Acquisition and Growth - The Company completed the Anchor Acquisition, acquiring $361.6 million in loans and $357.9 million in deposits for a total consideration of $64.6 million[175]. - The Company funded $37.3 million in fixture secured loans during the quarter ended September 30, 2019, totaling approximately 2,000 loans[179]. - The Company originated $638.7 million of one-to-four-family loans during the nine months ended September 30, 2019, with $551.6 million sold to investors[179]. - One-to-four-family residential mortgage loans held for investment totaled $253.8 million, representing 19.1% of the total gross loan portfolio as of September 30, 2019[179]. - One-to-four-family loan originations increased by $83.4 million, or 15.0%, to $638.7 million during the nine months ended September 30, 2019[196]. Financial Performance - Net income for the three months ended September 30, 2019, increased by $3.1 million, or 76.3%, to $7.1 million, from $4.1 million for the same period in 2018[205]. - Net income for the nine months ended September 30, 2019, increased by $4.2 million, or 33.0%, to $16.8 million from $12.6 million for the same period in 2018[220]. - Net interest income increased by $4.9 million, or 37.9%, to $17.7 million for the three months ended September 30, 2019, compared to $12.9 million for the same period in 2018[209]. - Net interest income increased by $16.7 million, or 46.0%, to $53.0 million for the nine months ended September 30, 2019, compared to $36.3 million for the same period in 2018[222]. - Noninterest income increased by $1.9 million, or 40.4%, to $6.7 million for the three months ended September 30, 2019, from $4.8 million for the same period in 2018[216]. - Noninterest income increased by $1.9 million, or 12.6%, to $17.4 million for the nine months ended September 30, 2019, mainly due to higher service charges and fee income[229]. Asset and Liability Management - Total assets increased by $73.4 million, or 4.5%, to $1.69 billion at September 30, 2019, compared to $1.62 billion at December 31, 2018[192]. - Total liabilities increased by $59.1 million to $1.50 billion at September 30, 2019, from $1.44 billion at December 31, 2018[199]. - Total deposits increased to $1.39 billion at September 30, 2019, from $1.27 billion at December 31, 2018[200]. - Loans held for sale increased by $29.4 million, or 57.5%, to $80.6 million at September 30, 2019, from $51.2 million at December 31, 2018[195]. Capital and Liquidity - The Bank exceeded all regulatory capital requirements with Tier 1 leverage-based capital, Tier 1 risk-based capital, total risk-based capital, and common equity Tier 1 capital ratios of 11.6%, 13.6%, 14.5%, and 13.6%, respectively, as of September 30, 2019[241]. - FS Bancorp, Inc. regulatory capital ratios at September 30, 2019 were 11.3% for Tier 1 leverage-based capital, 13.3% for Tier 1 risk-based capital, 14.2% for total risk-based capital, and 13.3% for CET 1 capital ratio[242]. - The Bank is considered to be well capitalized based on its capital levels at September 30, 2019[241]. - FS Bancorp, Inc. had $3.5 million in unrestricted cash to meet liquidity needs as of September 30, 2019[239]. - At September 30, 2019, the Bank's total borrowing capacity was $451.5 million with unused borrowing capacity of $368.8 million[234]. Expense and Efficiency - Noninterest expense increased by $2.9 million, or 24.4%, to $14.7 million for the three months ended September 30, 2019, from $11.8 million for the same period in 2018[217]. - Noninterest expense rose by $11.6 million, or 33.0%, to $46.6 million for the nine months ended September 30, 2019, largely due to the Anchor Acquisition[230]. - The efficiency ratio improved to 60.1% for the three months ended September 30, 2019, compared to 67.0% for the same period in 2018[218]. - The efficiency ratio improved to 66.2% for the nine months ended September 30, 2019, compared to 67.7% for the same period in 2018[231]. Interest and Taxation - Interest income rose by $7.1 million, or 45.7%, to $22.7 million for the three months ended September 30, 2019, compared to $15.6 million for the same period in 2018[212]. - Interest income rose by $24.8 million, or 58.2%, to $67.4 million for the nine months ended September 30, 2019, driven by a $23.7 million increase in loans receivable interest income[225]. - Interest expense increased by $8.1 million, or 128.6%, to $14.4 million for the nine months ended September 30, 2019, primarily due to higher deposit costs[226]. - The effective corporate income tax rate decreased to 22.2% for the three months ended September 30, 2019, from 24.6% for the same period in 2018[219]. - The effective tax rate increased to 21.9% for the nine months ended September 30, 2019, from 18.3% for the same period in 2018[232]. Risk Management - The Company reviews its allowance for loan and lease losses quarterly, adjusting based on economic conditions and portfolio evaluations[186]. - The allowance for loan and lease losses (ALLL) was $12.8 million, or 0.96% of gross loans receivable, at September 30, 2019, compared to $12.3 million, or 0.93%, at December 31, 2018[197]. - Provision for loan losses was $573,000 for the three months ended September 30, 2019, compared to $450,000 for the same period in 2018[215]. - The provision for loan losses was $2.2 million for the nine months ended September 30, 2019, compared to $1.3 million for the same period in 2018[228]. - There have been no material changes in the market risk disclosures since the Annual Report on Form 10-K for the fiscal year ended December 31, 2018[243].
FS Bancorp(FSBW) - 2019 Q3 - Quarterly Report