FS Bancorp, Inc. Reports Third Quarter Net Income of $10.3 Million or $1.29 Per Diluted Share and the Forty-Seventh Consecutive Quarterly Cash Dividend
MOUNTLAKE TERRACE, Wash., Oct. 22, 2024 (GLOBE NEWSWIRE) -- FS Bancorp, Inc. (NASDAQ:FSBW) (the "Company"), the holding company for 1st Security Bank of Washington (the "Bank") today reported 2024 third quarter net income of $10.3 million, or $1.29 per diluted share, compared to $9.0 million, or $1.13 per diluted share, for the comparable quarter one year ago. For the nine months ended September 30, 2024, net income was $27.6 million, or $3.45 per diluted share, compared to net income of $26.3 million, or $3.33 per diluted share, for the comparable nine-month period in 2023.
"Deposit growth experienced in the third quarter of 2024 was a direct result of the Bank-wide focus and strategic planning objective to fund loan growth with core deposits," stated Joe Adams, CEO. "We are also pleased that our Board of Directors approved our forty-seventh consecutive quarterly cash dividend of $0.27 per common share, demonstrating our continued commitment to returning value to shareholders. The cash dividend will be paid on November 21, 2024, to shareholders of record as of November 7, 2024," concluded Adams.
2024 Third Quarter Highlights
Net income was $10.3 million for the third quarter of 2024, compared to $9.0 million for both the previous quarter and the comparable quarter one year ago;
Net interest margin ("NIM") increased to 4.35% for the third quarter of 2024, compared to 4.29% in the previous quarter, and 4.34% for the comparable quarter one year ago;
Total deposits increased $44.5 million, or 1.9%, to $2.43 billion at September 30, 2024, primarily due to an increase in noninterest-bearing checking of $34.4 million and certificates of deposit ("CDs") of $15.0 million, compared to $2.38 billion at June 30, 2024 and decreased $27.1 million, or 1.1%, from $2.45 billion at September 30, 2023. Noninterest-bearing deposits were $657.8 million at September 30, 2024, $623.3 million at June 30, 2024, and $670.2 million at September 30, 2023;
Borrowings decreased $18.1 million, or 9.9% to $163.8 million at September 30, 2024, compared to $181.9 million at June 30, 2024, as a result of the Company's strategic planning objective to fund loan growth with core deposits;
Loans receivable, net was unchanged at $2.46 billion at September 30, 2024, and June 30, 2024, and increased $88.1 million, or 3.7%, from $2.38 billion at September 30, 2023;
Consumer loans, of which 87.3% are home improvement loans, decreased $9.3 million, or 1.4%, to $632.4 million at September 30, 2024, compared to $641.7 million in the previous quarter, and decreased $7.7 million, or 1.2%, from $640.1 million in the comparable quarter one year ago. Yields on consumer loans increased 18 basis points to 7.59% from 7.41% at the end of the second quarter 2024. During the three months ended September 30, 2024, consumer loan originations included 80.4% of home improvement loans originated with a Fair Isaac Corporation ("FICO") score above 720 and 83.9% of home improvement loans with a UCC-2 security filing;
For the third quarter of 2024, there was a tax benefit of $420,000, compared to tax provisions of $2.4 million in the prior quarter, and $2.5 million for the same quarter last year. The tax benefit for the third quarter of 2024 was due to $28.4 million of energy tax credits purchased during the current quarter related to the Inflation Reduction Act of 2022;
Repurchased 97,000 shares of the Company's common stock in the third quarter of 2024 at an average price of $43.58 per share with $1.4 million remaining for future purchases under the share repurchase plan that was approved in July 2024;
Book value per share increased $0.30 to $37.45 at September 30, 2024, compared to $37.15 at June 30, 2024, and increased $4.87 from $32.58 at September 30, 2023. Tangible book value per share (non-GAAP financial measure) increased $0.44 to $35.10 at September 30, 2024, compared to $34.66 at June 30, 2024, and increased $5.37 from $29.73 at September 30, 2023. See, "Non-GAAP Financial Measures."
Segment reporting in the third quarter of 2024 reflected net income of $9.3 million for the Commercial and Consumer Banking segment and $1.0 million for the Home Lending segment, compared to net income of $8.0 million and $1.0 million in the prior quarter, and net income of $8.8 million and $166,000 in the third quarter of 2023, respectively;
The percentage of available unencumbered cash and secured borrowing capacity at the Federal Home Loan Bank ("FHLB") and the Federal Reserve Bank to uninsured deposits was 182% at September 30, 2024, compared to 191% in the prior quarter. The average deposit size per FDIC-insured account at the Bank was $33,000 and $32,000 for September 30, 2024 and June 30, 2024, respectively; and
Regulatory capital ratios at the Bank were 14.2% for total risk-based capital and 11.2% for Tier 1 leverage capital at September 30, 2024, compared to 13.9% for total risk-based capital and 10.9% for Tier 1 leverage capital at June 30, 2024.
Segment Reporting
The Company reports two segments: Commercial and Consumer Banking and Home Lending. The Commercial and Consumer Banking segment provides diversified financial products and services to our commercial and consumer customers. These products and services include deposit products; residential, consumer, business and commercial real estate lending portfolios and cash management services. This segment is also responsible for the management of the investment portfolio and other assets of the Bank. The Home Lending segment originates one-to-four-family residential mortgage loans primarily for sale in the secondary markets as well as loans held for investment.
The Company reflected the sale of servicing rights in the first quarter of 2024 as a gain to the Commercial and Consumer Banking segment to offset the realized loss on sale of investment securities and will allocate the gain on a straight-line basis over four years as intercompany income from the Commercial and Consumer Banking segment to the Home Lending segment.
The tables below provide a summary of segment reporting at or for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):
At or For the Three Months Ended September 30, 2024
Condensed income statement:
Commercial and Consumer Banking
Home Lending
Total
Net interest income (1)
$
28,612
$
2,632
$
31,244
Provision for credit losses
(1,331
)
(182
)
(1,513
)
Noninterest income (2)
2,257
3,710
5,967
Noninterest expense (3)
(20,199
)
(5,633
)
(25,832
)
Income before (provision) benefit for income taxes
9,339
527
9,866
(Provision) benefit for income taxes
(71
)
491
420
Net income
$
9,268
$
1,018
$
10,286
Total average assets for period ended
$
2,347,855
$
612,935
$
2,960,790
Full-time employees ("FTEs")
442
117
559
At or For the Three Months Ended September 30, 2023
Condensed income statement:
Commercial and Consumer Banking
Home Lending
Total
Net interest income (1)
$
27,563
$
3,071
$
30,634
Provision for credit losses
(437
)
(111
)
(548
)
Noninterest income (2)
2,680
2,302
4,982
Noninterest expense (3)
(18,539
)
(5,047
)
(23,586
)
Income before provision for income taxes
11,267
215
11,482
Provision for income taxes
(2,480
)
(49
)
(2,529
)
Net income
$
8,787
$
166
$
8,953
Total average assets for period ended
$
2,361,014
$
540,372
$
2,901,386
FTEs
434
128
562
At or For the Nine Months Ended September 30, 2024
Condensed income statement:
Commercial and Consumer Banking
Home Lending
Total
Net interest income (1)
$
84,749
$
7,242
$
91,991
Provision for credit losses
(3,796
)
(193
)
(3,989
)
Noninterest income (2)
6,919
10,027
16,946
Noninterest expense (3)
(58,250
)
(14,968
)
(73,218
)
Income before (provision) benefit for income taxes
29,622
2,108
31,730
(Provision) benefit for income taxes
(4,253
)
165
(4,088
)
Net income
$
25,369
$
2,273
$
27,642
Total average assets for period ended
$
2,369,740
$
586,001
$
2,955,741
FTEs
442
117
559
At or For the Nine Months Ended September 30, 2023
Condensed income statement:
Commercial and Consumer Banking
Home Lending
Total
Net interest income (1)
$
83,332
$
9,516
$
92,848
Provision for credit losses
(2,555
)
(817
)
(3,372
)
Noninterest income (2)
7,766
7,268
15,034
Noninterest expense (3)
(56,099
)
(15,215
)
(71,314
)
Income before provision for income taxes
32,444
752
33,196
Provision for income taxes
(6,758
)
(157
)
(6,915
)
Net income
$
25,686
$
595
$
26,281
Total average assets for period ended
$
2,288,996
$
520,513
$
2,809,509
FTEs
434
128
562
__________________________
(1)
Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to the other segment. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of assigned liabilities to fund segment assets.
(2)
Noninterest income includes activity from certain residential mortgage loans that were initially originated for sale and measured at fair value, and subsequently transferred to loans held for investment. Gains and losses from changes in fair value for these loans are reported in earnings as a component of noninterest income. For the three and nine months ended September 30, 2024, the Company recorded net increases in fair value of $262,000 and $448,000, respectively, as compared to net decreases in fair value of $343,000 and $285,000 for the three and nine months ended September 30, 2023. As of September 30, 2024 and 2023, there were $13.9 million and $15.2 million, respectively, in residential mortgage loans recorded at fair value as they were previously transferred from loans held for sale to loans held for investment.
(3)
Noninterest expense includes allocated overhead expense from general corporate activities. Allocation is determined based on a combination of segment assets and FTEs. For the three and nine months ended September 30, 2024 and 2023, the Home Lending segment included allocated overhead expenses of $1.8 million and $4.8 million, compared to $1.5 million and $4.7 million, respectively.
Asset Summary
Total assets increased $28.8 million, or 1.0%, to $2.97 billion at September 30, 2024, compared to $2.94 billion at June 30, 2024, and increased $50.1 million, or 1.7%, from $2.92 billion at September 30, 2023. The increase in total assets at September 30, 2024, compared to June 30, 2024, included increases of $15.7 million in other assets, consisting primarily of a federal income tax receivable of $25.7 million, $7.3 million in total cash and cash equivalents, $7.0 million in securities available-for-sale, and $6.5 million in loans receivable, net, partially offset by decreases in loans held for sale ("HFS") of $4.4 million, and core deposit intangible ("CDI"), net of $897,000. The increase compared to September 30, 2023, was primarily due to increases in loans receivable, net of $88.1 million, loans HFS of $30.7 million, other assets of $13.1 million, and FHLB stock of $5.8 million. These increases were partially offset by decreases in total cash and cash equivalents of $40.3 million, securities available-for-sale of $23.7 million, mortgage servicing rights ("MSR") of $8.9 million, certificates of deposit at other financial institutions of $5.6 million, CDI, net of $3.7 million, deferred tax asset, net of $3.2 million, operating lease right-of-use assets of $1.7 million, and premises and equipment, net of $900,000.
LOAN PORTFOLIO
(Dollars in thousands)
September 30, 2024
June 30, 2024
September 30, 2023
Amount
Percent
Amount
Percent
Amount
Percent
REAL ESTATE LOANS
Commercial
$
352,933
14.1
%
$
359,404
14.4
%
$
364,673
15.2
%
Construction and development
292,366
11.7
274,209
11.0
289,873
12.0
Home equity
75,063
3.0
73,749
3.0
67,103
2.8
One-to-four-family (excludes HFS)
591,666
23.7
588,966
23.7
540,670
22.5
Multi-family
238,462
9.6
239,675
9.6
243,661
10.1
Total real estate loans
1,550,490
62.1
1,536,003
61.7
1,505,980
62.6
CONSUMER LOANS
Indirect home improvement
552,226
22.2
563,621
22.7
562,650
23.4
Marine
76,845
3.1
74,627
3.0
73,887
3.1
Other consumer
3,346
0.1
3,440
0.1
3,547
0.1
Total consumer loans
632,417
25.4
641,688
25.8
640,084
26.6
COMMERCIAL BUSINESS LOANS
Commercial and industrial ("C&I")
296,773
11.9
285,183
11.5
236,520
9.8
Warehouse lending
15,249
0.6
25,548
1.0
23,489
1.0
Total commercial business loans
312,022
12.5
310,731
12.5
260,009
10.8
Total loans receivable, gross
2,494,929
100.0
%
2,488,422
100.0
%
2,406,073
100.0
%
Allowance for credit losses on loans
(31,232
)
(31,238
)
(30,501
)
Total loans receivable, net
$
2,463,697
$
2,457,184
$
2,375,572
Loans receivable, net was unchanged at $2.46 billion at September 30, 2024 and June 30, 2024, and increased $88.1 million from $2.38 billion at September 30, 2023. Total real estate loans remained virtually unchanged at $1.55 billion at September 30, 2024, compared to June 30, 2024, however, there were notable shifts within the portfolio. Specifically, construction and development loans increased $18.2 million, one-to-four-family loans (excluding HFS) increased $2.7 million mainly due to new loan originations, and home equity loans increased $1.3 million. These gains were partially offset by declines of $6.5 million in commercial real estate loans and $1.2 million in multi-family loans. In addition, commercial business loans increased $1.3 million to $312.0 million at September 30, 2024, up from $310.7 million on June 30, 2024, resulting from an increase of $11.6 million in C&I loans and a decrease of $10.3 million in warehouse lending. Consumer loans decreased $9.3 million to $632.4 million at September 30, 2024, compared to June 30, 2024, resulting from an $11.4 million decrease in indirect home improvement loans, partially offset by an increase of $2.2 million in marine loans.
The composition of CRE loans at the dates indicated were as follows:
(Dollars in thousands)
September 30, 2024
June 30, 2024
September 30, 2023
CRE by Type:
Amount
Amount
Amount
Agriculture
$
3,610
$
3,639
$
3,926
CRE Non-owner occupied:
Office
40,672
41,381
41,878
Retail
36,070
37,507
37,865
Hospitality/restaurant
27,743
28,314
25,252
Self storage
19,130
19,141
21,381
Mixed use
17,881
18,062
16,768
Industrial
15,402
17,163
17,431
Senior housing/assisted living
7,621
7,675
8,556
Other (1)
6,684
6,847
7,814
Land
2,523
3,021
6,381
Education/worship
2,545
2,571
2,645
Total CRE non-owner occupied
176,271
181,682
185,971
CRE owner occupied:
Industrial
63,577
63,969
63,307
Office
42,156
41,978
41,663
Retail
19,968
20,885
23,228
Hospitality/restaurant
10,528
10,800
14,153
Other (2)
8,116
8,354
8,850
Car wash
9,575
9,607
7,818
Automobile related
8,874
8,200
8,193
Education/worship
4,609
4,610
4,617
Mixed use
5,649
5,680
2,947
Total CRE owner occupied
173,052
174,083
174,776
Total
$
352,933
$
359,404
$
364,673
__________________________________
(1)
Primarily includes loans secured by mobile home parks totaling $774,000, $782,000, and $2.4 million, RV parks totaling $689,000, $692,000, and $702,000, automobile-related collateral totaling $594,000, $599,000, and $0, and other collateral totaling $4.6 million, $4.7 million, and $4.8 million at September 30, 2024, June 30, 2024, and September 30, 2023, respectively.
(2)
Primarily includes loans secured by gas stations totaling $1.5 million, $1.6 million and $1.7 million, non-profit organization totaling $901,000, $908,000 and $928,000, and other collateral totaling $5.7 million, $5.1 million and $6.2 million at September 30, 2024, June 30, 2024, and September 30, 2023, respectively.
The following tables includes CRE loans repricing or maturing within the next two years, excluding loans that reprice simultaneously with changes to the prime rate:
(Dollars in thousands)
For the Quarter Ended
Current Weighted
Dec 31,
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Mar 31,
Jun 30,
Sep 30,
Average
CRE by type:
2024
2025
2025
2025
2025
2026
2026
2026
Total
Rate
Agriculture
$
926
$
—
$
424
$
—
$
311
$
181
$
259
$
306
$
2,407
6.40%
Apartment
9,990
9,817
5,271
1,829
18,671
1,908
14,485
9,797
71,768
4.87%
Auto related
—
—
2,091
—
—
—
—
—
2,091
4.18%
Hotel / hospitality
—
579
1,212
1,336
—
118
1,307
—
4,552
4.39%
Industrial
8,337
897
588
—
10,361
584
173
1,636
22,576
5.29%
Mixed use
795
1,750
3,490
250
318
—
—
—
6,603
5.00%
Office
4,702
11,171
—
4,214
988
528
1,666
566
23,835
4.88%
Other
1,227
—
116
1,168
246
901
—
2,545
6,203
4.96%
Retail
1,266
2,006
—
83
—
465
3,285
—
7,105
4.15%
Senior housing and assisted living
—
—
—
—
—
2,186
—
—
2,186
4.75%
Total
$
27,243
$
26,220
$
13,192
$
8,880
$
30,895
$
6,871
$
21,175
$
14,850
$
149,326
4.91%
A breakdown of construction loans at the dates indicated were as follows:
(Dollars in thousands)
September 30, 2024
June 30, 2024
Construction Types:
Amount
Percent
Amount
Percent
Commercial construction ─ retail
$
8,710
3.0
%
$
8,698
3.2
%
Commercial construction ─ office
4,737
1.6
4,737
1.7
Commercial construction ─ self storage
10,408
3.5
10,000
3.6
Commercial construction ─ car wash
7,807
2.7
7,807
2.8
Multi-family
30,931
10.6
30,960
11.3
Custom construction ─ single family residential and single family manufactured residential
43,528
14.9
46,107
16.8
Custom construction ─ land, lot and acquisition and development
8,220
2.8
