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Foundation Bancorp Earns $536,000, or $0.15 Per Diluted Share, in First Quarter 2014, Results Highlighted by Strong Deposit Growth


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:

  • 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.

     
  • 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.

     
  • Allowance for loan losses stood at 1.82% of gross loans compared to 1.86% three months earlier.

     
  • 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.

     
  • Non-interest bearing demand deposits increased 13.8% compared to a year ago and represent 39.6% of total deposits at March 31, 2014.

     
  • Core deposits (which exclude time deposits) represent 90.1% of total deposits at March 31, 2014.

     
  • 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%
CONTACT: Randy Cloes, EVP & CFO
         425 691 5014
         www.foundationbank.com
Source: Foundation Bancorp