BELLEVUE, Wash., April 26, 2013 (GLOBE NEWSWIRE) -- Foundation Bancorp, Inc. (OTCBB:FDNB), the holding company for Foundation Bank, today reported its earnings increased 182% to a record $998,000, or $0.28 per diluted share, in the first quarter of 2013 compared to $354,000, or $0.10 per diluted share, in the first quarter a year ago.
"Our top and bottom line improvements, coupled with a stable local economy and loan growth helped drive our record profits in the first quarter," said Diane Dewbrey, President and CEO. "Profitability strengthened even further as we continued to substantially reduce legal costs and other expenses related to repossessed properties. We anticipate that 2013 will be a very strong year for us."
First Quarter 2013 Highlights:
- Net income increased 182% to $998,000 in the first quarter of 2013 compared to $354,000 in the first quarter a year ago.
- Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets was $31.9 million, or 9.2% of total assets, at March 31, 2013 compared to $35.6 million, or 10.5% of total assets, a year ago.
- Net interest margin was 3.93% for the quarter.
- Total non-interest expense decreased 21% to $2.4 million in the first quarter of 2013, compared to $3.1 million in the first quarter a year ago.
- Loans, excluding the decrease in non-accrual loans, increased 11% compared to the first quarter of 2012.
- Non-interest bearing demand deposits increased 16% compared to a year ago and represent more than one third of total deposits at March 31, 2013.
- Return on average equity was 15.12%.
Asset Quality
"Credit costs such as loan loss provisions, loan write downs, attorney fees and collection fees continue to decline and were significantly below those of a year ago as we continued to make meaningful progress at reducing problem assets," said Dewbrey.
Foundation had $21.9 million in loans classified as non-accrual, but 75.8% or $16.6 million of these loans are performing as agreed on a revised payment schedules. Total non-accrual loans were $21.9 million at March 31, 2013 compared to $17.6 million three months earlier and $24.1 million at March 31, 2012.
"While non-accrual loans increased during the quarter, it was primarily due to one loan totaling $3.9 million. This loan is collateralized and we are working with the borrower to come to a favorable resolution. We believe that this is an isolated case and we continue to believe the worst of the credit problems are behind us," Dewbrey said.
Foreclosed assets (including Other Real Estate Owned (OREO) and Other Property Owned) declined during the quarter to $7.9 million at March 31, 2013, compared to $9.2 million at December 31, 2012. The OREO balance of $7.1 million consists of 7 properties with one property accounting for over 50% of the total. The one property is a single family residence located on Lake Washington. The property is currently under contract for closing later in the year. Of the total amount in OREO, Foundation is receiving rent/lease payments on $5.2 million.
"During the first quarter we reported net loan recoveries of $12,000 compared to net charge-offs of $327,000 in the first quarter a year ago," said Dewbrey.
Non-performing assets (NPAs), consisting of non-accrual loans and foreclosed assets was $29.9 million, or 8.6% of total assets, at March 31, 2013 compared to $33.6 million, or 9.9% of total assets, a year ago. The overall credit quality of the loan portfolio continued to show steady improvements year-over-year and assets classified as performing, but internally risk rated special mention and substandard also continued to improve.
Balance Sheet Review
Foundation's total loans increased 9.1% to $285.8 million at March 31, 2013 compared to $261.9 million a year ago. Excluding non-accrual loans, loans increased 11.0% year-over-year. Commercial real estate (CRE) loans totaled $185.7 million at March 31, 2013 and comprise 65.0% 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 $49.2 million or 26.5% of the total CRE portfolio. Construction and land loans represented 9.9% of the total loan portfolio and the C&I portfolio represented 33.4% of the total loan portfolio.
"While total deposits only increased modestly compared to a year ago, client related deposits increased 11.5%. This is evidenced in the improvement in our deposit mix since the reduction in certificate of deposits was primarily due to reducing wholesale funding. The net result was to lower our funding costs by reducing our reliance on higher cost certificates of deposit. To that point, our non-interest-bearing demand deposits increased 16% from a year ago," said Dewbrey. Total deposits increased 2% to $308.1 million at March 31, 2013 compared to $302.0 million at March 31, 2012.
Core deposits, defined as non-interest-bearing demand deposits, interest-bearing checking and savings accounts and money market accounts, improved and now represent 86.3% of total deposits at March 31, 2013, compared to 76.7% of total deposits a year earlier. Certificates of deposit declined to $42.1 million at March 31, 2013 compared to $70.4 million a year ago from a reduction in wholesale funding.
Total shareholder equity increased 10.0% to $27.2 million at March 31, 2013, compared to $24.7 million a year ago. Book value per share was $7.72 at the end of March compared to $7.03 at March 31, 2012. Foundation's tangible common equity ratio was 7.8% at March 31, 2013.
Results of Operations
Foundation's first quarter net interest income before provision for loan losses was $3.2 million, compared to $3.3 million in the first quarter a year ago. First quarter net interest margin was 3.93% compared to 3.91% in the preceding quarter and 4.12% in the first quarter a year ago. "Our net interest margin expanded slightly from the preceding quarter but was down compared to the first quarter a year ago due to the continued downward pressure on loan yields," said Dewbrey
Non-interest income increased 57.7% to $205,000 in the first quarter of 2013 compared to $130,000 in the first quarter a year ago, primarily as a result of the increase in SBA loan sales.
"Non-interest, or other operating expense, was down substantially compared to a year ago with legal expenses and other costs associated with OREO representing the majority of the decline," said Dewbrey. "Additionally, we recovered $256,000 in foreclosed assets during the quarter which provided a net recovery of $242,000 and contributed to the expense reduction." Foundation's total non-interest expense decreased 21.3% to $2.4 million in the first quarter, compared to $3.1 million in the first quarter a year ago.
Capital
Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:
| Mar 31, 2013 | Dec 31, 2012 | Mar 31, 2012 | |
| Tier 1 Leverage (to average assets) | 10.13% | 9.56% | 9.55% |
| Tier 1 risk-based (to risk-weighted assets) | 12.04% | 11.39% | 11.47% |
| Total risk-based (to risk-weighted assets) | 13.31% | 12.66% | 12.74% |
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, 2013 | December 31, 2012 | March 31, 2012 | |
| Assets | |||
| Cash and Due from Banks | $ 10,889 | $ 12,657 | $ 11,950 |
| Interest-Bearing Deposits in Banks | 27,277 | 33,965 | 28,634 |
| Investments | 20,906 | 25,050 | 33,328 |
| Loans Held for Sale | -- | 192 | -- |
| Loans | 285,760 | 288,895 | 261,868 |
| Allowance for Loan Losses | (9,385) | (9,373) | (10,788) |
| Loans, net | 276,375 | 279,522 | 251,080 |
| Leaseholds and Equipment, net | 640 | 609 | 590 |
| Foreclosed Assets | 7,977 | 9,163 | 9,428 |
| Accrued Interest Receivable and Other Assets | 2,968 | 3,149 | 4,088 |
| Total Assets | $ 347,032 | $ 364,307 | $ 339,098 |
| Liabilities | |||
| Noninterest-Bearing Demand Deposits | $ 112,172 | $ 111,135 | $ 97,075 |
| Interest-Bearing Checking and Savings Accounts | 25,880 | 27,892 | 18,035 |
| Money Market Accounts | 127,884 | 128,243 | 116,442 |
| Certificates of Deposit | 42,128 | 58,223 | 70,416 |
| Total Deposits | 308,064 | 325,493 | 301,969 |
| Borrowings | 9,396 | 9,875 | 10,260 |
| Other Liabilities | 2,373 | 2,644 | 2,132 |
| Total Liabilities | 319,833 | 338,012 | 314,360 |
| Stockholders' Equity | |||
| Common Stock (1) | 3,522 | 3,522 | 3,517 |
| Additional Paid-in Capital | 38,708 | 38,703 | 38,675 |
| Retained Earnings (Deficit) | (15,226) | (16,217) | (18,045) |
| Accumulated Other Comprehensive Income | 195 | 287 | 591 |
| Total Stockholders' Equity | 27,199 | 26,295 | 24,738 |
| Total Liabilities and Stockholders' Equity | $ 347,032 | $ 364,307 | $ 339,098 |
| (1) $1 Par Value, Shares Authorized 25,000,000, Issued and outstanding 3,522,359, 3,522,341 and 3,517,158 respectively. | |||
| Book Value per Share | 7.72 | 7.47 | 7.03 |
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||
| (Unaudited) (dollars in 000's) | For the Three Months Ended | ||
| March 31, 2013 | December 31, 2012 | March 31, 2012 | |
| Interest Income | |||
| Loans, including Fees | $ 3,380 | $ 3,498 | $ 3,430 |
| Investments | 133 | 173 | 313 |
| Other | 15 | 14 | 12 |
| Total Interest Income | 3,528 | 3,685 | 3,755 |
| Interest Expense | |||
| Deposits | 249 | 277 | 375 |
| Borrowings | 84 | 91 | 103 |
| Total Interest Expense | 333 | 368 | 478 |
| Net Interest Income Before Provision | 3,195 | 3,317 | 3,277 |
| Provision for Loan Losses | -- | -- | -- |
| Net Interest Income | |||
| After Provision for Loan Losses | 3,195 | 3,317 | 3,277 |
| Noninterest Income | |||
| Deposit Account and Service Fees | 70 | 75 | 63 |
| OTTI on Investments | (6) | -- | -- |
| Gain on Sale of Loans | 56 | 290 | 4 |
| Other Noninterest Income | 85 | 89 | 63 |
| Total Noninterest Income | 205 | 454 | 130 |
| Noninterest Expense | |||
| Salaries and Employee Benefits | 1,412 | 1,379 | 1,240 |
| Occupancy and Equipment | 217 | 293 | 203 |
| Data Processing | 178 | 122 | 154 |
| Legal | 73 | 91 | 289 |
| Professional | 118 | 67 | 237 |
| Loan Expenses | 92 | 109 | 117 |
| FDIC/State Assessments | 186 | 168 | 172 |
| Foreclosed Assets, Net | (242) | 465 | 187 |
| Insurance | 56 | 56 | 78 |
| City and State Taxes | 80 | 82 | 77 |
| Other | 231 | 388 | 298 |
| Total Noninterest Expense | 2,402 | 3,220 | 3,053 |
| Income Before Provision for Income Tax | 998 | 551 | 354 |
| Provision for Income Tax | -- | -- | -- |
| NET INCOME | $ 998 | $ 551 | $ 354 |
| Return on average equity | 15.12% | 8.28% | 5.77% |
| Return on average assets | 1.18% | 0.62% | 0.43% |
| Net Interest Margin | 3.93% | 3.91% | 4.12% |
| Efficiency Ratio | 79.87% | 92.67% | 90.05% |
| Diluted Earning Per Avg. Share | $ 0.28 | $ 0.16 | $ 0.10 |
| Loan to deposit ratio | 92.38% | 88.35% | 88.35% |
| Book value per share | 7.72 | 7.47 | 7.47 |
| SELECTED INFORMATION | Quarter Ended | ||||
| Mar 31, | Dec 31, | Sept 30, | June 30, | Mar 31, | |
| 2013 | 2012 | 2012 | 2012 | 2012 | |
| Bank Only | |||||
| Risk Based Capital Ratio | 13.31% | 12.66% | 12.41% | 12.76% | 12.74% |
| Leverage Ratio | 10.13% | 9.56% | 9.38% | 9.58% | 9.55% |
| C&I Loans to Loans | 32.54% | 33.91% | 37.13% | 34.10% | 33.90% |
| Real Estate Loans to Loans | 66.13% | 64.67% | 61.33% | 64.11% | 64.10% |
| Consumer Loans to Loans | 0.36% | 0.28% | 0.33% | 0.29% | 0.37% |
| Allowance for Loan Loss Reserves (000's) | $ 9,385 | $ 9,373 | $ 9,087 | $ 9,459 | $10,788 |
| Allowance for Loan Loss Reserves to Loans | 3.28% | 3.24% | 3.19% | 3.48% | 4.12% |
| Total Noncurrent Loans to Loans | 7.69% | 6.08% | 6.34% | 8.08% | 9.22% |
| Nonperforming assets to assets | 9.25% | 8.33% | 8.75% | 9.83% | 11.29% |
| Texas Ratio | 72.33% | 69.79% | 73.14% | 82.95% | 88.44% |
| Net Charge-Offs (000's) | $ (12) | $ (286) | $ 371 | $ 1,329 | $ 327 |
| Net Charge-Offs in Qtr to Avg Total Loans | 0.00% | -0.10% | 0.13% | 0.50% | 0.12% |