Loan Portfolio and Provision for Losses - As of September 30, 2020, the Company had 471 Paycheck Protection Program (PPP) loans totaling $74.1 million for small- to mid-size businesses [181]. - The Company recorded a provision for loan losses of $3.1 million for the quarter ended September 30, 2020, compared to $573,000 for the same quarter in 2019, reflecting the adverse impact of the COVID-19 pandemic [182]. - The total amount of portfolio loans under payment/relief agreements as of September 30, 2020, included $23.8 million in commercial real estate loans and $7.6 million in commercial business loans [182]. - The allowance for loan and lease losses (ALLL) was $24.8 million, or 1.63% of gross loans receivable, at September 30, 2020, compared to $13.2 million, or 0.98%, at December 31, 2019 [211]. - Non-performing loans increased to $7.6 million at September 30, 2020, from $3.0 million at December 31, 2019, with a ratio of non-performing loans to total gross loans of 0.50% [213]. - Substandard loans increased to $18.5 million at September 30, 2020, compared to $6.7 million at December 31, 2019 [211]. - The provision for loan losses increased significantly to $11.4 million for the nine months ended September 30, 2020, compared to $2.2 million in the same period of 2019, reflecting credit deterioration due to the COVID-19 pandemic [243]. Loan Originations and Sales - For the nine months ended September 30, 2020, the Company originated $1.35 billion of one-to-four-family loans, with $1.12 billion sold to investors [191]. - The Company originated $1.35 billion in one-to-four-family loans during the nine months ended September 30, 2020, a 112.0% increase compared to $638.7 million for the same period in 2019 [210]. - The Company sold $1.12 billion of one-to-four-family loans during the nine months ended September 30, 2020, compared to $551.6 million for the same period one year ago [210]. Financial Performance - Net income for the three months ended September 30, 2020, was $12.7 million, a 78.87% increase from $7.1 million for the same period in 2019, primarily due to a $10.8 million increase in noninterest income [223]. - Net income for the nine months ended September 30, 2020, was $27.9 million, a 66.5% increase from $16.8 million in the same period of 2019 [236]. - Noninterest income surged by $10.8 million, or 160.2%, to $17.5 million for the three months ended September 30, 2020, driven by a $11.6 million increase in gain on sale of loans [232]. - Noninterest income rose by $23.2 million, or 133.4%, to $40.6 million for the nine months ended September 30, 2020, driven by a $24.9 million increase in gain on sale of loans [244]. Asset and Liability Management - Total assets increased by $341.6 million, or 19.9%, to $2.05 billion at September 30, 2020, compared to $1.71 billion at December 31, 2019 [207]. - Loans receivable, net increased by $155.2 million to $1.49 billion at September 30, 2020, from $1.34 billion at December 31, 2019 [208]. - Loans held for sale increased by $145.4 million, or 208.6%, to $215.1 million at September 30, 2020, from $69.7 million at December 31, 2019 [209]. - Total liabilities increased by $321.3 million to $1.83 billion at September 30, 2020, from $1.51 billion at December 31, 2019, primarily due to increases in deposits and borrowings [215]. - Total deposits rose by $220.8 million to $1.61 billion at September 30, 2020, driven by organic growth, PPP loan proceeds, and government stimulus checks [216]. Interest Income and Expense - Net interest income increased by $1.2 million to $18.9 million for the three months ended September 30, 2020, compared to $17.7 million for the same period in 2019 [225]. - Interest income decreased by $483,000 to $22.2 million for the three months ended September 30, 2020, primarily due to a 121 basis point decrease in the average yield on interest-earning assets [228]. - The net interest margin decreased by 62 basis points to 3.92% for the three months ended September 30, 2020, from 4.54% for the same period in the prior year [227]. - Interest income for the nine months ended September 30, 2020, decreased by $1.5 million to $65.9 million, primarily due to a 98 basis point decrease in the average yield on interest-earning assets [240]. - Interest expense decreased by $2.8 million to $11.6 million for the nine months ended September 30, 2020, primarily due to a $2.3 million decrease in interest expense on deposits and a $474,000 decrease on borrowings [241]. Capital and Liquidity - The Bank maintained a Tier 1 leverage-based capital ratio of 10.7% at September 30, 2020, down from 11.6% at December 31, 2019, while still exceeding the minimum capital requirements [256]. - FS Bancorp, Inc. had $12.6 million in unrestricted cash to meet liquidity needs as of September 30, 2020 [253]. - As of September 30, 2020, the Bank's total borrowing capacity with the FHLB was $573.8 million, with unused capacity of $495.5 million [249]. Operational Efficiency - The efficiency ratio improved to 47.11% for Q3 2020, compared to 60.14% for Q3 2019, indicating better cost management relative to income [234]. - The efficiency ratio improved to 50.61% for the nine months ended September 30, 2020, compared to 66.24% in the prior year, indicating better cost management relative to income [246]. - Noninterest expense rose by $2.5 million, or 16.7%, to $17.2 million for the three months ended September 30, 2020, primarily due to increased salaries and benefits [233]. - Noninterest expense increased by $1.4 million, or 3.0%, to $48.0 million for the nine months ended September 30, 2020, primarily due to a $2.4 million increase in salaries and benefits [245].
FS Bancorp(FSBW) - 2020 Q3 - Quarterly Report