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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): October 24, 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 October  24, 2019, FS Bancorp, Inc., the parent corporation of 1st Security Bank of Washington, issued its earnings release for the three and nine months ended September  30, 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 October 24, 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: October 24, 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 Third Quarter of $7.1 Million or $1.58 Per Diluted Share

 

MOUNTLAKE TERRACE, WA – October 24, 2019 – FS Bancorp, Inc. (NASDAQ:FSBW)  (the “Company”), the holding company for 1st Security Bank of Washington (the “Bank”) today reported 2019 third quarter net income of  $7.1 million, or $1.58 per diluted share, compared to $4.1 million, or $1.07 per diluted share for the same period last year.  

 “We continue to be pleased with the integration of the Anchor Bancorp acquisition,” stated CEO Joe Adams.  “Our financial results reflect the hard work by our combined employees that went into incorporating the two core operating systems, ongoing employee engagement, and partnerships with the communities we serve.”

CFO Matthew Mullet noted, “The Board of Directors increased the quarterly cash dividend to $0.20 per share from $0.15 per share payable on November 15, 2019, driven by the combined company’s financial results post acquisition.”

2019 Third  Quarter Highlights

 

·

Net income was $7.1 million for the third quarter of 2019,  compared to  $4.5 million in the previous quarter, and $4.1 million for the comparable quarter one year ago;

·

Net income for the third quarter of 2019 includes $257,000 of acquisition-related expenses, compared to $1.2 million of acquisition-related expenses in the preceding quarter and $443,000 in the third quarter of 2018;

·

Gain on sale of loans increased $1.0 million, or 28.2%, compared to the previous quarter and $765,000, or 20.0%, compared to the third quarter of 2018;

·

The efficiency ratio improved to 60.1%, reflecting increased revenues and decreased acquisition costs from  the merger with Anchor Bancorp (“Anchor Acquisition”), compared to 72.3% in the previous quarter and 67.0% in the third quarter of 2018;

·

Total gross loans increased $30.1 million, or 2.3%, during the quarter, to $1.33 billion at September 30, 2019, compared to $1.30 billion at June 30, 2019, and increased $365.1 million, or 38.0%, from $961.1 million at September 30, 2018, mainly due to the loans acquired from the Anchor Acquisition;

·

Deposits increased $52.4 million, or 3.9%, during the quarter to $1.39 billion at September  30, 2019, compared to $1.33 billion at June  30, 2019, and increased $442.1 million, or 46.8%, from $944.5 million at September  30, 2018,  primarily due to the deposits assumed  in the Anchor Acquisition; 

·

The Company repurchased 46,562 shares of its common stock during the quarter ended September 30, 2019, at an average price per share of $48.88; and

·

Capital levels at the Bank were 14.5% for total risk-based capital and 11.6% for Tier 1 leverage capital at September 30, 2019.

 

FS Bancorp Q3 Earnings
October 24, 2019
Page 2

Balance Sheet and Credit Quality

Total assets increased $53.9 million, or 3.3%, to $1.69 billion at September  30, 2019, compared to $1.64 billion at June 30, 2019, and increased $503.7 million, or 42.3%, from $1.19 billion at September  30, 2018.  The quarter over linked quarter increase in total assets was primarily due to increases in loans receivable, net of $29.2 million, loans held for sale (“HFS”) of $14.1 million,  securities available-for-sale, at fair value of $9.8 million, and total cash and cash equivalents of $3.3 million, partially offset by a decrease in other assets of $2.0 million. The year over year increase in total assets included increases in loans receivable, net of $363.7 million, total cash and cash equivalents of $47.7 million, loans HFS of $25.8 million, bank owned life insurance (“BOLI”) of $21.6 million,  premises and equipment, net of $12.5 million, securities available-for-sale, at fair value of $8.7 million, CDs at other financial institutions of $6.9 million, operating lease right-of-use assets of $4.7 million, core deposit intangible, net of $4.6 million, other assets of $3.3 million, and servicing rights of $2.0 million.    The year over year increases were primarily due to the assets acquired in the Anchor Acquisition, along with organic loan growth. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOAN PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

September 30, 2019

 

June 30, 2019

 

September 30, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

REAL ESTATE LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

205,500

 

15.5

%  

$

206,834

 

16.0

%  

$

68,694

 

7.1

%

Construction and development

 

 

200,720

 

15.1

 

 

214,140

 

16.5

 

 

191,172

 

19.9

 

Home equity

 

 

36,607

 

2.8

 

 

36,860

 

2.8

 

 

26,085

 

2.7

 

One-to-four-family (excludes HFS)

 

 

253,783

 

19.1

 

 

248,921

 

19.2

 

 

188,333

 

19.6

 

Multi-family

 

 

122,375

 

9.2

 

 

103,219

 

8.0

 

 

48,061

 

5.0

 

Total real estate loans

 

 

818,985

 

61.7

 

 

809,974

 

62.5

 

 

522,345

 

54.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect home improvement

 

 

200,984

 

15.2

 

 

188,336

 

14.5

 

 

155,870

 

16.2

 

Solar

 

 

44,254

 

3.3

 

 

44,508

 

3.4

 

 

42,967

 

4.5

 

Marine

 

 

68,036

 

5.1

 

 

66,064

 

5.1

 

 

56,578

 

5.9

 

Other consumer

 

 

4,660

 

0.4

 

 

4,875

 

0.4

 

 

2,059

 

0.2

 

Total consumer loans

 

 

317,934

 

24.0

 

 

303,783

 

23.4

 

 

257,474

 

26.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMERCIAL BUSINESS LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

134,104

 

10.1

 

 

135,336

 

10.5

 

 

113,786

 

11.9

 

Warehouse lending

 

 

55,172

 

4.2

 

 

47,028

 

3.6

 

 

67,540

 

7.0

 

Total commercial business loans

 

 

189,276

 

14.3

 

 

182,364

 

14.1

 

 

181,326

 

18.9

 

Total loans receivable, gross

 

 

1,326,195

 

100.0

%  

 

1,296,121

 

100.0

%  

 

961,145

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(12,765)

 

 

 

 

(12,340)

 

 

 

 

(12,045)

 

 

 

Deferred costs and fees, net

 

 

(3,137)

 

 

 

 

(2,940)

 

 

 

 

(3,195)

 

 

 

Premiums on purchased loans, net

 

 

995

 

 

 

 

1,278

 

 

 

 

1,667

 

 

 

Total loans receivable, net

 

$

1,311,288

 

 

 

$

1,282,119

 

 

 

$

947,572

 

 

 

 

Loans receivable, net increased $29.2 million to $1.31 billion for September  30, 2019, from $1.28 billion at June  30, 2019, and increased $363.7 million from $947.6 million at September  30, 2018.  The quarter over linked quarter increase in total real estate loans was  $9.0 million, including increases in multi-family of $19.2 million and one-to-

 

FS Bancorp Q3 Earnings
October 24, 2019
Page 3

four-family portfolio of $4.9 million, partially offset by decreases in construction and development of $13.4 million, commercial real estate of $1.3 million, and home equity of $253,000.  Consumer loans increased $14.2 million, primarily due to increases of  $12.6 million in indirect home improvement loans and $2.0 million in marine loans. Commercial business loans increased $6.9 million, primarily due to an increase in warehouse lending of $8.1 million, partially offset by a decrease in commercial and industrial loans of $1.2 million. This $1.2 million decrease primarily reflects the sale of four U.S. Department of Agriculture loans in the amount of $8.4 million, with a gain on sale of $122,000. 

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  $288.9 million during the quarter ended September  30, 2019, an increase of  $80.9 million, or 38.9%, compared to $208.0 million for the preceding quarter, and an increase of $95.9 million, or 49.7% from $193.0 million, for the comparable quarter one year ago. During the nine months ended September 30, 2019, originations through the home lending segment  were  $638.7 million, an increase of  $83.4 million, or 15.0%, compared to $555.3 million for the nine months ended September 30, 2018.  During the quarter ended September  30, 2019, the Company sold $247.3 million of one-to-four-family loans, compared to sales of $173.4 million during the previous quarter, and sales of $174.9 million during the same quarter one year ago. During the nine months ended September 30, 2019, the Company sold $551.6 million of one-to-four-family loans compared to sales of $490.6 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 nine months ended September  30, 2019 and 2018 were as follows: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

For the Three Months Ended

 

 

 

For the Three Months Ended

 

Year 

 

Year

 

 

 

September 30, 2019

 

 

 

September 30, 2018

 

over Year

 

over Year

 

 

 

Amount

 

Percent

 

 

 

Amount

 

Percent

 

$ Change

 

% Change

 

Purchase

 

$

163,459

 

56.6

%

 

 

$

162,166

 

84.4

%

$

1,293

 

0.8

%

Refinance

 

 

125,419

 

43.4

 

 

 

 

29,971

 

15.6

 

 

95,448

 

318.5

%

Total

 

$

288,878

 

100.0

%

 

 

$

192,137

 

100.0

%

$

96,741

 

50.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

 

For the Nine Months Ended

 

Year

 

Year

 

 

 

September 30, 2019

 

 

 

September 30, 2018

 

over Year

 

over Year

 

 

 

Amount

 

Percent

 

 

 

Amount

 

Percent

 

$ Change

 

% Change

 

Purchase

 

$

411,167

 

64.4

%

 

 

$

436,826

 

78.9

%

$

(25,659)

 

(5.9)

%

Refinance

 

 

227,547

 

35.6

 

 

 

 

116,626

 

21.1

 

 

110,921

 

95.1

%

Total

 

$

638,714

 

100.0

%

 

 

$

553,452

 

100.0

%

$

85,262

 

15.4

%

The allowance for loan losses (“ALLL”) at September 30, 2019 increased to $12.8 million, or 0.96% of gross loans receivable, excluding loans HFS, compared to $12.3 million, or 0.95% of gross loans receivable, excluding loans HFS at June  30, 2019, and $12.0 million, or 1.3% of gross loans receivable, excluding loans HFS, at September  30, 2018.  Non-performing loans increased to $2.2 million at September  30, 2019,  from $1.6 million at June  30, 2019,  and was unchanged from $2.2 million at September  30, 2018.  Substandard loans increased $898,000 to $7.4

 

FS Bancorp Q3 Earnings
October 24, 2019
Page 4

million at  September  30, 2019, compared to $6.5 million at June  30, 2019, and was unchanged from the prior year.  The quarter over linked quarter increase was primarily due to an increase in non-performing one-to-four-family loans of $512,000.  There were two other real estate owned (“OREO”) properties totaling $178,000 at September  30, 2019, and three OREO properties totaling $254,000 at June  30, 2019, compared to no OREO properties at September  30, 2018.

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 $3.1 million and $3.7 million, on $223.7 million and $278.4 million of gross loans at September  30, 2019 and June 30, 2019, respectively.

Total deposits increased to $1.39 billion at September 30, 2019, compared to $1.33 billion at June  30, 2019, and increased $442.1 million from $944.5 million at September  30, 2018.  Relationship-based transactional deposits (noninterest-bearing checking, interest-bearing checking, and escrow accounts) increased $18.2 million from June  30, 2019, primarily due to a  $16.3 million increase in interest-bearing checking accounts, and increased $172.6 million from September  30, 2018.  Money market and savings accounts increased $8.2 million from June  30, 2019, and increased $54.3 million from September  30, 2018.  Time deposits increased $26.0 million from June  30, 2019, and increased $215.2 million, from September  30, 2018.  Year over year increases were due to deposits assumed in the Anchor Acquisition and organic deposit growth.

At September  30, 2019, non-retail CDs which include brokered CDs, online CDs,  public deposits CDs,  and public funds CDs increased  $22.2 million to $141.1 million, compared to $118.9 million at June  30, 2019,  mainly due to a $21.7 million increase in brokered deposits. The year over year increase in non-retail CDs of $16.7 million from $124.4 million at September  30, 2018, was driven by  a $12.8 million increase in brokered deposits and $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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

June 30, 2019

 

September 30, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

Noninterest-bearing checking

 

$

264,482

 

19.1

%  

$

268,113

 

20.1

%  

$

174,712

 

18.5

%

Interest-bearing checking

 

 

196,834

 

14.2

 

 

180,498

 

13.5

 

 

115,059

 

12.2

 

Savings

 

 

114,826

 

8.3

 

 

117,687

 

8.8

 

 

78,785

 

8.3

 

Money market

 

 

258,883

 

18.7

 

 

247,854

 

18.6

 

 

240,626

 

25.5

 

Certificates of deposit less than $100,000

 

 

273,982

 

19.7

 

 

251,280

 

18.9

 

 

188,192

 

19.9

 

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

 

 

177,075

 

12.8

 

 

177,718

 

13.3

 

 

89,075

 

9.4

 

Certificates of deposit of $250,000 and over

 

 

83,929

 

6.0

 

 

79,959

 

6.0

 

 

42,563

 

4.5

 

Escrow accounts related to mortgages serviced

 

 

16,591

 

1.2

 

 

11,108

 

0.8

 

 

15,525

 

1.7

 

Total

 

$

1,386,602

 

100.0

%  

$

1,334,217

 

100.0

%  

$

944,537

 

100.0

%

 

At September  30, 2019, borrowings decreased  $6.3 million, or 7.6%, to $76.9 million, from $83.2 million at June 30, 2019, and decreased $9.7 million from $86.5 million at September  30, 2018.    The quarter and year to date decreases in borrowings were primarily related to a reduction in FHLB advances due to the growth in deposits. 

 

FS Bancorp Q3 Earnings
October 24, 2019
Page 5

Total stockholders’ equity increased $4.8 million, to $194.3 million at September  30, 2019, from $189.4 million at June 30, 2019, and increased $61.1 million, from $133.1 million at September  30, 2018.  The increase in stockholders’ equity from the second quarter was primarily due to net income of $7.1 million, partially offset by common stock repurchases of $2.3 million.  The Company repurchased 46,562 shares of its common stock during the quarter ended September 30, 2019, at an average price of $48.88 per share. At September 30, 2019, 125,816 shares remained available for repurchase pursuant to our January 2019 Share Repurchase Plan.   Book value per common share was $44.61 at September  30, 2019, compared to $43.18 at June  30, 2019, and $37.10 at September  30, 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 14.5%, a Tier 1 leverage capital ratio of 11.6%, and a common equity Tier 1 (“CET1”) capital ratio of 13.6% at September  30, 2019. 

The Company exceeded all regulatory capital requirements with a total risk-based capital ratio of 14.2%, a Tier 1 leverage capital ratio of 11.3%, and a CET1 ratio of 13.3% at September  30, 2019.

 

Operating Results

 

Net interest income increased $4.9 million, to $17.7 million for the three months ended September  30, 2019, from $12.9 million for the three months ended September  30, 2018.  This increase was primarily a result of a $6.8 million increase in loans receivable interest income, including additional interest from loans acquired in the Anchor Acquisition, partially offset by a $2.4 million increase in deposit interest expense due to assumed deposits and continued organic growth combined with higher market interest rates.  Net interest income increased $16.7 million, to $53.0 million for the nine months ended September 30, 2019, from $36.3 million for the nine months ended September 30, 2018, mostly attributable to a $23.7 million increase in interest income on loans receivable, partially offset by a $7.5 million increase in interest expense on deposits.  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”) decreased one basis point to 4.54% for the three months ended September  30, 2019, from 4.55% for the same period in the prior year, and decreased one basis point to 4.61% for the nine months ended September 30, 2019, from 4.62% for the nine months ended September 30, 2018.  The quarter over quarter NIM was positively impacted by incremental interest accretion on loans acquired in the Anchor Acquisition of 14 basis points. The year over year NIM was positively impacted from incremental interest accretion on loans acquired in the Anchor Acquisition of 17 basis points.  The average cost of funds increased 31 basis points to 1.37% for the three months ended September  30, 2019, from 1.06% for the three months ended September  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. The year over year average cost of funds increased 47 basis points to 1.36% for the nine months ended September 30, 2019, from 0.89% for the nine months ended September 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.

 

FS Bancorp Q3 Earnings
October 24, 2019
Page 6

For the three and nine months ended September  30, 2019, the provision for loan losses was $573,000 and $2.2 million, compared to $450,000, and $1.3 million for the three and nine months ended September  30, 2018.  During the three months ended September  30, 2019, net charge-offs totaled $147,000, compared to net recoveries of  $24,000 for the same period last year.  Net charge-offs totaled $1.8 million during the nine months ended September 30, 2019, compared to net recoveries of $39,000 during the nine months ended September 30, 2018. The increase in net charge-offs during the nine months ended September 30, 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 of 2019.

Noninterest income increased $1.9 million, to $6.7 million, for the three months ended September  30, 2019, from $4.8 million for the three months ended September  30, 2018.  The increase primarily reflects a $903,000 increase in service charges and fee income, mainly driven by deposit accounts assumed in the Anchor Acquisition and deposit growth, and a $765,000 increase in gain on sale of loans primarily due to higher sales volume.  Noninterest income increased $1.9 million, to  $17.4 million for the nine months ended September 30, 2019, from $15.4 million for the nine months ended September 30, 2018.  The year over year increase included increases in service charges and fee income of  $3.1 million, other noninterest income of  $455,000, and earnings on cash surrender value of BOLI of  $393,000, partially offset by a decrease of $1.9 million in gain on sale of loans.

Noninterest expense increased $2.9 million, to $14.7 million for the three months ended September  30, 2019, from $11.8 million for the three months ended September  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, $826,000 in salaries and benefits, including an increase of $1.1 million in incentives and commissions for the loan production staff associated with strong loan production growth this quarter, $523,000 in data processing, and $360,000 in occupancy expense, partially offset by decreases in acquisition costs of $186,000 and FDIC insurance of $166,000 as a result of a small bank credit awarded by the FDIC recognized during the quarter ended September 30, 2019. The Bank has $174,000 in small bank credits on future assessments remaining at September 30, 2019, which may be recognized in future periods when allowed for by the FDIC upon insurance fund levels being met. Noninterest expense increased $11.6 million to $46.6 million for the nine months ended September 30, 2019, from $35.0 million for the nine months ended September 30, 2018.  The increase during the period was primarily as a result of the Anchor Acquisition and growth in our operations with increases of $3.0 million in salaries and benefits, including an increase of $255,000 in incentives and commissions, $2.9 million in operations, $1.8 million in data processing, $1.4 million in acquisition costs, and $1.3 million in occupancy expense. Acquisition costs were $1.9 million for the nine months ended September 30, 2019, compared to $443,000 for the same period 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

 

FS Bancorp Q3 Earnings
October 24, 2019
Page 7

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 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 Q3 Earnings
October 24, 2019
Page 8

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Linked

 

Year

 

 

 

September 30,

 

June 30, 

 

September 30, 

 

Quarter

 

Over Year

 

 

    

2019

    

2019

    

2018

    

% Change

    

% Change

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

15,979

 

$

15,214

 

$

4,389

 

5

 

264

 

Interest-bearing deposits at other financial institutions

 

 

46,915

 

 

44,380

 

 

10,813

 

6

 

334

 

Total cash and cash equivalents

 

 

62,894

 

 

59,594

 

 

15,202

 

6

 

314

 

Certificates of deposit at other financial institutions

 

 

24,296

 

 

24,297

 

 

17,362

 

 

40

 

Securities available-for-sale, at fair value

 

 

106,038

 

 

96,252

 

 

97,374

 

10

 

9

 

Loans held for sale, at fair value

 

 

80,619

 

 

66,508

 

 

54,784

 

21

 

47

 

Loans receivable, net

 

 

1,311,288

 

 

1,282,119

 

 

947,572

 

2

 

38

 

Accrued interest receivable

 

 

5,723

 

 

5,779

 

 

4,453

 

(1)

 

29

 

Premises and equipment, net

 

 

29,066

 

 

29,517

 

 

16,527

 

(2)

 

76

 

Operating lease right-of-use

 

 

4,713

 

 

4,582

 

 

 —

 

3

 

100

 

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

 

 

7,995

 

 

8,329

 

 

7,131

 

(4)

 

12

 

Other real estate owned (“OREO”)

 

 

178

 

 

254

 

 

 —

 

(30)

 

100

 

Deferred tax asset, net

 

 

 —

 

 

 —

 

 

120

 

 

(100)

 

Bank owned life insurance (“BOLI”), net

 

 

35,136

 

 

34,917

 

 

13,586

 

1

 

159

 

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

 

 

11,193

 

 

10,849

 

 

9,190

 

3

 

22

 

Goodwill

 

 

2,312

 

 

2,312

 

 

2,312

 

 

 

Core deposit intangible, net

 

 

5,647

 

 

5,837

 

 

1,087

 

(3)

 

420

 

Other assets

 

 

7,899

 

 

9,919

 

 

4,631

 

(20)

 

71

 

TOTAL ASSETS

 

$

1,694,997

 

$

1,641,065

 

$

1,191,331

 

3

 

42

 

LIABILITIES

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Deposits:

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Noninterest-bearing accounts

 

$

281,073

 

$

279,221

 

$

190,237

 

1

 

48

 

Interest-bearing accounts

 

 

1,105,529

 

 

1,054,996

 

 

754,300

 

5

 

47

 

Total deposits

 

 

1,386,602

 

 

1,334,217

 

 

944,537

 

4

 

47

 

Borrowings

 

 

76,864

 

 

83,211

 

 

86,526

 

(8)

 

(11)

 

Subordinated note:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal amount

 

 

10,000

 

 

10,000

 

 

10,000

 

 —

 

 —

 

Unamortized debt issuance costs

 

 

(120)

 

 

(125)

 

 

(140)

 

(4)

 

(14)

 

Total subordinated note less unamortized debt issuance costs

 

 

9,880

 

 

9,875

 

 

9,860

 

 

 

Operating lease liability

 

 

4,881

 

 

4,721

 

 

 —

 

 3

 

100

 

Deferred tax liability, net

 

 

1,029

 

 

1,003

 

 

 —

 

3

 

100

 

Other liabilities

 

 

21,484

 

 

18,612

 

 

17,279

 

15

 

24

 

Total liabilities

 

 

1,500,740

 

 

1,451,639

 

 

1,058,202

 

3

 

42

 

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; 4,452,872 shares issued and outstanding at September 30, 2019, 4,476,864 at June 30, 2019, and 3,716,460 at September 30, 2018

 

 

44

 

 

45

 

 

37

 

(2)

 

19

 

Additional paid-in capital

 

 

88,608

 

 

90,418

 

 

57,027

 

(2)

 

55

 

Retained earnings

 

 

105,672

 

 

99,184

 

 

79,648

 

7

 

33

 

Accumulated other comprehensive gain (loss), net of tax

 

 

583

 

 

496

 

 

(2,664)

 

18

 

(122)

 

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

 

 

(650)

 

 

(717)

 

 

(919)

 

(9)

 

(29)

 

Total stockholders’ equity

 

 

194,257

 

 

189,426

 

 

133,129

 

3

 

46

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,694,997

 

$

1,641,065

 

$

1,191,331

 

3

 

42

 

 

FS Bancorp Q3 Earnings
October 24, 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

 

 

 

September 30, 

 

June 30, 

 

September 30, 

 

Over Qtr

 

Over Year

 

 

    

2019

    

2019

    

2018

    

% Change

    

% Change

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

21,466

 

$

21,102

 

$

14,624

 

2  

 

47

 

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

 

 

1,245

 

 

1,263

 

 

959

 

(1)

 

30

 

Total interest and dividend income

 

 

22,711

 

 

22,365

 

 

15,583

 

2  

 

46

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

4,223

 

 

4,056

 

 

1,850

 

4  

 

128

 

Borrowings

 

 

582

 

 

606

 

 

704

 

(4)

 

(17)

 

Subordinated note

 

 

171

 

 

169

 

 

171

 

1  

 

 —

 

Total interest expense

 

 

4,976

 

 

4,831

 

 

2,725

 

3  

 

83

 

NET INTEREST INCOME

 

 

17,735

 

 

17,534

 

 

12,858

 

1  

 

38

 

PROVISION FOR LOAN LOSSES

 

 

573

 

 

910

 

 

450

 

(37)

 

27

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

17,162

 

 

16,624

 

 

12,408

 

3  

 

38

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fee income

 

 

1,619

 

 

1,854

 

 

716

 

(13)

 

126

 

Gain on sale of loans

 

 

4,583

 

 

3,576

 

 

3,818

 

28

 

20

 

Gain on sale of investment securities

 

 

 —

 

 

32

 

 

 —

 

(100) 

 

— 

 

Earnings on cash surrender value of BOLI

 

 

219

 

 

217

 

 

88

 

1  

 

149

 

Other noninterest income

 

 

323

 

 

404

 

 

180

 

(20)

 

79

 

Total noninterest income

 

 

6,744

 

 

6,083

 

 

4,802

 

11

 

40

 

NONINTEREST EXPENSE

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

7,865

 

 

8,649

 

 

7,039

 

(9)

 

12

 

Operations

 

 

2,360

 

 

2,658

 

 

1,308

 

(11)

 

80

 

Occupancy

 

 

1,104

 

 

1,230

 

 

744

 

(10)

 

48

 

Data processing

 

 

1,148

 

 

1,336

 

 

625

 

(14)

 

84

 

Gain on sale of OREO

 

 

(40)

 

 

 —

 

 

 —

 

(100)

 

(100)

 

OREO expenses

 

 

 1

 

 

 7

 

 

 —

 

(86)

 

100

 

Loan costs

 

 

903

 

 

707

 

 

850

 

28

 

6  

 

Professional and board fees

 

 

654

 

 

616

 

 

414

 

6  

 

58

 

Federal Deposit Insurance Corporation (“FDIC”) insurance

 

 

(29)

 

 

139

 

 

137

 

(121)

 

(121)

 

Marketing and advertising

 

 

178

 

 

191

 

 

201

 

(7)

 

(11)

 

Acquisition costs

 

 

257

 

 

1,224

 

 

443

 

(79)

 

(42)

 

Amortization of core deposit intangible

 

 

190

 

 

190

 

 

77

 

 —

 

147

 

Impairment of servicing rights

 

 

131

 

 

124

 

 

 —

 

6  

 

100

 

Total noninterest expense

 

 

14,722

 

 

17,071

 

 

11,838

 

(14)

 

24

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

9,184

 

 

5,636

 

 

5,372

 

63

 

71

 

PROVISION FOR INCOME TAXES

 

 

2,040

 

 

1,173

 

 

1,320

 

74

 

55

 

NET INCOME

 

$

7,144

 

$

4,463

 

$

4,052

 

60

 

76

 

Basic earnings per share

 

$

1.62

 

$

1.00

 

$

1.12

 

62

 

45

 

Diluted earnings per share

 

$

1.58

 

$

0.98

 

$

1.07

 

61

 

48

 

 

FS Bancorp Q3 Earnings
October 24, 2019
Page 10

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

Year

 

 

 

September 30, 

 

September 30, 

 

Over Year

 

 

    

2019

    

2018

    

% Change

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

63,677

 

$

40,015

 

59

 

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

 

 

3,710

 

 

2,578

 

44

 

Total interest and dividend income

 

 

67,387

 

 

42,593

 

58

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Deposits

 

 

11,989

 

 

4,525

 

165

 

Borrowings

 

 

1,932

 

 

1,280

 

51

 

Subordinated note

 

 

508

 

 

508

 

 —

 

Total interest expense

 

 

14,429

 

 

6,313

 

129

 

NET INTEREST INCOME

 

 

52,958

 

 

36,280

 

46

 

PROVISION FOR LOAN LOSSES

 

 

2,233

 

 

1,250

 

79

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

50,725

 

 

35,030

 

45

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Service charges and fee income

 

 

5,131

 

 

2,045

 

151

 

Gain on sale of loans

 

 

10,556

 

 

12,467

 

(15)

 

Gain on sale of investment securities

 

 

32

 

 

113

 

(72)

 

Earnings on cash surrender value of BOLI

 

 

651

 

 

258

 

152

 

Other noninterest income

 

 

1,012

 

 

557

 

82

 

Total noninterest income

 

 

17,382

 

 

15,440

 

13

 

NONINTEREST EXPENSE

 

 

  

 

 

 

 

 

 

Salaries and benefits

 

 

24,757

 

 

21,759

 

14

 

Operations

 

 

7,062

 

 

4,209

 

68

 

Occupancy

 

 

3,446

 

 

2,097

 

64

 

Data processing

 

 

3,770

 

 

1,944

 

94

 

Gain on sale of OREO

 

 

(125)

 

 

 —

 

(100)

 

OREO expenses

 

 

12

 

 

 —

 

100

 

Loan costs

 

 

2,282

 

 

2,183

 

 5