FS Bancorp(FSBW) - 2024 Q3 - Quarterly Report

Acquisition and Growth - The Company completed the acquisition of seven retail bank branches from Columbia State Bank, gaining approximately $425.5 million in deposits and$66.1 million in loans[210]. - The Company’s strategic plan includes expanding into new markets and enhancing its banking franchise[212]. - The Company is actively involved in community activities, which strengthens its relationships within the markets served[211]. Loan Portfolio and Originations - As of September 30, 2024, the Company's loan portfolio consisted of real estate loans (62.1%), consumer loans (25.4%), and commercial business loans (12.5%)[213]. - The Company funded $27.2 million in fixture-secured consumer loans, comprising 1,230 loans during the quarter ended September 30, 2024[214]. - One-to-four-family loan originations totaled$196.2 million for the three months ended September 30, 2024, with $167.6 million sold to investors[215]. - The Company’s residential mortgage loans held for investment amounted to$591.7 million, representing 23.7% of the total gross loan portfolio as of September 30, 2024[215]. - One-to-four-family loan originations for the nine months ended September 30, 2024, totaled $560.3 million, a 32.8$421.8 million in the same period of 2023[242]. - The Company originated $94.8 million in fixture-secured loans for the nine months ended September 30, 2024, compared to$205.3 million for the year ended December 31, 2023[215]. Financial Performance - Net income for the three months ended September 30, 2024, was $10.3 million, a 14.4$9.0 million for the same period in 2023, primarily due to a $2.9 million decrease in provision for income tax expense[255]. - Net income for the nine months ended September 30, 2024, increased by$1.4 million to $27.6 million, driven by a$2.8 million decrease in the provision for income taxes[271]. - Noninterest income rose by $985,000 to$6.0 million for the three months ended September 30, 2024, primarily due to a $648,000 increase in gains on loan sales and a$566,000 increase in other noninterest income[266]. - Noninterest income increased $1.9 million to$16.9 million for the nine months ended September 30, 2024, from $15.0 million for the same period in 2023[283]. Interest Income and Expenses - The Company’s earnings are primarily dependent on net interest income, which is influenced by the balances of loans and investments outstanding[218]. - Net interest income rose by$610,000 to $31.2 million for the three months ended September 30, 2024, compared to$30.6 million for the same period in 2023, attributed to a $3.8 million increase in interest income[259]. - Interest income increased by$3.8 million to $47.0 million for the three months ended September 30, 2024, from$43.3 million in the prior year, driven by a $55.5 million increase in the average balance of total interest-earning assets[261]. - Total interest expense increased by$16.0 million for the nine months ended September 30, 2024, compared to the same period in 2023, mainly due to higher market interest rates and a shift in deposit mix[275]. - Interest expense increased $16.0 million to$45.9 million for the nine months ended September 30, 2024, from $29.9 million for the comparable period in 2023[280]. Asset Quality and Credit Losses - The Company emphasizes maintaining strong asset quality and diversifying its loan portfolio as part of its strategic focus[212]. - The allowance for credit losses (ACL) on loans totaled$31.2 million or 1.25% of gross loans receivable at September 30, 2024, down from $31.5 million or 1.30$23.2 million at September 30, 2024, from $24.9 million at December 31, 2023[244]. - The provision for credit losses for the three months ended September 30, 2024, was$1.5 million, up from $548,000 in the same period of 2023, reflecting increased charge-off activity and growth in the loan portfolio[264]. - Net loan charge-offs increased to$1.6 million for the three months ended September 30, 2024, compared to $533,000 in the same period of 2023, driven by higher charge-offs in indirect home improvement loans and marine loans[265]. Deposits and Liabilities - Total deposits decreased by$95.0 million to $2.43 billion at September 30, 2024, reflecting declines in all categories except for certificates of deposit (CDs)[246]. - Total liabilities decreased by$26.9 million to $2.68 billion at September 30, 2024, primarily due to a$95.0 million decrease in deposits[245]. - Uninsured deposits increased to approximately $644.9 million or 26.6$606.5 million or 24.0% at December 31, 2023[249]. - Total borrowings increased by $70.1 million to$163.8 million at September 30, 2024, from $93.7 million at December 31, 2023, primarily due to a decline in total brokered deposits[252]. Capital and Stockholder Equity - Total stockholders' equity increased by$24.4 million to $288.9 million as of September 30, 2024, from$264.5 million at December 31, 2023, driven by net income of $27.6 million[253]. - As of September 30, 2024, the Bank exceeded all regulatory capital requirements with Tier 1 leverage-based capital at 11.2$2.2 million to $25.8 million for the three months ended September 30, 2024, mainly due to higher salaries, professional fees, and impairment of mortgage servicing rights[267]. - Noninterest expense increased$1.9 million to $73.2 million for the nine months ended September 30, 2024, from$71.3 million for the nine months ended September 30, 2023[285]. Market and Regulatory Compliance - The Bank's total borrowing capacity was $695.8 million with the FHLB of Des Moines, with unused borrowing capacity of$531.6 million as of September 30, 2024[289]. - As of September 30, 2024, FS Bancorp's unrestricted cash held at the Bank totaled $7.2 million[297]. - The current quarterly common stock dividend rate is$0.27 per share, with total dividends paid each quarter expected to be approximately $2.1 million[297]. - Approximately$1.4 million remained available for future stock repurchases as of September 30, 2024, with an additional program authorized for up to $5.0 million in repurchases until July 31, 2025[298]. - There have been no material changes in market risk disclosures since the 2023 Form 10-K[301]. - The Company's disclosure controls and procedures were deemed effective as of September 30, 2024, ensuring timely reporting and communication of required disclosures[303]. - No changes in internal control over financial reporting occurred during the three months ended September 30, 2024, that materially affected the internal control[304].