BELLEVUE, Wash., Aug. 5, 2013 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported it earned $521,000, or $0.15 per diluted share, in the second quarter of 2013, compared to $581,000, or $0.17 per diluted share, in the second quarter a year ago. In the first six months of the year, Foundation's earnings increased 62.6% to $1.5 million, or $0.43 per diluted share, compared to $935,000, or $0.27 per diluted share, in the like period a year ago.
"Our business outlook continues to improve as the local economic recovery takes hold and our loan pipeline is active and growing," 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 and continued to grow our core deposit base while letting higher cost wholesale funding run off. We remain optimistic for a strong second half of the year."
Second Quarter 2013 Highlights:
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Net income was $521,000 in the second quarter of 2013 compared to $581,000 in the second quarter a year ago.
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Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets was $24.1 million, or 6.9% of total assets, at June 30, 2013 down from $31.9 million, or 9.2% of total assets, three months earlier.
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Net interest margin was 4.00% for the three months ended June 30, 2013 compared to 3.93% in the preceding quarter.
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Total non-interest expense decreased 11% to $2.9 million in the second quarter of 2013, compared to $3.2 million in the second quarter a year ago.
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Gross loans increased 3.3% to $280.9 million at June 30, 2013 compared to $271.9 million a year ago.
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Non-interest bearing demand deposits increased 12% compared to a year ago and represent 37% of total deposits at June 30, 2013.
- Return on average equity was 7.58% for the quarter and 11.25% for the first six months of 2013.
Asset Quality
Total non-accrual loans declined 23% to $16.9 million at June 30, 2013 compared to $21.9 million both three months earlier and a year earlier. Of the $16.9 million in loans classified as non-accrual, 58 %, or $9.9 million of these loans are performing as agreed under revised payment schedules.
Foreclosed assets (including Other Real Estate Owned (OREO) and Other Property Owned (OPO)) declined during the quarter to $7.2 million at June 30, 2013, compared to $8.0 million at March 31, 2013.
"OREO balances [without OPO] of $6.3 million, consists of eight properties with one property accounting for over 50% of the total. The one property is a single family residence located on Lake Washington and is currently under contract for closing later in the year," said Dewbrey. Of the total amount in OREO, Foundation is receiving rent/lease payments on $3.8 million.
"During the second quarter we had a significant charge off of $3.3 million due to a borrower committing fraud," Dewbrey added. "As a result, net charge-offs totaled $4.0 million in the second quarter and due to continued loan portfolio improvements, no loan loss provision was required. This compares to net loan recoveries of $12,000 in the first quarter of 2013 and net charge-offs of $1.3 million in the second quarter a year ago. We are pursuing different avenues for recovery; however, it is expected to take a long time to recover any money if we are successful."
Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets, were $24.1 million, or 6.9% of total assets, at June 30, 2013 compared to $29.9 million, or 8.6% of total assets, at March 31, 2013 and $30.8 million, or 9.8% 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
Gross loans increased 3.3% to $280.9 million at June 30, 2013 compared to $271.9 million a year ago. Excluding non-accrual loans, loans increased 5.7% year-over-year. Commercial real estate (CRE) loans totaled $163.4 million at June 30, 2013 and comprise 58.0% 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 $51.8 million or 31.7% of the total CRE portfolio. Construction and land loans represented 5.2% of the total loan portfolio and the C&I portfolio represented 34.3% of the total loan portfolio.
Total deposits were $308.2 million at June 30, 2013 compared to $315.5 million at June 30, 2012, while non-interest-bearing demand deposits increased 11.6% compared to a year ago. Wholesale funding accounted for $4.1 million of the decrease and was down 9.8% year over year.
Core deposits, defined as non-interest-bearing demand deposits, interest-bearing checking and savings accounts and money market accounts represent 83.4% of total deposits at June 30, 2013, compared to 80.4% of total deposits a year earlier.
Total shareholder equity increased 9.5% to $27.2 million at June 30, 2013, compared to $24.8 million a year ago. Book value per share was $7.72 at the end of June compared to $7.04 at June 30, 2012. Foundation's tangible common equity ratio was 7.8% at June 30, 2013, the same as Foundation's total stockholders' equity to total assets.
Results of Operations
Second quarter net interest income before provision for loan losses was $3.3 million, compared to $3.3 million in the second quarter a year ago. In the first half of 2013, Foundation's net interest income before provision was $6.5 million compared to $6.6 million in the first half of 2012.
Foundation's second quarter net interest margin improved seven basis points to 4.00% compared to 3.93% in the preceding quarter. The net interest margin was 4.12% in the second quarter a year ago. "Our net interest margin expanded from the preceding quarter but was down compared to the second quarter a year ago due to the continued downward pressure on loan yields," said Dewbrey. In the first six months of the year, the net interest margin was 3.98% compared to 4.14% in the first six months of 2012.
Non-interest income was $133,000 in the second quarter of 2013 compared to $490,000 in the second quarter a year ago. Second quarter 2012's non-interest income included $361,000 in gains from securities sales. In the first six months of 2013 non-interest income was $338,000 compared to $617,000 in the first six months of 2012.
Foundation's total non-interest expense decreased 10.9% to $2.9 million in the second quarter, compared to $3.2 million in the second quarter a year ago. In the first six months of the year non-interest expense declined 15.9% to $5.3 million compared to $6.3 million in the same period a year earlier. The decrease in non-interest expense both for the quarter and for the year-to-date period was primarily due to lower legal expenses and lower costs associated with OREO.
Capital
Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:
| Jun 30, 2013 | Dec 31, 2013 | Jun 30, 2012 | |
| Tier 1 Leverage (to average assets) | 10.38% | 9.56% | 9.58% |
| Tier 1 risk-based (to risk-weighted assets) | 12.50% | 11.39% | 11.48% |
| Total risk-based (to risk-weighted assets) | 13.76% | 12.66% | 12.76% |
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) | |||
| June 30, 2013 | December 31, 2012 | June 30, 2012 | |
| Assets | |||
| Cash and Due from Banks | $ 11,849 | $ 12,657 | $ 10,805 |
| Interest-Bearing Deposits in Banks | 26,639 | 33,965 | 40,217 |
| Investments | 24,309 | 25,050 | 26,501 |
| Loans Held for Sale | -- | 192 | -- |
| Loans | 280,915 | 288,895 | 271,938 |
| Allowance for Loan Losses | (5,388) | (9,373) | (9,459) |
| Loans, net | 275,527 | 279,522 | 262,479 |
| Leaseholds and Equipment, net | 813 | 609 | 574 |
| Foreclosed Assets | 7,186 | 9,163 | 8,911 |
| Accrued Interest Receivable and Other Assets | 2,157 | 3,149 | 3,316 |
| Total Assets | $ 348,480 | $ 364,307 | $ 352,803 |
| Liabilities | |||
| Noninterest-Bearing Demand Deposits | $ 112,855 | $ 111,135 | $ 101,107 |
| Interest-Bearing Checking and Savings Accounts | 16,197 | 27,892 | 24,985 |
| Money Market Accounts | 127,984 | 128,243 | 127,550 |
| Certificates of Deposit | 51,145 | 58,223 | 61,825 |
| Total Deposits | 308,181 | 325,493 | 315,467 |
| Borrowings | 9,015 | 9,875 | 9,942 |
| Other Liabilities | 4,109 | 2,644 | 2,582 |
| Total Liabilities | 321,305 | 338,012 | 327,991 |
| Stockholders' Equity | |||
| Common Stock (1) | 3,522 | 3,522 | 3,522 |
| Additional Paid-in Capital | 38,714 | 38,703 | 38,688 |
| Retained Earnings (Deficit) | (14,704) | (16,217) | (17,463) |
| Accumulated Other Comprehensive (Loss) Income | (357) | 287 | 65 |
| Total Stockholders' Equity | 27,175 | 26,295 | 24,812 |
| Total Liabilities and Stockholders' Equity | $ 348,480 | $ 364,307 | $ 352,803 |
| (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 | 7.04 |
| Tangible Common Equity Ratio | 7.8% | 7.2% | 7.0% |
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| (Unaudited) (dollars in 000's) | For the Three Months Ended | For the Six Months Ended | |||
| June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |
| Interest Income | |||||
| Loans, including Fees | $ 3,441 | $ 3,380 | $ 3,458 | $ 6,821 | $ 6,888 |
| Investments | 128 | 133 | 293 | 261 | 606 |
| Other | 13 | 15 | 15 | 28 | 27 |
| Total Interest Income | 3,582 | 3,528 | 3,766 | 7,110 | 7,521 |
| Interest Expense | |||||
| Deposits | 231 | 249 | 339 | 480 | 715 |
| Borrowings | 80 | 84 | 102 | 164 | 205 |
| Total Interest Expense | 311 | 333 | 441 | 644 | 920 |
| Net Interest Income Before Provision | 3,271 | 3,195 | 3,325 | 6,466 | 6,601 |
| Provision for Loan Losses | -- | -- | -- | -- | -- |
| Net Interest Income | |||||
| After Provision for Loan Losses | 3,271 | 3,195 | 3,325 | 6,466 | 6,601 |
| Noninterest Income | |||||
| Deposit Account and Service Fees | 62 | 70 | 69 | 132 | 132 |
| OTTI on Investments | -- | (6) | -- | (6) | -- |
| Gain on Sale of Loans | -- | 56 | -- | 56 | 4 |
| Gain on Sale of Securities | -- | -- | 361 | -- | 361 |
| Other Noninterest Income | 71 | 85 | 60 | 156 | 120 |
| Total Noninterest Income | 133 | 205 | 490 | 338 | 617 |
| Noninterest Expense | |||||
| Salaries and Employee Benefits | 1,491 | 1,413 | 1,341 | 2,903 | 2,581 |
| Occupancy and Equipment | 230 | 217 | 217 | 447 | 419 |
| Data Processing | 220 | 178 | 158 | 398 | 311 |
| Legal | 257 | 73 | 460 | 330 | 769 |
| Professional | 124 | 118 | 192 | 242 | 417 |
| Loan Expenses | 33 | 92 | 84 | 125 | 201 |
| FDIC/State Assessments | 186 | 186 | 178 | 372 | 351 |
| Foreclosed Assets, Net | (24) | (242) | 303 | (266) | 488 |
| Insurance | 56 | 56 | 78 | 112 | 156 |
| City and State Taxes | 78 | 80 | 77 | 158 | 154 |
| Other | 232 | 230 | 146 | 463 | 436 |
| Total Noninterest Expense | 2,883 | 2,402 | 3,234 | 5,284 | 6,283 |
| Income Before Provision for Income Tax | 521 | 998 | 581 | 1,520 | 935 |
| Provision for Income Tax | -- | -- | -- | -- | -- |
| NET INCOME | $ 521 | $ 998 | $ 581 | $ 1,520 | $ 935 |
| Return on average equity | 7.58% | 15.12% | 9.30% | 11.25% | 7.56% |
| Return on average assets | 0.61% | 1.18% | 0.69% | 0.89% | 0.56% |
| Net Interest Margin | 4.00% | 3.93% | 4.12% | 3.98% | 4.14% |
| Efficiency Ratio | 86.25% | 79.87% | 96.83% | 83.07% | 93.46% |
| Diluted Earnings Per Avg. Share | $ 0.15 | $ 0.28 | $ 0.17 | $ 0.43 | $ 0.27 |
| Loan to deposit ratio | 90.84% | 92.38% | 85.64% | ||
| Book value per share | $ 7.72 | $ 7.72 | $ 7.04 | ||
| SELECTED INFORMATION | Quarter Ended | ||||
| June 30, | Mar 31, | Dec 31, | Sept 30, | June 30, | |
| 2013 | 2013 | 2012 | 2012 | 2012 | |
| Bank Only | |||||
| Risk Based Capital Ratio | 13.76% | 13.31% | 12.66% | 12.41% | 12.76% |
| Leverage Ratio | 10.38% | 10.13% | 9.56% | 9.38% | 9.58% |
| C&I Loans to Loans | 34.24% | 32.54% | 33.91% | 37.13% | 34.10% |
| Real Estate Loans to Loans | 62.82% | 66.13% | 64.67% | 61.33% | 64.11% |
| Consumer Loans to Loans | 0.24% | 0.36% | 0.28% | 0.33% | 0.29% |
| Allowance for Loan Loss Reserves (000's) | $ 5,388 | $ 9,385 | $ 9,373 | $ 9,087 | $ 9,459 |
| Allowance for Loan Loss Reserves to Loans | 1.92% | 3.28% | 3.24% | 3.19% | 3.48% |
| Total Noncurrent Loans to Loans | 6.01% | 7.69% | 6.08% | 6.34% | 8.08% |
| Nonperforming assets to assets | 7.53% | 9.25% | 8.33% | 8.78% | 9.83% |
| Texas Ratio | 64.79% | 72.33% | 69.88% | 73.13% | 82.95% |
| Net Charge-Offs (Recoveries) (000's) | $ 3,997 | $ (12) | $ (286) | $ 372 | $ 1,329 |
| Net Charge-Offs in Qtr to Avg Total Loans | 1.42% | 0.00% | -0.10% | 0.13% | 0.50% |