Foundation Bancorp Earns Record $998,000 in First Quarter; Highlighted by Improved Operating Efficiencies

BELLEVUE, Wash., April 26, 2013 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported its earnings increased 182% to a record $998,000, or $0.28 per diluted share, in the first quarter of 2013 compared to $354,000, or $0.10 per diluted share, in the first quarter a year ago.

"Our top and bottom line improvements, coupled with a stable local economy and loan growth helped drive our record profits in the first quarter," said Diane Dewbrey, President and CEO. "Profitability strengthened even further as we continued to substantially reduce legal costs and other expenses related to repossessed properties. We anticipate that 2013 will be a very strong year for us."

First Quarter 2013 Highlights:

  • Net income increased 182% to $998,000 in the first quarter of 2013 compared to $354,000 in the first quarter a year ago.
  • Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets was $31.9 million, or 9.2% of total assets, at March 31, 2013 compared to $35.6 million, or 10.5% of total assets, a year ago.
  • Net interest margin was 3.93% for the quarter.
  • Total non-interest expense decreased 21% to $2.4 million in the first quarter of 2013, compared to $3.1 million in the first quarter a year ago.
  • Loans, excluding the decrease in non-accrual loans, increased 11% compared to the first quarter of 2012.
  • Non-interest bearing demand deposits increased 16% compared to a year ago and represent more than one third of total deposits at March 31, 2013.
  • Return on average equity was 15.12%.

Asset Quality

"Credit costs such as loan loss provisions, loan write downs, attorney fees and collection fees continue to decline and were significantly below those of a year ago as we continued to make meaningful progress at reducing problem assets," said Dewbrey.

Foundation had $21.9 million in loans classified as non-accrual, but 75.8% or $16.6 million of these loans are performing as agreed on a revised payment schedules. Total non-accrual loans were $21.9 million at March 31, 2013 compared to $17.6 million three months earlier and $24.1 million at March 31, 2012.

"While non-accrual loans increased during the quarter, it was primarily due to one loan totaling $3.9 million. This loan is collateralized and we are working with the borrower to come to a favorable resolution. We believe that this is an isolated case and we continue to believe the worst of the credit problems are behind us," Dewbrey said.

Foreclosed assets (including Other Real Estate Owned (OREO) and Other Property Owned) declined during the quarter to $7.9 million at March 31, 2013, compared to $9.2 million at December 31, 2012. The OREO balance of $7.1 million consists of 7 properties with one property accounting for over 50% of the total. The one property is a single family residence located on Lake Washington. The property is currently under contract for closing later in the year. Of the total amount in OREO, Foundation is receiving rent/lease payments on $5.2 million.

"During the first quarter we reported net loan recoveries of $12,000 compared to net charge-offs of $327,000 in the first quarter a year ago," said Dewbrey.

Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets was $29.9 million, or 8.6% of total assets, at March 31, 2013 compared to $33.6 million, or 9.9% 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.

Balance Sheet Review

Foundation's total loans increased 9.1% to $285.8 million at March 31, 2013 compared to $261.9 million a year ago. Excluding non-accrual loans, loans increased 11.0% year-over-year. Commercial real estate (CRE) loans totaled $185.7 million at March 31, 2013 and comprise 65.0% 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 $49.2 million or 26.5% of the total CRE portfolio. Construction and land loans represented 9.9% of the total loan portfolio and the C&I portfolio represented 33.4% of the total loan portfolio.

"While total deposits only increased modestly compared to a year ago, client related deposits increased 11.5%. This is evidenced in the improvement in our deposit mix since the reduction in certificate of deposits was primarily due to reducing wholesale funding. The net result was to lower our funding costs by reducing our reliance on higher cost certificates of deposit. To that point, our non-interest-bearing demand deposits increased 16% from a year ago," said Dewbrey. Total deposits increased 2% to $308.1 million at March 31, 2013 compared to $302.0 million at March 31, 2012.

Core deposits, defined as non-interest-bearing demand deposits, interest-bearing checking and savings accounts and money market accounts, improved and now represent 86.3% of total deposits at March 31, 2013, compared to 76.7% of total deposits a year earlier. Certificates of deposit declined to $42.1 million at March 31, 2013 compared to $70.4 million a year ago from a reduction in wholesale funding.

Total shareholder equity increased 10.0% to $27.2 million at March 31, 2013, compared to $24.7 million a year ago. Book value per share was $7.72 at the end of March compared to $7.03 at March 31, 2012. Foundation's tangible common equity ratio was 7.8% at March 31, 2013.

Results of Operations

Foundation's first quarter net interest income before provision for loan losses was $3.2 million, compared to $3.3 million in the first quarter a year ago. First quarter net interest margin was 3.93% compared to 3.91% in the preceding quarter and 4.12% in the first quarter a year ago. "Our net interest margin expanded slightly from the preceding quarter but was down compared to the first quarter a year ago due to the continued downward pressure on loan yields," said Dewbrey

Non-interest income increased 57.7% to $205,000 in the first quarter of 2013 compared to $130,000 in the first quarter a year ago, primarily as a result of the increase in SBA loan sales.

"Non-interest, or other operating expense, was down substantially compared to a year ago with legal expenses and other costs associated with OREO representing the majority of the decline," said Dewbrey. "Additionally, we recovered $256,000 in foreclosed assets during the quarter which provided a net recovery of $242,000 and contributed to the expense reduction." Foundation's total non-interest expense decreased 21.3% to $2.4 million in the first quarter, compared to $3.1 million in the first quarter a year ago.

Capital

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

Mar 31, 2013 Dec 31, 2012 Mar 31, 2012
Tier 1 Leverage (to average assets) 10.13% 9.56% 9.55%
Tier 1 risk-based (to risk-weighted assets) 12.04% 11.39% 11.47%
Total risk-based (to risk-weighted assets) 13.31% 12.66% 12.74%

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)
March 31, 2013 December 31, 2012 March 31, 2012
Assets
Cash and Due from Banks $ 10,889 $ 12,657 $ 11,950
Interest-Bearing Deposits in Banks 27,277 33,965 28,634
Investments 20,906 25,050 33,328
Loans Held for Sale -- 192 --
Loans 285,760 288,895 261,868
Allowance for Loan Losses (9,385) (9,373) (10,788)
Loans, net 276,375 279,522 251,080
Leaseholds and Equipment, net 640 609 590
Foreclosed Assets 7,977 9,163 9,428
Accrued Interest Receivable and Other Assets 2,968 3,149 4,088
Total Assets $ 347,032 $ 364,307 $ 339,098
Liabilities
Noninterest-Bearing Demand Deposits $ 112,172 $ 111,135 $ 97,075
Interest-Bearing Checking and Savings Accounts 25,880 27,892 18,035
Money Market Accounts 127,884 128,243 116,442
Certificates of Deposit 42,128 58,223 70,416
Total Deposits 308,064 325,493 301,969
Borrowings 9,396 9,875 10,260
Other Liabilities 2,373 2,644 2,132
Total Liabilities 319,833 338,012 314,360
Stockholders' Equity
Common Stock (1) 3,522 3,522 3,517
Additional Paid-in Capital 38,708 38,703 38,675
Retained Earnings (Deficit) (15,226) (16,217) (18,045)
Accumulated Other Comprehensive Income 195 287 591
Total Stockholders' Equity 27,199 26,295 24,738
Total Liabilities and Stockholders' Equity $ 347,032 $ 364,307 $ 339,098
(1) $1 Par Value, Shares Authorized 25,000,000, Issued and outstanding 3,522,359, 3,522,341 and 3,517,158 respectively.
Book Value per Share 7.72 7.47 7.03
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (dollars in 000's) For the Three Months Ended
March 31, 2013 December 31, 2012 March 31, 2012
Interest Income
Loans, including Fees $ 3,380 $ 3,498 $ 3,430
Investments 133 173 313
Other 15 14 12
Total Interest Income 3,528 3,685 3,755
Interest Expense
Deposits 249 277 375
Borrowings 84 91 103
Total Interest Expense 333 368 478
Net Interest Income Before Provision 3,195 3,317 3,277
Provision for Loan Losses -- -- --
Net Interest Income
After Provision for Loan Losses 3,195 3,317 3,277
Noninterest Income
Deposit Account and Service Fees 70 75 63
OTTI on Investments (6) -- --
Gain on Sale of Loans 56 290 4
Other Noninterest Income 85 89 63
Total Noninterest Income 205 454 130
Noninterest Expense
Salaries and Employee Benefits 1,412 1,379 1,240
Occupancy and Equipment 217 293 203
Data Processing 178 122 154
Legal 73 91 289
Professional 118 67 237
Loan Expenses 92 109 117
FDIC/State Assessments 186 168 172
Foreclosed Assets, Net (242) 465 187
Insurance 56 56 78
City and State Taxes 80 82 77
Other 231 388 298
Total Noninterest Expense 2,402 3,220 3,053
Income Before Provision for Income Tax 998 551 354
Provision for Income Tax -- -- --
NET INCOME $ 998 $ 551 $ 354
Return on average equity 15.12% 8.28% 5.77%
Return on average assets 1.18% 0.62% 0.43%
Net Interest Margin 3.93% 3.91% 4.12%
Efficiency Ratio 79.87% 92.67% 90.05%
Diluted Earning Per Avg. Share $ 0.28 $ 0.16 $ 0.10
Loan to deposit ratio 92.38% 88.35% 88.35%
Book value per share 7.72 7.47 7.47
SELECTED INFORMATION Quarter Ended
Mar 31, Dec 31, Sept 30, June 30, Mar 31,
2013 2012 2012 2012 2012
Bank Only
Risk Based Capital Ratio 13.31% 12.66% 12.41% 12.76% 12.74%
Leverage Ratio 10.13% 9.56% 9.38% 9.58% 9.55%
C&I Loans to Loans 32.54% 33.91% 37.13% 34.10% 33.90%
Real Estate Loans to Loans 66.13% 64.67% 61.33% 64.11% 64.10%
Consumer Loans to Loans 0.36% 0.28% 0.33% 0.29% 0.37%
Allowance for Loan Loss Reserves (000's) $ 9,385 $ 9,373 $ 9,087 $ 9,459 $10,788
Allowance for Loan Loss Reserves to Loans 3.28% 3.24% 3.19% 3.48% 4.12%
Total Noncurrent Loans to Loans 7.69% 6.08% 6.34% 8.08% 9.22%
Nonperforming assets to assets 9.25% 8.33% 8.75% 9.83% 11.29%
Texas Ratio 72.33% 69.79% 73.14% 82.95% 88.44%
Net Charge-Offs (000's) $ (12) $ (286) $ 371 $ 1,329 $ 327
Net Charge-Offs in Qtr to Avg Total Loans 0.00% -0.10% 0.13% 0.50% 0.12%

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