Lending Focus and Portfolio Composition - The Company has shifted its lending focus to include non-mortgage commercial business loans and commercial real estate, while maintaining its strength in consumer lending[33]. - As of December 31, 2019, the total loan portfolio was $1,351.9 million, with real estate loans comprising 60.95% of the portfolio[36]. - The Company’s consumer loans increased to $326.2 million, representing 24.13% of the total loan portfolio, up from 20.77% in the previous year[36]. - The Company’s commercial and industrial loans totaled $140.5 million, accounting for 10.40% of the total loan portfolio[36]. - Total real estate loans reached $169.5 million, which is 12.53% of total loans, with a notable increase in commercial real estate loans to $344.7 million, or 25.5% of the gross loan portfolio[46]. - The commercial business loan portfolio totaled $201.6 million, accounting for 14.9% of the gross loan portfolio[76]. - The Company originated $891.4 million of one-to-four-family mortgages in 2019, with $785.4 million sold to investors, including $550.1 million to government-sponsored entities[62]. - The Company’s marine loan portfolio totaled $67.2 million, representing 20.6% of total consumer loans at December 31, 2019[68]. - The Company’s indirect home improvement loans totaled $210.7 million, or 15.6% of the gross loan portfolio, as of December 31, 2019[64]. - The Company had $115.6 million, or 64.3% of the outstanding construction and development loan portfolio, comprised of speculative one-to-four-family construction loans[52]. Loan Performance and Allowance for Losses - The allowance for loan losses was $13.2 million, compared to $12.3 million in the prior year[1]. - The provision for loan losses for the year ended December 31, 2019, was $2.9 million, reflecting ongoing assessments of credit losses in the loan portfolio[107]. - The allowance for loan losses was $13.2 million, or 0.98% of gross loans receivable, compared to $12.3 million, or 0.93% in the previous year, indicating an increase in the allowance coverage ratio[107]. - Non-accruing loans totaled $3.033 million as of December 31, 2019, down from $3.894 million in 2018, showing a decline of approximately 23.1%[96]. - The total loans delinquent for 60-89 days amounted to $343 thousand, while those delinquent for 90 days or more totaled $1,502 thousand[95]. - The total amount of loans due after December 31, 2019, with predetermined interest rates is $546.5 million, while those with floating rates total $805.4 million[41]. Deposits and Funding Sources - As of December 31, 2019, the Bank had $1,392.4 million in total deposits, reflecting a net increase of $118.2 million or 9.28% compared to the previous year[129]. - The composition of total deposits included 39.6% from certificates of deposit and 10.6% from brokered deposits, amounting to $147.6 million[126]. - The Bank's total certificates of deposit amounted to $551.5 million, with 53.87% maturing at rates of 0.00 - 1.99%[135]. - The Bank's reliance on FHLB borrowings for funding was highlighted, with advances used to fund loan originations to increase net interest income[140]. - As of December 31, 2019, the Bank had outstanding advances from the FHLB of Des Moines totaling $84.9 million, with a weighted average interest rate of 2.29%[146]. - The Bank maintained a committed credit facility with the FHLB of Des Moines providing for advances up to $477.2 million[146]. Capital Ratios and Regulatory Compliance - As of December 31, 2019, 1st Security Bank of Washington's total risk-based capital ratio was 14.64%, significantly above the required 8.00%[193]. - The Tier 1 risk-based capital ratio for 1st Security Bank of Washington was 13.70% as of December 31, 2019, exceeding the minimum requirement of 6.00%[193]. - The CET1 capital ratio was 13.70% at the end of 2019, well above the required 4.50%[193]. - The bank's leverage ratio stood at 11.56% as of December 31, 2019, surpassing the minimum requirement of 4.00%[193]. - 1st Security Bank of Washington is categorized as well capitalized under FDIC regulations, meeting all capital requirements[187]. - The bank's capital conservation buffer requirement was fully phased in as of December 31, 2019, ensuring compliance with regulatory guidelines[193]. Economic and Market Conditions - The unemployment rate in King County was 2.1% at December 31, 2019, significantly lower than the state average of 4.3%[31]. - The median household income for King County was $95,000 in 2018, compared to $74,000 for the State of Washington[30]. - The Puget Sound region has a population of approximately 4.2 million, representing a significant market base for potential business[24]. - The average home value in King County was $671,000, with a statewide average increase in home values of 11.5% in Q4 2019[32]. Employee and Operational Metrics - The Company had 452 full-time equivalent employees as of December 31, 2019[152]. - The Company operates 21 full-service bank branches and seven home loan production offices in the Puget Sound region[23]. Miscellaneous - The Company issued an unsecured subordinated term note of $10.0 million due October 1, 2025, with an annual interest rate of 6.50%[143]. - The Company earned gross mortgage servicing fees of $3.5 million for the year ended December 31, 2019, servicing $1.46 billion of one-to-four-family loans[82]. - The Company processed approximately 790 loans and funded about $323.8 million under its mortgage warehouse lending program during the year ended December 31, 2019[74].
FS Bancorp(FSBW) - 2019 Q4 - Annual Report