BELLEVUE, Wash., July 22, 2016 (GLOBE NEWSWIRE) — Foundation Bancorp, Inc. (OTCPink:FDNB), (Foundation or Company), the holding company for Foundation Bank, today reported earnings of $761,000 in the second quarter of 2016, compared to net income of $743,000 in the preceding quarter. In the second quarter a year ago, Foundation lost $1.5 million following a $3.0 million total increase to its provision for loan losses. In the first six months of 2016, Foundation earned $1.5 million, compared to a net loss of $1.1 million in the first six months of 2015.
“On April 26, 2016, we announced that Foundation Bancorp had entered into a definitive merger agreement with Pacific Continental Corporation,” said Duane Woods, Vice Chair and Interim CEO. “Pacific Continental Bank is one of the most successful and well-regarded community business banks in the Pacific Northwest. We know our clients and employees will thrive in the culture and business environment Pacific Continental has created for over 40 years.”
Regulatory approvals have been received from the FDIC and Oregon State Department of Consumer and Business Services. The merger is expected to be completed during the third quarter of 2016.
After preferred dividends, net income available to common shareholders for the second quarter was $508,000, or $0.15 per diluted share, compared to net income of $490,000, or $0.15 per diluted share in the preceding quarter and a net loss of $1.7 million, or $0.48 per share, in the second quarter of 2015.
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.
Second Quarter 2016 Highlights:
- Earnings per diluted share were $0.15 in the second quarter of 2016.
- Allowance for loan losses was 1.94% of gross loans.
- Total non-accrual loans decreased 12.5% to $9.4 million at June 30, 2016 compared to $10.8 million at quarter-end a year earlier. Excluding performing restructured loans, non-accrual loans were $5.9 million, or 2.0% of total loans, at June 30, 2016.
- Non-interest bearing demand deposits increased 6.7% compared to a year ago, and represent 43.7% of deposits.
- Core client deposits represent 100% of total deposits at June 30, 2016.
- The ratio of tangible common equity to tangible assets (common equity ratio) was 7.3% at June 30, 2016.
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 June 30, 2016, Foundation held $3.5 million in performing restructured loans that were paying as agreed, but are included in non-accrual loans. Total non-accrual loans decreased 13.5% to $9.4 million at June 30, 2016, compared to $10.8 million one year earlier but increased compared to $7.4 million three months earlier. Excluding performing restructured loans, non-accrual loans were $5.9 million, or 2.0% of total loans at June 30, 2016.
At June 30, 2016, there were $911,000 in foreclosed assets, including Other Real Estate Owned (OREO) and Other Property Owned (OPO), compared to foreclosed assets of $8.1 million a year ago. At March 31, 2016 there were no foreclosed assets on the books. “Our OREO balance increased during the current quarter but the fair market value is twice the carrying value that we have it for on the books, so no loss is expected,” noted Randy Cloes, CFO.
Non-performing assets (NPAs), consisting of non-accrual loans, OREO, OPO and past due loans over 90 days, was $10.3 million, or 2.3% of total assets at June 30, 2016 compared to $7.4 million, or 1.7% of total assets, at March 31, 2016 and decreased 45.6% compared to $18.9 million, or 4.4% of total assets a year ago.
Balance Sheet Review
Total assets were $444.9 million at June 30, 2016, compared to $435.0 million a year earlier and $422.4 million at March 31, 2016. The total loan portfolio, excluding loans held for sale, was up 3.9% to $298.1 million at June 30, 2016, compared to $286.8 million a year ago, and was down modestly compared to $299.3 million three months earlier. Commercial real estate (CRE) loans totaled $116.5 million at June 30, 2016, and comprise 39.1% of total loans. 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 $53.2 million or 17.8% and construction and land loans represented 8.2% at June 30, 2016. The commercial and industrial (C&I) portfolio represented 31.9% of the total loan portfolio at June 30, 2016.
Foundation’s total deposits were $388.9 million at June 30, 2016 compared to $367.5 million at March 31, 2016, and $378.5 million a year earlier. Core client deposits represented 100% of total deposits at quarter-end. Non-interest bearing demand deposits increased 6.7% compared to a year ago. Total transaction accounts represent 52.3%, money market and savings accounts represent 45.7%, and certificates of deposits (CDs) represent only 1.9% of the total deposit portfolio at June 30, 2016. The ratio of loans to deposits was 76.3% at June 30, 2016.
Total stockholder equity was $47.5 million at June 30, 2016, compared to $47.2 million a year ago. Book value per share for the common shareholder was $9.10 at June 30, 2016, compared to $9.04 a year ago. The common equity ratio remained strong at 7.3% at June 30, 2016.
Results of Operations
Foundation’s first quarter net interest margin was 3.74%, a 16 basis point improvement compared to the preceding quarter and a 15 basis point improvement compared to the second quarter a year ago. In the first six months of 2016, the net interest margin was 3.62% compared to 3.50% in the first six months of 2015.
Second quarter net interest income before provision for loan losses increased 7.6% to $3.9 million, compared to $3.6 million in the second quarter a year ago. In the first six months of the year, net interest income increased 10.4% to $7.6 million compared to $6.9 million in the first six months of 2015. Non-interest income was $199,000 in the second quarter compared to $499,000 in the second quarter a year ago. In the first six months of the year, non-interest income was $673,000 compared to $670,000 in the same period a year earlier.
“We maintained tight control over our operating expenses during the quarter, but had $400,000 in M&A legal expenses due to the pending merger,” said Cloes. Foundation’s second quarter total non-interest expense was $2.9 million, compared to $3.2 million in the preceding quarter and $3.4 million in the second quarter one year ago. In the first six months of 2016 non-interest expense was $6.1 million compared to $6.4 million in the first six months of 2015.
Capital
Foundation Bank continues to remain well capitalized by regulatory guidelines. Capital ratios for the Bank are presented as follows:
| Jun 30, 2016 | Mar 31, 2016 | Jun 30, 2015 | |||||||
| Tier 1 Leverage (to average assets) | 10.75 | % | 10.35 | % | 10.01 | % | |||
| Tier 1 Risk-Based (to risk-weighted assets) | 12.87 | % | 12.31 | % | 12.37 | % | |||
| Tier 1 Common Capital (CET1) | 12.87 | % | 12.31 | % | 12.37 | % | |||
| Total Risk-Based (to risk-weighted assets) | 14.12 | % | 13.57 | % | 13.64 | % | |||
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) | |||||||||
| June 30, 2016 |
December 31, 2015 |
June 30, 2015 |
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| Assets | |||||||||
| Cash and Due from Banks | $ | 8,480 | $ | 8,819 | $ | 10,459 | |||
| Interest-Bearing Deposits in Banks | 33,225 | 45,540 | 40,192 | ||||||
| Investments | 91,662 | 85,647 | 76,253 | ||||||
| Loans Held for Sale | – | 407 | – | ||||||
| Loans | 298,067 | 287,769 | 286,795 | ||||||
| Allowance for Loan Losses | (5,796 | ) | (5,774 | ) | (5,580 | ) | |||
| Loans, net | 292,271 | 281,995 | 281,215 | ||||||
| Leaseholds and Equipment, net | 439 | 532 | 622 | ||||||
| Foreclosed Assets | 911 | 3,861 | 8,086 | ||||||
| Bank Owned Life Insurance | 11,512 | 11,330 | 11,134 | ||||||
| Accrued Interest Receivable and Other Assets | 6,442 | 8,411 | 7,008 | ||||||
| Total Assets | $ | 444,942 | $ | 446,542 | $ | 434,969 | |||
| Liabilities | |||||||||
| Noninterest-Bearing Demand Deposits | $ | 170,100 | $ | 174,735 | $ | 159,387 | |||
| Interest-Bearing Checking | |||||||||
| and Savings Accounts | 34,398 | 34,037 | 46,947 | ||||||
| Money Market Accounts | 176,942 | 172,327 | 161,261 | ||||||
| Certificates of Deposit | 7,427 | 9,100 | 10,951 | ||||||
| Total Deposits | 388,867 | 390,199 | 378,546 | ||||||
| Borrowings | 6,186 | 7,246 | 7,215 | ||||||
| Other Liabilities | 2,341 | 3,938 | 2,049 | ||||||
| Total Liabilities | 397,394 | 401,383 | 387,810 | ||||||
| Stockholders’ Equity | |||||||||
| Preferred Stock (1) | 15 | 15 | 15 | ||||||
| Common Stock (2) | 3,577 | 3,560 | 3,556 | ||||||
| Additional Paid-in Capital | 52,620 | 52,520 | 53,144 | ||||||
| Retained Earnings (Deficit) | (9,518 | ) | (10,516 | ) | (9,441 | ) | |||
| Accumulated Other Comprehensive (Loss) Income | 854 | (420 | ) | (115 | ) | ||||
| Total Stockholders’ Equity | 47,548 | 45,159 | 47,159 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 444,942 | $ | 446,542 | $ | 434,969 | |||
| (1) $1 Par Value, Shares Authorized 1,000,000, issued and outstanding 15,000, 15,000 and 15,000 respectively. | |||||||||
| (2) $1 Par Value, Shares Authorized 25,000,000, issued and outstanding 3,576,738, 3,559,738, and 3,555,976 respectively. | |||||||||
| Book Value per Share, Common Stock | $ | 9.10 | $ | 8.47 | $ | 9.04 | |||
| Common Equity Ratio | 7.3 | % | 6.8 | % | 7.4 | % | |||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
| (Unaudited) (dollars in 000’s, except per | For the Quarter Ended |
For the Six Months Ended |
|||||||||||||||
| share amounts) | June 30, 2016 |
March 31, 2016 |
June 30, 2015 |
June 30, 2016 |
June 30, 2015 |
||||||||||||
| Interest Income | |||||||||||||||||
| Loans, Including Fees | $ | 3,564 | $ | 3,471 | $ | 3,504 | $ | 7,035 | $ | 6,841 | |||||||
| Investments | 476 | 480 | 312 | 956 | 614 | ||||||||||||
| Other | 27 | 46 | 32 | 73 | 60 | ||||||||||||
| Total Interest Income | 4,067 | 3,997 | 3,848 | 8,064 | 7,515 | ||||||||||||
| Interest Expense | |||||||||||||||||
| Deposits | 170 | 170 | 206 | 340 | 410 | ||||||||||||
| Borrowings | 38 | 39 | 56 | 77 | 181 | ||||||||||||
| Total Interest Expense | 208 | 209 | 262 | 417 | 591 | ||||||||||||
| Net Interest Income Before Provision | 3,859 | 3,788 | 3,586 | 7,647 | 6,924 | ||||||||||||
| Provision for Loan Losses | – | – | (2,996 | ) | – | (2,996 | ) | ||||||||||
| Net Interest Income | |||||||||||||||||
| After Provision for Loan Losses | 3,859 | 3,788 | 590 | 7,647 | 3,928 | ||||||||||||
| Noninterest Income | |||||||||||||||||
| Service Fees | 83 | 103 | 119 | 186 | 235 | ||||||||||||
| OTTI on Investments | (4 | ) | – | – | (4 | ) | – | ||||||||||
| Bank Owned Life Insurance | 90 | 92 | 89 | 182 | 134 | ||||||||||||
| Gain on Sale of Loans | 2 | 73 | 74 | 75 | 76 | ||||||||||||
| Gain on Sale of Securities | – | – | 211 | – | 211 | ||||||||||||
| Other Noninterest Income | 28 | 206 | 6 | 234 | 14 | ||||||||||||
| Total Noninterest Income | 199 | 474 | 499 | 673 | 670 | ||||||||||||
| Noninterest Expense | |||||||||||||||||
| Salaries and Employee Benefits | 1,374 | 1,654 | 1,610 | 3,027 | 3,177 | ||||||||||||
| Occupancy and Equipment | 255 | 259 | 264 | 514 | 476 | ||||||||||||
| Data Processing | 171 | 186 | 187 | 357 | 375 | ||||||||||||
| Legal | 465 | 132 | 434 | 596 | 671 | ||||||||||||
| Professional | 18 | 21 | 20 | 39 | 42 | ||||||||||||
| Loan Expenses | 16 | 81 | 82 | 96 | 164 | ||||||||||||
| FDIC/State Assessments | 160 | 161 | 152 | 321 | 301 | ||||||||||||
| Foreclosed Assets, Net | – | 17 | 87 | 17 | 150 | ||||||||||||
| Insurance | 58 | 58 | 57 | 116 | 115 | ||||||||||||
| City and State Taxes | 73 | 67 | 66 | 140 | 129 | ||||||||||||
| Other | 346 | 533 | 410 | 881 | 788 | ||||||||||||
| Total Noninterest Expense | 2,936 | 3,169 | 3,369 | 6,104 | 6,388 | ||||||||||||
| Income (Loss) Before Provision | |||||||||||||||||
| (Benefit) for Income Tax | 1,122 | 1,093 | (2,280 | ) | 2,216 | (1,790 | ) | ||||||||||
| Provision (Benefit) for Income Tax | 361 | 350 | (831 | ) | 711 | (675 | ) | ||||||||||
| NET INCOME (LOSS) | $ | 761 | $ | 743 | $ | (1,449 | ) | $ | 1,505 | $ | (1,115 | ) | |||||
| Preferred dividends | 253 | 253 | 253 | 506 | 267 | ||||||||||||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS |
$ | 508 | $ | 490 | $ | (1,702 | ) | $ | 999 | $ | (1,382 | ) | |||||
| Return on average equity | 6.34 | % | 6.27 | % | -19.51 | % | 6.31 | % | -7.88 | % | |||||||
| Return on average assets | 0.47 | % | 0.44 | % | -1.60 | % | 0.45 | % | -0.66 | % | |||||||
| Net interest margin | 3.74 | % | 3.58 | % | 3.59 | % | 3.62 | % | 3.50 | % | |||||||
| Efficiency ratio | 72.46 | % | 79.88 | % | 88.66 | % | 76.14 | % | 87.46 | % | |||||||
| Basic earning (loss) per avg. share | $ | 0.14 | $ | 0.14 | $ | (0.48 | ) | $ | 0.28 | $ | (0.39 | ) | |||||
| Diluted earning (loss) per avg. share (1) | $ | 0.15 | $ | 0.15 | $ | – | $ | 0.29 | $ | – | |||||||
| Weighted avg common shares outstanding | 3,576,738 | 3,571,133 | 3,555,976 | ||||||||||||||
| Weighted avg dilutive shares outstanding | 5,110,103 | 5,113,499 | 5,112,665 | ||||||||||||||
| Loan to deposit ratio | 76.28 | % | 80.86 | % | 74.54 | % | |||||||||||
| (1) Common stock equivalents are not included if there is a loss to common shareholders as the shares were antidilutive. | |||||||||||||||||
| SELECTED INFORMATION | Quarter Ended | |||||||||||||||||||
| June 30 | Mar 31 | Dec 31 | Sept 30 | June 30 | ||||||||||||||||
| 2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||||||
| Bank Only | ||||||||||||||||||||
| Risk Based Capital Ratio | 14.12 | % | 13.57 | % | 13.33 | % | 13.22 | % | 13.64 | % | ||||||||||
| Leverage Ratio | 10.75 | % | 10.35 | % | 9.74 | % | 9.70 | % | 10.01 | % | ||||||||||
| C&I Loans to Loans | 31.92 | % | 35.20 | % | 36.53 | % | 37.55 | % | 37.75 | % | ||||||||||
| Real Estate Loans to Loans | 65.15 | % | 62.01 | % | 60.93 | % | 60.29 | % | 59.57 | % | ||||||||||
| Consumer Loans to Loans | 0.13 | % | 0.14 | % | 0.22 | % | 0.08 | % | 0.08 | % | ||||||||||
| Allowance for Loan Losses (000’s) | $ | 5,796 | $ | 5,737 | $ | 5,774 | $ | 5,692 | $ | 5,580 | ||||||||||
| Allowance for Loan Losses to Loans | 1.94 | % | 1.92 | % | 2.01 | % | 1.91 | % | 1.95 | % | ||||||||||
| Total Noncurrent Loans to Loans | 3.15 | % | 2.46 | % | 2.61 | % | 3.70 | % | 3.78 | % | ||||||||||
| Nonperforming assets to assets | 2.83 | % | 2.29 | % | 3.09 | % | 4.34 | % | 4.93 | % | ||||||||||
| Net Charge-Offs (Recoveries) (000’s) | $ | (59 | ) | $ | 38 | $ | (83 | ) | $ | (112 | ) | $ | 2,904 | |||||||
| Net Charge-Offs (Recoveries) in Qtr | ||||||||||||||||||||
| to Avg Total Loans | -0.02 | % | 0.01 | % | -0.03 | % | -0.04 | % | 1.02 | % | ||||||||||
CONTACT: Randy Cloes, EVP & CFO 425 691 5014 www.foundationbank.com