2012, compared to $23.8 million a year ago. Book value per share was $7.47 at December 31, 2012 compared to $7.04 at December 31, 2011. Foundation's tangible common equity ratio was 7.2% at year end.

Results of Operations

Fourth quarter net interest income before provision for loan losses increased modestly to $3.3 million, compared to $3.2 million in the fourth quarter a year ago. For all of 2012, Foundation's net interest income before provision increased to $13.2 million compared to $12.9 million for 2011.

"Our net interest margin expanded slightly during the quarter despite the continued downward pressure on loan yields," said Dewbrey. Foundation's fourth quarter net interest margin was 3.91%, a 10 basis point improvement from the preceding quarter and a four basis point improvement compared to the fourth quarter a year ago. For the full year, Foundation's net interest margin increased 29 basis points to 4.01%, when compared to 2011.

Non-interest income increased substantially during the fourth quarter compared to the same quarter last year, primarily as a result of the increase in SBA loan sales. For 2012, non-interest income increased to $1.3 million, compared to $571,000 in 2011. This increase was primarily due to SBA loan sales and the one time sale of securities of $361,000.

"Because we have made good progress in resolving problem loans, legal expenses and other costs associated with OREO, non-interest expense is sharply lower in 2012," Dewbrey said. Foundation's total non-interest expense declined 14% to $3.2 million in the fourth quarter, compared to $3.7 million in the fourth quarter a year ago. Expenses related to Foreclosed Assets are 58% lower in 2012 compared to a year ago.

Capital

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

Dec 31, 2012 Sept 30, 2012 Dec 31, 2011
Tier 1 Leverage (to average assets) 9.56% 9.38% 9.23%
Tier 1 risk-based (to risk-weighted assets) 11.39% 11.14% 11.33%
Total risk-based (to risk-weighted assets) 12.66% 12.41% 12.62%

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)
December 31, 2012 December 31, 2011
Assets
Cash and Due from Banks $ 12,657 $ 10,272
Interest-Bearing Deposits in Banks 33,965 10,831
Investments 25,051 34,717
Loans Held for Sale 192 493
Loans 288,894 262,611
Allowance for Loan Losses (9,373) (11,115)
Loans, net 279,521 251,496
Leaseholds and Equipment, net 609 629
Foreclosed Assets 9,163 6,701
Accrued Interest Receivable and Other Assets 3,150 4,343
Total Assets $ 364,307 $ 319,482
Liabilities
Noninterest-Bearing Demand Deposits $ 111,135 $ 80,137
Interest-Bearing Checking and Savings Accounts 27,892 15,718
Money Market Accounts 128,243 115,865
Certificates of Deposit 58,223 71,254
Total Deposits 325,493 282,974
Borrowings 9,875 11,148
Other Liabilities 2,643 1,590
Total Liabilities 338,011 295,712
Stockholders' Equity
Common Stock (1) 3,522 3,377
Additional Paid-in Capital 38,703 38,323
Retained Earnings (Deficit) (16,217) (18,399)
Accumulated Other Comprehensive Income 288 469
Total Stockholders' Equity 26,296 23,770
Total Liabilities and Stockholders' Equity $ 364,307 $ 319,482
(1) $1 Par Value, Shares Authorized 25,000,000, Issued and outstanding 3,522,341 and 3,376,455 respectively.
Book Value per Share 7.47 7.04
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (dollars in 000's) For the Three Months Ended For the Twelve Months Ended
December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
Interest Income
Loans, including Fees $ 3,498 $ 3,493 $ 13,832 $ 14,713
Investments 173 326 972 1,429
Other 14 12 61 60
Total Interest Income 3,685 3,831 14,865 16,202
Interest Expense
Deposits 277 483 1,302 2,789
Other Borrowings 91 124 391 499
Total Interest Expense 368 607 1,693 3,288
Net Interest Income Before Provision 3,317 3,224 13,172 12,914
Provision for Loan Losses -- (2,589) -- (3,763)
Net Interest Income
After Provision for Loan Losses 3,317 635 13,172 9,151
Noninterest Income
Deposit Account and Service Fees 75 61 277 255
OTTI on Investments -- (36) (14) (63)
Gain on Sale of Loans 290 32 376 184
Other Noninterest Income 89 54 626 195
Total Noninterest Income 454 111 1,266 571
Noninterest Expense
Salaries and Employee Benefits 1,379 1,233 4,931 4,698
Occupancy and Equipment 293 277 1,126 1,112
Data Processing 122 119 468 481
Legal 91 225 1,131 2,080
Professional 67 171 460 530
Loan Expenses 109 130 348 499
FDIC/State Assessments 168 (9) 708 812
Foreclosed Assets 465 1,098 1,043 2,545
Insurance 56 101 247 350
City and State Taxes 82 79 322 331
Other 388 312 1,470 1,287
Total Noninterest Expense 3,220 3,736 12,256 14,725
Income/(Loss) Before Provision for Income Tax 551 (2,990) 2,182 (5,003)
Provision/(Benefit) for Income Tax -- -- -- --
NET INCOME/(LOSS) $ 551 $ (2,990) $ 2,182 $ (5,003)
Return on average equity 8.28% -56.25% 8.59% -22.92%
Return on average assets 0.62% -3.52% 0.64% -1.40%
Net Interest Margin 3.91% 3.87% 4.01% 3.72%
Effiency Ratio 92.67% 112.77% 90.56% 112.57%
Diluted Earning Per Share $ 0.16 $ (0.89) $ 0.62 $ (1.48)
Loan to deposit ratio 88.35% 89.24%
Book value per share $ 7.47 $ 7.04
SELECTED INFORMATION Quarter Ended
Dec 31,
2012
Sept 30,
2012
June 30,
2012
Mar. 31,
2012
Dec. 31,
2011
Bank Only
Risk Based Capital Ratio 12.66% 12.41% 12.76% 12.74% 12.60%
Leverage Ratio 9.56% 9.38% 9.58% 9.55% 9.23%
C&I Loans to Loans 33.91% 37.13% 34.10% 33.90% 32.83%
Real Estate Loans to Loans 64.67% 61.33% 64.11% 64.10% 65.03%
Consumer Loans to Loans 0.28% 0.33% 0.29% 0.37% 0.33%
Allowance for Loan Loss Reserves (000's) $ 9,373 $ 9,087 $ 9,459 $ 10,788 $ 11,115
Allowance for Loan Loss Reserves to Loans 3.24% 3.19% 3.48% 4.12% 4.22%
Total Noncurrent Loans to Loans 6.08% 6.34% 8.08% 9.22% 11.31%
Nonperforming assets to assets 8.33% 8.75% 9.83% 11.29% 13.12%
Texas Ratio 69.79% 73.14% 82.95% 88.44% 97.46%
Net Charge-Offs (000's) $ (286) $ 371 $ 1,329 $ 327 $ 5,010
Net Charge-Offs in Qtr to Avg Total Loans -0.10% 0.13% 0.50% 0.12% 1.85%

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