Loan Performance and Provisions - The Company recorded a provision for loan losses of $4.6 million for the quarter ended June 30, 2020, compared to $910,000 for the same quarter in 2019, reflecting the adverse impact of the COVID-19 pandemic [205]. - The allowance for loan and lease losses (ALLL) was $21.5 million, or 1.47% of gross loans receivable, at June 30, 2020, compared to $13.2 million, or 0.98%, at December 31, 2019 [243]. - Non-performing loans increased to $7.9 million at June 30, 2020, from $3.0 million at December 31, 2019, with a ratio of non-performing loans to total gross loans of 0.54% [243]. - The provision for loan losses increased significantly to $4.6 million for the three months ended June 30, 2020, from $910,000 in the same period of 2019, due to credit deterioration from the COVID-19 pandemic [267]. - For the six months ended June 30, 2020, the provision for loan losses increased to $8.3 million from $1.7 million in the same period of 2019, primarily due to credit deterioration related to the COVID-19 pandemic [282]. Loan Originations and Modifications - The Company funded 463 Paycheck Protection Program (PPP) loans totaling $75.3 million as of June 30, 2020, aimed at supporting small to midsize businesses [203]. - As of June 30, 2020, the Bank approved loan modifications for 355 individual loans with aggregate principal balances totaling $103.6 million due to COVID-19 [208]. - The Company originated $764.0 million of one-to-four-family loans during the six months ended June 30, 2020, with $639.4 million sold to investors [218]. - One-to-four-family loan originations increased by $412.3 million, or 117.2%, to $764.0 million during the six months ended June 30, 2020, compared to $351.7 million during the same period in 2019 [239]. - Commercial business loans increased by $54.0 million, primarily due to $75.3 million in PPP loans originated in the second quarter of 2020 [237]. Financial Performance - Net income for the three months ended June 30, 2020, was $10.0 million, a 122.2% increase from $4.5 million for the same period in 2019 [258]. - For the six months ended June 30, 2020, net income was $15.2 million, up from $9.7 million in the same period of 2019, influenced by a $12.4 million increase in noninterest income [273]. - Noninterest income surged by $8.0 million, or 132.3%, to $14.1 million for the three months ended June 30, 2020, driven by a $9.8 million increase in gains on loan sales [268]. - Noninterest income rose by $12.4 million, or 116.4%, to $23.0 million for the six months ended June 30, 2020, driven by a $13.3 million increase in gain on sale of loans [283]. Asset and Liability Changes - Total assets increased by $295.7 million, or 17.3%, to $2.01 billion at June 30, 2020, compared to $1.71 billion at December 31, 2019 [236]. - Loans receivable, net increased by $108.1 million to $1.44 billion at June 30, 2020, from $1.34 billion at December 31, 2019 [237]. - Total liabilities increased by $287.3 million to $1.80 billion at June 30, 2020, from $1.51 billion at December 31, 2019, primarily due to increases in deposits and borrowings [246]. - Total deposits rose by $214.5 million to $1.61 billion at June 30, 2020, driven by PPP loan proceeds and government stimulus checks [247]. Interest Income and Expenses - Net interest income increased by $326,000 to $17.9 million for the three months ended June 30, 2020, compared to $17.5 million for the same period in 2019 [261]. - Interest income decreased by $652,000 to $21.7 million for the three months ended June 30, 2020, primarily due to a 111 basis point decrease in the average yield on interest-earning assets [264]. - Net interest income for the six months ended June 30, 2020, increased slightly by $110,000 to $35.3 million, despite a decrease in interest income of $1.0 million [274]. - Interest income for the six months ended June 30, 2020, decreased by $1.0 million to $43.7 million, with an average yield on interest-earning assets dropping to 5.06% [278]. - Noninterest expense decreased by $2.4 million, or 14.3%, to $14.6 million for the three months ended June 30, 2020, primarily due to a reduction in salaries and benefits [269]. Capital and Efficiency Ratios - Total stockholders' equity increased by $8.4 million to $208.6 million at June 30, 2020, primarily due to net income and other comprehensive income [254]. - The efficiency ratio improved to 45.71% for the three months ended June 30, 2020, compared to 72.28% for the same period in 2019, reflecting increased noninterest income and decreased noninterest expenses [270]. - The efficiency ratio improved to 52.79% for the six months ended June 30, 2020, compared to 69.49% for the same period in 2019, reflecting increased noninterest income and decreased noninterest expense [285]. - The Tier 1 leverage-based capital ratio for the Bank at June 30, 2020 was 10.8%, down from 11.6% at December 31, 2019, while still exceeding the minimum capital requirements [295]. Community Engagement and Operational Adjustments - The Company has taken measures to ensure branch safety, with most employees working remotely and branches operating under specific guidelines [209]. - The Company is actively involved in community activities, strengthening relationships within its market areas [214]. - The Company has emphasized lower cost core deposits to reduce funding costs for loan growth [215]. - The Company is focused on diversifying revenues and expanding lending channels, particularly in residential mortgage and commercial construction [217].
FS Bancorp(FSBW) - 2020 Q2 - Quarterly Report