FS Bancorp(FSBW) - 2025 Q2 - Quarterly Results

Financial Performance Q2 2025 Earnings Overview FS Bancorp's Q2 2025 net income decreased to $7.7 million ($0.99 diluted EPS) from $9.0 million ($1.13 diluted EPS) in Q2 2024, impacted by lower noninterest income and higher expenses Quarterly and YTD Earnings Summary | Period | Net Income | Diluted EPS | | :--- | :--- | :--- | | Q2 2025 | $7.7 million | $0.99 | | Q2 2024 | $9.0 million | $1.13 | | YTD 2025 | $15.7 million | $1.99 | | YTD 2024 | $17.4 million | $2.20 | Key Highlights Q2 2025 saw strong loan growth (3.2% to $2.58 billion) offset by a 2.4% deposit decrease to $2.55 billion, while the company managed capital through repurchases and maintained strong regulatory ratios Key Balance Sheet Changes (Q2 2025 vs Q1 2025) | Metric | Q2 2025 Value | QoQ Change | QoQ % Change | | :--- | :--- | :--- | :--- | | Loans receivable, net | $2.58 billion | +$81.2 million | +3.2% | | Total deposits | $2.55 billion | -$61.8 million | -2.4% | | Borrowings | $234.3 million | +$165.5 million | +240.5% | - Book value per share increased to $39.55 at June 30, 2025, up from $39.12 at March 31, 2025, and $37.15 a year prior[4] - The Bank's regulatory capital ratios remained strong, with total risk-based capital at 14.1% and Tier 1 leverage capital at 11.2% as of June 30, 2025[5] Segment Performance Commercial and Consumer Banking remained the primary earnings driver with $7.4 million net income in Q2 2025, while Home Lending's contribution significantly decreased to $0.4 million due to lower noninterest income - The company operates through two reportable segments: Commercial and Consumer Banking, and Home Lending[6] Segment Net Income (Q2 2025 vs Q2 2024) | Segment | Q2 2025 Net Income | Q2 2024 Net Income | Change | | :--- | :--- | :--- | :--- | | Commercial & Consumer Banking | $7.4 million | $8.0 million | -$0.6 million | | Home Lending | $0.4 million | $1.0 million | -$0.6 million | Segment Net Income (YTD 2025 vs YTD 2024) | Segment | YTD 2025 Net Income | YTD 2024 Net Income | Change | | :--- | :--- | :--- | :--- | | Commercial & Consumer Banking | $15.2 million | $16.1 million | -$0.9 million | | Home Lending | $0.6 million | $1.3 million | -$0.7 million | Operating Results Net interest income increased to $32.1 million in Q2 2025 with a stable 4.30% NIM, but noninterest income declined by $0.7 million and noninterest expense rose by $1.6 million - Net interest income increased by $1.7 million YoY to $32.1 million for Q2 2025, primarily due to a $2.6 million increase in interest income from loans[23] - Net interest margin (NIM) was 4.30% for Q2 2025, a slight increase from 4.29% in Q2 2024, reflecting higher yields on interest-earning assets[25] - The provision for credit losses was $2.0 million for Q2 2025, an increase from $1.1 million in Q2 2024, reflecting net loan growth and higher net charge-offs[27] - Total noninterest income decreased by $698,000 YoY to $5.2 million, mainly due to a $491,000 decrease in gain on sale of loans[29] - Total noninterest expense increased by $1.6 million YoY to $25.5 million, driven by higher salaries and benefits, operations expense, and professional fees[30] Financial Position Asset Summary Total assets grew to $3.18 billion by June 30, 2025, up 4% QoQ and 8% YoY, primarily driven by increases in net loans receivable and available-for-sale securities Total Assets Growth | Date | Total Assets | QoQ Change | YoY Change | | :--- | :--- | :--- | :--- | | June 30, 2025 | $3,176.0 million | +4% | +8% | | March 31, 2025 | $3,066.1 million | - | - | | June 30, 2024 | $2,941.4 million | - | - | - The growth in assets was funded by a combination of on-balance sheet liquidity and a significant increase in borrowings[10] Loan Portfolio Analysis The gross loan portfolio grew 5.1% YoY to $2.61 billion, led by Commercial Real Estate and Residential Real Estate, while the Consumer loan portfolio decreased Overall Loan Portfolio Composition As of Q2 2025, the loan portfolio was led by Commercial Real Estate (35.0%) and Residential Real Estate (29.8%) Loan Portfolio Composition (June 30, 2025) | Loan Category | Amount | Percent of Total | | :--- | :--- | :--- | | Total CRE loans | $916.1 million | 35.0% | | Total residential real estate loans | $779.5 million | 29.8% | | Total consumer loans | $606.3 million | 23.2% | | Total commercial business loans | $312.5 million | 12.0% | | Total gross loans receivable | $2,614.5 million | 100.0% | Commercial Real Estate (CRE) & Construction Loans CRE portfolio growth was driven by a $79.9 million increase in construction loans, with total construction loans reaching $354.7 million, primarily from speculative residential construction - The CRE non-owner occupied portfolio's largest exposures are to Office ($39.1M) and Retail ($38.7M) properties[12] - Total construction loans increased to $354.7 million at June 30, 2025, up from $274.2 million at June 30, 2024, with speculative residential construction accounting for 56.5% of the portfolio[13] Residential Mortgage Originations Q2 2025 one-to-four-family loan originations totaled $199.3 million (85.7% purchase activity), with $127.1 million sold, though gross margins on sales decreased One-to-Four-Family Loan Originations (Q2 2025) | Origination Type | Amount | % of Total | | :--- | :--- | :--- | | Purchase | $170.9 million | 85.7% | | Refinance | $28.5 million | 14.3% | | Total | $199.3 million | 100.0% | - Loan sales volume increased to $127.1 million in Q2 2025 from $91.9 million in Q1 2025, attributed to seasonal homebuying activity[13] Liabilities and Equity Summary Total deposits decreased by $61.8 million QoQ to $2.55 billion due to brokered CD reductions, while borrowings significantly increased by $165.5 million to fund asset growth, and equity slightly declined due to repurchases and dividends Deposit Composition (June 30, 2025) | Deposit Type | Amount | % of Total | | :--- | :--- | :--- | | Noninterest-bearing | $643.6 million | 25.2% | | Transactional & Savings | $721.7 million | 28.3% | | Certificates of deposit (CDs) | $1,177.6 million | 46.1% | | Total Deposits | $2,553.4 million | 100.0% | - Uninsured deposits were estimated at $677.2 million at June 30, 2025, slightly down from $679.4 million at March 31, 2025[16] - The linked-quarter decrease in stockholders' equity was primarily due to $5.1 million in share repurchases and $2.1 million in cash dividends, partially offset by $7.7 million in net income[17] Capital Adequacy Both the company and the bank remain 'well capitalized,' with the Bank's total risk-based capital ratio at 14.07% and Tier 1 leverage ratio at 11.18% as of June 30, 2025 Regulatory Capital Ratios (June 30, 2025) | Ratio | Bank | Company | | :--- | :--- | :--- | | Total risk-based capital | 14.07% | 14.16% | | Tier 1 leverage capital | 11.18% | 9.65% | | CET 1 capital | 12.82% | 11.07% | Credit Quality Allowance for Credit Losses (ACL) The Allowance for Credit Losses (ACL) on loans increased to $32.2 million in Q2 2025 due to a $1.7 million provision, partially offset by $1.2 million in net charge-offs, primarily from indirect consumer loans ACL on Loans to Total Gross Loans | Date | ACL to Gross Loans Ratio | | :--- | :--- | | June 30, 2025 | 1.23% | | March 31, 2025 | 1.25% | | June 30, 2024 | 1.26% | - The ending ACL balance on loans was $32.2 million, with a provision of $1.7 million and net charge-offs (charge-offs less recoveries) of $1.2 million for Q2 2025[20] Nonperforming and Criticized Loans Credit quality deteriorated as total nonperforming loans increased to $19.0 million, driven by a commercial construction loan and consumer delinquencies, with total criticized loans also rising to $24.9 million Trend in Nonperforming Loans (NPLs) | Date | Total NPLs | NPLs to Total Gross Loans | | :--- | :--- | :--- | | June 30, 2025 | $19.0 million | 0.73% | | March 31, 2025 | $14.5 million | 0.57% | | June 30, 2024 | $11.4 million | 0.46% | - The increase in nonaccrual loans was partly driven by a single commercial construction loan, which contributed to a $2.6 million increase from the prior quarter[21] - Total criticized loans increased to $24.9 million at June 30, 2025, up from $23.5 million in the prior quarter and $24.3 million in the prior year[22] Shareholder Information Dividends and Share Repurchases The company declared its 50th consecutive quarterly dividend of $0.28 per share plus a $0.22 special dividend, while repurchasing 132,282 shares and approving a new $5.0 million repurchase plan - The Board of Directors approved the 50th consecutive quarterly cash dividend of $0.28 per common share[3] - A special dividend of $0.22 per common share was also approved, both payable on August 21, 2025, to shareholders of record as of August 7, 2025[3] Q2 2025 Share Repurchase Activity | Metric | Value | | :--- | :--- | | Shares Repurchased | 132,282 | | Average Price | $38.92 | | Remaining Authorization (Existing Plan) | $725,000 | | New Repurchase Plan Authorization | $5.0 million | Per Share Data Diluted EPS for Q2 2025 was $0.99, a decrease from prior periods, while book value per share grew to $39.55 and tangible book value per share reached $37.46 Per Share Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Diluted EPS | $0.99 | $1.01 | $1.13 | | Book Value Per Share | $39.55 | $39.12 | $37.15 | | Tangible Book Value Per Share | $37.46 | $36.96 | $34.66 | Appendix Consolidated Financial Statements The appendix contains unaudited Consolidated Balance Sheets, Statements of Income, Key Financial Ratios, and Average Balance data for relevant periods - The appendix contains the Consolidated Balance Sheets[34][35] - The appendix contains the Consolidated Statements of Income[36][37][38][39] - The appendix includes Key Financial Ratios and Average Balance data[40][45] Non-GAAP Financial Measures The company presents non-GAAP financial measures like tangible book value per share and tangible common equity ratio, excluding intangible assets, with full reconciliation to GAAP measures - The company uses non-GAAP measures such as tangible book value per share and tangible common equity ratio, which exclude goodwill and other intangible assets[46] Reconciliation of GAAP to Non-GAAP Equity (June 30, 2025) | Metric | Amount | | :--- | :--- | | Stockholders' equity (GAAP) | $297.2 million | | Less: goodwill and core deposit intangible | ($15.7 million) | | Tangible common stockholders' equity (non-GAAP) | $281.5 million |