FSBW
FS Bancorp, Inc. Reports 2021 Results Including $37.4 Million of Net Income or $4.32 Per Diluted Share and a 33.3% Dividend Increase to $0.20 Per Share for the Thirty-Sixth Consecutive Quarterly Dividend
MOUNTLAKE TERRACE, WA - January 27, 2022 - FS Bancorp, Inc. (NASDAQ: FSBW) (the "Company"), the holding company for 1st Security Bank of Washington (the "Bank") today reported 2021 total net income of $37.4 million, or $4.32 per diluted share, compared to $39.3 million, or $4.49 per diluted share last year. Fourth quarter net income was $8.6 million, or $1.01 per diluted share, compared to $11.4 million, or $1.30 per diluted share in the comparable quarter one year ago. All share and per share data in this earnings release has been adjusted to reflect the two-for-one stock split, in the form of a 100% stock dividend, effective July 14, 2021.
"Fourth quarter results reflect strong loan growth funded by core deposits and continued diversified revenues supporting margins," stated Joe Adams, CEO. "We are also pleased that our Board of Directors approved our thirty-sixth consecutive quarterly cash dividend which is being increased to $0.20 from $0.15 per share. The quarterly dividend of $0.20 will be paid on February 24, 2022, to shareholders of record as of February 10, 2022."
CFO Matthew Mullet noted, "Improved credit performance and economic factors during 2021, as compared to 2020, supported a fourth quarter reversal for loan losses of $1.0 million."
2021 Fourth Quarter and Year End Highlights
Asset Summary
Total assets increased $57.7 million to $2.29 billion at December 31, 2021, compared to $2.23 billion at September 30, 2021, and increased $173.2 million, or 8.2%, from $2.11 billion at December 31, 2020. The quarter over linked quarter increase in total assets was primarily due to increases in loans receivable, net of $50.5 million,
FS Bancorp Q4 Earnings January 27, 2022 Page 2
loans held for sale ("HFS") of $7.7 million, securities available-for-sale of $2.6 million and other assets of $1.1 million, partially offset by decreases in total cash and cash equivalents of $1.8 million and certificates of deposit ("CDs") at other financial institutions of $1.2 million. The year over year increase was primarily due to increases in loans receivable, net of $183.6 million, securities available-for-sale of $93.3 million, servicing rights of $4.4 million, and other assets of $2.5 million, partially offset by decreases in total cash and cash equivalents of $65.1 million, loans HFS of $40.6 million, Federal Home Loan Bank ("FHLB") stock of $2.7 million, and CDs at other financial institutions of $1.7 million.
LOAN PORTFOLIO
(Dollars in thousands)
December 31, 2021
September 30, 2021
December 31, 2020
Amount
Percent
Amount
Percent
Amount
Percent
REAL ESTATE LOANS
Commercial
$
265,038
15.1
%
$
217,911
12.7
%
$
222,719
14.1
%
Construction and development
242,433
13.8
250,099
14.6
216,975
13.8
Home equity
40,558
2.3
42,095
2.5
43,093
2.7
One-to-four-family (excludes HFS)
366,388
20.8
365,326
21.4
311,093
19.8
Multi-family
178,694
10.1
165,240
9.7
131,601
8.4
Total real estate loans
1,093,111
62.1
1,040,671
60.9
925,481
58.8
CONSUMER LOANS
Indirect home improvement
340,285
19.3
325,630
19.0
286,020
18.2
Marine
80,627
4.6
83,827
4.9
85,740
5.4
Other consumer
2,900
0.2
3,188
0.2
3,418
0.2
Total consumer loans
423,812
24.1
412,645
24.1
375,178
23.8
COMMERCIAL BUSINESS LOANS
Commercial and industrial (includes PPP loans)
208,764
11.9
207,064
12.1
224,476
14.3
Warehouse lending
33,339
1.9
49,289
2.9
49,092
3.1
Total commercial business loans
242,103
13.8
256,353
15.0
273,568
17.4
Total loans receivable, gross
1,759,026
100.0
%
1,709,669
100.0
%
1,574,227
100.0
%
Allowance for loan losses
(25,635)
(26,925)
(26,172)
Deferred costs and fees, net
(5,061)
(4,978)
(4,017)
Premiums on purchased loans, net
210
277
943
Total loans receivable, net
$
1,728,540
$
1,678,043
$
1,544,981
Loans receivable, net increased $50.5 million to $1.73 billion at December 31, 2021, from $1.68 billion at September 30, 2021, and increased $183.6 million from $1.54 billion at December 31, 2020. The quarter over linked quarter increase in total real estate loans was $52.4 million, including increases in commercial real estate loans of $47.1 million, multi-family loans of $13.5 million, and one-to-four-family loans of $1.1 million, partially offset by decreases in construction and development loans of $7.7 million and home equity loans of $1.5 million. Consumer loans increased $11.2 million, primarily due to an increase of $14.7 million in indirect home improvement loans, partially offset by a decrease in marine loans of $3.2 million. Commercial business loans decreased $14.3 million, mainly driven by a decrease in warehouse lending of $16.0 million, reflecting the recent increase in residential mortgage interest rates and reduced refinance activity.
FS Bancorp Q4 Earnings January 27, 2022 Page 3
Originations of one-to-four-family loans to purchase and to refinance a home for the three months ended December 31, 2021 and September 30, 2021, and for the three months ended and years ended December 31, 2021 and 2020 were as follows:
(Dollars in thousands)
For the Three Months Ended
For the Three Months Ended
Quarter
Quarter
December 31, 2021
September 30, 2021
over Quarter
over Quarter
Amount
Percent
Amount
Percent
$ Change
% Change
Purchase
$
182,851
53.9
%
$
243,721
64.0
%
$
(60,870)
(25.0)
Refinance
156,322
46.1
136,803
36.0
19,519
14.3
Total
$
339,173
100.0
%
$
380,524
100.0
%
$
(41,351)
(10.9)
For the Three Months Ended
For the Three Months Ended
Year
Year
December 31, 2021
December 31, 2020
over Year
over Year
Amount
Percent
Amount
Percent
$ Change
% Change
Purchase
$
182,851
53.9
%
$
230,135
44.3
%
$
(47,284)
(20.5)
Refinance
156,322
46.1
289,074
55.7
(132,752)
(45.9)
Total
$
339,173
100.0
%
$
519,209
100.0
%
$
(180,036)
(34.7)
For the Year Ended
For the Year Ended
Year
Year
December 31, 2021
December 31, 2020
over Year
over Year
Amount
Percent
Amount
Percent
$ Change
% Change
Purchase
$
869,108
55.9
%
$
731,820
39.1
%
$
137,288
18.8
Refinance
685,727
44.1
1,141,277
60.9
(455,550)
(39.9)
Total
$
1,554,835
100.0
%
$
1,873,097
100.0
%
$
(318,262)
(17.0)
During the quarter ended December 31, 2021, the Company sold $305.8 million of one-to-four-family loans compared to sales of $319.9 million during the previous quarter, and sales of $522.9 million during the same quarter one year ago. During the year ended December 31, 2021, the Company sold $1.42 billion of one-to-four-family loans compared to sales of $1.64 billion during the same period last year. The reduction in purchase activity compared to the prior quarter reflects limited available inventory of homes for sale and seasonal changes in housing demand in the Pacific Northwest.
Gross margins on home loan sales increased to 3.66% during the quarter ended December 31, 2021, compared to 3.61% in the previous quarter and decreased from 4.76% in the same quarter one year ago. During the year ended December 31, 2021, gross margins on home loan sales decreased to 3.97%, compared to 4.25% in 2020. Gross margins are defined as the margin on loans sold (cash sales) without the impact of deferred costs.
FS Bancorp Q4 Earnings January 27, 2022 Page 4
Liabilities and Equity Summary
Changes in deposits at the dates indicated are as follows:
(Dollars in thousands)
December 31, 2021
September 30, 2021
Transactional deposits:
Amount
Percent
Amount
Percent
$ Change
% Change
Noninterest-bearing checking
$
443,133
23.1
%
$
423,091
22.7
%
$
20,042
4.7
Interest-bearing checking
349,251
18.2
308,142
16.5
41,109
13.3
Escrow accounts related to mortgages serviced
16,389
0.9
23,515
1.3
(7,126)
(30.3)
Subtotal
808,773
42.2
754,748
40.5
54,025
7.2
Savings
193,922
10.1
191,487
10.3
2,435
1.3
Money market
552,357
28.8
497,571
26.7
54,786
11.0
Subtotal
746,279
38.9
689,058
37.0
57,221
8.3
Certificates of deposit less than $100,000
186,974
9.8
231,453
12.4
(44,479)
(19.2)
Certificates of deposit of $100,000 through $250,000
116,206
6.1
126,095
6.8
(9,889)
(7.8)
Certificates of deposit of $250,000 and over
57,512
3.0
62,296
3.3
(4,784)
(7.7)
Subtotal
360,692
18.9
419,844
22.5
(59,152)
(14.1)
Total
$
1,915,744
100.0
%
$
1,863,650
100.0
%
$
52,094
2.8
(Dollars in thousands)
December 31, 2021
December 31, 2020
Transactional deposits:
Amount
Percent
Amount
Percent
$ Change
% Change
Noninterest-bearing checking
$
443,133
23.1
%
$
348,421
20.8
%
$
94,712
27.2
Interest-bearing checking
349,251
18.2
226,282
13.5
122,969
54.3
Escrow accounts related to mortgages serviced
16,389
0.9
14,432
0.9
1,957
13.6
Subtotal
808,773
42.2
589,135
35.2
219,638
37.3
Savings
193,922
10.1
152,842
9.1
41,080
26.9
Money market
552,357
28.8
429,548
25.7
122,809
28.6
Subtotal
746,279
38.9
582,390
34.8
163,889
28.1
Certificates of deposit less than $100,000
186,974
9.8
299,157
17.9
(112,183)
(37.5)
Certificates of deposit of $100,000 through $250,000
116,206
6.1
135,901
8.1
(19,695)
(14.5)
Certificates of deposit of $250,000 and over
57,512
3.0
67,488
4.0
(9,976)
(14.8)
Subtotal
360,692
18.9
502,546
30.0
(141,854)
(28.2)
Total
$
1,915,744
100.0
%
$
1,674,071
100.0
%
$
241,673
14.4
The increase in deposits from December 31, 2020 was primarily driven by organic growth in customer relationships and reduced withdrawals from deposit accounts due to a change in spending habits as a result of COVID-19.
At December 31, 2021, non-retail CDs, which include brokered CDs, online CDs, and public funds CDs, decreased $38.5 million to $114.2 million, compared to $152.6 million at September 30, 2021, due to a decrease of $38.0 million in brokered CDs. The year over year decrease in non-retail CDs of $82.4 million from $196.6 million at December 31, 2020, was primarily the result of an $88.9 million decrease in brokered CDs, offset by an increase of $6.4 million in online CDs. The reduction in non-retail CDs is directly tied to the Company replacing these non-retail CDs with brokered interest-bearing checking deposits of $90.0 million. The bulk of the wholesale funding activity has been tied to liability interest rate swap arrangements of $90.0 million that are funded with 90-day liabilities.
At December 31, 2021, borrowings comprised of FHLB advances, were unchanged from $42.5 million at September 30, 2021, and decreased $123.3 million, or 74.4% from $165.8 million at December 31, 2020. The
FS Bancorp Q4 Earnings January 27, 2022 Page 5
decrease in borrowings from the prior year is primarily due to the repayments of the following: $63.3 million of Paycheck Protection Program Liquidity Facility ("PPPLF") borrowings, due in part to the Small Business Administration's ("SBA") forgiveness of the underlying PPP loans and $60.0 million of FHLB advances utilizing funds primarily from deposit growth.
For the year ended December 31, 2021, the Company repaid $10.0 million in subordinated notes at 6.5% and issued $50.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes in a private placement transaction announced on February 10, 2021, at an initial fixed rate of 3.75%.
Total stockholders' equity increased $7.1 million, to $247.5 million at December 31, 2021, from $240.5 million at September 30, 2021, and increased $17.5 million, from $230.0 million at December 31, 2020. The increase in stockholders' equity during the current quarter was primarily due to net income of $8.6 million, partially offset by share repurchases totaling $1.3 million and dividends paid of $1.2 million. The Company repurchased 38,158 shares of its common stock at an average price of $34.01 per share. Book value per common share was $30.75 at December 31, 2021, compared to $29.78 at September 30, 2021, and $27.67 at December 31, 2020.
The Bank is well capitalized under the minimum capital requirements established by the Federal Deposit Insurance Corporation at December 31, 2021, with a CBLR of 12.2%, compared to the normally required CBLR of greater than 9.0% and the regulatory approved reduced CBLR of 8.5% due to the COVID-19 pandemic. The Company's Tier 1 leverage-based ratio was 10.8% at December 31, 2021.
Credit Quality
The allowance for loan and lease losses at December 31, 2021, decreased to $25.6 million, or 1.46% of gross loans receivable, excluding loans HFS, compared to $26.9 million, or 1.57% of gross loans receivable, excluding loans HFS at September 30, 2021, and decreased from $26.2 million, or 1.66% of gross loans receivable, excluding loans HFS, at December 31, 2020. Nonperforming loans decreased $113,000 to $5.8 million at December 31, 2021, from $5.9 million at September 30, 2021, and decreased $1.9 million from $7.8 million at December 31, 2020. The year over year decrease was primarily due to the payoff of a nonperforming commercial business loan of $1.2 million and a nonperforming home equity loan of $307,000.
Loans classified as substandard increased $567,000 to $18.1 million at December 31, 2021, compared to $17.5 million at September 30, 2021, and increased $441,000 from $17.6 million at December 31, 2020. The quarter over linked quarter increase in substandard loans was attributable to a $628,000 increase in commercial and industrial loans and a $143,000 increase in one-to-four-family loans, partially offset by a $129,000 decrease in home equity loans. The year over year increase in substandard loans was primarily due to increases of $5.7 million in commercial and industrial loans, partially offset by a $4.7 million decrease in one-to-four-family loans. There was no other real estate owned ("OREO") property at December 31, 2021 or September 30, 2021, compared to one OREO property in the amount of $90,000 at December 31, 2020.
As of December 31, 2021, the amount of loans remaining under interest-only payment/relief agreements due to COVID-19 included commercial real estate loans of $6.9 million and commercial business loans of $2.1 million. These loans were classified as current and accruing interest, with the exception of $1.2 million in commercial business loans which were classified as nonaccrual, yet current on contractual payments. These modifications were not classified as troubled debt restructurings ("TDRs") pursuant to guidance in effect at the time of modification. At December 31, 2021 the Company had no TDRs.
FS Bancorp Q4 Earnings January 27, 2022 Page 6
Included in the carrying value of gross loans are net discounts on loans purchased in the Anchor Bank acquisition in November 2018 ("Anchor Acquisition"). The remaining net discount on loans acquired was $751,000, $868,000, and $1.5 million, on $84.3 million, $90.8 million, and $132.6 million of gross loans at December 31, 2021, September 30, 2021, and December 31, 2020, respectively.
Operating Results
Net interest income increased $2.8 million, to $22.7 million for the three months ended December 31, 2021, from $19.9 million for the three months ended December 31, 2020. This comparable quarter over quarter increase was primarily the result of an improved mix of loans versus other interest-bearing assets and increased balances in higher yielding loans funded by lower cost deposits. Interest income increased $1.8 million, primarily due to an increase of $1.4 million in interest income on loans receivable, including fees, impacted primarily by loan growth and net deferred fees recognized upon SBA forgiveness of PPP loans. Interest expense decreased $966,000, primarily as a result of repricing deposit rates and a reduction in higher cost borrowings. For the three months ended December 31, 2021, the total recognition of net deferred fees on forgiven and amortizing PPP loans was $403,000. For the year ended December 31, 2021, net interest income increased by $12.5 million, to $86.6 million, from $74.1 million for the year ended December 31, 2020, in a similar manner as for the three-month comparison described above, with an increase in interest income of $7.5 million and a decrease in interest expense of $5.0 million. For the year ended December 31, 2021, the total recognition of net deferred fees on forgiven and amortizing PPP loans was $2.3 million.
NIM increased 21 basis points to 4.20% for the three months ended December 31, 2021, from 3.99% for the same period in the prior year, and increased 11 basis points to 4.13% for the year ended December 31, 2021, from 4.02% for the year ended December 31, 2020. The comparable quarter over quarter increase in NIM was impacted by an improved mix of interest-bearing assets, including a higher balance of higher yielding portfolio loans and investment securities and a significant decrease of interest-bearing cash balances, earning a nominal yield combined with declining deposit and borrowing costs. The increase in NIM between the year ended December 31, 2021, and 2020 primarily reflects the improved asset mix mentioned above and the reduction in deposit and borrowing costs.
The average total cost of funds, including noninterest-bearing checking, decreased 24 basis points to 0.43% for the three months ended December 31, 2021, from 0.67% for the three months ended December 31, 2020. This decrease was predominantly due to the decline in cost for market rate deposits and borrowings as well as a managed runoff of higher cost CD funding. The average total cost of funds, including noninterest-bearing checking, decreased 35 basis points to 0.51% for the year ended December 31, 2021, from 0.86% for the year ended December 31, 2020, also reflecting decreases in market interest rates over last year. Management remains focused on matching deposit/liability duration with the duration of loans/assets where appropriate.
There was a negative provision for loan losses of $1.0 million for the three months ended December 31, 2021, compared to $1.6 million provision for loan losses for the three months ended December 31, 2020. The provision for loan losses was $500,000 for the year ended December 31, 2021, compared to $13.0 million for the year ended December 31, 2020. The reduction of the provision for loan losses between both periods reflects improved economic factors on credit-deterioration related to the COVID-19 pandemic utilized to calculate the allowance for loan losses and also reflects loan-level improvements in "watch" classified loans that were downgraded based on the COVID-19 pandemic at December 31, 2021, compared to the same time last year. During the three months ended December 31, 2021, net charge-offs totaled $290,000, compared to $229,000 for the same period last year. The increase in net charge-offs was primarily due to increased consumer loan charge-offs. Net charge-offs totaled
FS Bancorp Q4 Earnings January 27, 2022 Page 7
$1.0 million during the year ended December 31, 2021, compared to $93,000 during the year ended December 31, 2020, due to the same reason mentioned above.
Noninterest income decreased $6.9 million, to $7.9 million, for the three months ended December 31, 2021, from $14.8 million for the three months ended December 31, 2020. The decrease during the period primarily reflects a $7.2 million decrease in gain on sale of loans due primarily to a reduction in the amount of originated and sold refinance loans, partially offset by a $516,000 increase in service charges and fee income primarily due to less amortization of mortgage servicing rights ("MSR") and increased servicing fees from non-portfolio loans. Noninterest income decreased $17.8 million, to $37.5 million, for the year ended December 31, 2021, from $55.4 million for the year ended December 31, 2020. This decrease was the result of a $17.8 million decrease in gain on sale of loans and a $1.8 million decrease in other noninterest income due to the one- time sale of Class B Visa stock shares of $1.5 million last year, partially offset by a $2.0 million increase in service charges and fee income.
Noninterest expense increased $2.4 million, to $21.0 million for the three months ended December 31, 2021, from $18.6 million for the three months ended December 31, 2020. The increase in noninterest expense reflects a $2.5 million increase in salaries and benefits, primarily attributable to a reduction in recognized deferred costs on direct loan origination activities of $3.8 million and an increase in compensation of $1.2 million, partially offset by a decrease in incentives and commissions of $2.5 million. Noninterest expense increased $9.6 million, to $76.2 million for the year ended December 31, 2021, from $66.6 million for the year ended December 31, 2020. The increase during the year was primarily due to an increase of $11.6 million in salaries and benefits, mostly attributable to a reduction in recognized deferred costs on direct loan origination activities of $9.7 million and increases in compensation of $4.2 million and medical expenses of $2.0 million, partially offset by a decrease in incentives and commissions of $5.3 million. The primary offset to the increase in noninterest expense was due to the $4.0 million net change in the value of servicing rights resulting in a $2.1 million recovery of servicing rights, from a $2.0 million impairment recognized last year due to the low interest rate environment from the government's response to the COVID-19 pandemic.
FS Bancorp Q4 Earnings January 27, 2022 Page 8
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, one headquarters office that produces loans and accepts deposits, and 11 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 the Company's actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: the effect of the COVID-19 pandemic, including on the Company's credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets, 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; 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 2022 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 Q4 Earnings January 27, 2022 Page 9
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
2021
2021
2020
% Change
% Change
ASSETS
Cash and due from banks
$
12,043
$
11,426
$
11,554
5
4
Interest-bearing deposits at other financial institutions
14,448
16,906
80,022
(15)
(82)
Total cash and cash equivalents
26,491
28,332
91,576
(6)
(71)
Certificates of deposit at other financial institutions
10,542
11,782
12,278
(11)
(14)
Securities available-for-sale, at fair value
271,359
268,802
178,018
1
52
Securities held-to-maturity
7,500
7,500
7,500
-
-
Loans held for sale, at fair value
125,810
118,106
166,448
7
(24)
Loans receivable, net
1,728,540
1,678,043
1,544,981
3
12
Accrued interest receivable
7,594
7,797
7,030
(3)
8
Premises and equipment, net
26,591
27,243
27,343
(2)
(3)
Operating lease right-of-use
4,557
4,875
4,949
(7)
(8)
Federal Home Loan Bank ("FHLB") stock, at cost
4,778
4,871
7,439
(2)
(36)
Other real estate owned ("OREO")
-
-
90
-
(100)
Deferred tax asset, net
-
303
-
(100)
-
Bank owned life insurance ("BOLI"), net
37,092
36,873
36,226
1
2
Servicing rights, held at the lower of cost or fair value
16,970
16,497
12,595
3
35
Goodwill
2,312
2,312
2,312
-
-
Core deposit intangible, net
4,060
4,220
4,751
(4)
(15)
Other assets
12,195
11,138
9,705
9
26
TOTAL ASSETS
$
2,286,391
$
2,228,694
$
2,113,241
3
8
LIABILITIES
Deposits:
Noninterest-bearing accounts
$
459,522
$
446,606
$
362,853
3
27
Interest-bearing accounts
1,456,222
1,417,044
1,311,218
3
11
Total deposits
1,915,744
1,863,650
1,674,071
3
14
Borrowings
42,528
42,528
165,809
-
(74)
Subordinated notes:
Principal amount
50,000
50,000
10,000
-
400
Unamortized debt issuance costs
(606)
(623)
-
(3)
-
Total subordinated notes less unamortized debt issuance costs
49,394
49,377
10,000
-
394
Operating lease liability
4,792
5,097
5,176
(6)
(7)
Deferred tax liability, net
1,183
-
58
-
1,940
Other liabilities
25,243
27,589
28,120
(9)
(10)
Total liabilities
2,038,884
1,988,241
1,883,234
3
8
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; 8,169,887 shares issued and outstanding at December 31, 2021, 8,208,045 at September 30, 2021, and 8,475,912 at December 31, 2020
82
82
85
-
(2)
Additional paid-in capital
67,958
68,481
81,275
(1)
(16)
Retained earnings
179,215
171,786
146,405
4
22
Accumulated other comprehensive income, net of tax
252
198
2,533
27
(90)
Unearned shares - Employee Stock Ownership Plan ("ESOP")
-
(94)
(291)
(100)
(100)
Total stockholders' equity
247,507
240,453
230,007
3
8
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
2,286,391
$
2,228,694
$
2,113,241
3
8
Share data has been adjusted for all periods to reflect the two-for-one stock split effective July 14, 2021.
FS Bancorp Q4 Earnings January 27, 2022 Page 10
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
2021
2021
2020
% Change
% Change
INTEREST INCOME
Loans receivable, including fees
$
23,199
$
23,520
$
21,758
(1)
7
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions
1,587
1,487
1,189
7
33
Total interest and dividend income
24,786
25,007
22,947
(1)
8
INTEREST EXPENSE
Deposits
1,448
1,629
2,310
(11)
(37)
Borrowings
179
227
503
(21)
(64)
Subordinated notes
485
496
265
(2)
83
Total interest expense
2,112
2,352
3,078
(10)
(31)
NET INTEREST INCOME
22,674
22,655
19,869
-
14
(REVERSAL) PROVISION FOR LOAN LOSSES
(1,000)
-
1,601
-
(162)
NET INTEREST INCOME AFTER (REVERSAL) PROVISION FOR LOAN LOSSES
23,674
22,655
18,268
4
30
NONINTEREST INCOME
Service charges and fee income
1,323
1,073
807
23
64
Gain on sale of loans
6,121
6,885
13,350
(11)
(54)
Earnings on cash surrender value of BOLI
219
218
220
-
-
Other noninterest income
232
222
414
5
(44)
Total noninterest income
7,895
8,398
14,791
(6)
(47)
NONINTEREST EXPENSE
Salaries and benefits
13,390
12,790
10,903
5
23
Operations
3,031
2,628
2,686
15
13
Occupancy
1,300
1,227
1,244
6
5
Data processing
1,132
1,309
1,230
(14)
(8)
OREO expenses
-
-
2
-
NM
Loan costs
782
842
522
(7)
50
Professional and board fees
816
757
847
8
(4)
Federal Deposit Insurance Corporation ("FDIC") insurance
145
120
255
21
(43)
Marketing and advertising
205
177
172
16
19
Amortization of core deposit intangible
160
177
177
(10)
(10)
(Recovery) impairment of servicing rights
(2)
(11)
570
(82)
(100)
Total noninterest expense
20,959
20,016
18,608
5
13
INCOME BEFORE PROVISION FOR INCOME TAXES
10,610
11,037
14,451
(4)
(27)
PROVISION FOR INCOME TAXES
1,961
2,706
3,087
(28)
(36)
NET INCOME
$
8,649
$
8,331
$
11,364
4
(24)
Basic earnings per share
$
1.04
$
0.99
$
1.33
5
(22)
Diluted earnings per share
$
1.01
$
0.97
$
1.30
4
(22)
Share and per share data has been adjusted for all periods to reflect the two-for-one stock split effective July 14, 2021.
FS Bancorp Q4 Earnings January 27, 2022 Page 11
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
2021
2020
% Change
INTEREST INCOME
Loans receivable, including fees
$
90,737
$
84,128
8
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions
5,637
4,709
20
Total interest and dividend income
96,374
88,837
8
INTEREST EXPENSE
Deposits
6,929
11,980
(42)
Borrowings
1,074
1,961
(45)
Subordinated note
1,722
776
122
Total interest expense
9,725
14,717
(34)
NET INTEREST INCOME
86,649
74,120
17
PROVISION FOR LOAN LOSSES
500
13,036
(96)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
86,149
61,084
41
NONINTEREST INCOME
Service charges and fee income
4,349
2,373
83
Gain on sale of loans
31,083
48,842
(36)
Gain on sale of investment securities
-
300
(100)
Earnings on cash surrender value of BOLI
866
870
-
Other noninterest income
1,215
2,974
(59)
Total noninterest income
37,513
55,359
(32)
NONINTEREST EXPENSE
Salaries and benefits
49,721
38,095
31
Operations
10,791
10,471
3
Occupancy
4,892
4,736
3
Data processing
4,951
4,388
13
Loss on sale of OREO
9
2
350
OREO expenses
-
4
(100)
Loan costs
2,795
2,066
35
Professional and board fees
3,181
2,797
14
FDIC insurance
636
829
(23)
Marketing and advertising
634
530
20
Amortization of core deposit intangible
691
706
(2)
(Recovery) impairment of servicing rights
(2,059)
1,969
(205)
Total noninterest expense
76,242
66,593
14
INCOME BEFORE PROVISION FOR INCOME TAXES
47,420
49,850
(5)
PROVISION FOR INCOME TAXES
10,008
10,586
(5)
NET INCOME
$
37,412
$
39,264
(5)
Basic earnings per share
$
4.42
$
4.57
(3)
Diluted earnings per share
$
4.32
$
4.49
(4)
Share and per share data has been adjusted for all periods to reflect the two-for-one stock split effective July 14, 2021.
FS Bancorp Q4 Earnings January 27, 2022 Page 12
KEY FINANCIAL RATIOS AND DATA (Unaudited)
At or For the Three Months Ended
December 31,
September 30,
December 31,
2021
2021
2020
PERFORMANCE RATIOS:
Return on assets (ratio of net income to average total assets) (1)
1.54
%
1.49
%
2.18
%
Return on equity (ratio of net income to average equity) (1)
14.07
13.82
20.48
Yield on average interest-earning assets (1)
4.59
4.67
4.61
Average total cost of funds (1)
0.43
0.48
0.67
Interest rate spread information - average during period
4.16
4.19
3.94
Net interest margin (1)
4.20
4.23
3.99
Operating expense to average total assets (1)
3.72
3.58
3.57
Average interest-earning assets to average interest-bearing liabilities
141.28
140.97
134.55
Efficiency ratio (2)
68.57
64.46
53.69
At or For the Year Ended
December 31,
December 31,
2021
2020
PERFORMANCE RATIOS:
Return on assets (ratio of net income to average total assets)
1.71
%
2.02
%
Return on equity (ratio of net income to average equity)
15.74
18.74
Yield on average interest-earning assets
4.59
4.82
Average total cost of funds
0.51
0.86
Interest rate spread information - average during period
4.09
3.96
Net interest margin
4.13
4.02
Operating expense to average total assets
3.48
3.43
Average interest-earning assets to average interest-bearing liabilities
139.74
133.62
Efficiency ratio (2)
61.41
51.43
December 31,
September 30,
December 31,
2021
2021
2020
ASSET QUALITY RATIOS AND DATA:
Non-performing assets to total assets at end of period (3)
0.25
%
0.27
%
0.37
%
Non-performing loans to total gross loans (4)
0.33
0.35
0.49
Allowance for loan losses to non-performing loans (4)
440.24
453.59
337.22
Allowance for loan losses to gross loans receivable, excluding HFS loans
1.46
1.57
1.66
CAPITAL RATIOS, BANK ONLY:
Community Bank Leverage Ratio
12.16
%
11.93
%
10.86
%
CAPITAL RATIOS, COMPANY ONLY:
Tier 1 leverage-based capital
10.78
%
10.57
%
11.09
%
FS Bancorp Q4 Earnings January 27, 2022 Page 13
At or For the Three Months Ended
December 31,
September 30,
December 31,
(Post stock split adjusted)
2021
2021
2020
PER COMMON SHARE DATA:
Basic earnings per share
$
1.04
$
0.99
$
1.33
Diluted earnings per share
$
1.01
$
0.97
$
1.30
Weighted average basic shares outstanding
8,186,775
8,240,218
8,433,236
Weighted average diluted shares outstanding
8,381,775
8,480,769
8,610,679
Common shares outstanding at end of period
8,048,215
(5)
8,073,412
(6)
8,313,886
(7)
Book value per share using common shares outstanding
$
30.75
$
29.78
$
27.67
Tangible book value per share using common shares outstanding (8)
$
29.96
$
28.97
$
26.82
Share and per share data has been adjusted for all periods to reflect the two-for-one stock split effective July 14, 2021.
____________________________
(Dollars in thousands)
For the Three Months Ended December 31,
For the Year Ended December 31,
QTR Over QTR
Year Over Year
Average Balances
2021
2020
2021
2020
$ Change
$ Change
Assets
Loans receivable, net of deferred loan fees (1)
$
1,813,922
$
1,694,942
$
1,762,832
$
1,576,975
$
118,980
$
185,857
Securities available-for-sale, at fair value
267,325
169,586
229,027
155,804
97,739
73,223
Securities held-to-maturity
7,500
7,250
7,500
2,441
250
5,059
Interest-bearing deposits and certificates of deposit at other financial institutions
48,621
100,625
93,435
100,783
(52,004)
(7,348)
FHLB stock, at cost
4,637
7,602
5,494
8,079
(2,965)
(2,585)
Total interest-earning assets
2,142,005
1,980,005
2,098,288
1,844,082
162,000
254,206
Noninterest-earning assets
92,622
91,595
90,925
95,966
1,027
(5,041)
Total assets
$
2,234,627
$
2,071,600
$
2,189,213
$
1,940,048
$
163,027
$
249,165
Liabilities and stockholders' equity
Interest-bearing accounts
$
1,428,334
$
1,286,725
$
1,394,323
$
1,222,395
$
141,609
$
171,928
Borrowings
38,429
174,899
63,128
147,836
(136,470)
(84,708)
Subordinated notes
49,384
9,919
44,160
9,899
39,465
34,261
Total interest-bearing liabilities
1,516,147
1,471,543
1,501,611
1,380,130
44,604
121,481
Noninterest-bearing accounts
444,371
347,798
421,319
323,086
96,573
98,233
Other noninterest-bearing liabilities
30,148
31,552
28,610
27,274
(1,404)
1,336
Stockholders' equity
243,961
220,707
237,673
209,558
23,254
28,115
Total liabilities and stockholders' equity
$
2,234,627
$
2,071,600
$
2,189,213
$
1,940,048
$
163,027
$
249,165
(1) Includes loans held for sale.
FS Bancorp Q4 Earnings January 27, 2022 Page 14
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 the tangible book value per share, a non-GAAP financial measure. 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 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)
2021
2021
2020
Stockholders' equity
$
247,507
$
240,453
$
230,007
Goodwill and core deposit intangible, net
(6,372)
(6,532)
(7,063)
Tangible common stockholders' equity
$
241,135
$
233,921
$
222,944
Common shares outstanding at end of period
8,048,215
8,073,412
8,313,886
Common stockholders' equity (book value) per share (GAAP)
$
30.75
$
29.78
$
27.67
Tangible common stockholders' equity (tangible book value) per share (non-GAAP)
$
29.96
$
28.97
$
26.82
Share and per share data has been adjusted for all periods to reflect the two-for-one stock split effective July 14, 2021.
Contacts:
Joseph C. Adams,
Chief Executive Officer
Matthew D. Mullet,
Chief Financial Officer
(425) 771-5299
www.FSBWA.com
Disclaimer
FS Bancorp Inc. published this content on 27 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 January 2022 16:25:24 UTC.