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Section 1: 8-K (8-K)

fsbw_Current_Folio_8K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,  D.C. 20549 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January  28, 2020

 

FS BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

Washington

001-35589

45-4585178

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

 

6920 220th Street SW, Suite 200,

Mountlake Terrace, Washington

 

98043

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code:  (425) 771-5299

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

FSBW

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 

Item 2.02  Results of Operations and Financial Condition

 

On January  28, 2020, FS Bancorp, Inc., the parent corporation of 1st Security Bank of Washington, issued its earnings release for the quarter and year ended December  31, 2019.  A copy of the press release is furnished with this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01  Financial Statements and Exhibits

 

(d)

Exhibits

 

The following exhibit is being furnished herewith and this list shall constitute the exhibit index:

 

 

 

99.1

Press release of FS Bancorp, Inc. dated January 28, 2020

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

Date: January 28, 2020

FS BANCORP, INC.

 

 

 

/s/Matthew D. Mullet

 

Matthew D. Mullet

 

Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 

 

 

 

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Section 2: EX-99.1 (EX-99.1)

fsbw_Ex99_1

Exhibit 99.1

Image - Image1.gif

 

 

FS Bancorp, Inc. Reports 2019 Results Including  $22.7 Million of Net Income or $5.01 Per Diluted Share,  and  a 5% Increase in Its Dividend to $0.21 Per Quarter

 

MOUNTLAKE TERRACE, WA – January  28, 2020 – FS Bancorp, Inc. (NASDAQ:FSBW)  (the “Company”), the holding company for 1st Security Bank of Washington (the “Bank”) today reported 2019 fourth quarter net income of  $5.9 million, or $1.30 per diluted share, compared to $11.7 million, or $2.83 per diluted share for the same period last year, which included a bargain purchase gain of $7.4 million from the Anchor Bancorp Acquisition (“Anchor Acquisition”) in November 2018.  Net income for the year ended December 31, 2019 was $22.7 million, or $5.01 per diluted share, compared to net income of $24.3 million, or $6.29 per diluted share for last year.

 “2019 was a transitional year due to the integration of Anchor Bank and the establishment of 1st Security Bank in new communities as a result of the merger,” stated CEO Joe Adams.  “We are pleased to announce that our Board of Directors increased and approved our twenty-eighth consecutive quarterly cash dividend. The quarterly dividend will be paid on February 19, 2020, to shareholders of record as of February 5, 2020.”

CFO Matthew Mullet noted, “Our Board of Directors approved another 225,000 annual share repurchase plan as we continue to manage our capital prudently and in a manner which we believe will enhance liquidity and return value for our shareholders.”

2019 Fourth  Quarter and Year End Highlights

 

·

Net income was $5.9 million for the fourth quarter of 2019,  compared to  $7.1 million in the previous quarter, and $11.7 million for the comparable quarter one year ago;

·

Our Board of Directors (“Board”) approved a $0.01 increase in the quarterly dividend to $0.21, or $0.84 annually;

·

Our Board approved a share repurchase plan which includes up to 225,000 shares to be repurchased over the next 12 months, depending on market conditions and other factors including the Company’s liquidity requirements;

·

Net income of $22.7 million for the year ended December 31, 2019, included  $1.8 million of acquisition-related expenses, compared to net income of $24.3 million, which included the $7.4 million bargain purchase gain and $1.4 million of acquisition-related expenses for the year ended December 31, 2018;

·

Total gross loans increased $25.7 million during the quarter to $1.35 billion at December 31, 2019, compared to $1.33 billion at both September 30, 2019, and December 31, 2018; and

·

Capital levels at the Bank were 14.6% for total risk-based capital and 11.6% for Tier 1 leverage capital at December 31, 2019.

Balance Sheet and Credit Quality

Total assets increased $18.1 million, or 1.1%, to $1.71 billion at December  31, 2019, compared to $1.69 billion at September 30, 2019, and increased $91.4 million, or 5.6%, from $1.62 billion at December  31, 2018.  The quarter over linked quarter increase in total assets was primarily due to increases in loans receivable, net of $25.1 million, 

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 2

securities available-for-sale, at fair value of $20.0 million, and other assets of $3.8 million, partially offset by a decrease in total cash and cash equivalents of $17.1 million, loans held for sale (“HFS”) of $10.9 million, and certificates of deposit at other financial institutions of $3.4 million. The year over year increase in total assets included increases in securities available-for-sale, at fair value of $28.9 million, loans receivable, net of $23.8 million, loans HFS of $18.5 million, total cash and cash equivalents of $13.0 million, operating lease right-of-use assets of $5.0 million, other assets of $4.7 million, and servicing rights of $1.1 million, partially offset by decreases in Federal Home Loan Bank (“FHLB”) stock of $1.8 million and certificates of deposit at other financial institutions of $1.2 million.    The year over year increases were primarily due to organic loan and deposit growth. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

December 31, 2019

 

September 30, 2019

 

December 31, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

REAL ESTATE LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

210,749

 

15.6

%  

$

205,500

 

15.5

%  

$

204,699

 

15.4

%

Construction and development

 

 

179,654

 

13.3

 

 

200,720

 

15.1

 

 

247,306

 

18.7

 

Home equity

 

 

38,167

 

2.8

 

 

36,607

 

2.8

 

 

40,258

 

3.0

 

One-to-four-family (excludes HFS)

 

 

261,539

 

19.3

 

 

253,783

 

19.1

 

 

249,397

 

18.8

 

Multi-family

 

 

133,930

 

9.9

 

 

122,375

 

9.2

 

 

104,663

 

7.9

 

Total real estate loans

 

 

824,039

 

60.9

 

 

818,985

 

61.7

 

 

846,323

 

63.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect home improvement

 

 

210,653

 

15.6

 

 

200,984

 

15.2

 

 

167,793

 

12.7

 

Solar

 

 

44,038

 

3.3

 

 

44,254

 

3.3

 

 

44,433

 

3.3

 

Marine

 

 

67,179

 

5.0

 

 

68,036

 

5.1

 

 

57,822

 

4.4

 

Other consumer

 

 

4,340

 

0.3

 

 

4,660

 

0.4

 

 

5,425

 

0.4

 

Total consumer loans

 

 

326,210

 

24.2

 

 

317,934

 

24.0

 

 

275,473

 

20.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMERCIAL BUSINESS LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

140,531

 

10.4

 

 

134,104

 

10.1

 

 

138,686

 

10.4

 

Warehouse lending

 

 

61,112

 

4.5

 

 

55,172

 

4.2

 

 

65,756

 

5.0

 

Total commercial business loans

 

 

201,643

 

14.9

 

 

189,276

 

14.3

 

 

204,442

 

15.4

 

Total loans receivable, gross

 

 

1,351,892

 

100.0

%  

 

1,326,195

 

100.0

%  

 

1,326,238

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(13,229)

 

 

 

 

(12,765)

 

 

 

 

(12,349)

 

 

 

Deferred costs and fees, net

 

 

(3,272)

 

 

 

 

(3,137)

 

 

 

 

(2,907)

 

 

 

Premiums on purchased loans, net

 

 

955

 

 

 

 

995

 

 

 

 

1,537

 

 

 

Total loans receivable, net

 

$

1,336,346

 

 

 

$

1,311,288

 

 

 

$

1,312,519

 

 

 

 

Loans receivable, net increased $25.1 million to $1.34 billion at December  31, 2019, from $1.31 billion at September  30, 2019, and increased $23.8 million from $1.31 billion at December  31, 2018.  The quarter over linked quarter increase in total real estate loans was  $5.1 million, including increases in multi-family of $11.6 million, one-to-four-family portfolio of $7.8 million, commercial real estate of $5.2 million, and home equity of $1.6 million, partially offset by a planned decrease in construction and development of $21.1 million.  Consumer loans increased $8.3 million, primarily due to an increase of  $9.7 million in indirect home improvement loans. Commercial business loans increased $12.4 million, due to increases in commercial and industrial loans of $6.4 million and warehouse lending of $5.9 million.  

One-to-four-family loans originated through the home lending segment, which includes loans HFS, loans held for investment, fixed rate seconds, and loans brokered to other institutions, were  $252.6 million during the quarter ended December  31, 2019, a decrease of  $36.3 million, or 12.6%, compared to $288.9 million for the preceding quarter, and an increase of $100.9 million, or 66.6% from $151.7 million, for the comparable quarter one year ago.

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 3

During the year ended December  31, 2019, originations through the home lending segment  were  $891.4 million, an increase of  $186.6 million, or 26.5%, compared to $704.8 million for the year ended December  31, 2018.  During the quarter ended December  31, 2019, the Company sold $233.8 million of one-to-four-family loans, compared to sales of $247.3 million during the previous quarter, and sales of $147.1 million during the same quarter one year ago. During the year ended December  31, 2019, the Company sold $785.4 million of one-to-four-family loans compared to sales of $637.7 million during the same period last year.

Originations of one-to-four-family loans to purchase and to refinance a home for the three months ended and years ended December  31, 2019 and 2018 were as follows: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

For the Three Months Ended

 

 

 

For the Three Months Ended

 

Year 

 

Year

 

 

 

December 31, 2019

 

 

 

December 31, 2018

 

over Year

 

over Year

 

 

 

Amount

 

Percent

 

 

 

Amount

 

Percent

 

$ Change

 

% Change

 

Purchase

 

$

 143,623

 

56.8

%

 

 

$

121,478

 

80.1

%

$

 22,145

 

18.2

%

Refinance

 

 

 109,021

 

43.2

 

 

 

 

30,209

 

19.9

 

 

 78,812

 

260.9 

%

Total

 

$

252,644

 

100.0

%

 

 

$

151,687

 

100.0

%

$

100,957

 

66.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended

 

 

 

For the Year Ended

 

Year

 

Year

 

 

 

December 31, 2019

 

 

 

December 31, 2018

 

over Year

 

over Year

 

 

 

Amount

 

Percent

 

 

 

Amount

 

Percent

 

$ Change

 

% Change

 

Purchase

 

$

 554,790

 

62.2

%

 

 

$

557,960

 

79.2

%

$

 (3,170)

 

(0.6)

%

Refinance

 

 

 336,568

 

37.8

 

 

 

 

146,835

 

20.8

 

 

 189,733

 

129.2 

%

Total

 

$

891,358

 

100.0

%

 

 

$

704,795

 

100.0

%

$

186,563

 

26.5

%

The allowance for loan losses (“ALLL”) at December 31, 2019 increased to $13.2 million, or 0.98% of gross loans receivable, excluding loans HFS, compared to $12.8 million, or 0.96% of gross loans receivable, excluding loans HFS at September  30, 2019, and $12.3 million, or 0.93% of gross loans receivable, excluding loans HFS, at December  31, 2018.  Non-performing loans increased to $3.0 million at December  31, 2019,  from $2.2 million at September  30, 2019,  and decreased $861,000 from $3.9 million at December  31, 2018.  Substandard loans decreased $696,000 to $6.7 million at  December  31, 2019, compared to $7.4 million at September  30, 2019, and decreased $1.3 million from $8.0 million at December 31, 2018.  The year over year decreases in non-performing and substandard loans were primarily due to the charge-off of a commercial line of credit of $1.2 million in the first quarter and one commercial business relationship totaling $431,000 in the second quarter of 2019.  There were two other real estate owned (“OREO”) properties totaling $168,000 at December  31, 2019, compared to two OREO properties totaling $178,000 and $689,000 at September 30, 2019 and December  31, 2018, respectively.

Included in the carrying value of gross loans are net discounts on loans purchased in the Anchor Acquisition. The remaining net discount on loans acquired in the Anchor Acquisition was $2.7 million, $3.1 million, and $5.3 million, on $198.5 million, $223.7 million, and $361.6 million of gross loans at December  31, 2019, September 30, 2019, and December 31, 2018, respectively.

Total deposits were unchanged at $1.39 billion at both December 31, 2019 and September  30, 2019, and increased $118.2 million from $1.27 billion at December  31, 2018.  Relationship-based transactional deposits (noninterest-bearing checking, interest-bearing checking, and escrow accounts) decreased $26.3 million from September  30, 2019, primarily due to an  $18.9 million decrease in interest-bearing checking accounts, and a $4.7 million decrease in noninterest-bearing checking accounts, and increased $65.9 million from December  31, 2018.  Money market and savings accounts increased $15.6 million from September  30, 2019, and decreased $15.6 million from

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 4

December  31, 2018.  Time deposits increased $16.5 million from September  30, 2019, and increased $67.9 million from December  31, 2018. 

At December  31, 2019, non-retail certificates of deposit (“CDs”) which include brokered CDs, online CDs, and public funds increased  $5.1 million to $146.2 million, compared to $141.1 million at September  30, 2019,  mainly due to a $5.2 million increase in brokered CDs. The year over year increase in non-retail CDs of $18.7 million from $127.5 million at December  31, 2018, was driven by  a $24.7 million increase in brokered CDs and a $3.2 million increase in online CDs, primarily offset by a $9.0 million decrease in public funds.  Management remains focused on increasing our lower cost relationship-based deposits to fund long-term asset growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEPOSIT BREAKDOWN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

September 30, 2019

 

December 31, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

Noninterest-bearing checking

 

$

259,822

 

18.7

%  

$

264,482

 

19.1

%  

$

221,107

 

17.3

%

Interest-bearing checking

 

 

177,972

 

12.8

 

 

196,834

 

14.2

 

 

151,103

 

11.9

 

Savings

 

 

118,845

 

8.5

 

 

114,826

 

8.3

 

 

122,344

 

9.6

 

Money market

 

 

270,489

 

19.4

 

 

258,883

 

18.7

 

 

282,595

 

22.2

 

Certificates of deposit less than $100,000

 

 

277,988

 

20.0

 

 

273,982

 

19.7

 

 

243,193

 

19.1

 

Certificates of deposit of $100,000 through $250,000

 

 

181,402

 

13.0

 

 

177,075

 

12.8

 

 

154,095

 

12.1

 

Certificates of deposit of $250,000 and over

 

 

92,110

 

6.6

 

 

83,929

 

6.0

 

 

86,357

 

6.8

 

Escrow accounts related to mortgages serviced

 

 

13,780

 

1.0

 

 

16,591

 

1.2

 

 

13,425

 

1.0

 

Total

 

$

1,392,408

 

100.0

%  

$

1,386,602

 

100.0

%  

$

1,274,219

 

100.0

%

 

At December  31, 2019, borrowings increased  $8.0 million, or 10.4%, to $84.9 million, from $76.9 million at September 30, 2019, and decreased $52.3 million, or 38.1% from $137.2 million at December  31, 2018.    The quarter to date increase and year to date decrease in borrowings were primarily related to the use and repayments of FHLB advances in relation to the fluctuating activity in deposits and our liquidity objectives. 

Total stockholders’ equity increased $6.0 million, to $200.2 million at December  31, 2019, from $194.3 million at September 30, 2019, and increased $20.2 million, from $180.0 million at December  31, 2018.  The increase in stockholders’ equity from the third quarter was primarily due to net income of $5.9 million.  Book value per common share was $45.85 at December  31, 2019, compared to $44.61 at September  30, 2019, and $41.19 at December  31, 2018.

The Bank is well capitalized under the minimum capital requirements established by the Federal Deposit Insurance Corporation (“FDIC”) with a total risk-based capital ratio of 14.6%, a Tier 1 leverage capital ratio of 11.6%, and a common equity Tier 1 (“CET1”) capital ratio of 13.7% at December  31, 2019. 

The Company exceeded all regulatory capital requirements with a total risk-based capital ratio of 14.3%, a Tier 1 leverage capital ratio of 11.3%, and a CET1 ratio of 13.4% at December  31, 2019.

 

Operating Results

 

Net interest income increased $1.5 million, to $17.4 million for the three months ended December  31, 2019, from $15.8 million for the three months ended December  31, 2018.  This increase was a result of a $2.4 million increase in loans receivable interest income primarily as a result of the Anchor Acquisition, and a $404,000 decrease in borrowing interest expense, partially offset by a $1.4 million increase in deposit interest expense due to deposits assumed in the Anchor Acquisition and continued organic deposit growth combined with higher market interest

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 5

rates in 2019.  Net interest income increased $18.2 million, to $70.3 million for the year ended December  31, 2019, from $52.1 million for the year ended December  31, 2018, mostly attributable to a $26.1 million increase in interest income on loans receivable, partially offset by an  $8.8 million increase in interest expense on deposits. 

The net interest margin (“NIM”) decreased 30 basis points to 4.29% for the three months ended December  31, 2019, from 4.59% for the same period in the prior year, and decreased eight basis points to 4.53% for the year ended December  31, 2019, from 4.61% for the year ended December  31, 2018,  largely as a result of three 25 basis point decreases in the targeted Fed Funds Rate in the third and fourth quarter of 2019.  The quarter over quarter decrease in NIM was impacted by lower note rates on recent fixed rate real estate loan originations and adjustable rate commercial loans and less recognized fee income due to slower construction loan growth, partially offset by incremental interest accretion on loans acquired in the Anchor Acquisition of 10 basis points.    

 

The year over year decrease in NIM was primarily due to lower note rates for recently originated real estate loans, including significantly lower construction and development loans that typically carry higher note rates than one-to-four-family loans, partially offset by incremental interest accretion on loans acquired in the Anchor Acquisition of 15 basis points.  The average cost of funds, including noninterest-bearing checking, increased eight basis points to 1.31% for the three months ended December  31, 2019, from 1.23% for the three months ended December  31, 2018.  This increase was predominantly due to growth in higher market rate deposits with overall deposit growth. The year over year average cost of funds, including noninterest-bearing checking, increased 34 basis points to 1.34% for the year ended December  31, 2019, from 1.00% for the year ended December  31, 2018, reflecting the increase in market interest rates over the last year as reductions in deposit costs lag the recent reductions in loan yields, due in part to competitive pressures.    Management remains focused on matching deposit/liability duration with the duration of loans/assets where appropriate.

For the three months ended December  31, 2019, the provision for loan losses was $647,000, compared to $290,000 for the three months ended December  31, 2018, due primarily to the increase in the loan portfolio due to organic loan growth and loans acquired in the Anchor Acquisition, and net charge-offs.  During the three months ended December  31, 2019, net charge-offs totaled $183,000, compared to net recoveries of  $14,000 for the same period last year.  The provision for loan losses was $2.9 million for the year ended December 31, 2019, compared to $1.5 million for the year ended December 31, 2018, due primarily to loan growth and $2.0 million in net charge-offs during the year, compared to net recoveries of $53,000 during the year ended December  31, 2018. The increase in net charge-offs during the year ended December 31, 2019, was primarily due to the charge-off of a commercial line of credit of $1.2 million in the first quarter and one commercial business relationship totaling $431,000 in the second quarter.

Noninterest income decreased $5.8 million, to $5.7 million, for the three months ended December  31, 2019, from $11.4 million for the three months ended December  31, 2018, which included a $7.4 million bargain purchase gain from the Anchor Acquisition.  Excluding the bargain purchase gain, the quarter over quarter increases included  $1.3 million in gain on sale of loans, primarily due to higher sales volume, and $235,000 in service charges and fee income, mainly driven by deposit growth.    Noninterest income decreased  $3.8 million, to  $23.0 million for the year ended December  31, 2019, from $26.9 million for the year ended December  31, 2018.  Excluding the bargain purchase gain, the year over year increases included $3.3 million in service charges and fee income, driven by the loans acquired in the Anchor Acquisition and organic loan growth, $526,000 in other noninterest income, and  $459,000 in earnings on the cash surrender value of BOLI, partially offset by a decrease of $613,000 in gain on sale of loans.

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 6

Noninterest expense increased $1.9 million, to $15.7 million for the three months ended December  31, 2019, from $13.8 million for the three months ended December  31, 2018.  The increase in noninterest expense was primarily as a result of growth in our operations with increases of $2.3 million in salaries and benefits, including an increase of $1.6 million in incentives and commissions for the loan production staff associated with strong loan production growth this quarter, $338,000 in loan costs, $276,000 in data processing, $249,000 in occupancy, partially offset by a  decrease in acquisition costs of $1.0 million and a $186,000 recovery on servicing rights reflecting changes in market interest rates.   

Noninterest expense increased $13.5 million to $62.3 million for the year ended December  31, 2019, from $48.8 million for the year ended December  31, 2018.  The increase during the period was primarily as a result of the Anchor Acquisition and growth in our operations with increases of $5.3 million in salaries and benefits, including an increase of  $1.9 million in incentives and commissions, $3.0 million in operations, $2.1 million in data processing, and $1.6 million in occupancy expense. Acquisition costs were $1.8 million for the year ended December  31, 2019, compared to $1.4 million for last year, primarily due to the integration of the Anchor Bank core processing platform.  

 

About FS Bancorp

 

FS Bancorp, Inc., a Washington corporation, is the holding company for 1st Security Bank of Washington.  The Bank provides loan and deposit services to customers who are predominantly small- and middle-market businesses and individuals in Western Washington through its 21 bank branches, including nine branches from the Anchor Acquisition,  one administrative office that accepts deposits, and seven loan production offices in various suburban communities in the greater Puget Sound area, and one loan production office in the market area of the Tri-Cities, Washington.  The Bank services home mortgage customers throughout Washington State with an emphasis in the Puget Sound and Tri-Cities home lending markets.

 

Forward-Looking Statements

 

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward‑looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control.  Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: the expected cost savings, synergies and other financial benefits from our recent acquisition of Anchor might not be realized within the expected time frames or at all; the integration of the combined company, including personnel changes/retention, might not proceed as planned; and the combined company might not perform as well as expected; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; our ability to execute our plans to grow our residential construction lending, mortgage banking, and warehouse lending operations, and the geographic expansion of our indirect home improvement lending; secondary market conditions for loans and our ability to originate loans for sale and sell loans in the secondary

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 7

market; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the SEC which are available on our website at www.fsbwa.com and on the SEC's website at www.sec.gov.  Any of the forward-looking statements that we make in this press release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward‑looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2020 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of us and could negatively affect our operating and stock performance.

 

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 8

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts) (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Linked

 

Year

 

 

 

December 31, 

 

September 30, 

 

December 31, 

 

Quarter

 

Over Year

 

 

    

2019

    

2019

    

2018

    

% Change

    

% Change

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

13,175

 

$

15,979

 

$

9,408

 

(18)

 

40

 

Interest-bearing deposits at other financial institutions

 

 

32,603

 

 

46,915

 

 

23,371

 

(31)

 

40

 

Total cash and cash equivalents

 

 

45,778

 

 

62,894

 

 

32,779

 

(27)

 

40

 

Certificates of deposit at other financial institutions

 

 

20,902

 

 

24,296

 

 

22,074

 

(14)

 

(5)

 

Securities available-for-sale, at fair value

 

 

126,057

 

 

106,038

 

 

97,205

 

19

 

30

 

Loans held for sale, at fair value

 

 

69,699

 

 

80,619

 

 

51,195

 

(14)

 

36

 

Loans receivable, net

 

 

1,336,346

 

 

1,311,288

 

 

1,312,519

 

2

 

2

 

Accrued interest receivable

 

 

5,908

 

 

5,723

 

 

5,761

 

3

 

3

 

Premises and equipment, net

 

 

28,770

 

 

29,066

 

 

29,110

 

(1)

 

(1)

 

Operating lease right-of-use

 

 

5,016

 

 

4,713

 

 

 —

 

6

 

100

 

Federal Home Loan Bank (“FHLB”) stock, at cost

 

 

8,045

 

 

7,995

 

 

9,887

 

1

 

(19)

 

Other real estate owned (“OREO”)

 

 

168

 

 

178

 

 

689

 

(6)

 

(76)

 

Bank owned life insurance (“BOLI”), net

 

 

35,356

 

 

35,136

 

 

34,485

 

1

 

3

 

Servicing rights, held at the lower of cost or fair value

 

 

11,560

 

 

11,193

 

 

10,429

 

3

 

11

 

Goodwill

 

 

2,312

 

 

2,312

 

 

2,312

 

 

 

Core deposit intangible, net

 

 

5,457

 

 

5,647

 

 

6,217

 

(3)

 

(12)

 

Other assets

 

 

11,682

 

 

7,899

 

 

6,982

 

48

 

67

 

TOTAL ASSETS

 

$

1,713,056

 

$

1,694,997

 

$

1,621,644

 

1

 

6

 

LIABILITIES

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Deposits:

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Noninterest-bearing accounts

 

$

273,602

 

$

281,073

 

$

234,532

 

(3)

 

17

 

Interest-bearing accounts

 

 

1,118,806

 

 

1,105,529

 

 

1,039,687

 

1

 

8

 

Total deposits

 

 

1,392,408

 

 

1,386,602

 

 

1,274,219

 

 

9

 

Borrowings

 

 

84,864

 

 

76,864

 

 

137,149

 

10

 

(38)

 

Subordinated note:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal amount

 

 

10,000

 

 

10,000

 

 

10,000

 

 —

 

 —

 

Unamortized debt issuance costs

 

 

(115)

 

 

(120)

 

 

(135)

 

(4)

 

(15)

 

Total subordinated note less unamortized debt issuance costs

 

 

9,885

 

 

9,880

 

 

9,865

 

 

 

Operating lease liability

 

 

5,214

 

 

4,881

 

 

 —

 

 7

 

100

 

Deferred tax liability, net

 

 

1,971

 

 

1,029

 

 

361

 

92

 

446

 

Other liabilities

 

 

18,472

 

 

21,484

 

 

20,012

 

(14)

 

(8)

 

Total liabilities

 

 

1,512,814

 

 

1,500,740

 

 

1,441,606

 

1

 

5

 

COMMITMENTS AND CONTINGENCIES

 

 

  

 

 

  

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued or outstanding

 

 

 —

 

 

 —

 

 

 

 

 

Common stock, $.01 par value; 45,000,000 shares authorized; 4,459,041 shares issued and outstanding at December 31, 2019, 4,452,872 at September 30, 2019, and 4,492,478 at December 31, 2018

 

 

44

 

 

44

 

 

45

 

 —

 

 

Additional paid-in capital

 

 

89,268

 

 

88,608

 

 

91,466

 

 1

 

(2)

 

Retained earnings

 

 

110,715

 

 

105,672

 

 

90,854

 

5

 

22

 

Accumulated other comprehensive income (loss), net of tax

 

 

788

 

 

583

 

 

(1,479)

 

35

 

(153)

 

Unearned shares – Employee Stock Ownership Plan (“ESOP”)

 

 

(573)

 

 

(650)

 

 

(848)

 

(12)

 

(32)

 

Total stockholders’ equity

 

 

200,242

 

 

194,257

 

 

180,038

 

3

 

11

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,713,056

 

$

1,694,997

 

$

1,621,644

 

1

 

6

 

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 9

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts) (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Qtr

 

Year

 

 

 

December 31, 

 

September 30, 

 

December 31, 

 

Over Qtr

 

Over Year

 

 

    

2019

    

2019

    

2018

    

% Change

    

% Change

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

21,029

 

$

21,466

 

$

18,601

 

(2)

 

13

 

Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions

 

 

1,209

 

 

1,245

 

 

1,132

 

(3)

 

7

 

Total interest and dividend income

 

 

22,238

 

 

22,711

 

 

19,733

 

(2)

 

13

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

4,173

 

 

4,223

 

 

2,796

 

(1)

 

49

 

Borrowings

 

 

544

 

 

582

 

 

948

 

(7)

 

(43)

 

Subordinated note

 

 

171

 

 

171

 

 

171

 

 —

 

 —

 

Total interest expense

 

 

4,888

 

 

4,976

 

 

3,915

 

(2)

 

25

 

NET INTEREST INCOME

 

 

17,350

 

 

17,735

 

 

15,818

 

(2)

 

10

 

PROVISION FOR LOAN LOSSES

 

 

647

 

 

573

 

 

290

 

13

 

123

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

16,703

 

 

17,162

 

 

15,528

 

(3)

 

8

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fee income

 

 

1,423

 

 

1,619

 

 

1,188

 

(12)

 

20

 

Bargain purchase gain

 

 

 —

 

 

 —

 

 

7,414

 

 —

 

(100)

 

Gain on sale of loans

 

 

3,692

 

 

4,583

 

 

2,394

 

(19)

 

54

 

Loss on disposed fixed assets

 

 

(26)

 

 

 —

 

 

(71)

 

 —

 

(63)

 

Gain on sale of investment securities

 

 

 —

 

 

 —

 

 

57

 

 —

 

(100)

 

Earnings on cash surrender value of BOLI

 

 

221

 

 

219

 

 

155

 

1

 

43

 

Other noninterest income

 

 

343

 

 

323

 

 

273

 

6

 

26

 

Total noninterest income

 

 

5,653

 

 

6,744

 

 

11,410

 

(16)

 

(50)

 

NONINTEREST EXPENSE

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

9,059

 

 

7,865

 

 

6,780

 

15

 

34

 

Operations

 

 

2,660

 

 

2,360

 

 

2,500

 

13

 

6

 

Occupancy

 

 

1,194

 

 

1,104

 

 

945

 

8

 

26

 

Data processing

 

 

1,202

 

 

1,148

 

 

926

 

5

 

30

 

Gain on sale of OREO

 

 

(13)

 

 

(40)

 

 

 —

 

(68)

 

100

 

OREO expenses

 

 

 1

 

 

 1

 

 

 2

 

 —

 

(50)

 

Loan costs

 

 

956

 

 

903

 

 

618

 

6

 

55

 

Professional and board fees

 

 

606

 

 

654

 

 

551

 

(7)

 

10

 

Federal Deposit Insurance Corporation (“FDIC”) insurance

 

 

 —

 

 

(29)

 

 

249

 

(100)

 

100

 

Marketing and advertising

 

 

173

 

 

178

 

 

183

 

(3)

 

(5)

 

Acquisition costs

 

 

(99)

 

 

257

 

 

946

 

(139)

 

(110)

 

Amortization of core deposit intangible

 

 

190

 

 

190

 

 

121

 

 —

 

57

 

(Recovery) impairment on servicing rights

 

 

(186)

 

 

131

 

 

 —

 

(242)

 

100

 

Total noninterest expense

 

 

15,743

 

 

14,722

 

 

13,821

 

7

 

14

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

6,613

 

 

9,184

 

 

13,117

 

(28)

 

(50)

 

PROVISION FOR INCOME TAXES

 

 

695

 

 

2,040

 

 

1,401

 

(66)

 

(50)

 

NET INCOME

 

$

5,918

 

$

7,144

 

$

11,716

 

(17)

 

(49)

 

Basic earnings per share

 

$

1.33

 

$

1.62

 

$

2.93

 

(18)

 

(55)

 

Diluted earnings per share

 

$

1.30

 

$

1.58

 

$

2.83

 

(18)

 

(54)

 

 

FS Bancorp Q4 Earnings
January 28, 2020
Page 10

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts) (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

Year

 

 

 

December 31, 

 

December 31, 

 

Over Year

 

 

    

2019

    

2018

    

% Change

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

84,706

 

$

58,616

 

45

 

Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions

 

 

4,919

 

 

3,710

 

33

 

Total interest and dividend income

 

 

89,625

 

 

62,326

 

44

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Deposits

 

 

16,162

 

 

7,321

 

121

 

Borrowings

 

 

2,476

 

 

2,228

 

11

 

Subordinated note

 

 

679

 

 

679

 

 —

 

Total interest expense

 

 

19,317

 

 

10,228

 

89

 

NET INTEREST INCOME

 

 

70,308

 

 

52,098

 

35

 

PROVISION FOR LOAN LOSSES

 

 

2,880

 

 

1,540

 

87

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

67,428

 

 

50,558

 

33

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Service charges and fee income

 

 

6,554

 

 

3,233

 

103

 

Bargain purchase gain

 

 

 —

 

 

7,414

 

(100)

 

Gain on sale of loans

 

 

14,248

 

 

14,861

 

(4)

 

Loss on disposed fixed assets

 

 

(26)

 

 

(71)

 

(63)

 

Gain on sale of investment securities

 

 

32

 

 

171

 

(81)

 

Earnings on cash surrender value of BOLI

 

 

872

 

 

413

 

111

 

Other noninterest income

 

 

1,355

 

 

829

 

63

 

Total noninterest income

 

 

23,035

 

 

26,850

 

(14)

 

NONINTEREST EXPENSE

 

 

  

 

 

 

 

 

 

Salaries and benefits

 

 

33,816

 

 

28,538

 

18

 

Operations

 

 

9,722

 

 

6,709

 

45

 

Occupancy

 

 

4,640

 

 

3,042

 

53

 

Data processing

 

 

4,972

 

 

2,870

 

73

 

Gain on sale of OREO

 

 

(138)

 

 

 —

 

100

 

OREO expenses

 

 

13

 

 

 2

 

550

 

Loan costs

 

 

3,238

 

 

2,801

 

16

 

Professional and board fees

 

 

2,426

 

 

1,872

 

30

 

FDIC insurance

 

 

358

 

 

517

 

(31)

 

Marketing and advertising

 

 

678

 

 

747

 

(9)

 

Acquisition costs

 

 

1,756

 

 

1,389