BELLEVUE, Wash., Nov. 1, 2013 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported it earned $363,000, or $0.10 per diluted share, in the third quarter of 2013, compared to $696,000, or $0.20 per diluted share, in the third quarter a year ago. In the first nine months of the year, Foundation's earnings increased 15.5% to $1.9 million, or $0.53 per diluted share, compared to $1.6 million, or $0.47 per diluted share, in the first nine months a year ago. In the current quarter, Foundation booked a $700,000 provision for loan losses to offset charge-offs. This compares to no provision for loan losses in the preceding quarter or the third quarter a year ago.
"For the third quarter we had solid top line growth, and our core business is continuing to improve, particularly in the composition of our deposit portfolio, increasing total transaction account balances and adding new customer relationships. Operating efficiencies are also improving as we work to effectively manage controllable operating expenses," said Diane Dewbrey, President and CEO. "Our business outlook continues to improve as the local economic recovery takes hold and our loan pipeline is active. We remain proactive in substantially reducing legal costs and other expenses related to repossessed properties as we continue to work our way through this difficult credit cycle."
Third Quarter 2013 Highlights:
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Net income was $363,000 in the third quarter of 2013 compared to $696,000 in the third quarter a year ago.
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Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets, was $23.5 million, or 6.4% of total assets, at September 30, 2013 compared to $26.2 million, or 7.5% of total assets, three months earlier.
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Net interest margin was 4.00% in the third quarter, the same as in the preceding quarter and compared to 3.81% in the third quarter a year ago.
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Total non-interest expense decreased 5.6% to $2.6 million in the third quarter of 2013, compared to $2.8 million in the third quarter a year ago.
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Gross loans were $281.2 million at September 30, 2013 compared to $284.8 million a year ago.
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Non-interest bearing demand deposits increased 20.3% compared to a year ago and represent 39.3% of total deposits at September 30, 2013.
- Return on average equity was 5.18% for the quarter and 9.18% for the first nine months of 2013.
Asset Quality
Total non-accrual loans declined modestly to $16.8 million at September 30, 2013 compared to $16.9 million three months earlier and $18.1 million a year earlier. Of the $16.8 million in loans classified as non-accrual, 57%, or $9.6 million of these loans are performing as agreed under revised payment schedules. "Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans," said Dewbrey. At September 30, 2013, Foundation held $9.6 million in performing restructured loans that were included in nonaccrual loans.
Non-performing assets (NPAs), consisting of non-accrual loans, OREO and performing trouble debt restructured, were $23.5 million, or 6.4% of total assets at September 30, 2013 compared to $26.2 million, or 7.5% of total assets at June 30, 2013 and $31.0 million, or 8.8% of total assets, a year ago. Of the non-performing assets, foreclosed assets (Other Real Estate Owned (OREO) and Other Property Owned (OPO)) accounted for $7.4 million at September 30, 2013, compared to $7.2 million at June 30, 2013. "OREO balances [without OPO] were $6.1 million, and consist of 7 properties. A single property located on Lake Washington accounts for 60% of the total and is currently under contract for sale and expected to close in 2014," said Dewbrey. Of the total amount in OREO, Foundation is receiving rent/lease payments on $3.8 million.
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 third quarter we had charge-offs of $1.2 million. Most of the charged off amount was for non-accrual loans that we are still receiving payments for," Dewbrey said. "As a result of these net charge-offs, we booked a loan loss provision of $700,000 for the quarter. This compares to no loan loss provision recorded during either the preceding or year ago quarters."
Balance Sheet Review
Gross loans were $281.2 million at September 30, 2013 compared to $284.8 million a year ago. Commercial real estate (CRE) loans totaled $164.3 million at September 30, 2013 and comprise 58.4% 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 $47.6 million or 29.0% of the total CRE portfolio. Construction and land loans represented 5.5% of the total loan portfolio and the C&I portfolio represented 37.2% of the total loan portfolio.
Total deposits increased 3.6% to $325.6 million at September 30, 2013, compared to $314.3 million at September 30, 2012. Non-interest-bearing demand deposits increased 20.3% compared to a year ago. Total transaction accounts represent 45.0%, money market and savings accounts represent 40.0% and CDs comprise 15.0% of the total deposit portfolio at September 30, 2013.
Core deposits, (which exclude time deposits) represent 84.8% of total deposits at September 30, 2013, compared to 81.2% of total deposits a year earlier.
Total shareholder equity increased 7.3% to $27.6 million at September 30, 2013, compared to $25.8 million a year ago. Book value per share was $7.84 at the end of September compared to $7.31 at September 30, 2012. Foundation's tangible common equity ratio was 7.6% at September 30, 2013.
Results of Operations
Foundation's third quarter net interest income before provision for loan losses increased 5.1% to $3.4 million, compared to $3.3 million in the third quarter a year ago. In the first nine months of 2013, Foundation's net interest income before provision was $9.9 million, the same as in the first nine months of 2012.
"Our net interest margin contracted slightly year-to-date compared to the third quarter a year ago due to the continued downward pressure on loan yields," said Dewbrey. Net interest margin in the third quarter was 4.00%, the same as in the preceding quarter and compared to 3.81% in the third quarter a year ago.
Non-interest income was $241,000 in the third quarter of 2013, up compared to $196,000 in the third quarter a year ago. In the first nine months of the year, non-interest income was $565,000 compared to $812,000 in the first nine months of 2012.
Foundation's total non-interest expense decreased 5.6% to $2.6 million in the third quarter, compared to $2.8 million in the third quarter a year ago. Year-to-date, non-interest expense declined 12.9% to $7.9 million compared to $9.0 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 foreclosed assets.
Capital
Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:
| Sep 30, 2013 | Jun 30, 2012 | Sep 30, 2012 | |
| Tier 1 Leverage (to average assets) | 10.11% | 10.38% | 9.38% |
| Tier 1 risk-based (to risk-weighted assets) | 12.51% | 12.50% | 11.14% |
| Total risk-based (to risk-weighted assets) | 13.77% | 13.76% | 12.41% |
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) | |||
| September 30, 2013 | December 31, 2012 | September 30, 2012 | |
| Assets | |||
| Cash and Due from Banks | $ 16,000 | $ 12,657 | $ 13,384 |
| Interest-Bearing Deposits in Banks | 32,292 | 33,965 | 20,245 |
| Investments | 30,094 | 25,050 | 29,876 |
| Loans Held for Sale | 545 | 192 | -- |
| Loans | 281,154 | 288,895 | 284,803 |
| Allowance for Loan Losses | (4,911) | (9,373) | (9,087) |
| Loans, net | 276,243 | 279,522 | 275,716 |
| Leaseholds and Equipment, net | 891 | 609 | 573 |
| Foreclosed Assets | 7,437 | 9,163 | 10,255 |
| Accrued Interest Receivable and Other Assets | 1,714 | 3,149 | 3,449 |
| Total Assets | $ 365,216 | $ 364,307 | $ 353,498 |
| Liabilities | |||
| Noninterest-Bearing Demand Deposits | $ 128,077 | $ 111,135 | $ 106,501 |
| Interest-Bearing Checking and Savings Accounts | 17,218 | 27,892 | 22,567 |
| Money Market Accounts | 130,686 | 128,243 | 125,993 |
| Certificates of Deposit | 49,625 | 58,223 | 59,230 |
| Total Deposits | 325,606 | 325,493 | 314,291 |
| Borrowings | 9,344 | 9,875 | 10,143 |
| Other Liabilities | 2,659 | 2,644 | 3,301 |
| Total Liabilities | 337,609 | 338,012 | 327,735 |
| Stockholders' Equity | |||
| Common Stock (1) | 3,522 | 3,522 | 3,522 |
| Additional Paid-in Capital | 38,719 | 38,703 | 38,702 |
| Retained Earnings (Deficit) | (14,341) | (16,217) | (16,768) |
| Accumulated Other Comprehensive (Loss) Income | (293) | 287 | 307 |
| Total Stockholders' Equity | 27,607 | 26,295 | 25,763 |
| Total Liabilities and Stockholders' Equity | $ 365,216 | $ 364,307 | $ 353,498 |
| (1) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,522,359, 3,522,341 and 3,522,341 respectively. | |||
| Book Value per Share | 7.84 | 7.47 | 7.31 |
| Tangible Common Equity Ratio | 7.6% | 7.2% | 7.3% |
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| (Unaudited) (dollars in 000's) | For the Three Months Ended | For the Nine Months Ended | |||
| September 30, 2013 | June 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |
| Interest Income | |||||
| Loans, including Fees | $ 3,571 | $ 3,441 | $ 3,446 | $ 10,391 | $ 10,334 |
| Investments | 137 | 128 | 194 | 400 | 799 |
| Other | 19 | 13 | 19 | 47 | 47 |
| Total Interest Income | 3,727 | 3,582 | 3,659 | 10,838 | 11,180 |
| Interest Expense | |||||
| Deposits | 227 | 231 | 310 | 708 | 1,025 |
| Borrowings | 78 | 80 | 95 | 243 | 300 |
| Total Interest Expense | 305 | 311 | 405 | 951 | 1,325 |
| Net Interest Income Before Provision | 3,422 | 3,271 | 3,254 | 9,887 | 9,855 |
| Provision for Loan Losses | (700) | -- | -- | (700) | -- |
| Net Interest Income | |||||
| After Provision for Loan Losses | 2,722 | 3,271 | 3,254 | 9,187 | 9,855 |
| Noninterest Income | |||||
| Deposit Account and Service Fees | 61 | 62 | 70 | 194 | 201 |
| OTTI on Investments | -- | -- | (14) | (6) | (14) |
| Gain on Sale of Loans | 108 | -- | 82 | 164 | 86 |
| Gain on Sale of Securities | -- | -- | -- | -- | 361 |
| Other Noninterest Income | 72 | 121 | 58 | 213 | 178 |
| Total Noninterest Income | 241 | 183 | 196 | 565 | 812 |
| Noninterest Expense | |||||
| Salaries and Employee Benefits | 1,352 | 1,491 | 1,287 | 4,255 | 3,868 |
| Occupancy and Equipment | 248 | 230 | 218 | 695 | 638 |
| Data Processing | 232 | 220 | 159 | 630 | 470 |
| Legal | 61 | 257 | 265 | 391 | 1,041 |
| Professional | 109 | 124 | 157 | 351 | 574 |
| Loan Expenses | 107 | 33 | 38 | 232 | 239 |
| FDIC/State Assessments | 94 | 186 | 189 | 467 | 540 |
| Foreclosed Assets, Net | (4) | (24) | 108 | (270) | 608 |
| Insurance | 60 | 56 | 35 | 171 | 191 |
| City and State Taxes | 70 | 78 | 86 | 228 | 240 |
| Other | 271 | 282 | 212 | 719 | 628 |
| Total Noninterest Expense | 2,600 | 2,933 | 2,754 | 7,869 | 9,037 |
| Income Before Provision for Income Tax | 363 | 521 | 696 | 1,883 | 1,630 |
| Provision for Income Tax | -- | -- | -- | -- | -- |
| NET INCOME | $ 363 | $ 521 | $ 696 | $ 1,883 | $ 1,630 |
| Return on average equity | 5.18% | 7.58% | 10.92% | 9.18% | 8.71% |
| Return on average assets | 0.40% | 0.61% | 0.79% | 0.73% | 0.64% |
| Net Interest Margin | 4.00% | 4.00% | 3.81% | 3.99% | 4.04% |
| Efficiency Ratio | 73.58% | 86.25% | 82.55% | 79.81% | 89.85% |
| Diluted Earning Per Avg. Share | $ 0.10 | $ 0.15 | $ 0.20 | $ 0.53 | $ 0.47 |
| Loan to deposit ratio | 86.13% | 90.84% | 90.10% | ||
| Book value per share | $ 7.84 | $ 7.72 | $ 7.31 | ||
| SELECTED INFORMATION | Quarter Ended | ||||
| Sept 30, | June 30, | Mar 31, | Dec 31, | Sept 30, | |
| 2013 | 2013 | 2013 | 2012 | 2012 | |
| Bank Only | |||||
| Risk Based Capital Ratio | 13.77% | 13.76% | 13.31% | 12.66% | 12.41% |
| Leverage Ratio | 10.11% | 10.38% | 10.13% | 9.56% | 9.38% |
| C&I Loans to Loans | 37.30% | 34.24% | 32.54% | 33.91% | 37.13% |
| Real Estate Loans to Loans | 59.42% | 62.82% | 66.13% | 64.67% | 61.33% |
| Consumer Loans to Loans | 0.25% | 0.24% | 0.36% | 0.28% | 0.33% |
| Allowance for Loan Loss Reserves (000's) | $ 4,911 | $ 5,388 | $ 9,385 | $ 9,373 | $ 9,087 |
| Allowance for Loan Loss Reserves to Loans | 1.74% | 1.92% | 3.28% | 3.24% | 3.19% |
| Total Noncurrent Loans to Loans | 6.15% | 6.01% | 7.69% | 6.08% | 6.34% |
| Nonperforming assets to assets | 6.44% | 7.53% | 9.25% | 8.33% | 8.78% |
| Texas Ratio | 59.25% | 64.79% | 72.33% | 69.88% | 73.13% |
| Net Charge-Offs (Recoveries) (000's) | $ 1,177 | $ 3,997 | $ (12) | $ (286) | $ 372 |
| Net Charge-Offs in Qtr to Avg Total Loans | 0.42% | 1.42% | 0.00% | -0.10% | 0.13% |