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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): April 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))

 

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 April  25, 2019, FS Bancorp, Inc., the parent corporation of 1st Security Bank of Washington, issued its earnings release for the quarter ended March 31, 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 April 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: April 25, 2019

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 Net Income for the First Quarter of $5.2 Million or $1.15 Per Diluted Share and Twenty-Fifth Consecutive Quarterly Dividend 

 

MOUNTLAKE TERRACE, WA – April 25, 2019 – FS Bancorp, Inc. (NASDAQ:FSBW) (the “Company”), the holding company for 1st Security Bank of Washington (the “Bank”) today reported 2019  first quarter net income of  $5.2 million, or $1.15 per diluted share, compared to $4.3 million, or $1.15 per diluted share for the same period last year.  

 “We were honored to ring the NASDAQ opening bell on April 15th in recognition of our successful Anchor Bank acquisition,” stated CEO Joe Adams.  “We are also pleased to announce that our Board of Directors has approved our twenty-fifth consecutive quarterly cash dividend of $0.15 per share.”  The dividend will be paid on May 23, 2019, to shareholders of record as of May 9, 2019.

CFO Matthew Mullet noted, “We repurchased 5,436 shares during the quarter at an average price of $47.30 per share in accordance with our January 2019 Share Repurchase Plan previously approved by the Board of Directors.”

2019 First  Quarter Highlights

 

·

Net income was $5.2 million for the first quarter of 2019,  compared to  $11.7 million in the previous quarter which included a  $7.4 million bargain purchase gain from the acquisition of Anchor Bancorp (“Anchor Acquisition”), and $4.3 million for the comparable quarter one year ago;

·

Net income for the first quarter adjusted for $374,000 of acquisition related costs, $131,000 of core deposit intangible (“CDI”) amortization and $321,000 of net accretion/amortization on loans, certificates of deposit (“CDs”) and borrowings (adjusted at a 21% tax rate) would have been $5.3 million, or $1.18 per diluted share (See “Non-GAAP Financial Measures”);

·

Total assets increased to $1.63 billion at March 31, 2019, compared to $1.62 billion at December 31, 2018, and $1.04 billion one year ago;

·

Total gross loans decreased $29.2 million, or 2.2% during the quarter, primarily due to construction and construction warehouse loan payoffs, to $1.30 billion at March  31, 2019, compared to $1.33 billion at December  31, 2018, and increased $479.4 million, or 58.6%, from $817.7 million at March  31, 2018,  relating to the loans acquired from the Anchor Acquisition of $311.6 million at March 31, 2019;

·

Deposits increased $47.3 million, or 3.7%, during the quarter to $1.32 billion at March 31, 2019, compared to $1.27 billion at December 31, 2018, and increased $464.1 million, or 54.1%, from $857.5 million at March 31, 2018,  mainly due to the deposits acquired from the Anchor Acquisition of $343.6 million at March 31, 2019; and

·

Capital levels at the Bank were 14.7% for total risk-based capital and 11.0% for Tier 1 leverage capital at March  31, 2019, compared to 13.5% and 10.7% at December  31, 2018, respectively.

Balance Sheet and Credit Quality

Total assets increased $4.5 million, or 0.3%, to $1.63 billion at March  31, 2019, compared to $1.62 billion at December 31, 2018, and increased $582.5 million, or 55.8%, from $1.04 billion at March  31, 2018.  The quarter

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 2

over linked quarter increase in total assets included increases in total cash and cash equivalents of $30.3 million, operating lease right-of-use asset of $4.8 million, other assets of $2.7 million, and securities available-for-sale of $2.6 million, partially offset by a decrease in loans receivable, net of $28.6 million, loans held for sale (“HFS”) of $5.6 million, and Federal Home Loan Bank (“FHLB”) stock of $1.7 million.  The year over year increase was primarily due to the $474.9 million of assets acquired in the Anchor Acquisition,  with the remaining growth partially funded by organic growth in deposits. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOAN PORTFOLIO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

March 31, 2019

 

December 31, 2018

 

March 31, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

REAL ESTATE LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

208,607

 

16.1

%  

$

204,699

 

15.4

%  

$

61,956

 

7.6

%

Construction and development

 

 

219,229

 

16.9

 

 

247,306

 

18.7

 

 

143,611

 

17.5

 

Home equity

 

 

40,714

 

3.1

 

 

40,258

 

3.0

 

 

23,563

 

2.9

 

One-to-four-family (excludes HFS)

 

 

261,868

 

20.2

 

 

249,397

 

18.8

 

 

165,030

 

20.2

 

Multi-family

 

 

102,997

 

8.0

 

 

104,663

 

7.9

 

 

52,431

 

6.4

 

Total real estate loans

 

 

833,415

 

64.3

 

 

846,323

 

63.8

 

 

446,591

 

54.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirect home improvement

 

 

174,792

 

13.5

 

 

167,793

 

12.7

 

 

136,946

 

16.8

 

Solar

 

 

44,494

 

3.4

 

 

44,433

 

3.3

 

 

41,581

 

5.1

 

Marine

 

 

59,884

 

4.6

 

 

57,822

 

4.4

 

 

38,451

 

4.7

 

Other consumer

 

 

5,246

 

0.4

 

 

5,425

 

0.4

 

 

1,951

 

0.2

 

Total consumer loans

 

 

284,416

 

21.9

 

 

275,473

 

20.8

 

 

218,929

 

26.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMERCIAL BUSINESS LOANS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

137,325

 

10.6

 

 

138,686

 

10.4

 

 

104,612

 

12.8

 

Warehouse lending

 

 

41,914

 

3.2

 

 

65,756

 

5.0

 

 

47,563

 

5.8

 

Total commercial business loans

 

 

179,239

 

13.8

 

 

204,442

 

15.4

 

 

152,175

 

18.6

 

Total loans receivable, gross

 

 

1,297,070

 

100.0

%  

 

1,326,238

 

100.0

%  

 

817,695

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(11,845)

 

 

 

 

(12,349)

 

 

 

 

(11,140)

 

 

 

Deferred costs and fees, net

 

 

(2,710)

 

 

 

 

(2,907)

 

 

 

 

(2,760)

 

 

 

Premiums on purchased loans

 

 

1,408

 

 

 

 

1,537

 

 

 

 

1,837

 

 

 

Total loans receivable, net

 

$

1,283,923

 

 

 

$

1,312,519

 

 

 

$

805,632

 

 

 

 

Loans receivable, net decreased $28.6 million to $1.28 billion at March  31, 2019, from $1.31 billion at December  31, 2018, and increased $478.3 million from $805.6 million at March  31, 2018.  The quarter over linked quarter decrease in real estate loans was  $12.9 million, including decreases in construction and development of $28.1 million and multi-family of $1.7 million, partially offset by increases in the one-to-four-family portfolio of $12.5 million,  commercial of $3.9 million, and home equity of $456,000.  Commercial business loans decreased $25.2 million, primarily due to a decrease in construction warehouse lending of $21.7 million, as well as a decrease in commercial and industrial loans of $1.4 million.  Consumer loans increased $8.9 million, primarily due to an increase of  $7.0 million in indirect home improvement loans and $2.1 million in marine loans. The year over year increase was primarily due to the loans acquired in the Anchor Acquisition, along with organic loan growth.

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 3

One-to-four-family loans originated through the home lending segment which includes loans HFS, loans held for investment, fixed seconds, and loans brokered to other institutions was $143.7 million during the quarter ended March 31, 2019, a decrease of  $11.8 million, or 7.6%, compared to $155.5 million for the preceding quarter, and decreased 15.6% from $170.2 million, for the comparable quarter one year ago. During the quarter ended March 31, 2019, the Company sold $130.9 million of one-to-four-family loans, compared to sales of $147.1 million during the previous quarter, and sales of $155.0 million during the same quarter one year ago.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

For the Three Months Ended

 

 

 

For the Three Months Ended

 

Year

 

Year

 

 

 

March 31, 2019

 

 

 

March 31, 2018

 

over Year

 

over Year

 

 

 

Amount

 

Percent

 

 

 

Amount

 

Percent

 

$ Change

 

% Change

 

Purchase

 

$

105,518

 

73.4

%

 

 

$

117,982

 

69.3

%

$

(12,464)

 

(10.6)

%

Refinance

 

 

38,155

 

26.6

 

 

 

 

 52,205

 

30.7

 

 

(14,050)

 

(26.9)

%

Total

 

$

143,673

 

100.0

%

 

 

$

 170,187

 

100.0

%

$

(26,514)

 

 (15.6)

%

The allowance for loan losses (“ALLL”) at March 31, 2019 decreased to $11.8 million, or 0.9% of gross loans receivable, excluding loans HFS, compared to $12.3 million, or 0.9% of gross loans receivable, excluding loans HFS at December  31, 2018, and $11.1 million, or 1.4% of gross loans receivable, excluding loans HFS, at March  31, 2018.  The linked quarter decrease in ALLL was primarily due to a $1.2 million charge-off of a commercial line of credit, partially offset by the $750,000 provision for loan losses.  Non-performing loans, consisting solely of non-accruing loans, decreased to $3.0 million at March  31, 2019,  from $4.2 million at December 31, 2018, primarily from the $1.2 million charge-off mentioned above, and increased from $720,000 at March  31, 2018, due to the Anchor Acquisition.  Substandard loans decreased  $1.2 million for the same reason to $7.1 million at March  31, 2019, compared to $8.3 million at December 31, 2018, and were $6.0 million at March 31, 2018.  There were two other real estate owned (“OREO”) properties totaling $167,000 at March 31, 2019 and $689,000 at December  31, 2018, compared to no OREO at March 31, 2018.

The allowance does not include the recorded discount on loans acquired in the Anchor Acquisition of $4.5 million on $313.7 million of gross loans at March 31, 2019.

Total deposits increased to  $1.32 billion at March  31, 2019, compared to $1.27 billion at December  31, 2018, and $857.5 million at March  31, 2018.  Relationship-based transactional deposits (noninterest-bearing checking, interest-bearing checking, and escrow accounts) increased $41.4 million, from December  31, 2018, primarily due to the $30.3 million increase in interest-bearing checking, and increased $106.7 million, from March  31, 2018.  Money market and savings accounts decreased $11.3 million from December  31, 2018, and increased $102.1 million from March  31, 2018.  Time deposits increased $17.3 million, from December  31, 2018, and increased $255.2 million, from March  31, 2018.  Year over year increases were primarily due to the deposits assumed in the Anchor Acquisition.

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 4

At March  31, 2019, non-retail CDs which include brokered CDs, online CDs,  public deposits CDs,  and public funds CDs increased $3.4 million to $130.9 million, compared to $127.5 million at December  31, 2018, primarily due an increase in brokered CDs of $13.0 million, partially offset by a decrease of $9.6 million due to  a public deposit CD assumed in the Anchor Acquisition maturing during the quarter. The year over year increase in non-retail CDs of $46.7 million from $84.2 million at March 31, 2018, primarily reflects a $52.2 million increase in brokered CDs, partially offset by a decrease of $5.8 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

 

March 31, 2018

 

 

    

Amount

    

Percent

 

Amount

    

Percent

 

Amount

    

Percent

 

Noninterest-bearing checking

 

$

228,067

 

17.3

%  

$

221,107

 

17.3

%  

$

177,251

 

20.7

%

Interest-bearing checking

 

 

181,402

 

13.7

 

 

151,103

 

11.9

 

 

130,002

 

15.2

 

Savings

 

 

122,940

 

9.3

 

 

122,344

 

9.6

 

 

76,843

 

9.0

 

Money market

 

 

270,718

 

20.5

 

 

282,595

 

22.2

 

 

214,676

 

25.0

 

Certificates of deposit less than $100,000

 

 

261,664

 

19.8

 

 

243,193

 

19.1

 

 

129,778

 

15.1

 

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

 

 

160,899

 

12.2

 

 

154,095

 

12.1

 

 

73,934

 

8.6

 

Certificates of deposit of $250,000 and over

 

 

78,342

 

5.9

 

 

86,357

 

6.8

 

 

41,944

 

4.9

 

Escrow accounts related to mortgages serviced

 

 

17,518

 

1.3

 

 

13,425

 

1.0

 

 

13,050

 

1.5

 

Total

 

$

1,321,550

 

100.0

%  

$

1,274,219

 

100.0

%  

$

857,478

 

100.0

%

 

At March  31, 2019, borrowings decreased  $50.3 million, or 36.7%, to $86.8 million, from $137.1 million at December 31, 2018, and increased $47.3 million from $39.5 million at March  31, 2018.    The decrease in borrowings during the current quarter was primarily related to an $83.2 million pay down of FHLB Fed Funds using funds from deposit growth, partially offset by a $32.8 million increase in term FHLB advances. The year over year increase was primarily due to an increase in FHLB overnight borrowings.

Total stockholders’ equity increased $5.9 million, to $186.0 million at March  31, 2019, from $180.0 million at December 31, 2018, and increased $60.5 million, from $125.4 million at March  31, 2018.  The increase in stockholders’ equity during the current quarter from December 31, 2018 was primarily due to net income of $5.2 million, and a decrease in accumulated other comprehensive loss, net of tax of $1.0 million,  partially offset by common stock repurchases of $257,000.  The Company repurchased 5,436 of its common stock during the quarter ended March 31, 2019, at an average price of $47.30 per share.  At March 31, 2019, 219,564 shares remained available for repurchase as authorized pursuant to our January 2019 Share Repurchase Plan.    Book value per common share was $42.48 at March  31, 2019, compared to $41.19 at December  31, 2018, and $35.21 at March  31, 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 11.0%, and a common equity Tier 1 (“CET1”) capital ratio of 13.8% at March  31, 2019.  At December  31, 2018, the total risk-based capital ratio was 13.5%, the Tier 1 leverage capital ratio was 10.7%, and the CET1 capital ratio was 12.6%.

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 5

The Company exceeded all regulatory capital requirements with a total risk-based capital ratio of 13.9%, a Tier 1 leverage capital ratio of 11.1%, and a CET1 ratio of 13.0% at March  31, 2019, compared to 13.3%, 12.1%, and 12.4%, respectively, at December 31, 2018.

 

Operating Results

 

Net interest income increased $6.2 million, to $17.7 million for the three months ended March  31, 2019, from $11.5 million for the three months ended March  31, 2018.  This increase was a result of  an  $8.9 million increase in loans receivable interest income, including additional interest from loans acquired in the Anchor Acquisition,  and a $470,000 increase in interest and dividends on investment securities, and cash and cash equivalents, partially offset by a $2.5 million increase in deposit interest expense due to assumed deposits and continued organic growth in interest-bearing deposits with higher market interest rates paid on new interest-bearing deposits, and a  $664,000 increase in interest expense on borrowings mainly from the use of FHLB advances to support loan growth.  

The net interest margin (“NIM”) decreased six basis points to 4.70% for the three months ended March  31, 2019, from 4.76% for the same period in the prior year.  The decrease in NIM for the comparable quarter year over year was driven primarily by higher cost market rate deposits and increased borrowing costs to fund loan growth, partially offset by a positive impact from incremental interest accretion on loans acquired in the Anchor Acquisition of 15 basis points.  The average cost of funds increased 64 basis points to 1.33% for the three months ended March  31, 2019, from 0.69% for the three months ended March  31, 2018.  This increase was predominantly due to growth in CDs, primarily those assumed in the Anchor Acquisition along with overall deposit growth, and an increase in FHLB borrowings.  Management remains focused on matching deposit/liability duration with the duration of loans/assets where appropriate.

For the three months ended March 31, 2019, the provision for loan losses was $750,000, compared to $350,000 for the three months ended March 31, 2018.  During the three months ended March  31, 2019, net charge-offs totaled $1.3 million, compared to net recoveries of $34,000 for the same period last year.  The significant increase in charge-offs compared to the prior year’s net recovery was primarily due to one commercial line of credit charge-off in the amount of $1.2 million.

Noninterest income decreased $469,000, to $4.6 million for the three months ended March  31, 2019, from $5.0 million for the three months ended March  31, 2018.  The decrease during the period primarily reflects a $1.6 million reduction in gain on sale of loans, partially offset by a $1.0 million increase in service charges and fee income primarily due to deposit accounts assumed in the Anchor Acquisition and deposit growth. 

Noninterest expense increased $3.8 million, to $14.8 million for the three months ended March  31, 2019, from $11.0 million for the three months ended March  31, 2018.  The increase in noninterest expense was primarily due to the Anchor Acquisition and growth in our operations with increases of  $1.2 million in salaries and benefits, $685,000 in operations, $645,000 in data processing, $464,000 in occupancy expense, $374,000 in acquisition costs, and $207,000 in FDIC insurance premiums. Total salaries and benefits expense also includes a $480,000 decrease in incentives and commissions reflecting lower one-to-four-family loan originations.  

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 6

Merger related activity in the first quarter was focused on the integration of the Anchor Bank core processing platform scheduled for the second quarter of 2019.  Merger related expenses, as noted above, include integration costs as well as legal expenses associated with consolidating the two companies.  Management anticipates the bulk of the remaining merger related expenses to be recognized in the second quarter of 2019.

 

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 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 Q1 Earnings
April 25, 2019
Page 7

 

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Linked

 

Year

 

 

 

March 31, 

 

December 31, 

 

March 31, 

 

Quarter

 

Over Year

 

 

    

2019

    

2018

    

2018

    

% Change

    

% Change

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

9,126

 

$

9,408

 

$

3,532

 

(3)

 

158

 

Interest-bearing deposits at other financial institutions

 

 

53,948

 

 

23,371

 

 

22,108

 

131

 

144

 

Total cash and cash equivalents

 

 

63,074

 

 

32,779

 

 

25,640

 

92

 

146

 

Certificates of deposit at other financial institutions

 

 

22,073

 

 

22,074

 

 

17,611

 

 

25

 

Securities available-for-sale, at fair value

 

 

99,783

 

 

97,205

 

 

91,371

 

3

 

9

 

Loans held for sale, at fair value

 

 

45,591

 

 

51,195

 

 

51,315

 

(11)

 

(11)

 

Loans receivable, net

 

 

1,283,923

 

 

1,312,519

 

 

805,632

 

(2)

 

59

 

Accrued interest receivable

 

 

5,812

 

 

5,761

 

 

3,693

 

1

 

57

 

Premises and equipment, net

 

 

29,318

 

 

29,110

 

 

15,798

 

1

 

86

 

Operating lease right-of-use

 

 

4,849

 

 

 —

 

 

 —

 

100

 

100

 

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

 

 

8,157

 

 

9,887

 

 

4,308

 

(17)

 

89

 

Other real estate owned (“OREO”)

 

 

167

 

 

689

 

 

 —

 

(76)

 

100

 

Bank owned life insurance (“BOLI”), net

 

 

34,700

 

 

34,485

 

 

13,410

 

1

 

159

 

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

 

 

10,611

 

 

10,429

 

 

7,515

 

2

 

41

 

Goodwill

 

 

2,312

 

 

2,312

 

 

2,312

 

 

 —

 

Core deposit intangible, net

 

 

6,027

 

 

6,217

 

 

1,240

 

(3)

 

386

 

Other assets

 

 

9,719

 

 

6,982

 

 

3,767

 

39

 

158

 

TOTAL ASSETS

 

$

1,626,116

 

$

1,621,644

 

$

1,043,612

 

 

56

 

LIABILITIES

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Deposits:

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Noninterest-bearing accounts

 

$

245,585

 

$

234,532

 

$

190,301

 

5

 

29

 

Interest-bearing accounts

 

 

1,075,965

 

 

1,039,687

 

 

667,177

 

3

 

61

 

Total deposits

 

 

1,321,550

 

 

1,274,219

 

 

857,478

 

4

 

54

 

Borrowings

 

 

86,824

 

 

137,149

 

 

39,529

 

(37)

 

120

 

Subordinated note:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal amount

 

 

10,000

 

 

10,000

 

 

10,000

 

 —

 

 —

 

Unamortized debt issuance costs

 

 

(130)

 

 

(135)

 

 

(150)

 

(4)

 

(13)

 

Total subordinated note less unamortized debt issuance costs

 

 

9,870

 

 

9,865

 

 

9,850

 

 

 

Operating lease liability

 

 

4,976

 

 

 —

 

 

 —

 

100

 

100

 

Deferred tax liability, net

 

 

663

 

 

361

 

 

137

 

84

 

384

 

Other liabilities

 

 

16,281

 

 

20,012

 

 

11,176

 

(19)

 

46

 

Total liabilities

 

 

1,440,164

 

 

1,441,606

 

 

918,170

 

 

57

 

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; 4,489,042 shares issued and outstanding at March 31, 2019, 4,492,478 at December 31, 2018, and 3,695,552 at March 31, 2018

 

 

45

 

 

45

 

 

37

 

 —

 

22

 

Additional paid-in capital

 

 

91,742

 

 

91,466

 

 

55,823

 

 

64

 

Retained earnings

 

 

95,383

 

 

90,854

 

 

72,349

 

5

 

32

 

Accumulated other comprehensive loss, net of tax

 

 

(436)

 

 

(1,479)

 

 

(1,716)

 

(71)

 

(75)

 

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

 

 

(782)

 

 

(848)

 

 

(1,051)

 

(8)

 

(26)

 

Total stockholders’ equity

 

 

185,952

 

 

180,038

 

 

125,442

 

3

 

48

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,626,116

 

$

1,621,644

 

$

1,043,612

 

 

56

 

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 8

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

 

Year

 

 

March 31, 

 

Over Year

 

    

2019

    

2018

    

% Change

INTEREST INCOME

 

 

 

 

 

 

Loans receivable, including fees

 

$

21,109

 

$

12,256

 

72

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

 

 

1,202

 

 

732

 

64

Total interest and dividend income

 

 

22,311

 

 

12,988

 

72

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

3,710

 

 

1,244

 

198

Borrowings

 

 

744

 

 

80

 

830

Subordinated note

 

 

168

 

 

167

 

 1

Total interest expense

 

 

4,622

 

 

1,491

 

210

NET INTEREST INCOME

 

 

17,689

 

 

11,497

 

54

PROVISION FOR LOAN LOSSES

 

 

750

 

 

350

 

114

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

16,939

 

 

11,147

 

52

NONINTEREST INCOME

 

 

 

 

 

 

 

 

Service charges and fee income

 

 

1,658

 

 

659

 

152

Gain on sale of loans

 

 

2,397

 

 

3,978

 

(40)

Gain on sale of investment securities

 

 

 —

 

 

113

 

(100)

Earnings on cash surrender value of BOLI

 

 

215

 

 

82

 

162

Other noninterest income

 

 

285

 

 

192

 

48

Total noninterest income

 

 

4,555

 

 

5,024

 

(9)

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

8,243

 

 

7,048

 

17

Operations

 

 

2,044

 

 

1,359

 

50

Occupancy

 

 

1,112

 

 

648

 

72

Data processing

 

 

1,286

 

 

641

 

101

Gain on sale of OREO

 

 

(85)

 

 

 —

 

(100)

OREO expenses

 

 

 4

 

 

 —

 

100

Loan costs

 

 

673

 

 

629

 

7

Professional and board fees

 

 

550

 

 

444

 

24

Federal Deposit Insurance Corporation (“FDIC”) insurance

 

 

248

 

 

41

 

505

Marketing and advertising

 

 

135

 

 

149

 

(9)

Acquisition costs

 

 

374

 

 

 —

 

100

Amortization of core deposit intangible

 

 

190

 

 

77

 

147

Impairment on mortgage servicing rights

 

 

23

 

 

 —

 

100

Total noninterest expense

 

 

14,797

 

 

11,036

 

34

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

6,697

 

 

5,135

 

30

PROVISION FOR INCOME TAXES

 

 

1,505

 

 

813

 

85

NET INCOME

 

$

5,192

 

$

4,322

 

20

Basic earnings per share

 

$

1.19

 

$

1.22

 

(2)

Diluted earnings per share

 

$

1.15

 

$

1.15

 

 —

 

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 9

 

 

 

 

 

 

 

 

KEY FINANCIAL RATIOS AND DATA (Unaudited)

 

 

 

 

 

 

 

(Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

At or For the Three Months Ended

 

 

 

March 31, 

 

December 31, 

 

March 31, 

 

 

    

2019

 

2018

 

2018

 

PERFORMANCE RATIOS:

 

 

 

                

 

 

 

Return on assets (ratio of net income to average total assets) (1)

 

1.30

%  

3.24

%  

1.72

%

Return on equity (ratio of net income to average equity) (1)

 

11.46

 

29.80

 

14.28

 

Yield on average interest-earning assets

 

5.93

 

5.73

 

5.38

 

Interest incurred on liabilities as a percentage of average noninterest bearing deposits and interest-bearing liabilities

 

1.33

 

1.23

 

0.69

 

Interest rate spread information – average during period

 

4.60

 

4.50

 

4.69

 

Net interest margin (1)

 

4.70

 

4.59

 

4.76

 

Operating expense to average total assets

 

3.72

 

3.83

 

4.40

 

Average interest-earning assets to average interest-bearing liabilities

 

 129.86

 

130.15

 

139.62

 

Efficiency ratio (2)

 

66.52

 

50.77

 

66.80

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

March 31, 

 

 

    

2019

 

2018

 

2018

 

ASSET QUALITY RATIOS AND DATA:

 

 

 

 

 

 

 

Non-performing assets to total assets at end of period (3)

 

0.19

%  

0.28

%  

0.07

%

Non-performing loans to total gross loans (4)

 

0.23

 

0.31

 

0.09

 

Allowance for loan losses to non-performing loans (4)

 

397.35

 

297.35

 

1,547.22

 

Allowance for loan losses to gross loans receivable, excluding HFS loans

 

0.91

 

0.93

 

1.36

 

 

 

 

 

 

 

 

 

CAPITAL RATIOS, BANK ONLY:

 

 

 

 

 

 

 

Tier 1 leverage-based capital

 

11.01

%  

10.67

%  

12.58

%

Tier 1 risk-based capital

 

13.81

 

12.62

 

14.96

 

Total risk-based capital

 

14.73

 

13.52

 

16.21

 

Common equity Tier 1 capital

 

13.81

 

12.62

 

14.96

 

 

 

 

 

 

 

 

 

CAPITAL RATIOS, COMPANY ONLY:

 

 

 

 

 

 

 

Tier 1 leverage-based capital

 

11.06

%  

12.07

%  

12.20

%

Total risk-based capital

 

13.86

 

13.32

 

15.76

 

Common equity Tier 1 capital

 

12.98

 

12.41

 

14.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At or For the Three Months Ended

 

 

 

 

March 31, 

 

December 31, 

 

March 31, 

 

 

    

2019

     

2018

     

2018

 

PER COMMON SHARE DATA:

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.19

 

$

2.93

 

$

1.22

 

Diluted earnings per share

 

$

1.15

 

$

2.83

 

$

1.15

 

Weighted average basic shares outstanding

 

 

4,380,307

 

 

4,000,584

 

 

3,556,581

 

Weighted average diluted shares outstanding

 

 

4,518,426

 

 

4,139,570

 

 

3,751,537

 

Common shares outstanding at period end

 

 

4,377,638

(5)

 

4,371,294

(6)

 

3,563,006

(7)

Book value per share using common shares outstanding

 

$

42.48

 

$

41.19

 

$

35.21

 

Tangible book value per share using common shares outstanding (8)

 

$

40.57

 

$

39.24

 

$

34.21

 


(1)

Annualized.

(2)

Total noninterest expense as a percentage of net interest income and total other noninterest income.

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 10

(3)

Non-performing assets consist of non-performing loans (which include non-accruing loans and accruing loans more than 90 days past due), foreclosed real estate and other repossessed assets.

(4)

Non-performing loans consist of non-accruing loans and accruing loans 90 days or more past due.

(5)

Common shares were calculated using shares outstanding of 4,489,042 at March  31, 2019, less 40,121 unvested restricted stock shares, and 71,283 unallocated ESOP shares.

(6)

Common shares were calculated using shares outstanding of 4,492,478 at December  31, 2018, less 43,421 unvested restricted stock shares, and 77,763 unallocated ESOP shares.

(7)

Common shares were calculated using shares outstanding of 3,695,552 at March  31, 2018, less 35,342 unvested restricted stock shares, and 97,204 unallocated ESOP shares.

(8)

Tangible book value per share using outstanding common shares excludes intangible assets. This ratio represents a non-GAAP financial measure.  See also non-GAAP financial measures below.

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 

 

Year Over Year

Average Balances

    

2019

    

2018

 

$ Change

Assets

 

 

 

 

 

 

 

 

 

Loans receivable, net deferred loan fees (1)

 

$

1,348,418

 

$

844,794

 

$

503,624

Securities available-for-sale, at fair value

 

 

99,650

 

 

90,532

 

 

9,118

Interest-bearing deposits and certificates of deposit at other financial institutions

 

 

68,169

 

 

40,734

 

 

27,435

FHLB stock, at cost

 

 

8,930

 

 

3,404

 

 

5,526

Total interest-earning assets

 

 

1,525,167

 

 

979,464

 

 

545,703

Noninterest-earning assets (2)

 

 

89,694

 

 

37,254

 

 

52,440

Total assets

 

$

1,614,861

 

$

1,016,718

 

$

598,143

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

Interest-bearing accounts

 

$

1,054,149

 

$

670,058

 

$

384,091

Borrowings

 

 

110,445

 

 

21,604

 

 

88,841

Subordinated note

 

 

9,867

 

 

9,847

 

 

20

Total interest-bearing liabilities

 

 

1,174,461

 

 

701,509

 

 

472,952

Noninterest-bearing accounts

 

 

239,598

 

 

180,507

 

 

59,091

Other noninterest-bearing liabilities

 

 

17,082

 

 

11,921

 

 

5,161

Stockholders’ equity

 

 

183,720

 

 

122,781

 

 

60,939

Total liabilities and stockholders’ equity

 

$

1,614,861

 

$

1,016,718

 

$

598,143

(1) Includes loans held for sale.

(2) Includes fixed assets, operating lease right-of-use asset, BOLI, goodwill, and CDI.

 

Non-GAAP Financial Measures:

In addition to results presented in accordance with generally accepted accounting principles utilized in the United States (“GAAP”), this earnings release contains certain non-GAAP financial measures: net income and diluted earnings per share, excluding net accretion/amortization on loans, CDs, and borrowings, acquisition costs,  and acquisition-related CDI amortization, net of tax;  and tangible book value per share. Management believes these non-GAAP financial measures provide useful and comparative information to assess trends reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. The after-tax impact of acquisition-related costs to net income which we have recorded in connection with the Anchor Acquisition provides meaningful supplemental information that management believes is useful to readers.  Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 11

Tangible common stockholders’ equity is calculated by excluding intangible assets from stockholders’ equity.  For this financial measure, the Company’s intangible assets are goodwill and core deposit intangible. Tangible book value per share is calculated by dividing tangible common shareholders’ equity by the number of common shares outstanding. The Company believes that this measure is consistent with the capital treatment by the investment community, which excludes intangible assets from the calculation of risk-based capital ratios and presents this measure to facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors.    

These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Reconciliation of net income, excluding net accretion/amortization on loans, CDs and borrowings, acquisition costs and acquisition-related CDI amortization, net of tax is presented below.

 

 

 

 

 

 

    

Three Months Ended

(in thousands)

 

March 31, 2019

Consolidated results:

 

 

 

Net interest income after provision for loan losses (GAAP)

 

$

16,939

Net accretion/amortization on loans, CDs and borrowings

 

 

(321)

Net interest income after provision for loan losses, excluding net accretion/amortization on loans, CDs and borrowings (non-GAAP)

 

 

16,618

Noninterest income

 

 

4,555

Noninterest expense

 

 

14,797

Acquisition costs

 

 

(374)

CDI amortization

 

 

(131)

Noninterest expense, excluding acquisition costs and acquisition-related CDI amortization (non-GAAP)

 

 

14,292

 

 

 

 

Income before provision for income taxes, excluding net accretion/amortization on loans, CDs and borrowings, acquisition costs and acquisition-related CDI amortization (non-GAAP)

 

 

6,881

Provision for income taxes, excluding net accretion/amortization on loans, CDs and borrowings, acquisition costs and acquisition-related CDI amortization, net of related taxes (non-GAAP)

 

 

1,544

NET INCOME, excluding net accretion/amortization on loans, CDs and borrowings, acquisition costs and acquisition-related CDI amortization, net of tax (non-GAAP)

 

$

5,337

 

 

 

 

 

 

 

 

Diluted earnings per share (GAAP)

 

$

1.15

Diluted earnings per share, excluding net accretion/amortization, acquisition costs and acquisition-related CDI amortization, net of tax (non-GAAP)

 

 

1.18

 

 


 

FS Bancorp Q1 Earnings
April 25, 2019
Page 12

Reconciliation of the GAAP book value per share and non-GAAP tangible book value per share is presented below.

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

March 31, 

 

    

2019

    

2018

    

2018

 

(Dollars in thousands)

Stockholders' equity

 

$

185,952

 

$

180,038

 

$

125,442

Goodwill and core deposit intangible, net

 

 

(8,339)

 

 

(8,529)

 

 

(3,552)

Tangible common stockholders' equity

 

$

177,613

 

$

171,509

 

$

121,890