FS Bancorp(US:FSBW)2026-03-13 20:40Acquisition and Growth - The Company completed the acquisition of seven retail bank branches from Columbia State Bank, adding approximately $425.5 million in deposits and $66.1 million in loans[26]. - Total deposits increased by $334,224 thousand, or 14.29%, to $2,673,642 thousand at December 31, 2025, from $2,339,418 thousand in 2024[114]. - The company reported a net increase in brokered deposits of $219,137 thousand in 2025, compared to a decrease of $288,225 thousand in 2024[114]. Loan Portfolio - As of December 31, 2025, the total loans amounted to $2.131 billion, with $1.298 billion in fixed interest rate loans and $832.9 million in adjustable rate loans[39]. - The Company’s commercial real estate (CRE) loans totaled $969.5 million, representing 36.5% of the gross loan portfolio[45]. - The largest lending relationship at December 31, 2025, totaled $37.2 million, consisting of two multi-family real estate loans[43]. - The Company has a diversified lending strategy, focusing on various types of loans including commercial real estate, multi-family, and consumer loans[37]. - The Company’s internal lending limit is set at $35 million, with any loans exceeding this amount requiring Board approval[43]. - As of December 31, 2025, total outstanding construction and development loans amounted to $396.5 million, representing 14.9% of the gross loan portfolio, an increase from $330.7 million in 2024[50][51]. - The largest single commercial or multi-family real estate loan at December 31, 2025, was a performing $20.1 million loan secured by a 159-unit apartment building in Tacoma, Washington[48]. - The Company originated $739.5 million of one-to-four-family mortgages in 2025, with $555.2 million sold to investors, including $209.1 million sold to government-sponsored entities[61]. - Total outstanding second lien mortgage and home equity loans reached $88.3 million, or 3.3% of the gross loan portfolio, at December 31, 2025[60]. - The Company's residential speculative construction lending program includes loans for both speculative and pre-sold one-to-four-family residences, with a maximum loan amount of 95% of cost or 75% of appraised value[52]. - Indirect home improvement loans totaled $525.8 million, or 19.8% of gross loans, and 88.1% of total consumer loans at December 31, 2025[64]. - The commercial business loan portfolio totaled $329.3 million, representing 12.4% of the gross loan portfolio as of December 31, 2025[72]. Credit Quality and Risk Management - The allowance for credit losses (ACL) on loans was $31.9 million, or 1.20% of gross loans receivable, as of December 31, 2025, compared to 1.26% in 2024[101]. - The provision for credit losses on loans for the year ended December 31, 2025, was $9.0 million, an increase from $5.6 million in 2024[100]. - Nonaccrual loans as a percentage of total loans outstanding increased to 0.71% in 2025 from 0.54% in 2024[104]. - The Company experienced net charge-offs of $8.9 million for the year ended December 31, 2025, compared to $5.3 million in 2024[104]. - The ACL on loans as a percentage of nonaccrual loans at year end was 170.59% in 2025, down from 234.55% in 2024[104]. - The most significant qualitative adjustment in 2025 was related to elevated reserves for commercial construction and consumer lending due to higher levels of past due and nonperforming loans[101]. - The Company classified an additional $10.5 million of assets as special mention as of December 31, 2025[93]. - Management remains vigilant regarding the adequacy of the ACL, recognizing potential increases due to declining economic conditions[102]. Market and Economic Conditions - The unemployment rate in Washington was estimated at 4.7% as of December 31, 2025, slightly above the national average of 4.4%[35]. - The primary market area for the Company includes the Seattle-Tacoma-Bellevue MSA, which has a diverse economy supported by major industries such as aerospace and technology[30]. Capital and Regulatory Compliance - As of December 31, 2025, 1st Security Bank's total risk-based capital ratio was 13.96%, exceeding the required minimum of 8.00%[163]. - The Tier 1 risk-based capital ratio was 12.73%, above the minimum requirement of 6.00%[163]. - The Common Equity Tier 1 (CET1) capital ratio stood at 12.73%, surpassing the minimum of 4.50%[163]. - The Bank was categorized as "well capitalized" under FDIC regulations as of December 31, 2025[163]. - The capital conservation buffer required is an additional 2.5% of risk-weighted assets above the minimum capital ratios[161]. - The Bank paid $24.0 million in dividends to the holding company in 2025[174]. Employee and Workplace Culture - The company hired 95 new employees in 2025, increasing the total employee count to 581 as of December 31, 2025[147]. - Volunteer hours increased to approximately 9,500 hours in 2025, up from about 6,000 hours in 2024[148]. - The employee turnover rate decreased to 17.5% in 2025 from 19% in 2024[150]. - Employee health benefits have not increased in contribution costs since 2014, and the company offers a 401k match of up to 5% of contributions[149]. - The company provides education reimbursement of up to $5,000 per year for accredited programs[149]. - The workforce composition shows 68% female representation among individual contributors and managers[146]. - The average tenure for management positions is eight years and two months[146]. - 91.4% of employees reside in Washington State, with the remaining in Oregon, Arizona, Idaho, Colorado, and Texas[150]. - The company has a commitment to a balanced work/life schedule and offers flexible working arrangements[144]. - The company emphasizes a diverse workplace, with 1% Alaska Native or American Indian, 12% Asian, 2% Black, 11% Hispanic/Latino, and 69% White employees[146]. Regulatory Environment - FS Bancorp is subject to comprehensive regulation by the Federal Reserve and must file quarterly and annual reports, ensuring it operates in a safe and sound manner[187]. - The Federal Reserve has established minimum regulatory capital requirements for bank holding companies with consolidated assets exceeding $3.0 billion[191]. - The Gramm-Leach-Bliley Act requires 1st Security Bank to disclose its privacy policy and inform consumers of their rights regarding information sharing[180]. - The SEC adopted rules in July 2023 requiring registrants to disclose material cybersecurity incidents and annual information on cybersecurity risk management[182]. - The Dodd-Frank Act established the CFPB, which oversees consumer protection regulations applicable to 1st Security Bank, although its enforcement activities have been significantly scaled back[185]. - Noncompliance with federal or state privacy and cybersecurity laws could lead to substantial regulatory fines and reputational harm for 1st Security Bank[181].