OREANDA-NEWS. Folsom Lake Bank reported net income of $238,459 for the second quarter of 2016, a 2.5% decrease over second quarter 2015 net income of $244,548 and $465,056 for the first half of 2016, a 14.1% increase over first half 2015 earnings of $407,760. The second quarter earnings were the Bank’s 26th consecutive quarter of profitability. Total assets increased $27.6 million to reach $187.9 million as of the end of June, net interest income was up 5.6% and shareholder equity grew 10.4% to reach $17.3 million or $10.87 per share. “We are pleased to see the continued strong growth at Folsom Lake Bank after nine years of successful operations,” said Robert J. Flautt, President and Chief Executive Officer. “The Bank continues to attract new deposit and loan relationships for clients looking for that extra level of personal attention and full service community banking."

Pre-tax earnings for the first six months of 2016 were $790,316, up $149,843 or 23.4% compared to first six months of 2015. Overall, the Bank’s pre-tax income was helped by strong growth in earning assets as well as lower non-interest expense. Pre-tax earnings for the second quarter of 2016 were $405,239, up $22,751, or 5.9%. Net income for first six months of 2016 was $465,056, up $57,296 or 14.1% compared to net income of $407,760 for the first six months of 2015. For the quarter, net income of $238,459 was down $6,089 or 2.5% compared to second quarter 2015 income of $244,548. Second quarter income was impacted negatively by weak loan growth and a lower margin and helped with a higher level of earning assets and flat growth in non-interest expense. Earnings per share for the second quarter were $0.15 unchanged from $0.15 per share in the second quarter of 2015. Earnings per share for the first six months of 2016 were $0.29 compared to $0.26 per share in the first half of 2015 up 14.1%.

Total assets were $187.9 million at June 30, 2016, up 17.2% or $27.6 million compared $160.3 million at June 30, 2015. Assets increased $5.5 million or 3.0% from March 31, 2015 to June 30, 2016. Total loans were $101.9 million at June 30, 2016, up $1.6 million or 1.6% from 2015. Loan demand has been weak in the Bank’s service area the last year but the outlook for the remainder of 2016 is favorable. Total deposits were $157.9 million, up $28.1 million, or 21.7% from 2015. The Bank continues to show solid growth with a focus on local core deposit growth as a key to maintaining a lower cost of funds and maintaining an adequate net interest margin in the continuing low rate interest environment.

Net interest income for the six month period ending June 30, 2016 was $2,883,131 up $151,652 or 5.6% over the same period in 2015. Net interest income for the second quarter of 2016 was $1,404,162 compared to $1,436,188 in the second quarter of 2015, a decrease of $32,026 or 2.2% over last year. The Bank’s net interest margin was 3.43% for the first half of 2016 down from 3.80% for the first half of 2015. For the quarter, net interest income declined $32,026 compared to 2015. Overall the Bank’s net interest income was helped by growth in earning assets, and hurt by a lower loan to deposit ratio and a lower yield on earning assets due to the current low interest rate environment. The Bank’s loan to deposit ratio also declined from 77.3% at June 30, 2015 to 64.5% at June 30, 2016 due to weak loan demand in the Bank’s market area.

Non-interest income for the second quarter ending June 2016 was $126,092, an increase of $14,446 or 12.9% over the second quarter of 2015.  On a year to date basis, the Bank earned $200,017 in non-interest income, virtually flat from the same six month period in 2015. Non-Interest expense for the first six months of 2016 was $2,342,922, a decrease of $23,153 or 1.0% over the first six months of 2015, and the Bank’s efficiency ratio improved over the same period from 80.7% to 76.0%. Non-Interest expense for the second quarter of 2016 was $1,175,016, a nominal increase of $9,670 or 0.8% over the second quarter of 2015.

The Bank had a negative provision to the allowance for loan and lease losses of $50,000 in the second quarter, adjusting the loss reserve from $1,516,920 at June 30, 2015 to $1,466,920 as of June 30, 2016, due to continually improving credit conditions. There have been no credit losses in the first six months of 2016 or 2015. Non accrual loans declined from $1,655,826 at June 30, 2015 to $0 at June 30, 2016. OREO also declined from $293,000 to $0, as the Bank eliminated the last of its non performing assets during the quarter. The Bank’s Allowance for Loan & Lease Losses (ALLL) was 1.44% of loans as of June 30, 2016 compared to 1.51% as of June 30, 2015. The balance in the Bank’s loan loss reserve is considered adequate to absorb the inherent risk of credit loss in the Bank’s loan portfolio.

Return on average assets was 0.55% for 2016 compared to 0.56% in 2015, a small decrease from one year ago. Return on average equity was 5.4% for the first half of 2016 and 5.2% for the first half of 2015.  

Tier 1 Capital at June 30, 2016 was $17,315,000, up from $15,678,000 at June 30, 2015, an increase of $1,637,000 or 10.4%. At June 30, 2016, the Bank’s Tier 1 Capital Ratio was 9.21% compared to 10.00% at June 30, 2015. Total Risk Based Capital to Risk Weighted Assets was 14.74% compared to 14.15% at quarter end 2016 and 2015, respectively. Both capital ratios are well above minimum regulatory standards to be considered a well-capitalized bank by the FDIC. Liquidity remains healthy at $79.6 million as of June 30, 2016, and the Bank maintained a moderate loan to deposit ratio of 64.5%. The Bank’s investment portfolio consists primarily of safe U.S. Government agency bonds and mortgage-backed securities.