BELLEVUE, Wash., April 28, 2014 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported that it earned $536,000, or $0.15 per diluted share, in the first quarter of 2014 compared to $998,000, or $0.28 per diluted share in the first quarter of 2013. Earnings in the first quarter included a provision for income taxes which was not required previously and reduced net earnings. In addition, one time recoveries on foreclosed assets in the first quarter of 2013 were greater and reduced expenses. In the preceding quarter, following a $5.6 million tax benefit as a result of the reversal of its deferred tax asset valuation allowance, Foundation earned $5.2 million, or $1.48 per diluted share.
"A highlight of the first quarter was the FDIC and Washington State Department of Financial Institution's decision to lift our consent order. This meaningful step, along with the reversal of all of the valuation allowance against our deferred tax asset during the prior quarter, shows the significant improvement in the financial condition and operating results of the Bank," said Diane Dewbrey, President and CEO. "Our outlook for 2014 looks prosperous, as we continue to improve asset quality while focusing on growing our loan portfolio and core deposit franchise."
First Quarter 2014 Highlights:
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Net income was $536,000, or $0.15 per diluted share, in the first quarter of 2014 compared to $998,000, or $0.28 per diluted share, in the first quarter a year ago.
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First quarter net interest margin was 3.91%, compared to 3.96% in the preceding quarter and 3.93% in the first quarter a year ago.
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Allowance for loan losses stood at 1.82% of gross loans compared to 1.86% three months earlier.
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Non-performing assets (NPAs), consisting of non-accrual loans, OREO and performing trouble debt restructured loans, declined 5.4% to $22.6 million, or 6.2% of total assets, at March 31, 2014, compared to $23.9 million, or 6.6% of total assets, three months earlier.
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Non-interest bearing demand deposits increased 13.8% compared to a year ago and represent 39.6% of total deposits at March 31, 2014.
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Core deposits (which exclude time deposits) represent 90.1% of total deposits at March 31, 2014.
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Book value per share grew 3.1% in the quarter and 23.0% in the year to $9.50 per share.
- The ratio of tangible common equity to tangible assets improved to 9.1% at March 31, 2014 compared to 7.8% a year ago.
Asset Quality
"All of our key credit quality metrics continued to improve significantly compared to the quarter and year ago levels," said Dewbrey. "As a result of current reserves already in place, representing 1.82% of total loans, as well as declining net charge-offs, we did not record a provision for loan losses for the first quarter of 2014." In the preceding quarter, Foundation recorded a $1.0 million loan loss provision and in the first quarter a year ago recorded no provision for loan losses.
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. As of March 31, 2014, Foundation held $9.4 million in performing restructured loans that were paying as agreed but are included in non-accrual loans. Total non-accrual loans declined to $15.9 million at March 31, 2014 compared to $16.1 million three months earlier and $21.9 million a year earlier.
Non-performing assets (NPAs), consisting of non-accrual loans, OREO and performing trouble debt restructured loans, were $22.6 million, or 6.2% of total assets at March 31, 2014 compared to $23.9 million, or 6.6% of total assets at December 31, 2013 and $22.9 million, or 8.6% 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 $6.6 million at March 31, 2014, compared to $7.3 million at December 31, 2013. "OREO balances, excluding OPO were $5.7 million, and consist of 6 properties. A single property located on Lake Washington accounts for 68% of the total and is currently under contract for sale and expected to close in 2014," added Dewbrey. Of the total amount in OREO, Foundation is receiving rent/lease payments on $4.5 million.
Charge-offs during the first quarter of 2014 totaled $165,000 compared to charge-offs of $654,000 in the preceding quarter and recoveries of $12,000 in the first quarter a year ago.
Balance Sheet Review
Foundation's gross loans were $280.0 million at March 31, 2014, compared to $285.8 million a year ago. Commercial real estate (CRE) loans totaled $180.2 million at March 31, 2014, and comprise 64.4% 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 $48.3 million or 17.2% of the total loan portfolio. The C&I portfolio represented 33.2% of the total loan portfolio and construction and land loans represented 7.6% of the total loan portfolio.
Total deposits increased 4.6% to $322.3 million at March 31, 2014, compared to $308.1 million a year earlier. Non-interest bearing demand deposits increased 13.8% compared to a year ago. Total transaction accounts represent 46.8%, money market and savings accounts represent 43.3% and CDs comprise 9.9% of the total deposit portfolio at March 31, 2014.
Core deposits, (which exclude time deposits) represent 90.1% of total deposits at March 31, 2014, compared to 86.3% of total deposits a year earlier.
Total shareholder equity increased 23.1% to $33.5 million at March 31, 2014, compared to $27.2 million a year ago. Book value per share increased to $9.50 at March 31, 2014, compared to $7.72 a year ago. Foundation's common equity ratio stood at 9.1% at March 31, 2014.
Results of Operations
"The net interest margin contracted slightly during the quarter, mostly due to continued downward pressure on loan yields," said Dewbrey. "We expect this trend to continue for the next few quarters." Foundation's first quarter interest margin was 3.91%, compared to 3.96% in the preceding quarter and 3.93% in the first quarter a year ago.
Foundation's first quarter net interest income before provision for loan losses increased 2.8% to $3.3 million, compared to $3.2 million in the first quarter a year ago.
Non-interest income increased 28.4% to $262,000 in the first quarter of 2014, compared to $204,000 in the first quarter a year ago. Gain on sale of loans increased substantially to $144,000 in the first quarter, compared to $56,000 in the first quarter a year ago.
Foundation's total non-interest expense declined 5.2% to $2.7 million, compared to $2.9 million in the preceding quarter but increased 13.4% when compared to $2.4 million in the first quarter a year ago. The increase compared to a year ago was primarily due to a $245,000 net foreclosed assets recovery recorded in the first quarter of 2013.
Capital
Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:
| Mar 31, 2014 | Dec 31, 2013 | Mar 31, 2013 | |
| Tier 1 Leverage (to average assets) | 10.50% | 10.39% | 10.13% |
| Tier 1 risk-based (to risk-weighted assets) | 12.97% | 12.60% | 12.04% |
| Total risk-based (to risk-weighted assets) | 14.22% | 13.86% | 13.31% |
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, 2014 | December 31, 2013 | March 31, 2013 | |
| Assets | |||
| Cash and Due from Banks | $ 12,763 | $ 10,613 | $ 10,889 |
| Interest-Bearing Deposits in Banks | 31,713 | 28,238 | 27,276 |
| Investments | 33,051 | 33,459 | 20,906 |
| Loans Held for Sale | -- | 233 | -- |
| Loans | 279,958 | 282,110 | 285,760 |
| Allowance for Loan Losses | (5,093) | (5,258) | (9,385) |
| Loans, net | 274,865 | 276,852 | 276,375 |
| Leaseholds and Equipment, net | 787 | 836 | 640 |
| Foreclosed Assets | 6,581 | 7,268 | 7,977 |
| Accrued Interest Receivable and Other Assets | 6,639 | 7,191 | 2,969 |
| Total Assets | $ 366,399 | $ 364,690 | $ 347,032 |
| Liabilities | |||
| Noninterest-Bearing Demand Deposits | $ 127,627 | $ 124,226 | $ 112,172 |
| Interest-Bearing Checking and Savings Accounts | 23,312 | 15,900 | 25,880 |
| Money Market Accounts | 139,387 | 138,005 | 127,884 |
| Certificates of Deposit | 31,938 | 41,901 | 42,128 |
| Total Deposits | 322,264 | 320,032 | 308,064 |
| Borrowings | 8,521 | 9,595 | 9,396 |
| Other Liabilities | 2,133 | 2,578 | 2,372 |
| Total Liabilities | 332,918 | 332,205 | 319,832 |
| Stockholders' Equity | |||
| Common Stock (1) | 3,526 | 3,526 | 3,522 |
| Additional Paid-in Capital | 38,763 | 38,706 | 38,708 |
| Retained Earnings (Deficit) | (8,581) | (9,118) | (15,225) |
| Accumulated Other Comprehensive (Loss) Income | (227) | (629) | 195 |
| Total Stockholders' Equity | 33,481 | 32,485 | 27,200 |
| Total Liabilities and Stockholders' Equity | $ 366,399 | $ 364,690 | $ 347,032 |
| (1) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,526,264, 3,526,064 and 3,522,359 respectively. | |||
| Book Value per Share | 9.50 | 9.21 | 7.72 |
| Common Equity Ratio | 9.1% | 8.9% | 7.8% |
| CONSOLIDATED STATEMENTS OF INCOME | |||
| (Unaudited) (dollars in 000's) | For the Quarter Ended | ||
| March 31, 2014 | December 31, 2013 | March 31, 2013 | |
| Interest Income | |||
| Loans, Including Fees | $ 3,366 | $ 3,483 | $ 3,379 |
| Investments | 182 | 181 | 134 |
| Other | 13 | 13 | 15 |
| Total Interest Income | 3,561 | 3,677 | 3,528 |
| Interest Expense | |||
| Deposits | 206 | 210 | 249 |
| Borrowings | 69 | 74 | 84 |
| Total Interest Expense | 275 | 284 | 333 |
| Net Interest Income Before Provision | 3,286 | 3,393 | 3,195 |
| Provision for Loan Losses | -- | (1,000) | -- |
| Net Interest Income | |||
| After Provision for Loan Losses | 3,286 | 2,393 | 3,195 |
| Noninterest Income | |||
| Service Fees | 108 | 111 | 119 |
| OTTI on Investments | -- | (35) | (6) |
| Gain on Sale of Loans | 144 | 39 | 56 |
| Gain on Sale of Securities | -- | -- | -- |
| Other Noninterest Income | 10 | 10 | 35 |
| Total Noninterest Income | 262 | 125 | 204 |
| Noninterest Expense | |||
| Salaries and Employee Benefits | 1,435 | 1,218 | 1,347 |
| Occupancy and Equipment | 325 | 324 | 294 |
| Data Processing | 176 | 177 | 123 |
| Legal | 117 | 139 | 81 |
| Professional | 36 | 67 | 73 |
| Loan Expenses | 47 | 240 | 92 |
| FDIC/State Assessments | 119 | 96 | 186 |
| Foreclosed Assets, Net | (67) | 137 | (245) |
| Insurance | 60 | 59 | 56 |
| City and State Taxes | 63 | 68 | 80 |
| Other | 412 | 348 | 314 |
| Total Noninterest Expense | 2,723 | 2,873 | 2,401 |
| Income (Loss) Before Provision | |||
| (Benefit) for Income Tax | 825 | (355) | 998 |
| Provision (Benefit) for Income Tax | 289 | (5,572) | -- |
| NET INCOME | $ 536 | $ 5,217 | $ 998 |
| Return on average equity | 6.51% | 73.20% | 15.12% |
| Return on average assets | 0.60% | 5.81% | 1.18% |
| Net interest margin | 3.91% | 3.96% | 3.93% |
| Efficiency ratio | 84.76% | 81.98% | 79.87% |
| Diluted earning per avg. share | $ 0.15 | $ 1.48 | $ 0.28 |
| Loan to deposit ratio | 86.80% | 88.02% | 92.38% |
| SELECTED INFORMATION | Quarter Ended | ||||
| Mar 31, | Dec 31, | Sept 30, | June 30, | Mar 31, | |
| 2014 | 2013 | 2013 | 2013 | 2013 | |
| Bank Only | |||||
| Risk Based Capital Ratio | 14.22% | 13.86% | 13.77% | 13.76% | 13.31% |
| Leverage Ratio | 10.50% | 10.39% | 10.11% | 10.38% | 10.13% |
| C&I Loans to Loans | 33.20% | 37.18% | 37.30% | 34.24% | 32.54% |
| Real Estate Loans to Loans | 64.38% | 60.24% | 59.42% | 62.82% | 66.13% |
| Consumer Loans to Loans | 0.15% | 0.15% | 0.25% | 0.24% | 0.36% |
| Allowance for Loan Loss Reserves (000's) | $ 5,093 | $ 5,258 | $ 4,911 | $ 5,388 | $ 9,385 |
| Allowance for Loan Loss Reserves to Loans | 1.82% | 1.86% | 1.74% | 1.92% | 3.28% |
| Total Noncurrent Loans to Loans | 5.73% | 5.90% | 6.15% | 6.01% | 7.69% |
| Nonperforming assets to assets | 5.89% | 6.30% | 6.44% | 7.53% | 9.25% |
| Net Charge-Offs (Recoveries) (000's) | $ 165 | $ 653 | $ 1,177 | $ 3,997 | $ (12) |
| Net Charge-Offs in Qtr to Avg Total Loans | 0.06% | 0.23% | 0.42% | 1.42% | 0.00% |