BELLEVUE, Wash., Oct. 21, 2014 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCQB:FDNB), the holding company for Foundation Bank, today reported that it earned $304,000, or $0.09 per diluted share in the third quarter of 2014, compared to $363,000, or $0.10 per diluted share in the third quarter of 2013. In the first nine months of 2014, Foundation earned $1.2 million, or $0.34 per diluted share compared to $1.9 million, or $0.53 per diluted share in the first nine months of 2013. Earnings in the third quarter and first nine months of 2014 included a provision for income taxes which was not required previously and reduced net earnings.
"Our strong core deposit program continued at a robust pace which will allow us to fund future loan growth," said Diane Dewbrey, President and CEO. "We continue to see opportunities for both loan and deposit growth in the near future."
Third Quarter 2014 Highlights:
- Net income was $304,000, or $0.09 per diluted share in the third quarter of 2014, compared to $363,000, or $0.10 per diluted share in the third quarter a year ago.
- Third quarter net interest margin saw a slight decrease quarter-over-quarter at 3.61%, compared to 3.69% in the preceding quarter and 4.00% in the third quarter a year ago.
- Allowance for loan losses improved to 1.84% of gross loans compared to 1.80% three months earlier.
- Total non-accrual loans were $11.8 million at September 30, 2014, which were nearly unchanged compared to three months earlier and decreased 29.9% compared to $16.8 million a year earlier.
- Non-interest bearing demand deposits increased 10.0% compared to a year ago.
- Core deposits (which exclude time deposits) represent 95.6% of total deposits at September 30, 2014.
- Book value per share increased 23.9% to $9.71 per share at September 30, 2014, compared to $7.84 per share a year ago.
- The ratio of tangible common equity to tangible assets improved to 8.7% at September 30, 2014, compared to 7.6% a year ago.
Asset Quality
"As we continue to manage asset quality, we have made substantial progress over the past year, and we expect that our credit quality metrics will continue to stabilize," said Dewbrey. "As a result of current reserves already in place, representing 1.84% of total loans, as well as declining net charge-offs, we did not record a provision for loan losses for the third quarter of 2014." Foundation recorded no loan loss provision in the preceding quarter and recorded a $700,000 provision for loan losses in the third quarter a year ago. Additionally, there were no charge-offs recorded in the third quarter of 2014, compared to charge-offs of $63,000 in the preceding quarter and charge-offs of $1.2 million in the third quarter a year ago.
Foundation categorizes borrowers who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations as restructured loans. As of September 30, 2014, Foundation held $3.7 million in performing restructured loans that were paying as agreed but are included in non-accrual loans. Total non-accrual loans were $11.8 million at September 30, 2014, which were nearly unchanged compared to three months earlier and decreased 29.9% when compared to $16.8 million a year earlier.
Non-performing assets (NPAs), consisting of non-accrual loans, Other Real Estate Owned (OREO) and past due loans over 90 days, decreased to $21.4 million, or 5.4% of total assets at September 30, 2014 compared to $25.3 million, or 6.6% of total assets at June 30, 2014 and $23.4 million, or 6.4% of total assets a year ago.
Foreclosed assets including OREO and Other Property Owned (OPO) totaled $10.5 million at September 30, 2014, compared to $11.0 million at June 30, 2014, and $7.4 million at September 30, 2013. "As we work our way through this credit cycle, we continue to shift loans out of non-accrual status and into OREO, which is the reason for the balance increase compared to a year ago," said Dewbrey. "OREO consists of seven properties, with one single property located on Lake Washington accounting for 39.6% of the total. This property is currently under contract for sale and expected to close sometime during the fourth quarter." Of the total amount in OREO, Foundation is receiving rent/lease payments on $3.8 million.
Balance Sheet Review
Foundation's gross loans were $286.3 million at September 30, 2014, compared to $281.2 million a year ago. Commercial real estate (CRE) loans totaled $176.6 million at September 30, 2014, and comprise 61.7% 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 $48.0 million or 16.8% and construction and land loans represented 7.2%. The commercial and industrial (C&I) portfolio represented 35.1% of the total loan portfolio.
"Our focus over the last several quarters has been to grow our core deposit base, and our progress in developing new client relationships demonstrates the hard work, dedication and teamwork of our employees," said Dewbrey. Total deposits increased 7.3% to $349.4 million at September 30, 2014, compared to $325.6 million a year earlier. Non-interest bearing demand deposits increased 10.0% compared to a year ago. Total transaction accounts represent 50.6%, money market and savings accounts represent 45.0% and CDs comprise 4.4% of the total deposit portfolio at September 30, 2014.
Core deposits (which exclude time deposits) represent 95.6% of total deposits at September 30, 2014, compared to 83.0% of total deposits a year earlier.
Total shareholder equity increased 24.0% to $34.2 million at September 30, 2014, compared to $27.6 million a year ago. Book value per share increased 23.9% to $9.71 at September 30, 2014, compared to $7.84 a year ago. Foundation's common equity to total assets (common equity ratio) remained strong at 8.7% at September 30, 2014.
Results of Operations
"As a result of the strong core client deposit growth, we have seen a reduction in net interest margin as loan yields have not kept pace with the large amount of cash balances we are accumulating," said Dewbrey. Foundation's third quarter net interest margin was 3.61%, compared to 3.69% in the preceding quarter and 4.00% in the third quarter a year ago. In the first nine months of 2014, Foundation's net interest margin was 3.73% compared to 3.99% in the first nine months of 2013.
Foundation's third quarter net interest income before provision for loan losses was $3.4 million, unchanged from the third quarter a year ago. In the first nine months of the year, net interest income was $9.9 million, the same as in the first nine months one year ago.
Foundation's total non-interest expense was up slightly to $3.0 million in the third quarter of 2014, compared to $2.9 million in the preceding quarter and $2.6 million in the third quarter one year ago. The increase is partially attributable to higher costs associated with foreclosed assets. Year-to-date, Foundation's total non-interest expense was $8.7 million, compared to $7.9 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:
| Sep 30, 2014 | Jun 30, 2014 | Sep 30, 2013 | |
| Tier 1 Leverage (to average assets) | 9.94% | 10.32% | 10.11% |
| Tier 1 risk-based (to risk-weighted assets) | 12.62% | 12.71% | 12.51% |
| Total risk-based (to risk-weighted assets) | 13.88% | 13.97% | 13.77% |
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, 2014 | December 31, 2013 | September 30, 2013 | |
| Assets | |||
| Cash and Due from Banks | $ 8,805 | $ 10,613 | $ 16,000 |
| Interest-Bearing Deposits in Banks | 27,739 | 28,238 | 32,292 |
| Investments | 59,669 | 33,459 | 30,094 |
| Loans Held for Sale | -- | 233 | 545 |
| Loans | 286,299 | 282,110 | 281,154 |
| Allowance for Loan Losses | (5,258) | (5,258) | (4,911) |
| Loans, net | 281,041 | 276,852 | 276,243 |
| Leaseholds and Equipment, net | 703 | 836 | 891 |
| Foreclosed Assets | 10,468 | 7,268 | 7,437 |
| Accrued Interest Receivable and Other Assets | 6,612 | 7,191 | 1,714 |
| Total Assets | $ 395,037 | $ 364,690 | $ 365,216 |
| Liabilities | |||
| Noninterest-Bearing Demand Deposits | $ 140,830 | $ 124,226 | $ 128,077 |
| Interest-Bearing Checking and Savings Accounts | 37,350 | 15,900 | 17,218 |
| Money Market Accounts | 155,860 | 138,005 | 130,686 |
| Certificates of Deposit | 15,340 | 41,901 | 49,625 |
| Total Deposits | 349,380 | 320,032 | 325,606 |
| Borrowings | 8,723 | 9,595 | 9,344 |
| Other Liabilities | 2,692 | 2,578 | 2,659 |
| Total Liabilities | 360,795 | 332,205 | 337,609 |
| Stockholders' Equity | |||
| Preferred Stock (1) | -- | -- | -- |
| Common Stock (2) | 3,526 | 3,526 | 3,522 |
| Additional Paid-in Capital | 38,881 | 38,706 | 38,719 |
| Retained Earnings (Deficit) | (7,929) | (9,118) | (14,341) |
| Accumulated Other Comprehensive (Loss) Income | (236) | (629) | (293) |
| Total Stockholders' Equity | 34,242 | 32,485 | 27,607 |
| Total Liabilities and Stockholders' Equity | $ 395,037 | $ 364,690 | $ 365,216 |
| (1) $1 Par Value, Shares Authorized 1,000,000, issued and outstanding 0. | |||
| (2) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,526,089, 3,526,064 and 3,522,359 respectively. | |||
| Book Value per Share | 9.71 | 9.21 | 7.84 |
| Common Equity Ratio | 8.7% | 8.9% | 7.6% |
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| (Unaudited) (dollars in 000's) | For the Quarter Ended | For the Nine Months Ended | |||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |
| Interest Income | |||||
| Loans, Including Fees | $ 3,376 | $ 3,298 | $ 3,571 | $ 10,040 | $ 10,391 |
| Investments | 228 | 196 | 137 | 606 | 400 |
| Other | 33 | 25 | 19 | 71 | 47 |
| Total Interest Income | 3,637 | 3,519 | 3,727 | 10,717 | 10,838 |
| Interest Expense | |||||
| Deposits | 218 | 212 | 227 | 636 | 708 |
| Borrowings | 54 | 63 | 78 | 186 | 243 |
| Total Interest Expense | 272 | 275 | 305 | 822 | 951 |
| Net Interest Income Before Provision | 3,365 | 3,244 | 3,422 | 9,895 | 9,887 |
| Provision for Loan Losses | -- | -- | (700) | -- | (700) |
| Net Interest Income | |||||
| After Provision for Loan Losses | 3,365 | 3,244 | 2,722 | 9,895 | 9,187 |
| Noninterest Income | |||||
| Service Fees | 119 | 123 | 108 | 350 | 342 |
| OTTI on Investments | -- | -- | -- | -- | (6) |
| Gain on Sale of Loans | 2 | 45 | 108 | 191 | 164 |
| Gain on Sale of Securities | -- | 43 | -- | 43 | -- |
| Other Noninterest Income | 6 | 8 | 25 | 24 | 65 |
| Total Noninterest Income | 127 | 219 | 241 | 608 | 565 |
| Noninterest Expense | |||||
| Salaries and Employee Benefits | 1,420 | 1,389 | 1,273 | 4,243 | 4,028 |
| Occupancy and Equipment | 311 | 323 | 319 | 947 | 897 |
| Data Processing | 181 | 178 | 185 | 547 | 499 |
| Legal | 110 | 136 | 61 | 363 | 391 |
| Professional | 20 | 81 | 62 | 137 | 198 |
| Loan Expenses | 58 | 64 | 107 | 169 | 232 |
| FDIC/State Assessments | 133 | 126 | 94 | 378 | 467 |
| Foreclosed Assets, Net | 113 | (21) | (4) | 25 | (275) |
| Insurance | 60 | 60 | 60 | 180 | 171 |
| City and State Taxes | 89 | 62 | 70 | 214 | 228 |
| Other | 530 | 526 | 373 | 1,468 | 1,033 |
| Total Noninterest Expense | 3,025 | 2,924 | 2,600 | 8,671 | 7,869 |
| Income Before Provision for Income Tax | 467 | 539 | 363 | 1,832 | 1,883 |
| Provision for Income Tax | 163 | 188 | -- | 640 | -- |
| NET INCOME | $ 304 | $ 351 | $ 363 | $ 1,192 | $ 1,883 |
| Return on average equity | 3.48% | 4.13% | 5.18% | 4.68% | 9.18% |
| Return on average assets | 0.31% | 0.38% | 0.40% | 0.42% | 0.73% |
| Net interest margin | 3.61% | 3.69% | 4.00% | 3.73% | 3.99% |
| Efficiency ratio | 86.86% | 86.83% | 73.58% | 86.15% | 79.81% |
| Diluted earning per avg. share | $ 0.09 | $ 0.10 | $ 0.10 | $ 0.34 | $ 0.53 |
| Loan to deposit ratio | 81.88% | 82.42% | 86.13% | ||
| Book value per share | $ 9.71 | $ 9.68 | $ 7.84 | ||
| SELECTED INFORMATION | Quarter Ended | |||||
| Sept 30, | June 30, | Mar 31, | Dec 31, | Sept 30, | ||
| 2014 | 2014 | 2014 | 2013 | 2013 | ||
| Bank Only | ||||||
| Risk Based Capital Ratio | 13.88% | 13.97% | 14.22% | 13.86% | 13.77% | |
| Leverage Ratio | 9.94% | 10.32% | 10.50% | 10.39% | 10.11% | |
| C&I Loans to Loans | 35.05% | 35.89% | 33.20% | 37.18% | 37.30% | |
| Real Estate Loans to Loans | 61.67% | 61.45% | 64.38% | 60.24% | 59.42% | |
| Consumer Loans to Loans | 0.17% | 0.14% | 0.15% | 0.15% | 0.25% | |
| Allowance for Loan Loss Reserves (000's) | $ 5,258 | $ 5,030 | $ 5,093 | $ 5,258 | $ 4,911 | |
| Allowance for Loan Loss Reserves to Loans 1.84% | 1.80% | 1.82% | 1.86% | 1.74% | ||
| Total Noncurrent Loans to Loans | 4.11% | 5.45% | 5.73% | 5.90% | 6.15% | |
| Nonperforming assets to assets | 6.44% | 6.65% | 5.89% | 6.30% | 6.44% | |
| Net Charge-Offs (Recoveries) (000's) | $ (228) | $ 63 | $ 165 | $ 653 | $ 1,177 | |
| Net Charge-Offs in Qtr to Avg Total Loans | -0.08% | 0.02% | 0.06% | 0.23% | 0.42% | |