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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): July 25, 2019

 

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 July  25, 2019, FS Bancorp, Inc., the parent corporation of 1st Security Bank of Washington, issued its earnings release for the quarter ended June  30, 2019.  A copy of the news 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 filed herewith and this list shall constitute the exhibit index:

 

 

 

99.1

Press release of FS Bancorp, Inc. dated July 25, 2019

 

 

 

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: July 25, 2019

FS BANCORP, INC.

 

 

 

/s/Matthew D. Mullet

 

Matthew D. Mullet

 

Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

fsbw_Ex99_1

Exhibit 99.1

Image - Image1.gif

 

FS Bancorp, Inc. Reports Net Income for the Second Quarter of $4.5 Million or $0.98 Per Diluted Share and Announces Twenty-Sixth Consecutive Quarterly Dividend 

 

MOUNTLAKE TERRACE, WA – July 25, 2019 – FS Bancorp, Inc. (NASDAQ:FSBW) (the “Company”), the holding company for 1st Security Bank of Washington (the “Bank”) today reported 2019 second quarter net income of  $4.5 million, or $0.98 per diluted share, compared to $4.3 million, or $1.13 per diluted share for the same period last year.  

 “This quarter we integrated Anchor Bank’s operating systems into our core system.  We are excited to have all of our operations on one operating system” stated CEO Joe Adams.  “We are also pleased to announce that our Board of Directors has approved our twenty-sixth consecutive quarterly cash dividend of $0.15 per share.”  The dividend will be paid on August 22, 2019, to shareholders of record as of August 8, 2019.

CFO Matthew Mullet noted, “We repurchased 47,186 shares during the quarter and continue to review our long-term capital strategy with our Board of Directors.”

2019 Second  Quarter Highlights

 

·

Net income was $4.5 million for the second quarter of 2019,  compared to  $5.2 million in the previous quarter, and $4.3 million for the comparable quarter one year ago;

·

Net income for the second quarter included $1.2 million in acquisition related costs and $490,000 in severance related expenses;

·

Net income for the second quarter of 2019 adjusted for $1.2 million of acquisition costs, $526,000 of net accretion on loans, certificates of deposit (“CDs”) and borrowings, and $131,000 of core deposit intangible (“CDI”) amortization (adjusted at a 21% tax rate) would have been $5.1 million, or $1.12 per diluted share (See “Non-GAAP Financial Measures”);

·

Deposits increased $12.7 million, or 1.0%, during the quarter to $1.33 billion at June  30, 2019, compared to $1.32 billion at March  31, 2019, and increased $464.1 million, or 53.3%, from $870.1 million at June  30, 2018,  mainly due to the deposits assumed from the acquisition of Anchor Bancorp (“Anchor Acquisition”);

·

The Company repurchased 47,186 shares of its common stock during the quarter ended June 30, 2019, at an average price per share of $48.05; and

·

Capital levels at the Bank were 14.7% for total risk-based capital and 11.4% for Tier 1 leverage capital at June  30, 2019.

Balance Sheet and Credit Quality

Total assets increased $14.9 million, or 0.9%, to $1.64 billion at June  30, 2019, compared to $1.63 billion at March 31, 2019, and increased $508.5 million, or 44.9%, from $1.13 billion at June  30, 2018.  The quarter over linked quarter increase in total assets was primarily due to the increase in loans held for sale (“HFS”) of $20.9 million, and an increase in CDs at other financial institutions of $2.2 million, partially offset by decreases of $3.5 million in both total cash and cash equivalents and securities available-for-sale. Year over year increases in total

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 2

assets included increases in loans receivable, net of $400.9 million, total cash and cash equivalents of $37.6 million, bank owned life insurance (“BOLI”) of $21.4 million,  premises and equipment, net of $13.2 million, loans HFS of $11.3 million, CDs at other financial institutions of $6.7 million, other assets of $5.2 million, core deposit intangible, net of $4.7 million, and operating lease right-of-use assets of $4.6 million.  The year over year increase in loans receivable, net  was primarily due to the loans acquired in the Anchor Acquisition, along with organic loan growth. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOAN PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

REAL ESTATE LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

206,834

 

16.0

%  

$

208,607

 

16.1

%  

$

64,599

 

7.2

%

Construction and development

 

 

214,140

 

16.5

 

 

219,229

 

16.9

 

 

160,521

 

18.0

 

Home equity

 

 

36,860

 

2.8

 

 

40,714

 

3.1

 

 

25,460

 

2.9

 

One-to-four-family (excludes HFS)

 

 

248,921

 

19.2

 

 

261,868

 

20.2

 

 

177,988

 

19.9

 

Multi-family

 

 

103,219

 

8.0

 

 

102,997

 

8.0

 

 

47,695

 

5.3

 

Total real estate loans

 

 

809,974

 

62.5

 

 

833,415

 

64.3

 

 

476,263

 

53.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect home improvement

 

 

188,336

 

14.5

 

 

174,792

 

13.5

 

 

147,067

 

16.5

 

Solar

 

 

44,508

 

3.4

 

 

44,494

 

3.4

 

 

42,189

 

4.7

 

Marine

 

 

66,064

 

5.1

 

 

59,884

 

4.6

 

 

48,591

 

5.4

 

Other consumer

 

 

4,875

 

0.4

 

 

5,246

 

0.4

 

 

2,027

 

0.2

 

Total consumer loans

 

 

303,783

 

23.4

 

 

284,416

 

21.9

 

 

239,874

 

26.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMERCIAL BUSINESS LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

135,336

 

10.5

 

 

137,325

 

10.6

 

 

110,962

 

12.4

 

Warehouse lending

 

 

47,028

 

3.6

 

 

41,914

 

3.2

 

 

66,681

 

7.5

 

Total commercial business loans

 

 

182,364

 

14.1

 

 

179,239

 

13.8

 

 

177,643

 

19.9

 

Total loans receivable, gross

 

 

1,296,121

 

100.0

%  

 

1,297,070

 

100.0

%  

 

893,780

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(12,340)

 

 

 

 

(11,845)

 

 

 

 

(11,571)

 

 

 

Deferred costs and fees, net

 

 

(2,940)

 

 

 

 

(2,710)

 

 

 

 

(2,885)

 

 

 

Premiums on purchased loans, net

 

 

1,278

 

 

 

 

1,408

 

 

 

 

1,876

 

 

 

Total loans receivable, net

 

$

1,282,119

 

 

 

$

1,283,923

 

 

 

$

881,200

 

 

 

 

Loans receivable, net was relatively unchanged at  $1.28 billion for both June  30, 2019 and March  31, 2019, and increased $400.9 million from $881.2 million at June  30, 2018.  The quarter over linked quarter decrease in total real estate loans was  $23.4 million, including decreases in one-to-four-family portfolio of $12.9 million, construction and development of $5.1 million, home equity of $3.9 million, and commercial real estate of $1.8 million, partially offset by an increase in multi-family of $222,000.  Consumer loans increased $19.4 million, primarily due to increases of  $13.5 million in indirect home improvement loans and $6.2 million in marine loans. Commercial business loans increased $3.1 million, primarily due to an increase in warehouse lending of $5.1 million, partially offset by a decrease in commercial and industrial loans of $2.0 million. 

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 3

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, was $208.0 million during the quarter ended June  30, 2019, an increase of  $64.3 million, or 44.7%, compared to $143.7 million for the preceding quarter, and an increase of $15.8 million, or 8.2% from $192.2 million, for the comparable quarter one year ago. During the six months ended June 30, 2019, originations through the home lending segment decreased by $10.6 million, or 2.9%, compared to the originations for the six months ended June 30, 2018.  During the quarter ended June  30, 2019, the Company sold $173.4 million of one-to-four-family loans, compared to sales of $130.9 million during the previous quarter, and sales of $160.6 million during the same quarter one year ago. During the six months ended June 30, 2019, the Company sold $304.3 million of one-to-four-family loans compared to sales of $315.6 million during the same period last year.

Originations of one-to-four-family loans to purchase and to refinance a home for the three and six months ended June  30, 2019 and 2018 were as follows: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

For the Three Months Ended

 

 

 

For the Three Months Ended

 

Year 

 

Year

 

 

 

June 30, 2019

 

 

 

June 30, 2018

 

over Year

 

over Year

 

 

 

Amount

 

Percent

 

 

 

Amount

 

Percent

 

$ Change

 

% Change

 

Purchase

 

$

142,115

 

68.3

%

 

 

$

156,679

 

81.5

%

$

(14,564)

 

(9.3)

%

Refinance

 

 

65,841

 

31.7

 

 

 

 

35,473

 

18.5

 

 

30,368

 

85.6

%

Total

 

$

207,956

 

100.0

%

 

 

$

192,152

 

100.0

%

$

15,804

 

8.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

 

For the Six Months Ended

 

Year

 

Year

 

 

 

June 30, 2019

 

 

 

June 30, 2018

 

over Year

 

over Year

 

 

 

Amount

 

Percent

 

 

 

Amount

 

Percent

 

$ Change

 

% Change

 

Purchase

 

$

247,708

 

70.4

%

 

 

$

274,660

 

76.0

%

$

(26,952)

 

(9.8)

%

Refinance

 

 

103,996

 

29.6

 

 

 

 

86,655

 

24.0

 

 

17,341

 

20.0

%

Total

 

$

351,704

 

100.0

%

 

 

$

361,315

 

100.0

%

$

(9,611)

 

(2.7)

%

The allowance for loan losses (“ALLL”) at June 30, 2019 increased to $12.3 million, or 1.0% of gross loans receivable, excluding loans HFS, compared to $11.8 million, or 0.9% of gross loans receivable, excluding loans HFS at March  31, 2019, and $11.6 million, or 1.3% of gross loans receivable, excluding loans HFS, at June  30, 2018.  Non-performing loans decreased to $1.6 million at June  30, 2019,  from $3.0 million at March  31, 2019,  primarily from the pay-off of a one-to-four-family loan in the amount of $834,000,  the charge-off of one commercial business relationship totaling $431,000, and a transfer of a one-to-four-family loan in the amount of $88,000 to other real estate owned (“OREO”).  Non-performing loans increased to $1.6 million at June 30, 2019, from $627,000 at June  30, 2018, primarily as a result of the Anchor Acquisition.  Substandard loans decreased to $6.5 million at June  30, 2019, compared to $7.1 million at March  31, 2019, and increased from $5.8 million at June 30, 2018.  There were three OREO properties totaling $254,000 at June  30, 2019, and two OREO properties totaling $167,000 at March  31, 2019, compared to no OREO properties at June  30, 2018.

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 4

The ALLL does not include the recorded discount on loans acquired in the Anchor Acquisition of $3.7 million on $278.4 million of gross loans at June  30, 2019.

The Bank sold $10.5 million of securities available-for-sale during the second quarter of 2019 realizing a gain of $32,000.  The Bank sold these securities to reduce portfolio duration and sell lower yielding investments. The proceeds were used to pay down overnight borrowings, primarily Federal Home Loan Bank (“FHLB”) federal funds.

Total deposits increased slightly to $1.33 billion at June 30, 2019, compared to $1.32 billion at March  31, 2019, and increased $464.1 million from $870.1 million at June  30, 2018.  Relationship-based transactional deposits (noninterest-bearing checking, interest-bearing checking, and escrow accounts) increased $32.7 million from March  31, 2019, primarily due to a  $40.0 million increase in noninterest-bearing checking, and increased $147.3 million from June  30, 2018.  Money market and savings accounts decreased $28.1 million from March  31, 2019, and increased $77.2 million from June  30, 2018.  Time deposits increased $8.1 million from March  31, 2019, and increased $239.7 million, from June  30, 2018.  Year over year increases were primarily due to the deposits assumed in the Anchor Acquisition.

At June  30, 2019, non-retail CDs which include brokered CDs, online CDs,  public deposits CDs,  and public funds CDs decreased $12.0 million to $118.9 million, compared to $130.9 million at March  31, 2019,  primarily due to a  decrease in brokered CDs of $15.1 million, partially offset by an increase of $3.2 million in online CDs. The year over year increase in non-retail CDs of $31.4 million from $87.6 million at June  30, 2018, primarily reflects a $28.0 million increase in brokered CDs, and an increase of $3.2 million in online CDs.  Management remains focused on increasing our lower cost relationship-based deposits to fund long-term asset growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEPOSIT BREAKDOWN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

Noninterest-bearing checking

 

$

268,113

 

20.1

%  

$

228,067

 

17.3

%  

$

172,848

 

19.9

%

Interest-bearing checking

 

 

180,498

 

13.5

 

 

181,402

 

13.7

 

 

128,080

 

14.7

 

Savings

 

 

117,687

 

8.8

 

 

122,940

 

9.3

 

 

77,631

 

8.9

 

Money market

 

 

247,854

 

18.6

 

 

270,718

 

20.5

 

 

210,742

 

24.2

 

Certificates of deposit less than $100,000

 

 

251,280

 

18.9

 

 

261,664

 

19.8

 

 

144,755

 

16.7

 

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

 

 

177,718

 

13.3

 

 

160,899

 

12.2

 

 

79,131

 

9.1

 

Certificates of deposit of $250,000 and over

 

 

79,959

 

6.0

 

 

78,342

 

5.9

 

 

45,417

 

5.2

 

Escrow accounts related to mortgages serviced

 

 

11,108

 

0.8

 

 

17,518

 

1.3

 

 

11,509

 

1.3

 

Total

 

$

1,334,217

 

100.0

%  

$

1,321,550

 

100.0

%  

$

870,113

 

100.0

%

 

At June  30, 2019, borrowings decreased  $3.6 million, or 4.2%, to $83.2 million, from $86.8 million at March 31, 2019, and decreased $23.3 million from $106.5 million at June  30, 2018.    The quarter and year to date decreases in borrowings were primarily related to the repayment of FHLB federal funds to take advantage of lower cost FHLB advances. 

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 5

Total stockholders’ equity increased $3.5 million, to $189.4 million at June  30, 2019, from $186.0 million at March 31, 2019, and increased $60.1 million, from $129.4 million at June  30, 2018.  The increase in stockholders’ equity from the first quarter was primarily due to net income of $4.5 million, and a $932,000 reduction in accumulated other comprehensive loss to a gain, net of tax of $496,000,  representing an increase in the fair value of our investment portfolio, partially offset by common stock repurchases of $2.5 million.  The Company repurchased 47,186 shares of its common stock during the quarter ended June 30, 2019, at an average price of $48.05 per share. At June 30, 2019, 172,378 shares remain available for repurchase pursuant to our January 2019 Share Repurchase Plan.   The $60.1 million increase in total stockholders’ equity from the second quarter of 2018 was significantly impacted by the shares issued in the Anchor Acquisition.  Book value per common share was $43.18 at June  30, 2019, compared to $42.48 at March  31, 2019, and $35.94 at June  30, 2018.

The Bank is well capitalized under the minimum capital requirements established by the FDIC with a total risk-based capital ratio of 14.7%, a Tier 1 leverage capital ratio of 11.4%, and a common equity Tier 1 (“CET1”) capital ratio of 13.8% at June  30, 2019. 

The Company exceeded all regulatory capital requirements with a total risk-based capital ratio of 14.4%, a Tier 1 leverage capital ratio of 11.1%, and a CET1 ratio of 13.5% at June  30, 2019.

 

Operating Results

 

Net interest income increased $5.6 million, to $17.5 million for the three months ended June  30, 2019, from $11.9 million for the three months ended June  30, 2018.  This increase was a result of  an  $8.0 million increase in loans receivable interest income, including additional interest from loans acquired in the Anchor Acquisition, and a $376,000 increase in interest and dividends on investment securities, and cash and cash equivalents, partially offset by a $2.6 million increase in deposit interest expense due to assumed deposits and continued organic growth combined with higher market interest rates, and a  $110,000 increase in interest expense on borrowings mainly from the use of FHLB advances.  Net interest income increased $11.8 million, to $35.2 million for the six months ended June 30, 2019, from $23.4 million for the six months ended June 30, 2018, mostly attributable to a $16.8 million increase in interest income on loans receivable, partially offset by a $5.9 million increase in interest expense on deposits and borrowings.  The increases in interest income and interest expense were primarily impacted by the loans acquired and deposits assumed in the Anchor Acquisition.

The net interest margin (“NIM”) increased two basis points to 4.60% for the three months ended June  30, 2019, from 4.58% for the same period in the prior year, and decreased one basis point to 4.65% for the six months ended June 30, 2019, from 4.66% for the six months ended June 30, 2018.  The quarter over quarter increase in NIM was driven primarily by a positive incremental interest accretion on loans acquired in the Anchor Acquisition of 20 basis points, partially offset by higher cost market rate deposits and increased borrowing costs. The year over year decrease in NIM was mostly driven by higher cost market rate deposits and increased borrowing costs, partially offset by a positive impact from incremental interest accretion on loans acquired in the Anchor Acquisition of 18 basis points.  The average cost of funds increased 48 basis points to 1.37% for the three months ended June  30, 2019, from 0.89% for the three months ended June  30, 2018.  This increase was predominantly due to growth in higher market rate deposits, primarily those assumed in the Anchor Acquisition along with overall deposit growth.  

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 6

The year over year average cost of funds increased 56 basis points to 1.35% for the six months ended June 30, 2019, from 0.79% for the six months ended June 30, 2018 reflecting the increase in market interest rates over the last year.    Management remains focused on matching deposit/liability duration with the duration of loans/assets where appropriate.

For the three and six months ended June  30, 2019, the provision for loan losses was $910,000 and $1.7 million, compared to $450,000, and $800,000 for the three and six months ended June  30, 2018.  During the three months ended June  30, 2019, net charge-offs totaled $415,000, compared to $19,000 for the same period last year.  Net charge-offs totaled $1.7 million during the six months ended June 30, 2019, compared to net recoveries of $15,000 during the six months ended June 30, 2018.  For the three months ended June 30, 2019, the significant increase in charge-offs was primarily due to one commercial business relationship totaling $431,000, and for the six months ended June 30, 2019, the increase was primarily due to the charge-off of a commercial line of credit of $1.2 million in the first quarter of 2019.

Noninterest income increased $469,000, to $6.1 million, for the three months ended June  30, 2019, from $5.6 million for the three months ended June  30, 2018.  The increase during the period primarily reflects a $1.2 million increase in service charges and fee income primarily due to deposit accounts assumed in the Anchor Acquisition and deposit growth, partially offset by a $1.1 million decrease in gain on sale of loans.  Noninterest income was unchanged at  $10.6 million for both the six months ended June 30, 2019, and June 30, 2018.  Service charges and fee income increased $2.2 million, other noninterest income increased $312,000, and earnings on cash surrender value of BOLI increased $262,000, partially offset by a decrease of $2.7 million in gain on sale of loans.

Noninterest expense increased $4.9 million, to $17.1 million for the three months ended June  30, 2019, from $12.1 million for the three months ended June  30, 2018.  The increase in noninterest expense was primarily as a result of the Anchor Acquisition and growth in our operations with increases of $1.1 million in operations, $978,000 in salaries and benefits, $656,000 in data processing, and $526,000 in occupancy expense.   Acquisition costs were $1.2 million for the three months ended June 30, 2019, compared to none for the three months ended June 30, 2018 and were primarily due to the integration of the Anchor Bank core processing platform. Noninterest expense increased $8.7 million, to $31.9 million for the six months ended June 30, 2019, from $23.2 million for the six months ended June 30, 2018.  The increase during the period was primarily due to increases of $2.2 million in salaries and benefits, $1.8 million in operations, $1.6 million in acquisition costs, $1.3 million in data processing, $989,000 in occupancy expense, $259,000 in professional and board fees, $256,000 in FDIC insurance, and $227,000 in amortization of core deposit intangible. Acquisition costs were $1.6 million for the six months ended June 30, 2019, compared to none for the same period last year.  

 

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,

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 7

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 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 Securities and Exchange Commission 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 2019 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 Q2 Earnings
July 25, 2019
Page 8

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Linked

 

Year

 

 

 

June 30, 

 

March 31, 

 

June 30, 

 

Quarter

 

Over Year

 

 

    

2019

    

2019

    

2018

    

% Change

    

% Change

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

15,214

 

$

9,126

 

$

3,429

 

67

 

344

 

Interest-bearing deposits at other financial institutions

 

 

44,380

 

 

53,948

 

 

18,548

 

(18)

 

139

 

Total cash and cash equivalents

 

 

59,594

 

 

63,074

 

 

21,977

 

(6)

 

171

 

Certificates of deposit at other financial institutions

 

 

24,297

 

 

22,073

 

 

17,611

 

10

 

38

 

Securities available-for-sale, at fair value

 

 

96,252

 

 

99,783

 

 

98,465

 

(4)

 

(2)

 

Loans held for sale, at fair value

 

 

66,508

 

 

45,591

 

 

55,191

 

46

 

21

 

Loans receivable, net

 

 

1,282,119

 

 

1,283,923

 

 

881,200

 

 

45

 

Accrued interest receivable

 

 

5,779

 

 

5,812

 

 

4,071

 

(1)

 

42

 

Premises and equipment, net

 

 

29,517

 

 

29,318

 

 

16,273

 

1

 

81

 

Operating lease right-of-use

 

 

4,582

 

 

4,849

 

 

 —

 

(6)

 

100

 

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

 

 

8,329

 

 

8,157

 

 

7,742

 

2

 

8

 

Other real estate owned (“OREO”)

 

 

254

 

 

167

 

 

 —

 

52

 

100

 

Bank owned life insurance (“BOLI”), net

 

 

34,917

 

 

34,700

 

 

13,498

 

1

 

159

 

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

 

 

10,849

 

 

10,611

 

 

8,352

 

2

 

30

 

Goodwill

 

 

2,312

 

 

2,312

 

 

2,312

 

 

 

Core deposit intangible, net

 

 

5,837

 

 

6,027

 

 

1,164

 

(3)

 

401

 

Other assets

 

 

9,919

 

 

9,719

 

 

4,686

 

2

 

112

 

TOTAL ASSETS

 

$

1,641,065

 

$

1,626,116

 

$

1,132,542

 

1

 

45

 

LIABILITIES

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Deposits:

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Noninterest-bearing accounts

 

$

279,221

 

$

245,585

 

$

184,357

 

14

 

51

 

Interest-bearing accounts

 

 

1,054,996

 

 

1,075,965

 

 

685,756

 

(2)

 

54

 

Total deposits

 

 

1,334,217

 

 

1,321,550

 

 

870,113

 

1

 

53

 

Borrowings

 

 

83,211

 

 

86,824

 

 

106,526

 

(4)

 

(22)

 

Subordinated note:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal amount

 

 

10,000

 

 

10,000

 

 

10,000

 

 —

 

 —

 

Unamortized debt issuance costs

 

 

(125)

 

 

(130)

 

 

(145)

 

(4)

 

(14)

 

Total subordinated note less unamortized debt issuance costs

 

 

9,875

 

 

9,870

 

 

9,855

 

 

 

Operating lease liability

 

 

4,721

 

 

4,976

 

 

 —

 

(5)

 

100

 

Deferred tax liability, net

 

 

1,003

 

 

663

 

 

27

 

51

 

3,615

 

Other liabilities

 

 

18,612

 

 

16,281

 

 

16,650

 

14

 

12

 

Total liabilities

 

 

1,451,639

 

 

1,440,164

 

 

1,003,171

 

1

 

45

 

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; 4,476,864 shares issued and outstanding at June 30, 2019, 4,489,042 at March 31, 2019, and 3,708,660 at June 30, 2018

 

 

45

 

 

45

 

 

37

 

 —

 

22

 

Additional paid-in capital

 

 

90,418

 

 

91,742

 

 

56,344

 

(1)

 

60

 

Retained earnings

 

 

99,184

 

 

95,383

 

 

76,102

 

4

 

30

 

Accumulated other comprehensive gain (loss), net of tax

 

 

496

 

 

(436)

 

 

(2,127)

 

(214)

 

(123)

 

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

 

 

(717)

 

 

(782)

 

 

(985)

 

(8)

 

(27)

 

Total stockholders’ equity

 

 

189,426

 

 

185,952

 

 

129,371

 

2

 

46

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,641,065

 

$

1,626,116

 

$

1,132,542

 

1

 

45

 

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 9

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Qtr

 

Year

 

 

 

June 30, 

 

March 31, 

 

June 30, 

 

Over Qtr

 

Over Year

 

 

    

2019

    

2019

    

2018

    

% Change

    

% Change

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

21,102

 

$

21,109

 

$

13,135

 

 —

 

61

 

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

 

 

1,263

 

 

1,202

 

 

887

 

5  

 

42

 

Total interest and dividend income

 

 

22,365

 

 

22,311

 

 

14,022

 

 —

 

59

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

4,056

 

 

3,710

 

 

1,432

 

9  

 

183

 

Borrowings

 

 

606

 

 

744

 

 

496

 

(19)

 

22

 

Subordinated note

 

 

169

 

 

168

 

 

169

 

1  

 

 —

 

Total interest expense

 

 

4,831

 

 

4,622

 

 

2,097

 

5  

 

130

 

NET INTEREST INCOME

 

 

17,534

 

 

17,689

 

 

11,925

 

(1)

 

47

 

PROVISION FOR LOAN LOSSES

 

 

910

 

 

750

 

 

450

 

21

 

102

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

16,624

 

 

16,939

 

 

11,475

 

(2)

 

45

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fee income

 

 

1,854

 

 

1,658

 

 

670

 

12

 

177

 

Gain on sale of loans

 

 

3,576

 

 

2,397

 

 

4,671

 

49

 

(23)

 

Gain on sale of investment securities

 

 

32

 

 

 —

 

 

 —

 

100

 

100

 

Earnings on cash surrender value of BOLI

 

 

217

 

 

215

 

 

88

 

1  

 

147

 

Other noninterest income

 

 

404

 

 

285

 

 

185

 

42

 

118

 

Total noninterest income

 

 

6,083

 

 

4,555

 

 

5,614

 

34

 

8  

 

NONINTEREST EXPENSE

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

8,649

 

 

8,243

 

 

7,671

 

5  

 

13

 

Operations

 

 

2,658

 

 

2,044

 

 

1,541

 

30

 

72

 

Occupancy

 

 

1,230

 

 

1,112

 

 

704

 

11

 

75

 

Data processing

 

 

1,336

 

 

1,286

 

 

679

 

4  

 

97

 

Gain on sale of OREO

 

 

 —

 

 

(85)

 

 

 —

 

(100)

 

 —

 

OREO expenses

 

 

 7

 

 

 4

 

 

 —

 

75

 

100

 

Loan costs

 

 

707

 

 

673

 

 

704

 

 5

 

 —

 

Professional and board fees

 

 

616

 

 

550

 

 

463

 

12

 

33

 

Federal Deposit Insurance Corporation (“FDIC”) insurance

 

 

139

 

 

248

 

 

90

 

(44)

 

54

 

Marketing and advertising

 

 

191

 

 

135

 

 

215

 

41

 

(11)

 

Acquisition costs

 

 

1,224

 

 

374

 

 

 —

 

227

 

100

 

Amortization of core deposit intangible

 

 

190

 

 

190

 

 

77

 

 —

 

147

 

Impairment of mortgage servicing rights

 

 

124

 

 

23

 

 

 —

 

439

 

100

 

Total noninterest expense

 

 

17,071

 

 

14,797

 

 

12,144

 

15

 

41

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

5,636

 

 

6,697

 

 

4,945

 

(16)

 

14

 

PROVISION FOR INCOME TAXES

 

 

1,173

 

 

1,505

 

 

688

 

(22)

 

70

 

NET INCOME

 

$

4,463

 

$

5,192

 

$

4,257

 

(14)

 

5  

 

Basic earnings per share

 

$

1.00

 

$

1.19

 

$

1.19

 

(16)

 

(16)

 

Diluted earnings per share

 

$

0.98

 

$

1.15

 

$

1.13

 

(15)

 

(13)

 

 

FS Bancorp Q2 Earnings
July 25, 2019
Page 10

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

Year

 

 

 

June 30, 

 

June 30, 

 

Over Year

 

 

    

2019

    

2018

    

% Change

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

42,211

 

$

25,391

 

66

 

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

 

 

2,465

 

 

1,619

 

52

 

Total interest and dividend income

 

 

44,676

 

 

27,010

 

65

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Deposits

 

 

7,766

 

 

2,675

 

190

 

Borrowings

 

 

1,350

 

 

576

 

134

 

Subordinated note

 

 

337

 

 

337

 

 —

 

Total interest expense

 

 

9,453

 

 

3,588

 

163

 

NET INTEREST INCOME

 

 

35,223

 

 

23,422

 

50

 

PROVISION FOR LOAN LOSSES

 

 

1,660

 

 

800

 

108

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

33,563

 

 

22,622

 

48

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Service charges and fee income

 

 

3,512

 

 

1,329

 

164

 

Gain on sale of loans

 

 

5,973

 

 

8,649

 

(31)

 

Gain on sale of investment securities

 

 

32

 

 

113

 

(72)

 

Earnings on cash surrender value of BOLI

 

 

432

 

 

170

 

154

 

Other noninterest income

 

 

689

 

 

377

 

83

 

Total noninterest income

 

 

10,638

 

 

10,638

 

 —

 

NONINTEREST EXPENSE

 

 

  

 

 

 

 

 

 

Salaries and benefits

 

 

16,892

 

 

14,719

 

15

 

Operations

 

 

4,702

 

 

2,901

 

62

 

Occupancy

 

 

2,342

 

 

1,353

 

73

 

Data processing

 

 

2,622

 

 

1,319

 

99

 

Gain on sale of OREO

 

 

(85)

 

 

 —

 

(100)

 

OREO expenses

 

 

11

 

 

 —

 

100

 

Loan costs

 

 

1,379

 

 

1,332

 

 4

 

Professional and board fees

 

 

1,166

 

 

907

 

29

 

FDIC insurance

 

 

387

 

 

131

 

195