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A Message from First Sound Bank Sound Publications News Center
A Message from First Sound Bank
November 25, 2012
Dear First Sound Shareholders,
I am pleased to report continued progress since our 2nd Quarter report. I delayed this report pending the resolution of some issues that have now been successfully concluded. For the 3rd Quarter, we reported a profit of $1.435 million compared with a $4.438 million quarterly loss in 2011. Year-to-date profit through September was $1.503 million compared to a loss of $6.965 million in 2011. Asset quality continued to improve, with non-performing assets at $5.350 million, down from $16.011 million a year ago. There has been further improvement since September 30.
We continued to shrink the asset size of the bank by resolving problem assets and shedding excess liquidity to strengthen capital ratios. We now have a Tier 1 leverage capital ratio of 4.13%, and a Total Risk-weighted ratio of 8.03%, up from 2.07% and 4.23%, respectively, a year ago. The Bank now meets the regulatory capital definition of "adequately capitalized" as opposed to "significantly undercapitalized" a year ago.
The 3rd Quarter results included the settlement agreement on a participation loan I mentioned in the last report. This resulted in the collection of $1.5 million of default interest (booked as a gain on sale) and payment in full of the balance on the foreclosed property. This was partially offset by charges to resolve problem assets and the issue of space previously occupied by a leasing company acquired in 2008. Last quarter I indicated we had negotiated an amendment of the lease to current market rates in order to be able to sublease the space. We have now subleased 85% of that space effective this month, resulting in savings of approximately $500 thousand annually. An accounting charge of $365 thousand for commissions, rent abatement and remaining fixture depreciation was taken in the 3rd Quarter.
The most significant recent event relates to the $7.4 million in TARP (Troubled Asset Relief Program) funds the Bank received in late 2008 before the onset of its troubled condition. When the U. S. Treasury Department, having made a profit on bank TARP, announced last March its intention to negotiate repayments with banks that were unable or not allowed by regulators to repay, I initiated discussions with them. In October, an agreement was reached with the Treasury for repayment of the Bank's TARP at a 50% discount ($3.7 million). This would include extinguishment of the accumulated unpaid dividends of approximately $1.3 million to-date on the preferred stock issued to the Treasury for the TARP. The agreement requires the Bank to raise $7 million in new capital, bringing our ratios above the regulatory definition of a "well-capitalized" bank.
Permission to sign the agreement with Treasury has now been received from state and federal regulators. This is a major milestone in restoring the bank to a condition where it can operate successfully and thrive. We intend to raise the necessary capital from accredited investors (generally defined as investors with a net worth of $1 million or more, excluding their personal residence) through a private placement offering beginning immediately. I would hope to hear from current shareholders who may have an interest before broadening the effort. Since taking on this role in January, I have been encouraged by the support of the Bank's shareholders, staff and customers, which I greatly appreciate. Please feel free to contact me at (206) 436-2001 if you have an interest in the offering or other questions.
Patrick M. Fahey
Chairman, President, & CEO

A Shareholder Message From First Sound Bank - July 25, 2012

A Shareholder Message From First Sound Bank - January 3, 2012

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