FS Bancorp, Inc. Reports $29.6 Million of Net Income or $3.70 Per Diluted Share for 2022 and the Fortieth Consecutive Quarterly Dividend including a 25% Dividend Increase to $0.25 Per Share
FS Bancorp reported a net income of $29.6 million for 2022, down from $37.4 million in 2021, translating to $3.70 per diluted share versus $4.37 in the previous year. In Q4 2022, net income was $7.6 million, reflecting a decrease from $8.6 million in Q4 2021. The company announced a $0.25 cash dividend per share, up from $0.20, payable on February 23, 2023. Total loans receivable reached $2.19 billion, marking a 5.1% increase since Q3 2022. Although net interest margin improved to 4.62%, overall asset levels declined slightly by 0.7% to $2.63 billion by year-end.
- Net interest margin improved to 4.62% from 4.20% year-over-year.
- Cash dividend increased to $0.25 per share, reflecting company confidence.
- Net income decreased by $7.8 million year-over-year, raising concerns about profitability.
- Loan originations in Q4 dropped 61.3% year-over-year, indicating reduced mortgage activity.
MOUNTLAKE TERRACE, Wash., Jan. 25, 2023 (GLOBE NEWSWIRE) -- FS Bancorp, Inc. (NASDAQ: FSBW) (the “Company”), the holding company for 1st Security Bank of Washington (the “Bank”) today reported 2022 net income of
“Our teams remain focused on completing the announced branch acquisitions which is scheduled to close during the first quarter of 2023, subject to customary closing conditions. The new deposits associated with the branch acquisitions are expected to support the Company’s loan growth,” stated Joe Adams, CEO. “We are also pleased that our Board of Directors approved our fortieth consecutive quarterly cash dividend of
“Our anticipated geographic expansion into Oregon resulted in related acquisition expenses in the fourth quarter of 2022 with the remaining expenses expected to be realized with the closing of the branch acquisitions projected in February,” noted Matthew Mullet, CFO.
2022 Fourth Quarter and Year End Highlights
- Net income was
$7.6 million for the fourth quarter of 2022, compared to$8.5 million in the previous quarter, and$8.6 million for the comparable quarter one year ago; - Net interest margin (“NIM”) improved to
4.62% , compared to4.54% for the previous quarter, and4.20% for the comparable quarter one year ago; - Loans receivable, net increased
$106.9 million , or5.1% , to$2.19 billion at December 31, 2022, compared to$2.08 billion at September 30, 2022, and increased$462.3 million , or26.7% from$1.73 billion at December 31, 2021; - Consumer loans, of which
87.1% are home improvement loans, increased$51.0 million , or9.8% , to$569.6 million at December 31, 2022, compared to$518.6 million in the previous quarter and increased$147.5 million , or35.0% from$422.0 million in the comparable quarter one year ago. During the three months ended December 31, 2022, originations in the consumer portfolio included82.2% of home improvement loans originated with a Fair Isaac and Company, Incorporated (“FICO”) score above 720 and87.3% of home improvement loans with a UCC-2 security filing; - Segment reporting reflected
$8.3 million of net income for the Commercial and Consumer Banking segment and$684,000 of net loss for the Home Lending segment in the fourth quarter of 2022, compared to$6.1 million and$2.6 million of net income in the fourth quarter of 2021, respectively; - Quarterly cash dividend increased to
$0.25 per share for the fourth quarter, resulting in a dividend payout ratio of25.4% based on fourth quarter 2022 earnings; and - Capital levels at the Bank were
13.7% for total risk-based capital and11.3% for Tier 1 leverage capital at December 31, 2022.
Segment Reporting
The Company reports two segments: Commercial and Consumer Banking and Home Lending. The Commercial and Consumer Banking segment provides diversified financial products and services to our commercial and consumer customers. These products and services include deposit products; residential, consumer, business and commercial real estate lending portfolios and cash management services. This segment is also responsible for the management of the investment portfolio and other assets of the Bank. The Home Lending segment originates one-to-four-family residential mortgage loans primarily for sale in the secondary markets as well as loans held for investment.
The tables below are a summary of segment reporting for the three months and years ended December 31, 2022 and 2021:
| At or For the Three Months Ended December 31, 2022 | ||||||||||||
| Condensed income statement: | Commercial and Consumer Banking | Home Lending | Total | |||||||||
| Net interest income(1) | $ | 26,375 | $ | 2,927 | $ | 29,302 | ||||||
| Provision for credit losses on loans(2) | (1,337 | ) | (248 | ) | (1,585 | ) | ||||||
| Noninterest income(3) | 2,214 | 1,482 | 3,696 | |||||||||
| Noninterest expense | (16,845 | ) | (5,004 | ) | (21,849 | ) | ||||||
| Income (loss) before (provision) benefit for income taxes | 10,407 | (843 | ) | 9,564 | ||||||||
| (Provision) benefit for income taxes | (2,101 | ) | 159 | (1,942 | ) | |||||||
| Net income (loss) | $ | 8,306 | $ | (684 | ) | $ | 7,622 | |||||
| Total average assets for period ended | $ | 2,154,427 | $ | 457,315 | $ | 2,611,742 | ||||||
| Full-time employees ("FTEs") | 405 | 132 | 537 | |||||||||
| At or For the Three Months Ended December 31, 2021 | ||||||||||||
| Condensed income statement: | Commercial and Consumer Banking | Home Lending | Total | |||||||||
| Net interest income(1) | $ | 20,477 | $ | 2,197 | $ | 22,674 | ||||||
| Reversal of loan losses(2) | 432 | 568 | 1,000 | |||||||||
| Noninterest income(3) | 1,999 | 5,896 | 7,895 | |||||||||
| Noninterest expense | (15,406 | ) | (5,553 | ) | (20,959 | ) | ||||||
| Income before provision for income taxes | 7,502 | 3,108 | 10,610 | |||||||||
| Provision for income taxes | (1,431 | ) | (530 | ) | (1,961 | ) | ||||||
| Net income | $ | 6,071 | $ | 2,578 | $ | 8,649 | ||||||
| Total average assets for period ended | $ | 1,805,471 | $ | 429,156 | $ | 2,234,627 | ||||||
| FTEs | 384 | 152 | 536 | |||||||||
| At or For the Year Ended December 31, 2022 | ||||||||||||
| Commercial | ||||||||||||
| and Consumer | ||||||||||||
| Condensed income statement: | Banking | Home Lending | Total | |||||||||
| Net interest income(1) | $ | 93,358 | $ | 10,922 | $ | 104,280 | ||||||
| Provision for credit losses on loans(2) | (5,064 | ) | (1,153 | ) | (6,217 | ) | ||||||
| Noninterest income(3) | 10,158 | 7,950 | 18,108 | |||||||||
| Noninterest expense | (59,723 | ) | (19,460 | ) | (79,183 | ) | ||||||
| Income (loss) before (provision) benefit for income taxes | 38,729 | (1,741 | ) | 36,988 | ||||||||
| (Provision) benefit for income taxes | (7,684 | ) | 345 | (7,339 | ) | |||||||
| Net income (loss) | $ | 31,045 | $ | (1,396 | ) | $ | 29,649 | |||||
| Total average assets for period ended | $ | 2,018,263 | $ | 417,431 | $ | 2,435,694 | ||||||
| FTEs | 405 | 132 | 537 | |||||||||
| At or For the Year Ended December 31, 2021 | ||||||||||||
| Commercial | ||||||||||||
| and Consumer | ||||||||||||
| Condensed income statement: | Banking | Home Lending | Total | |||||||||
| Net interest income(1) | $ | 78,306 | $ | 8,343 | $ | 86,649 | ||||||
| (Provision for) reversal of loan losses(2) | (2,613 | ) | 2,113 | (500 | ) | |||||||
| Noninterest income(3) | 8,545 | 28,968 | 37,513 | |||||||||
| Noninterest expense | (56,557 | ) | (19,685 | ) | (76,242 | ) | ||||||
| Income before provision for income taxes | 27,681 | 19,739 | 47,420 | |||||||||
| Provision for income taxes | (5,842 | ) | (4,166 | ) | (10,008 | ) | ||||||
| Net income | $ | 21,839 | $ | 15,573 | $ | 37,412 | ||||||
| Total average assets for period ended | $ | 1,779,850 | $ | 409,363 | $ | 2,189,213 | ||||||
| FTEs | 384 | 152 | 536 | |||||||||
________________________
(1) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to the other segment. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of assigned liabilities to fund segment assets.
(2) Provision for credit losses on loans as calculated using the Current Expected Credit Loss (“CECL”) method adopted January 1, 2022, and provision for loan losses as calculated using the previous incurred loss method in 2021. The change in methodology reflects shifts in allocation between segments due to various changes, adjustments to qualitative factors, changes in loan balances, and charge-off and recovery activity.
(3) Noninterest income includes activity from certain residential mortgage loans that were initially originated for sale and measured at fair value; and subsequently transferred to loans held for investment. Gains and losses from changes in fair value for these loans are reported in earnings as a component of noninterest income. For the three months and year ended December 31, 2022, the Company recorded a net increase in fair value of
Asset Summary
Total assets decreased
| LOAN PORTFOLIO | |||||||||||||||||||
| (Dollars in thousands) | December 31, 2022 | September 30, 2022 | December 31, 2021 | ||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||
| REAL ESTATE LOANS | |||||||||||||||||||
| Commercial | $ | 334,059 | 15.1 | % | $ | 310,923 | 14.7 | % | $ | 264,429 | 15.1 | % | |||||||
| Construction and development | 342,591 | 15.4 | 335,177 | 15.9 | 240,553 | 13.7 | |||||||||||||
| Home equity | 55,387 | 2.5 | 53,681 | 2.6 | 41,017 | 2.3 | |||||||||||||
| One-to-four-family (excludes HFS) | 469,485 | 21.2 | 429,196 | 20.3 | 366,146 | 20.8 | |||||||||||||
| Multi-family | 219,738 | 9.9 | 223,712 | 10.6 | 178,158 | 10.2 | |||||||||||||
| Total real estate loans | 1,421,260 | 64.1 | 1,352,689 | 64.1 | 1,090,303 | 62.1 | |||||||||||||
| CONSUMER LOANS | |||||||||||||||||||
| Indirect home improvement | 495,941 | 22.3 | 447,462 | 21.2 | 336,285 | 19.2 | |||||||||||||
| Marine | 70,567 | 3.2 | 68,106 | 3.2 | 82,778 | 4.7 | |||||||||||||
| Other consumer | 3,064 | 0.1 | 2,987 | 0.2 | 2,980 | 0.2 | |||||||||||||
| Total consumer loans | 569,572 | 25.6 | 518,555 | 24.6 | 422,043 | 24.1 | |||||||||||||
| COMMERCIAL BUSINESS LOANS | |||||||||||||||||||
| Commercial and industrial | 196,791 | 8.9 | 211,009 | 10.0 | 208,552 | 11.9 | |||||||||||||
| Warehouse lending | 31,229 | 1.4 | 28,102 | 1.3 | 33,277 | 1.9 | |||||||||||||
| Total commercial business loans | 228,020 | 10.3 | 239,111 | 11.3 | 241,829 | 13.8 | |||||||||||||
| Total loans receivable, gross | 2,218,852 | 100.0 | % | 2,110,355 | 100.0 | % | 1,754,175 | 100.0 | % | ||||||||||
| Allowance for credit losses on loans(1) | (27,992 | ) | (26,426 | ) | (25,635 | ) | |||||||||||||
| Total loans receivable, net | $ | 2,190,860 | $ | 2,083,929 | $ | 1,728,540 | |||||||||||||
_________________________
(1) Allowance in 2022 is reported using the CECL method and as of December 31, 2021, the allowance is reported in accordance with previous GAAP using the incurred loss method.
Loans receivable, net increased
Originations of one-to-four-family loans to purchase and to refinance a home for the three months ended December 31, 2022 and September 30, 2022, and for the three months ended and years ended December 31, 2022 and 2021 were as follows:
| (Dollars in thousands) | For the Three Months Ended | For the Three Months Ended | Quarter | Quarter | ||||||||||||||||||
| December 31, 2022 | September 30, 2022 | over Quarter | over Quarter | |||||||||||||||||||
| Amount | Percent | Amount | Percent | $ Change | % Change | |||||||||||||||||
| Purchase | $ | 115,102 | 87.8 | % | $ | 172,639 | 89.1 | % | $ | (57,537 | ) | (33.3 | ) | % | ||||||||
| Refinance | 16,045 | 12.2 | 21,096 | 10.9 | (5,051 | ) | (23.9 | ) | ||||||||||||||
| Total | $ | 131,147 | 100.0 | % | $ | 193,735 | 100.0 | % | $ | (62,588 | ) | (32.3 | ) | % | ||||||||
| (Dollars in thousands) | For the Three Months Ended | For the Three Months Ended | Year | Year | ||||||||||||||||||
| December 31, 2022 | December 31, 2021 | over Year | over Year | |||||||||||||||||||
| Amount | Percent | Amount | Percent | $ Change | % Change | |||||||||||||||||
| Purchase | $ | 115,102 | 87.8 | % | $ | 182,851 | 53.9 | % | $ | (67,749 | ) | (37.1 | ) | % | ||||||||
| Refinance | 16,045 | 12.2 | 156,322 | 46.1 | (140,277 | ) | (89.7 | ) | ||||||||||||||
| Total | $ | 131,147 | 100.0 | % | $ | 339,173 | 100.0 | % | $ | (208,026 | ) | (61.3 | ) | % | ||||||||
| (Dollars in thousands) | For the Year Ended | For the Year Ended | Year | Year | ||||||||||||||||||
| December 31, 2022 | December 31, 2021 | over Year | over Year | |||||||||||||||||||
| Amount | Percent | Amount | Percent | $ Change | % Change | |||||||||||||||||
| Purchase | $ | 664,361 | 80.2 | % | $ | 869,108 | 55.9 | % | $ | (204,747 | ) | (23.6 | ) | % | ||||||||
| Refinance | 164,380 | 19.8 | 685,727 | 44.1 | (521,347 | ) | (76.0 | ) | ||||||||||||||
| Total | $ | 828,741 | 100.0 | % | $ | 1,554,835 | 100.0 | % | $ | (726,094 | ) | (46.7 | ) | % | ||||||||
During the quarter ended December 31, 2022, the Company sold
Gross margins on home loan sales decreased to
Liabilities and Equity Summary
Changes in deposits at the dates indicated are as follows:
| (Dollars in thousands) | ||||||||||||||||||
| December 31, 2022 | September 30, 2022 | |||||||||||||||||
| Transactional deposits: | Amount | Percent | Amount | Percent | $ Change | % Change | ||||||||||||
| Noninterest-bearing checking | $ | 537,938 | 25.3 | % | $ | 555,753 | 26.7 | % | $ | (17,815 | ) | (3.2 | ) | % | ||||
| Interest-bearing checking(1) | 135,127 | 6.3 | 147,968 | 7.1 | (12,841 | ) | (8.7 | ) | ||||||||||
| Escrow accounts related to mortgages serviced(2) | 16,236 | 0.8 | 25,859 | 1.2 | (9,623 | ) | (37.2 | ) | ||||||||||
| Subtotal | 689,301 | 32.4 | 729,580 | 35.0 | (40,279 | ) | (5.5 | ) | ||||||||||
| Savings | 134,358 | 6.3 | 143,612 | 6.9 | (9,254 | ) | (6.4 | ) | ||||||||||
| Money market(3) | 574,290 | 27.0 | 659,861 | 31.7 | (85,571 | ) | (13.0 | ) | ||||||||||
| Subtotal | 708,648 | 33.3 | 803,473 | 38.6 | (94,825 | ) | (11.8 | ) | ||||||||||
| Certificates of deposit less than | 440,785 | 20.7 | 345,227 | 16.6 | 95,558 | 27.7 | ||||||||||||
| Certificates of deposit of | 195,447 | 9.2 | 133,429 | 6.4 | 62,018 | 46.5 | ||||||||||||
| Certificates of deposit of | 93,560 | 4.4 | 71,629 | 3.4 | 21,931 | 30.6 | ||||||||||||
| Subtotal | 729,792 | 34.3 | 550,285 | 26.4 | 179,507 | 32.6 | ||||||||||||
| Total | $ | 2,127,741 | 100.0 | % | $ | 2,083,338 | 100.0 | % | $ | 44,403 | 2.1 | % | ||||||
| (Dollars in thousands) | ||||||||||||||||||
| December 31, 2022 | December 31, 2021 | |||||||||||||||||
| Transactional deposits: | Amount | Percent | Amount | Percent | $ Change | % Change | ||||||||||||
| Noninterest-bearing checking(5) | $ | 537,938 | 25.3 | % | $ | 564,360 | 29.4 | % | $ | (26,422 | ) | (4.7 | ) | % | ||||
| Interest-bearing checking(1)(5) | 135,127 | 6.3 | 228,024 | 11.9 | (92,897 | ) | (40.7 | ) | ||||||||||
| Escrow accounts related to mortgages serviced(2) | 16,236 | 0.8 | 16,389 | 0.9 | (153 | ) | (0.9 | ) | ||||||||||
| Subtotal | 689,301 | 32.4 | 808,773 | 42.2 | (119,472 | ) | (14.8 | ) | ||||||||||
| Savings | 134,358 | 6.3 | 193,922 | 10.1 | (59,564 | ) | (30.7 | ) | ||||||||||
| Money market(3) | 574,290 | 27.0 | 552,357 | 28.8 | 21,933 | 4.0 | ||||||||||||
| Subtotal | 708,648 | 33.3 | 746,279 | 38.9 | (37,631 | ) | (5.0 | ) | ||||||||||
| Certificates of deposit less than | 440,785 | 20.7 | 186,974 | 9.8 | 253,811 | 135.7 | ||||||||||||
| Certificates of deposit of | 195,447 | 9.2 | 116,206 | 6.1 | 79,241 | 68.2 | ||||||||||||
| Certificates of deposit of | 93,560 | 4.4 | 57,512 | 3.0 | 36,048 | 62.7 | ||||||||||||
| Subtotal | 729,792 | 34.3 | 360,692 | 18.9 | 369,100 | 102.3 | ||||||||||||
| Total | $ | 2,127,741 | 100.0 | % | $ | 1,915,744 | 100.0 | % | $ | 211,997 | 11.1 | % | ||||||
_______________________
(1) Includes
(2) Noninterest-bearing accounts.
(3) Includes
(4) Includes
(5) Interest-bearing checking balance as of December 31, 2021, was revised due to the misclassification of certain checking products in previous periods. As a result of the misclassification, interest-bearing checking balance as of December 31, 2021, of
At December 31, 2022, certificates of deposit (“CDs”), which include retail and nonretail CDs, totaled
At December 31, 2022, borrowings comprised of FHLB advances decreased
Total stockholders’ equity increased
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
The Company exceeded all regulatory capital requirements with a total risk-based capital ratio of
Credit Quality
The allowance for credit losses on loans (“ACLL”) at December 31, 2022, increased to
Nonperforming loans increased
Loans classified as substandard increased
At December 31, 2022 and September 30, 2022, the Company had two commercial business loans totaling
Operating Results
Net interest income increased
For the year ended December 31, 2022, net interest income increased by
NIM increased 42 basis points to
The average total cost of funds, including noninterest-bearing checking, increased 69 basis points to
For the three months and year ended December 31, 2022, the provision for credit losses on loans was
For the three months and year ended December 31, 2022, the Company recorded a recovery from the allowance for credit losses on unfunded commitments of
During the three months ended December 31, 2022, net charge-offs totaled
Noninterest income decreased
Noninterest expense increased
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 20 Bank branches, one headquarters office that produces loans and accepts deposits, and loan production offices in various suburban communities in the greater Puget Sound area, the Tri-Cities, and in Vancouver, Washington. The Bank services home mortgage customers throughout Washington State with an emphasis in the Puget Sound, Tri-Cities, and Vancouver home lending markets. The Bank announced the purchase of seven retail bank branches from Columbia Bank (two in Washington state and five in Oregon) with the transaction projected to be consummated on February 24, 2023, and the branches opening as 1st Security Bank branches on February 27, 2023.
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 the Company’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: potential adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels; labor shortages, the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war, including Russia’s invasion of Ukraine, as well as supply chain disruptions, and any governmental or societal response to new COVID-19 variants; increased competitive pressures, changes in the interest rate environment, adverse changes in the securities markets, the Company’s ability to successfully realize the anticipated benefits of the pending branch acquisitions, including customer acquisition and retention; the Company’s ability to execute its plans to grow its residential construction lending, mortgage banking, and warehouse lending operations, and the geographic expansion of its indirect home improvement lending; challenges arising from expanding into new geographic markets, products, or services; secondary market conditions for loans and the Company’s ability to originate loans for sale and sell loans in the secondary market; legislative and regulatory changes, including as a result of the COVID-19 pandemic; and other factors described in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the SEC which are available on its website at www.fsbwa.com and on the SEC's website at www.sec.gov. Any of the forward-looking statements that the Company makes 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 incorrect because of the inaccurate assumptions the Company might make, because of the factors illustrated above or because of other factors that cannot be foreseen by the Company. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The Company does not undertake and specifically disclaims 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 the Company’s actual results for 2023 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of the Company and could negatively affect its operating and stock performance.
| FS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share amounts) (Unaudited) | ||||||||||||||||||
| Linked | Year | |||||||||||||||||
| December 31, | September 30, | December 31, | Quarter | Over Year | ||||||||||||||
| 2022 | 2022 | 2021 | % Change | % Change | ||||||||||||||
| ASSETS | ||||||||||||||||||
| Cash and due from banks | $ | 10,525 | $ | 11,541 | $ | 12,043 | (9 | ) | (13 | ) | ||||||||
| Interest-bearing deposits at other financial institutions | 30,912 | 148,256 | 14,448 | (79 | ) | 114 | ||||||||||||
| Total cash and cash equivalents | 41,437 | 159,797 | 26,491 | (74 | ) | 56 | ||||||||||||
| Certificates of deposit at other financial institutions | 4,712 | 4,960 | 10,542 | (5 | ) | (55 | ) | |||||||||||
| Securities available-for-sale, at fair value | 229,252 | 227,942 | 271,359 | 1 | (16 | ) | ||||||||||||
| Securities held-to-maturity, net | 8,469 | 8,469 | 7,500 | — | 13 | |||||||||||||
| Loans held for sale, at fair value | 20,093 | 23,447 | 125,810 | (14 | ) | (84 | ) | |||||||||||
| Loans receivable, net | 2,190,860 | 2,083,929 | 1,728,540 | 5 | 27 | |||||||||||||
| Accrued interest receivable | 11,144 | 10,407 | 7,594 | 7 | 47 | |||||||||||||
| Premises and equipment, net | 25,119 | 25,438 | 26,591 | (1 | ) | (6 | ) | |||||||||||
| Operating lease right-of-use | 6,226 | 6,607 | 4,557 | (6 | ) | 37 | ||||||||||||
| Federal Home Loan Bank (“FHLB”) stock, at cost | 10,611 | 13,591 | 4,778 | (22 | ) | 122 | ||||||||||||
| Other real estate owned (“OREO”) | 570 | 145 | — | 293 | 100 | |||||||||||||
| Deferred tax asset, net | 6,670 | 6,571 | — | 2 | 100 | |||||||||||||
| Bank owned life insurance (“BOLI”), net | 36,799 | 36,578 | 37,092 | 1 | (1 | ) | ||||||||||||
| Servicing rights, held at the lower of cost or fair value | 18,017 | 18,470 | 16,970 | (2 | ) | 6 | ||||||||||||
| Goodwill | 2,312 | 2,312 | 2,312 | — | — | |||||||||||||
| Core deposit intangible, net | 3,369 | 3,542 | 4,060 | (5 | ) | (17 | ) | |||||||||||
| Other assets | 17,238 | 19,933 | 12,195 | (14 | ) | 41 | ||||||||||||
| TOTAL ASSETS | $ | 2,632,898 | $ | 2,652,138 | $ | 2,286,391 | (1 | ) | 15 | |||||||||
| LIABILITIES | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Noninterest-bearing accounts | $ | 554,174 | $ | 581,612 | $ | 580,749 | (5 | ) | (5 | ) | ||||||||
| Interest-bearing accounts | 1,573,567 | 1,501,726 | 1,334,995 | 5 | 18 | |||||||||||||
| Total deposits | 2,127,741 | 2,083,338 | 1,915,744 | 2 | 11 | |||||||||||||
| Borrowings | 186,528 | 260,828 | 42,528 | (28 | ) | 339 | ||||||||||||
| Subordinated notes: | ||||||||||||||||||
| Principal amount | 50,000 | 50,000 | 50,000 | — | — | |||||||||||||
| Unamortized debt issuance costs | (539 | ) | (556 | ) | (606 | ) | (3 | ) | (11 | ) | ||||||||
| Total subordinated notes less unamortized debt issuance costs | 49,461 | 49,444 | 49,394 | — | — | |||||||||||||
| Operating lease liability | 6,474 | 6,836 | 4,792 | (5 | ) | 35 | ||||||||||||
| Deferred tax liability, net | — | — | 1,183 | — | (100 | ) | ||||||||||||
| Other liabilities | 30,997 | 31,145 | 25,243 | — | 23 | |||||||||||||
| Total liabilities | 2,401,201 | 2,431,591 | 2,038,884 | (1 | ) | 18 | ||||||||||||
| 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; 7,736,185 shares issued and outstanding at December 31, 2022, 7,704,373 at September 30, 2022, and 8,169,887 at December 31, 2021 | 77 | 77 | 82 | — | (6 | ) | ||||||||||||
| Additional paid-in capital | 55,187 | 53,769 | 67,958 | 3 | (19 | ) | ||||||||||||
| Retained earnings | 202,065 | 195,986 | 179,215 | 3 | 13 | |||||||||||||
| Accumulated other comprehensive (loss) income, net of tax | (25,632 | ) | (29,285 | ) | 252 | (12 | ) | (10,271 | ) | |||||||||
| Total stockholders’ equity | 231,697 | 220,547 | 247,507 | 5 | (6 | ) | ||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,632,898 | $ | 2,652,138 | $ | 2,286,391 | (1 | ) | 15 | |||||||||
| FS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited) | ||||||||||||||||||
| Three Months Ended | Qtr | Year | ||||||||||||||||
| December 31, | September 30, | December 31, | Over Qtr | Over Year | ||||||||||||||
| 2022 | 2022 | 2021 | % Change | % Change | ||||||||||||||
| INTEREST INCOME | ||||||||||||||||||
| Loans receivable, including fees | $ | 33,763 | $ | 29,563 | $ | 23,199 | 14 | 46 | ||||||||||
| Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions | 2,056 | 1,741 | 1,587 | 18 | 30 | |||||||||||||
| Total interest and dividend income | 35,819 | 31,304 | 24,786 | 14 | 45 | |||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||
| Deposits | 3,982 | 2,596 | 1,448 | 53 | 175 | |||||||||||||
| Borrowings | 2,049 | 696 | 179 | 194 | 1,045 | |||||||||||||
| Subordinated notes | 486 | 485 | 485 | — | — | |||||||||||||
| Total interest expense | 6,517 | 3,777 | 2,112 | 73 | 209 | |||||||||||||
| NET INTEREST INCOME | 29,302 | 27,527 | 22,674 | 6 | 29 | |||||||||||||
| PROVISION (REVERSAL) FOR CREDIT LOSSES | 1,585 | 1,718 | (1,000 | ) | (8 | ) | (259 | ) | ||||||||||
| NET INTEREST INCOME AFTER PROVISION (REVERSAL) FOR CREDIT LOSSES | 27,717 | 25,809 | 23,674 | 7 | 17 | |||||||||||||
| NONINTEREST INCOME | ||||||||||||||||||
| Service charges and fee income | 2,404 | 2,327 | 1,323 | 3 | 82 | |||||||||||||
| Gain on sale of loans | 592 | 1,402 | 6,121 | (58 | ) | (90 | ) | |||||||||||
| Earnings on cash surrender value of BOLI | 222 | 221 | 219 | — | 1 | |||||||||||||
| Other noninterest income | 478 | 231 | 232 | 107 | 106 | |||||||||||||
| Total noninterest income | 3,696 | 4,181 | 7,895 | (12 | ) | (53 | ) | |||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||||
| Salaries and benefits | 12,522 | 11,402 | 13,390 | 10 | (6 | ) | ||||||||||||
| Operations | 3,087 | 2,812 | 3,031 | 10 | 2 | |||||||||||||
| Occupancy | 1,340 | 1,344 | 1,300 | — | 3 | |||||||||||||
| Data processing | 1,699 | 1,548 | 1,132 | 10 | 50 | |||||||||||||
| Loan costs | 698 | 746 | 782 | (6 | ) | (11 | ) | |||||||||||
| Professional and board fees | 767 | 631 | 816 | 22 | (6 | ) | ||||||||||||
| Federal Deposit Insurance Corporation (“FDIC”) insurance | 420 | 462 | 145 | (9 | ) | 190 | ||||||||||||
| Marketing and advertising | 245 | 220 | 205 | 11 | 20 | |||||||||||||
| Acquisition cost | 898 | — | — | 100 | 100 | |||||||||||||
| Amortization of core deposit intangible | 173 | 173 | 160 | — | 8 | |||||||||||||
| Recovery of servicing rights | — | — | (2 | ) | — | 100 | ||||||||||||
| Total noninterest expense | 21,849 | 19,338 | 20,959 | 13 | 4 | |||||||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 9,564 | 10,652 | 10,610 | (10 | ) | (10 | ) | |||||||||||
| PROVISION FOR INCOME TAXES | 1,942 | 2,194 | 1,961 | (11 | ) | (1 | ) | |||||||||||
| NET INCOME | $ | 7,622 | $ | 8,458 | $ | 8,649 | (10 | ) | (12 | ) | ||||||||
| Basic earnings per share(1) | $ | 0.98 | $ | 1.09 | $ | 1.05 | (10 | ) | (7 | ) | ||||||||
| Diluted earnings per share(1) | $ | 0.97 | $ | 1.08 | $ | 1.03 | (10 | ) | (6 | ) | ||||||||
| FS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited) | |||||||||||
| Year Ended | Year | ||||||||||
| December 31, | December 31, | Over Year | |||||||||
| 2022 | 2021 | % Change | |||||||||
| INTEREST INCOME | |||||||||||
| Loans receivable, including fees | $ | 111,648 | $ | 90,737 | 23 | ||||||
| Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions | 7,046 | 5,637 | 25 | ||||||||
| Total interest and dividend income | 118,694 | 96,374 | 23 | ||||||||
| INTEREST EXPENSE | |||||||||||
| Deposits | 9,420 | 6,929 | 36 | ||||||||
| Borrowings | 3,052 | 1,074 | 184 | ||||||||
| Subordinated note | 1,942 | 1,722 | 13 | ||||||||
| Total interest expense | 14,414 | 9,725 | 48 | ||||||||
| NET INTEREST INCOME | 104,280 | 86,649 | 20 | ||||||||
| PROVISION FOR CREDIT LOSSES | 6,217 | 500 | 1,143 | ||||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 98,063 | 86,149 | 14 | ||||||||
| NONINTEREST INCOME | |||||||||||
| Service charges and fee income | 8,525 | 4,349 | 96 | ||||||||
| Gain on sale of loans | 7,917 | 31,083 | (75 | ) | |||||||
| Earnings on cash surrender value of BOLI | 876 | 866 | 1 | ||||||||
| Other noninterest income | 790 | 1,215 | (35 | ) | |||||||
| Total noninterest income | 18,108 | 37,513 | (52 | ) | |||||||
| NONINTEREST EXPENSE | |||||||||||
| Salaries and benefits | 47,632 | 49,721 | (4 | ) | |||||||
| Operations | 10,743 | 10,791 | — | ||||||||
| Occupancy | 5,165 | 4,892 | 6 | ||||||||
| Data processing | 6,062 | 4,951 | 22 | ||||||||
| Loss on sale of OREO | — | 9 | 100 | ||||||||
| Loan costs | 2,718 | 2,795 | (3 | ) | |||||||
| Professional and board fees | 3,154 | 3,181 | (1 | ) | |||||||
| FDIC insurance | 1,224 | 636 | 92 | ||||||||
| Marketing and advertising | 897 | 634 | 41 | ||||||||
| Acquisition cost | 898 | — | 100 | ||||||||
| Amortization of core deposit intangible | 691 | 691 | — | ||||||||
| Recovery of servicing rights | (1 | ) | (2,059 | ) | (100 | ) | |||||
| Total noninterest expense | 79,183 | 76,242 | 4 | ||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 36,988 | 47,420 | (22 | ) | |||||||
| PROVISION FOR INCOME TAXES | 7,339 | 10,008 | (27 | ) | |||||||
| NET INCOME | $ | 29,649 | $ | 37,412 | (21 | ) | |||||
| Basic earnings per share(1) | $ | 3.75 | $ | 4.48 | (16 | ) | |||||
| Diluted earnings per share(1) | $ | 3.70 | $ | 4.37 | (15 | ) | |||||
____________________________
(1) Earnings per share for the three months and year ended December 31, 2021, was revised due to the improper inclusion of certain unvested shares in the denominator of basic and diluted earnings per share. As a result of the inclusion, earnings per share was understated for the three months ended and year ended December 31, 2021. Basic earnings per share for those periods was updated to
| KEY FINANCIAL RATIOS AND DATA(Unaudited) | |||||||
| For the Three Months Ended | |||||||
| December 31, | September 30, | December 31, | |||||
| 2022 | 2022 | 2021 | |||||
| PERFORMANCE RATIOS: | |||||||
| Return on assets (ratio of net income to average total assets)(1) | 1.16 | % | 1.34 | % | 1.54 | % | |
| Return on equity (ratio of net income to average equity)(1) | 11.52 | 13.31 | 14.07 | ||||
| Yield on average interest-earning assets(1) | 5.65 | 5.16 | 4.59 | ||||
| Average total cost of funds(1) | 1.12 | 0.68 | 0.43 | ||||
| Interest rate spread information – average during period | 4.53 | 4.48 | 4.16 | ||||
| Net interest margin(1) | 4.62 | 4.54 | 4.20 | ||||
| Operating expense to average total assets(1) | 3.32 | 3.07 | 3.72 | ||||
| Average interest-earning assets to average interest-bearing liabilities(1) | 142.94 | 147.92 | 152.96 | ||||
| Efficiency ratio(2) | 66.21 | 60.99 | 68.57 | ||||
| For the Year Ended | |||||||
| December 31, | December 31, | ||||||
| 2022 | 2021 | ||||||
| PERFORMANCE RATIOS: | |||||||
| Return on assets (ratio of net income to average total assets) | 1.22 | % | 1.71 | % | |||
| Return on equity (ratio of net income to average equity) | 11.66 | 15.74 | |||||
| Yield on average interest-earning assets | 5.07 | 4.59 | |||||
| Average total cost of funds | 0.67 | 0.51 | |||||
| Interest rate spread information – average during period | 4.40 | 4.08 | |||||
| Net interest margin | 4.46 | 4.13 | |||||
| Operating expense to average total assets | 3.25 | 3.48 | |||||
| Average interest-earning assets to average interest-bearing liabilities | 149.09 | 146.06 | |||||
| Efficiency ratio(2) | 64.70 | 61.41 | |||||
| December 31, | September 30, | December 31, | |||||
| 2022 | 2022 | 2021 | |||||
| ASSET QUALITY RATIOS AND DATA: | |||||||
| Nonperforming assets to total assets at end of period(3) | 0.35 | % | 0.32 | % | 0.25 | % | |
| Nonperforming loans to total gross loans(4) | 0.39 | 0.39 | 0.33 | ||||
| Allowance for credit losses - loans to nonperforming loans(4) | 303.50 | 315.35 | 440.24 | ||||
| Allowance for credit losses - loans to gross loans receivable, excluding HFS loans | 1.26 | 1.25 | 1.46 |
| At or For the Three Months Ended | ||||||||||
| December 31, | September 30, | December 31, | ||||||||
| 2022 | 2022 | 2021 | ||||||||
| PER COMMON SHARE DATA: | ||||||||||
| Basic earnings per share | $ | 0.98 | $ | 1.09 | $ | 1.05 | ||||
| Diluted earnings per share | $ | 0.97 | $ | 1.08 | $ | 1.03 | ||||
| Weighted average basic shares outstanding | 7,597,260 | 7,605,360 | 8,065,103 | |||||||
| Weighted average diluted shares outstanding | 7,712,498 | 7,707,762 | 8,260,103 | |||||||
| Common shares outstanding at end of period | 7,617,655 | (5) | 7,585,843 | (6) | 8,048,215 | (7) | ||||
| Book value per share using common shares outstanding | $ | 30.42 | $ | 29.07 | $ | 30.75 | ||||
| Tangible book value per share using common shares outstanding(8) | $ | 29.67 | $ | 28.30 | $ | 29.96 | ||||
____________________________
(1) Annualized.
(2) Total noninterest expense as a percentage of net interest income and total noninterest income.
(3) Nonperforming assets consist of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), foreclosed real estate and other repossessed assets.
(4) Nonperforming loans consist of nonaccruing loans and accruing loans 90 days or more past due.
(5) Common shares were calculated using shares outstanding of 7,736,185 at December 31, 2022, less 118,530 unvested restricted stock shares.
(6) Common shares were calculated using shares outstanding of 7,704,373 at September 30, 2022, less 118,530 unvested restricted stock shares.
(7) Common shares were calculated using shares outstanding of 8,169,887 at December 31, 2021, less 121,672 unvested restricted stock shares.
(8) Tangible book value per share using outstanding common shares excludes intangible assets. This ratio represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” below.
| (Dollars in thousands) | For the Three Months Ended December 31, | For the Year Ended December 31, | QTR Over QTR | Year Over Year | ||||||||||||||||
| Average Balances | 2022 | 2021 | 2022 | 2021 | $ Change | $ Change | ||||||||||||||
| Assets | ||||||||||||||||||||
| Loans receivable(1) | $ | 2,194,173 | $ | 1,813,922 | $ | 2,014,017 | $ | 1,762,832 | $ | 380,251 | $ | 251,185 | ||||||||
| Securities available-for-sale, at fair value | 274,255 | 267,325 | 278,099 | 229,027 | 6,930 | 49,072 | ||||||||||||||
| Securities held-to-maturity | 8,500 | 7,500 | 8,084 | 7,500 | 1,000 | 584 | ||||||||||||||
| Interest-bearing deposits and certificates of deposit at other financial institutions | 11,729 | 48,621 | 7,231 | 93,435 | (36,892 | ) | (86,204 | ) | ||||||||||||
| FHLB stock, at cost | 26,706 | 4,637 | 32,689 | 5,494 | 22,069 | 27,195 | ||||||||||||||
| Total interest-earning assets | 2,515,363 | 2,142,005 | 2,340,120 | 2,098,288 | 373,358 | 241,832 | ||||||||||||||
| Noninterest-earning assets | 96,379 | 92,622 | 95,574 | 90,925 | 3,757 | 4,649 | ||||||||||||||
| Total assets | $ | 2,611,742 | $ | 2,234,627 | $ | 2,435,694 | $ | 2,189,213 | $ | 377,115 | $ | 246,481 | ||||||||
| Liabilities and stockholders’ equity | ||||||||||||||||||||
| Interest-bearing accounts | $ | 1,495,841 | $ | 1,312,545 | $ | 1,417,561 | $ | 1,329,350 | $ | 183,296 | $ | 88,211 | ||||||||
| Borrowings | 214,488 | 38,429 | 102,571 | 63,128 | 176,059 | 39,443 | ||||||||||||||
| Subordinated notes | 49,450 | 49,384 | 49,425 | 44,160 | 66 | 5,265 | ||||||||||||||
| Total interest-bearing liabilities | 1,759,779 | 1,400,358 | 1,569,557 | 1,436,638 | 359,421 | 132,919 | ||||||||||||||
| Noninterest-bearing accounts | 555,622 | 560,161 | 579,968 | 486,292 | (4,539 | ) | 93,676 | |||||||||||||
| Other noninterest-bearing liabilities | 33,775 | 30,147 | 31,955 | 28,610 | 3,628 | 3,345 | ||||||||||||||
| Stockholders’ equity | 262,566 | 243,961 | 254,214 | 237,673 | 18,605 | 16,541 | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,611,742 | $ | 2,234,627 | $ | 2,435,694 | $ | 2,189,213 | $ | 377,115 | $ | 246,481 | ||||||||
(1) Includes loans HFS.
Non-GAAP Financial Measures:
In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States (“GAAP”), this earnings release contains tangible book value per share, a non-GAAP financial measure. Tangible book value per share is calculated by dividing tangible common stockholders’ equity by the number of common shares outstanding. 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. The Company believes that this non-GAAP measure is consistent with the capital treatment utilized 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.
This non-GAAP financial measure has inherent limitations, is not required to be uniformly applied, and is not audited. Further, this non-GAAP financial measure should not be considered in isolation or as a substitute for book value per share or total stockholders' equity determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.
Reconciliation of the GAAP book value per share and non-GAAP tangible book value per share is presented below.
| December 31, | September 30, | December 31, | ||||||||||
| (Dollars in thousands, except share and per share amounts) | 2022 | 2022 | 2021 | |||||||||
| Stockholders' equity | $ | 231,697 | $ | 220,547 | $ | 247,507 | ||||||
| Goodwill and core deposit intangible, net | (5,681 | ) | (5,854 | ) | (6,372 | ) | ||||||
| Tangible common stockholders' equity | $ | 226,016 | $ | 214,693 | $ | 241,135 | ||||||
| Common shares outstanding at end of period | 7,617,655 | 7,585,843 | 8,048,215 | |||||||||
| Common stockholders' equity (book value) per share (GAAP) | $ | 30.42 | $ | 29.07 | $ | 30.75 | ||||||
| Tangible common stockholders' equity (tangible book value) per share (non-GAAP) | $ | 29.67 | $ | 28.30 | $ | 29.96 | ||||||
Contacts:
Joseph C. Adams,
Chief Executive Officer
Matthew D. Mullet,
Chief Financial Officer
(425) 771-5299
www.FSBWA.com
FAQ
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