BELLEVUE, Wash., July 25, 2014 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported that it earned $351,000, or $0.10 per diluted share, in the second quarter of 2014 compared to $522,000, or $0.15 per diluted share in the second quarter of 2013. In the first six months of 2014, Foundation earned $888,000, or $0.25 per diluted share, compared to $1.5 million, or $0.43 per diluted share, in the first six months of 2013. Earnings in the second quarter and first six months of 2014 included a provision for income taxes which was not required previously and reduced net earnings.
"With strong capital, improving asset quality and continued profitability, we have invested in our franchise to position Foundation Bank for future growth," said Diane Dewbrey, President and CEO. "Our initiatives remain focused on strengthening our balance sheet, increasing liquidity and building our capital base."
Second Quarter 2014 Highlights:
-
Net income was $351,000, or $0.10 per diluted share, in the second quarter of 2014 compared to $522,000, or $0.15 per diluted share, in the second quarter a year ago.
-
Second quarter net interest margin was 3.69%, compared to 3.91% in the preceding quarter and 4.00% in the second quarter a year ago.
-
Allowance for loan losses stood at 1.80% of gross loans compared to 1.82% three months earlier.
-
Total non-accrual loans declined 26.5% to $11.7 million at June 30, 2014 when compared to $15.9 million three months earlier and decreased 30.9% when compared to $16.9 million a year earlier.
-
Non-interest bearing demand deposits increased 23.3% compared to a year ago.
-
Core deposits (which exclude time deposits) represent 95.5% of total deposits at June 30, 2014.
-
Book value per share increased 25.3% to $9.68 per share at June 30, 2014, compared to $7.72 per share a year ago.
- The ratio of tangible common equity to tangible assets improved to 8.9% at June 30, 2014, compared to 7.8% a year ago.
Asset Quality
"The overall trend in credit quality has stabilized, with minimal problem credits added to the non-accrual portfolio during the quarter," said Dewbrey. "As a result of current reserves already in place, representing 1.80% of total loans, as well as declining net charge-offs, we did not record a provision for loan losses for the second quarter of 2014." Foundation also recorded no loan loss provision in both the preceding quarter and in the second quarter a year ago.
Foundation categorizes borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations as restructured loans. As of June 30, 2014, Foundation held $9.2 million in performing restructured loans that were paying as agreed but are included in non-accrual loans. Total non-accrual loans declined 26.5% to $11.7 million at June 30, 2014 when compared to $15.9 million three months earlier and decreased 30.9% when compared to $16.9 million a year earlier.
Non-performing assets (NPAs), consisting of non-accrual loans, Other Real Estate Owned (OREO) and performing trouble debt restructured loans, were $26.2 million, or 6.8% of total assets at June 30, 2014 compared to $22.6 million, or 6.2% of total assets at March 31, 2014 and $24.1 million, or 6.9% of total assets, a year ago.
Of the NPAs, foreclosed assets OREO and Other Property Owned (OPO) accounted for $11.0 million at June 31, 2014, compared to $6.6 million at March 31, 2014. "During the second quarter, $4.4 million shifted out of non-accrual loans and into OREO, bringing to total OREO balance, excluding OPO, to $10.1 million at June 30, 2014," said Dewbrey. "OREO consists of seven properties, with one single property located on Lake Washington accounting for 37.9% of the total. This property is currently under contract for sale and expected to close in the 2014." Of the total amount in OREO, Foundation is receiving rent/lease payments on $3.8 million.
Charge-offs during the second quarter of 2014 totaled $227,000 compared to charge-offs of $165,000 in the preceding quarter and $1.2 million in the second quarter a year ago.
Balance Sheet Review
Foundation's gross loans were $279.2 million at June 30, 2014, compared to $280.1 million a year ago. Commercial real estate (CRE) loans totaled $171.5 million at June 30, 2014, and comprise 61.4% of the total loan portfolio. Business loans secured by the property on which the business operates are classified as owner occupied CRE. Of the total loan portfolio, owner occupied CRE loans comprised $47.7 million or 17.1% and construction and land loans represented 7.0%. The commercial and industrial (C&I) portfolio represented 35.9% of the total loan portfolio.
Total deposits increased 9.8% to $338.5 million at June 30, 2014, compared to $308.2 million a year earlier. Non-interest bearing demand deposits increased 23.3% compared to a year ago. Total transaction accounts represent 52.3%, money market and savings accounts represent 43.2% and CDs comprise 4.5% of the total deposit portfolio at June 30, 2014.
Core deposits (which exclude time deposits) represent 95.5% of total deposits at June 30, 2014, compared to 90.6% of total deposits a year earlier.
Total shareholder equity increased 25.6% to $34.1 million at June 30, 2014, compared to $27.2 million a year ago. Book value per share increased to $9.68 at June 30, 2014, compared to $7.72 a year ago. Foundation's common equity to total assets (common equity ratio) stood at 8.9% at June 30, 2014.
Results of Operations
"Due to continued downward pressure on loan yields, the net interest margin contracted again this quarter. We expect continued margin pressure as long as this current low interest rate environment persists," said Dewbrey. Foundation's second quarter net interest margin was 3.69%, compared to 3.91% in the preceding quarter and 4.00% in the second quarter a year ago. In the first six months of 2014, Foundation's net interest margin was 3.80% compared to 3.98% in the first six months of 2013.
Foundation's second quarter net interest income before provision for loan losses was $3.2 million, compared to $3.3 million in the second quarter a year ago. In the first six months of the year, net interest income was $6.5 million, the same as in the first six months one year ago.
Non-interest income increased 82.5% to $219,000 in the second quarter of 2014, compared to $120,000 in the second quarter a year ago. Gain on sale of loans and gain on sale of securities accounted for the majority of the increase compared to the prior year second quarter. In the first six months of the year non-interest income increased 48.5% to $481,000, from $324,000 in the same period one year ago.
Foundation's total non-interest expense was up slightly to $2.9 million in the second quarter of 2014, compared to $2.7 million in the preceding quarter but remained unchanged when compared to the second quarter a year ago. Year-to-date, Foundation's total non-interest expense was $5.6 million, compared to $5.3 million in the same period a year earlier.
Capital
Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:
| Jun 30, 2014 | Mar 31, 2014 | Jun 30, 2013 | |
| Tier 1 Leverage (to average assets) | 10.32% | 10.50% | 10.38% |
| Tier 1 risk-based (to risk-weighted assets) | 12.71% | 12.97% | 12.50% |
| Total risk-based (to risk-weighted assets) | 13.97% | 14.22% | 13.76% |
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, 2014 | December 31, 2013 | June 30, 2013 | |
| Assets | |||
| Cash and Due from Banks | $ 14,131 | $ 10,613 | $ 11,849 |
| Interest-Bearing Deposits in Banks | 42,522 | 28,238 | 26,639 |
| Investments | 34,490 | 33,459 | 24,309 |
| Loans Held for Sale | -- | 233 | -- |
| Loans | 279,157 | 282,110 | 280,915 |
| Allowance for Loan Losses | (5,030) | (5,258) | (5,388) |
| Loans, net | 274,127 | 276,852 | 275,527 |
| Leaseholds and Equipment, net | 757 | 836 | 813 |
| Foreclosed Assets | 10,962 | 7,268 | 7,186 |
| Accrued Interest Receivable and Other Assets | 6,302 | 7,191 | 2,157 |
| Total Assets | $ 383,291 | $ 364,690 | $ 348,480 |
| Liabilities | |||
| Noninterest-Bearing Demand Deposits | $ 139,162 | $ 124,226 | $ 112,855 |
| Interest-Bearing Checking and Savings Accounts | 38,303 | 15,900 | 16,197 |
| Money Market Accounts | 145,618 | 138,005 | 127,984 |
| Certificates of Deposit | 15,371 | 41,901 | 51,145 |
| Total Deposits | 338,454 | 320,032 | 308,181 |
| Borrowings | 8,267 | 9,595 | 9,015 |
| Other Liabilities | 2,435 | 2,578 | 4,109 |
| Total Liabilities | 349,156 | 332,205 | 321,305 |
| Stockholders' Equity | |||
| Common Stock (1) | 3,526 | 3,526 | 3,522 |
| Additional Paid-in Capital | 38,822 | 38,706 | 38,714 |
| Retained Earnings (Deficit) | (8,231) | (9,118) | (14,704) |
| Accumulated Other Comprehensive (Loss) Income | 18 | (629) | (357) |
| Total Stockholders' Equity | 34,135 | 32,485 | 27,175 |
| Total Liabilities and Stockholders' Equity | $ 383,291 | $ 364,690 | $ 348,480 |
| (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 | 9.68 | 9.21 | 7.72 |
| Common Equity Ratio | 8.9% | 8.9% | 7.8% |
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| (Unaudited) (dollars in 000's) | For the Quarter Ended | For the Six Months Ended | |||
| June 30, 2014 | March 31, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | |
| Interest Income | |||||
| Loans, Including Fees | $ 3,298 | $ 3,366 | $ 3,441 | $ 6,664 | $ 6,820 |
| Investments | 196 | 182 | 128 | 378 | 263 |
| Other | 25 | 13 | 13 | 38 | 27 |
| Total Interest Income | 3,519 | 3,561 | 3,582 | 7,080 | 7,110 |
| Interest Expense | |||||
| Deposits | 212 | 206 | 231 | 418 | 480 |
| Borrowings | 63 | 69 | 80 | 132 | 165 |
| Total Interest Expense | 275 | 275 | 311 | 550 | 645 |
| Net Interest Income Before Provision | 3,244 | 3,286 | 3,271 | 6,530 | 6,465 |
| Provision for Loan Losses | -- | -- | -- | -- | -- |
| Net Interest Income | |||||
| After Provision for Loan Losses | 3,244 | 3,286 | 3,271 | 6,530 | 6,465 |
| Noninterest Income | |||||
| Service Fees | 123 | 108 | 115 | 231 | 234 |
| OTTI on Investments | -- | -- | -- | -- | (6) |
| Gain on Sale of Loans | 45 | 144 | -- | 189 | 56 |
| Gain on Sale of Securities | 43 | -- | -- | 43 | -- |
| Other Noninterest Income | 8 | 10 | 5 | 18 | 40 |
| Total Noninterest Income | 219 | 262 | 120 | 481 | 324 |
| Noninterest Expense | |||||
| Salaries and Employee Benefits | 1,389 | 1,435 | 1,407 | 2,824 | 2,754 |
| Occupancy and Equipment | 323 | 312 | 296 | 635 | 579 |
| Data Processing | 178 | 188 | 179 | 366 | 313 |
| Legal | 136 | 117 | 249 | 253 | 330 |
| Professional | 81 | 36 | 64 | 117 | 137 |
| Loan Expenses | 64 | 47 | 34 | 111 | 125 |
| FDIC/State Assessments | 126 | 119 | 186 | 245 | 372 |
| Foreclosed Assets, Net | (21) | (67) | (26) | (88) | (271) |
| Insurance | 60 | 60 | 56 | 120 | 112 |
| City and State Taxes | 62 | 63 | 78 | 125 | 158 |
| Other | 526 | 412 | 346 | 938 | 660 |
| Total Noninterest Expense | 2,924 | 2,722 | 2,869 | 5,646 | 5,269 |
|
Income Before Provision for Income Tax |
539 | 826 | 522 | 1,365 | 1,520 |
| Provision for Income Tax | 188 | 289 | -- | 477 | -- |
| NET INCOME | $ 351 | $ 537 | $ 522 | $ 888 | $ 1,520 |
| Return on average equity | 4.13% | 6.51% | 7.58% | 5.30% | 11.25% |
| Return on average assets | 0.38% | 0.60% | 0.61% | 0.49% | 0.89% |
| Net interest margin | 3.69% | 3.91% | 4.00% | 3.80% | 3.98% |
| Efficiency ratio | 86.83% | 84.76% | 86.25% | 85.79% | 83.07% |
| Diluted earning per avg. share | $ 0.10 | $ 0.15 | $ 0.15 | $ 0.25 | $ 0.43 |
| Loan to deposit ratio | 82.42% | 86.80% | 90.84% | ||
| Book value per share | $ 9.68 | $ 9.50 | $ 7.72 | ||
| SELECTED INFORMATION | Quarter Ended | ||||
| June 30, | Mar 31, | Dec 31, | Sept 30, | June 30, | |
| 2014 | 2014 | 2013 | 2013 | 2013 | |
| Bank Only | |||||
| Risk Based Capital Ratio | 13.97% | 14.22% | 13.86% | 13.77% | 13.76% |
| Leverage Ratio | 10.32% | 10.50% | 10.39% | 10.11% | 10.38% |
| C&I Loans to Loans | 35.89% | 33.20% | 37.18% | 37.30% | 34.24% |
| Real Estate Loans to Loans | 61.45% | 64.38% | 60.24% | 59.42% | 62.82% |
| Consumer Loans to Loans | 0.14% | 0.15% | 0.15% | 0.25% | 0.24% |
| Allowance for Loan Loss Reserves (000's) | $ 5,030 | $ 5,093 | $ 5,258 | $ 4,911 | $ 5,388 |
| Allowance for Loan Loss Reserves to Loans | 1.80% | 1.82% | 1.86% | 1.74% | 1.92% |
| Total Noncurrent Loans to Loans | 5.45% | 5.73% | 5.90% | 6.15% | 6.01% |
| Nonperforming assets to assets | 6.65% | 5.89% | 6.30% | 6.44% | 7.53% |
| Net Charge-Offs (Recoveries) (000's) | $ 63 | $ 165 | $ 653 | $ 1,177 | $ 3,997 |
| Net Charge-Offs in Qtr to Avg Total Loans | 0.02% | 0.06% | 0.23% | 0.42% | 1.42% |