BELLEVUE, Wash., Jan. 28, 2016 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCPink:FDNB), (Foundation or Company), the holding company for Foundation Bank, today reported that is has made significant reductions to its Other Real Estate Owned (“OREO”) and Other Property Owned (“OPO”) portfolios through foreclosed asset sales and write-downs in the fourth quarter of 2015. Non-performing loans are now at the lowest levels since 2009.
As a result of these transactions, Foundation reported a net loss of $1.4 million in the fourth quarter, compared to a net loss of $131,000 in the fourth quarter a year ago. For fiscal year 2015, Foundation reported a net loss of $2.5 million compared to net income of $1.1 million in 2014. Results for the full year included a $3.0 million charge off related to the discovery of loan fraud recorded during the second quarter of 2015.
“During the fourth quarter we executed a strategy to move non-performing assets out of the Bank and as a result had significant charge offs and write downs related to the sale and disposal of OREO and OPO to better position the Bank going forward,” said Randy Cloes, CFO. “The sales significantly reduce our non-performing assets and will provide meaningful cost savings from reduced legal fees and management expenses in future quarters. These transactions will improve our future viability and allow us to focus on returning to profitability.”
In August 2015, the Company announced the discovery of fraudulent activity by one of its Washington-based customers. The borrower used falsified financial statements and bank statements to qualify for the loan. The fraudulent documents were discovered approximately 60 days after the loan was originated. Foundation has filed a claim with its insurance company seeking a full recovery. At this time, the former customer has been arrested and charged with Bank fraud.
After preferred dividends, the net loss available to common shareholders for the fourth quarter was $1.6 million, or $0.45 per share, compared to a net loss of $230,000, or $0.06 per share in the preceding quarter and a net loss of $131,000, or $0.04 per share in the fourth quarter of 2014. For the year, the net loss attributable to common shareholders was $3.2 million, or $0.91 per share, compared to earnings of $1.1 million, or $0.29 per diluted average share in 2014. Book value per share was $8.47 at December 31, 2015, compared to $9.12 at September 30, 2015 and $9.73 a year ago.
Fourth Quarter 2015 Highlights:
- Allowance for loan losses increased to 2.01% of gross loans from recoveries and a reduction in non-accrual loans.
- Total non-accrual loans decreased 40.0% to $7.5 million at December 31, 2015, compared to $12.5 million a year earlier.
- Foreclosed assets including OREO and OPO decreased 47.0% compared to a year ago to $3.9 million at December 31, 2015.
- All of the remaining OREO as of December 31, 2015 is under contract for sale and is scheduled to close during the first quarter 2016.
- OPO write offs totaled $624,000 resulting in no OPO at December 31, 2015.
- Non-interest bearing demand deposits increased 24.4%, compared to a year ago and represent 44.8% of deposits.
- Core client deposits represent 100% of total deposits at December 31, 2015.
- The ratio of tangible common equity to tangible assets (common equity ratio) was 6.8% at December 31, 2015.
Asset Quality
Foundation categorizes borrowers who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations as restructured loans. As of December 31, 2015, Foundation held $3.8 million in performing restructured loans that were paying as agreed but are included in non-accrual loans. Total non-accrual loans decreased 30.9% to $7.5 million at December 31, 2015, compared to $10.9 million three months earlier and decreased 40.0% compared to $12.5 million a year earlier. Excluding performing restructured loans, non-accrual loans were $3.8 million, or 1.3% of total loans at the end of the year.
Foreclosed assets include OREO and OPO and totaled $3.9 million at December 31, 2015, a 43.0% decrease compared to $6.8 million in the preceding quarter and a 47.0% decrease compared to $7.3 million a year ago. “We currently have two remaining foreclosed properties that are pending sale and are expected to close during the first quarter of 2016,” said Cloes. “In addition, we are in the foreclosure process with one property which is expected to move to OREO from non-accrual loans in the first quarter.”
Non-performing assets (NPAs) (excluding restructured), consisting of non-accrual loans, OREO, OPO and past due loans over 90 days, decreased 35.9% to $11.4 million, or 2.6% of total assets at December 31, 2015 compared to $17.8 million, or 3.9% of total assets, at September 30, 2015 and decreased 42.5% compared to $19.8 million, or 5.0% of total assets a year ago.
Balance Sheet Review
Total assets increased 12.2% to $446.5 million at December 31, 2015, compared to $398.1 million a year earlier, but were down compared to $461.8 million at September 30, 2015. The total loan portfolio, excluding loans held for sale, was up 1.6% to $287.8 million at December 31, 2015, compared to $283.2 million a year ago, and contracted slightly compared to $297.0 million three months earlier. Commercial real estate (CRE) loans totaled $175.6 million at December 31, 2015, and comprise 60.9% 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 $52.3 million or 18.2% and construction and land loans represented 6.5% of the total loan portfolio. The commercial and industrial (C&I) portfolio represented 36.5% of the total loan portfolio.
“Total deposits increased year over year and were down slightly over the prior quarter, reflecting the year end asset/liability balancing strategy,” said Cloes. Foundation’s total deposits increased 13.9% to $390.2 million at December 31, 2015, compared to $342.6 million a year earlier, and were down 3.4% compared to $403.9 million at September 30, 2015. Core client deposits represented 100% of total deposits at year-end. Non-interest bearing demand deposits increased 24.4% compared to a year ago. Total transaction accounts represent 53.2%, money market and savings accounts represent 44.4%, and CDs comprise only 2.3% of the total deposit portfolio at December 31, 2015. The ratio of loans to deposits was stable at 73.6% at year-end.
Total stockholder equity increased 31.4% to $45.2 million at December 31, 2015, compared to $34.4 million a year ago. Book value per common share was $8.47 at December 31, 2015, compared to $9.73 a year ago and common equity ratio remained strong at 6.8% at December 31, 2015.
Results of Operations
Foundation’s fourth quarter net interest margin was 3.52%, compared to 3.35% in the preceding quarter and 3.89% in the fourth quarter a year ago. In 2015, Foundation’s net interest margin was 3.44% compared to 3.78% in 2014.
Fourth quarter net interest income before provision for loan losses increased modestly to $3.8 million, compared to $3.7 million in the fourth quarter a year ago. For the year, net interest income before the provision for loan losses increased 5.4% to $14.4 million, compared to $13.6 million in 2014. Non-interest income increased to $229,000 in the fourth quarter compared to $182,000 in the fourth quarter a year ago. In 2015, non-interest income increased 43.7% to $1.1 million compared to $788,000 in 2014. The increase was primarily due to Bank Owned Life Insurance and the gain on sale of securities.
“Absent the elevated expenses associated with non-performing assets the Bank had a strong performance in 2015. By moving out our non-performing assets and associated expenses, we will have a clean balance sheet and a strong platform for profitable growth,” said Cloes.
Foundation’s fourth quarter total non-interest expense increased to $6.2 million, compared to $3.9 million in the preceding quarter and $3.4 million in the fourth quarter one year ago. The increase is primarily attributable to higher costs associated with foreclosed assets and legal fees as well as severance costs related to the prior CEO’s departure. In the full year 2015, total non-interest expense was $16.5 million compared to $12.1 million in 2014.
Capital
Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:
| Dec 31, 2015 | Sep 30, 2015 | Dec 31, 2014 | |||||||
| Tier 1 Leverage (to average assets) | 9.74 | % | 9.70 | % | 9.54 | % | |||
| Tier 1 Risk-Based (to risk-weighted assets) | 12.19 | % | 11.96 | % | 12.78 | % | |||
| Tier 1 Common Capital (CET1) | 12.19 | % | 11.96 | % | ─ | ||||
| Total Risk-Based (to risk-weighted assets) | 13.33 | % | 13.22 | % | 14.04 | % | |||
In the first quarter of 2015, Foundation raised $15 million in new equity to fund future growth. The equity was through a private placement of convertible preferred shares. This capital raise allows the Company to continue to meet the growing needs of its existing and future clients in the business community.
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. Foundation Bancorp 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 except per share amounts) | |||||||||||
| December 31, 2015 | September 30, 2015 | December 31, 2014 | |||||||||
| Assets | |||||||||||
| Cash and Due from Banks | $ | 8,819 | $ | 10,293 | $ | 11,245 | |||||
| Interest-Bearing Deposits in Banks | 45,540 | 45,519 | 33,976 | ||||||||
| Investments | 85,646 | 88,436 | 60,720 | ||||||||
| Loans Held for Sale | 407 | 618 | - | ||||||||
| Loans | 287,769 | 296,993 | 283,173 | ||||||||
| Allowance for Loan Losses | (5,774 | ) | (5,692 | ) | (5,615 | ) | |||||
| Loans, net | 281,995 | 291,301 | 277,558 | ||||||||
| Leaseholds and Equipment, net | 532 | 581 | 640 | ||||||||
| Foreclosed Assets | 3,861 | 6,768 | 7,280 | ||||||||
| Bank Owned Life Insurance | 11,330 | 11,231 | - | ||||||||
| Accrued Interest Receivable and Other Assets | 8,411 | 7,049 | 6,729 | ||||||||
| Total Assets | $ | 446,541 | $ | 461,796 | $ | 398,148 | |||||
| Liabilities | |||||||||||
| Noninterest-Bearing Demand Deposits | $ | 174,735 | $ | 187,487 | $ | 140,460 | |||||
| Interest-Bearing Checking | |||||||||||
| and Savings Accounts | 34,037 | 38,233 | 37,515 | ||||||||
| Money Market Accounts | 172,327 | 169,033 | 149,367 | ||||||||
| Certificates of Deposit | 9,100 | 9,129 | 15,251 | ||||||||
| Total Deposits | 390,199 | 403,882 | 342,593 | ||||||||
| Borrowings | 7,246 | 8,580 | 17,341 | ||||||||
| Other Liabilities | 3,937 | 1,907 | 3,851 | ||||||||
| Total Liabilities | 401,382 | 414,369 | 363,785 | ||||||||
| Stockholders' Equity | |||||||||||
| Preferred Stock (1) | 15 | 15 | - | ||||||||
| Common Stock (2) | 3,560 | 3,556 | 3,530 | ||||||||
| Additional Paid-in Capital | 53,294 | 52,692 | 38,921 | ||||||||
| Retained Earnings (Deficit) | (11,290 | ) | (9,151 | ) | (8,060 | ) | |||||
| Accumulated Other Comprehensive (Loss) Income | (420 | ) | 315 | (28 | ) | ||||||
| Total Stockholders’ Equity | 45,159 | 47,427 | 34,363 | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | 446,541 | $ | 461,796 | $ | 398,148 | |||||
| (1) $1 Par Value, Shares Authorized 1,000,000, issued and outstanding 15,000, 15,000 and 0 respectively. | |||||||||||
| (2) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,559,738, 3,555,976 and 3,529,976 respectively. | |||||||||||
| Book Value per Share, Common Stock | $ | 8.47 | $ | 9.12 | $ | 9.73 | |||||
| Common Equity Ratio | 6.8 | % | 7.0 | % | 8.6 | % | |||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||||
| (Unaudited) (dollars in 000's, except per share amounts) | For the Quarter Ended | For the Twelve Months Ended | ||||||||||||||||||||||||
| December 31, 2015 | September 30, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||||||||||||||||||
| Interest Income | ||||||||||||||||||||||||||
| Loans, Including Fees | $ | 3,517 | $ | 3,432 | $ | 3,778 | $ | 13,791 | $ | 13,818 | ||||||||||||||||
| Investments | 469 | 459 | 295 | 1,541 | 901 | |||||||||||||||||||||
| Other | 35 | 33 | 23 | 129 | 94 | |||||||||||||||||||||
| Total Interest Income | 4,021 | 3,924 | 4,096 | 15,461 | 14,813 | |||||||||||||||||||||
| Interest Expense | ||||||||||||||||||||||||||
| Deposits | 189 | 212 | 213 | 811 | 848 | |||||||||||||||||||||
| Borrowings | 45 | 43 | 137 | 269 | 324 | |||||||||||||||||||||
| Total Interest Expense | 234 | 255 | 350 | 1,080 | 1,172 | |||||||||||||||||||||
| Net Interest Income Before Provision | 3,787 | 3,669 | 3,746 | 14,381 | 13,641 | |||||||||||||||||||||
| Provision for Loan Losses | - | - | 772 | 2,996 | 772 | |||||||||||||||||||||
| Net Interest Income | ||||||||||||||||||||||||||
| After Provision for Loan Losses | 3,787 | 3,669 | 2,974 | 11,385 | 12,869 | |||||||||||||||||||||
| Noninterest Income | ||||||||||||||||||||||||||
| Service Fees | 118 | 118 | 122 | 470 | 471 | |||||||||||||||||||||
| OTTI on Investments | - | (5 | ) | (5 | ) | (5 | ) | (5 | ) | |||||||||||||||||
| Bank Owned Life Insurance | 99 | 98 | - | 330 | - | |||||||||||||||||||||
| Gain on Sale of Loans | 7 | 16 | 6 | 99 | 197 | |||||||||||||||||||||
| Gain on Sale of Securities | - | - | 53 | 211 | 96 | |||||||||||||||||||||
| Other Noninterest Income | 5 | 8 | 6 | 27 | 29 | |||||||||||||||||||||
| Total Noninterest Income | 229 | 235 | 182 | 1,132 | 788 | |||||||||||||||||||||
| Noninterest Expense | ||||||||||||||||||||||||||
| Salaries and Employee Benefits | 2,089 | 1,540 | 1,401 | 6,806 | 5,644 | |||||||||||||||||||||
| Occupancy and Equipment | 268 | 259 | 320 | 1,003 | 1,266 | |||||||||||||||||||||
| Data Processing | 197 | 192 | 182 | 764 | 729 | |||||||||||||||||||||
| Legal | 268 | 428 | 167 | 1,368 | 530 | |||||||||||||||||||||
| Professional | 22 | 22 | 31 | 86 | 168 | |||||||||||||||||||||
| Loan Expenses | 53 | 32 | 65 | 249 | 234 | |||||||||||||||||||||
| FDIC/State Assessments | 162 | 168 | 144 | 631 | 513 | |||||||||||||||||||||
| Foreclosed Assets, Net | 2,235 | 628 | 454 | 3,012 | 478 | |||||||||||||||||||||
| Insurance | 51 | 62 | 57 | 227 | 237 | |||||||||||||||||||||
| City and State Taxes | 65 | 77 | 80 | 272 | 294 | |||||||||||||||||||||
| Other | 759 | 511 | 479 | 2,057 | 1,958 | |||||||||||||||||||||
| Total Noninterest Expense | 6,169 | 3,919 | 3,380 | 16,475 | 12,051 | |||||||||||||||||||||
| Income (Loss) Before Provision | ||||||||||||||||||||||||||
| (Benefit) for Income Tax | (2,153 | ) | (15 | ) | (224 | ) | (3,958 | ) | 1,606 | |||||||||||||||||
| Provision (Benefit) for Income Tax | (788 | ) | (38 | ) | (93 | ) | (1,501 | ) | 548 | |||||||||||||||||
| NET INCOME (LOSS) | $ | (1,365 | ) | $ | 23 | $ | (131 | ) | $ | (2,457 | ) | $ | 1,058 | |||||||||||||
| Preferred dividends | 253 | 253 | - | 773 | - | |||||||||||||||||||||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (1,618 | ) | $ | (230 | ) | $ | (131 | ) | $ | (3,230 | ) | $ | 1,058 | ||||||||||||
| Return on average equity | -19.55 | % | -2.78 | % | -1.48 | % | -9.40 | % | 3.09 | % | ||||||||||||||||
| Return on average assets | -1.43 | % | -0.20 | % | -0.13 | % | -0.73 | % | 0.28 | % | ||||||||||||||||
| Net interest margin | 3.52 | % | 3.35 | % | 3.89 | % | 3.44 | % | 3.78 | % | ||||||||||||||||
| Efficiency ratio | 153.85 | % | 100.67 | % | 87.30 | % | 108.30 | % | 86.47 | % | ||||||||||||||||
| Basic earning (loss) per avg. share | $ | (0.45 | ) | $ | (0.06 | ) | $ | (0.04 | ) | $ | (0.91 | ) | $ | 0.30 | ||||||||||||
| Diluted earning (loss) per avg. share (1) | $ | - | $ | - | $ | - | $ | - | $ | 0.29 | ||||||||||||||||
| Weighted avg common shares outstanding | 3,556,640 | 3,555,976 | 3,526,292 | |||||||||||||||||||||||
| Weighted avg dilutive shares outstanding | 5,109,778 | 5,121,479 | 3,666,671 | |||||||||||||||||||||||
| Loan to deposit ratio | 73.63 | % | 72.83 | % | 82.59 | % | ||||||||||||||||||||
| (1) Common stock equivalents are not included if there is a loss to common shareholders as the shares were antidilutive. | ||||||||||||||||||||||||||
| SELECTED INFORMATION | Quarter Ended | ||||||||||||||||||||
| Dec 31 | Sept 30 | June 30 | Mar 31, | Dec 31, | |||||||||||||||||
| 2015 | 2015 | 2015 | 2015 | 2014 | |||||||||||||||||
| Bank Only | |||||||||||||||||||||
| Risk Based Capital Ratio | 13.33 | % | 13.22 | % | 13.64 | % | 14.19 | % | 14.04 | % | |||||||||||
| Leverage Ratio | 9.74 | % | 9.70 | % | 10.01 | % | 10.88 | % | 9.54 | % | |||||||||||
| C&I Loans to Loans | 36.53 | % | 37.55 | % | 37.75 | % | 35.05 | % | 35.96 | % | |||||||||||
| Real Estate Loans to Loans | 60.93 | % | 60.29 | % | 59.57 | % | 61.73 | % | 60.75 | % | |||||||||||
| Consumer Loans to Loans | 0.22 | % | 0.08 | % | 0.08 | % | 0.15 | % | 0.19 | % | |||||||||||
| Allowance for Loan Losses (000's) | $ | 5,774 | $ | 5,692 | $ | 5,580 | $ | 5,488 | $ | 5,615 | |||||||||||
| Allowance for Loan Losses to Loans | 2.01 | % | 1.91 | % | 1.95 | % | 1.94 | % | 1.98 | % | |||||||||||
| Total Noncurrent Loans to Loans | 2.61 | % | 3.70 | % | 3.78 | % | 4.80 | % | 4.43 | % | |||||||||||
| Nonperforming assets to assets | 3.09 | % | 4.34 | % | 4.93 | % | 5.59 | % | 5.60 | % | |||||||||||
| Net Charge-Offs (Recoveries) (000's) | $ | (83 | ) | $ | (112 | ) | $ | 2,904 | $ | 128 | $ | (415 | ) | ||||||||
| Net Charge-Offs (Recoveries) in Qtr | |||||||||||||||||||||
| to Avg Total Loans | -0.03 | % | -0.04 | % | 1.02 | % | 0.05 | % | -0.15 | % | |||||||||||