Washington
|
001-35589
|
45-4585178
|
(State or other jurisdiction
of incorporation)
|
(Commission
File Number)
|
(I.R.S. Employer
Identification No.)
|
6920 220th Street SW, Suite 200,
Mountlake Terrace, Washington
|
98043
|
(Address of principal executive offices)
|
(Zip Code)
|
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
|
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
|
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
|
Item 9.01
|
Financial Statements and Exhibits
|
(a)
|
Financial Statements of Business Acquired
|
(b)
|
Pro Forma Financial Information
|
•
|
Unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2018, giving effect to the Merger as if it occurred on September 30, 2018;
|
•
|
Unaudited pro forma combined condensed consolidated statement of income for the nine months ended September 30, 2018, giving effect to the Merger as if it occurred on January 1, 2017; and
|
•
|
Unaudited pro forma combined condensed consolidated statement of income for the year ended December 31, 2017, giving effect to the Merger as if it occurred on January 1, 2017.
|
(d)
|
Exhibits
|
*
|
Filed herewith.
|
Date: January 29, 2019
|
FS BANCORP, INC.
|
|
|
|
|
|
/s/ Matthew D. Mullet
|
|
Matthew D. Mullet
Chief Financial Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)
|
•
|
the accompanying notes to the unaudited pro forma condensed combined financial statements;
|
•
|
FS Bancorp's separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2017, included in FS Bancorp's Annual Report on Form 10-K for the year ended December 31, 2017 and its unaudited Quarterly Report on Form 10-Q for the nine months ended September 30, 2018;
|
•
|
Anchor's separate audited historical consolidated financial statements and accompanying notes as of and for the year ended June 30, 2018, included in Anchor's Annual Report on Form 10-K for the year ended June 30, 2018 and its unaudited Quarterly Report on Form 10-Q for the three months ended September 30, 2018; and
|
•
|
other information pertaining to FS Bancorp and Anchor contained in or incorporated by reference into the proxy statement/prospectus filed by FS Bancorp on Pre-Effective Amendment No. 2 to Form S-4 on September 24, 2018. See also "Selected Consolidated Financial Information of FS Bancorp" and "Selected Consolidated Financial Information of Anchor" included elsewhere in the proxy statement/prospectus.
|
FS
Bancorp(1)
|
Anchor(1)
|
Pro Forma
Adjustments
|
Notes
|
Pro
Forma
|
||||||||||||||||
ASSETS
|
||||||||||||||||||||
Cash and cash equivalents
|
$
|
32,564
|
$
|
50,546
|
$
|
(36,698
|
)
|
A |
|
$
|
46,412
|
|||||||||
Investment securities available for
sale
|
97,374
|
16,817
|
--
|
114,191
|
||||||||||||||||
Investment securities held to
maturity
|
--
|
3,287
|
(54
|
)
|
B |
|
3,233
|
|||||||||||||
Loans held for sale, at fair value
|
54,784
|
999
|
--
|
55,783
|
||||||||||||||||
Loans receivable, net of unearned
income
|
959,617
|
373,711
|
(5,527
|
)
|
C |
|
1,327,801
|
|||||||||||||
Less: Allowance for loan losses
|
12,045
|
4,420
|
(4,420
|
)
|
D |
|
12,045
|
|||||||||||||
Total loans receivable, net
|
947,572
|
369,291
|
(1,107
|
)
|
1,315,756
|
|||||||||||||||
Other real estate owned
|
--
|
742
|
--
|
742
|
||||||||||||||||
Core deposit intangible, net
|
1,087
|
--
|
5,251
|
E |
|
6,338
|
||||||||||||||
Goodwill
|
2,312
|
--
|
--
|
2,312
|
||||||||||||||||
BOLI
|
13,586
|
20,675
|
--
|
34,261
|
||||||||||||||||
Other assets (includes MSR)
|
42,052
|
16,523
|
1,492
|
F |
|
60,067
|
||||||||||||||
TOTAL ASSETS
|
$
|
1,191,331
|
$
|
478,880
|
$
|
(31,116
|
)
|
$
|
1,639,095
|
|||||||||||
LIABILITIES AND
STOCKHOLDERS'
EQUITY
|
||||||||||||||||||||
LIABILITIES
|
||||||||||||||||||||
Deposits
|
$
|
944,537
|
$
|
365,657
|
$
|
(980
|
)
|
G |
|
$
|
1,309,214
|
|||||||||
Borrowings
|
86,526
|
37,000
|
(282
|
)
|
H |
|
123,244
|
|||||||||||||
Subordinated note less unamortized
debt issuance costs
|
9,860
|
--
|
--
|
9,860
|
||||||||||||||||
Accrued expenses and other
liabilities
|
17,279
|
7,547
|
--
|
24,826
|
||||||||||||||||
Total liabilities
|
1,058,202
|
410,204
|
(1,262
|
)
|
1,467,144
|
|||||||||||||||
STOCKHOLDERS' EQUITY
|
||||||||||||||||||||
Common stock
|
37
|
25
|
(18
|
)
|
I |
|
44
|
|||||||||||||
Additional paid-in capital
|
57,027
|
22,343
|
11,416
|
J |
|
90,786
|
||||||||||||||
Retained earnings
|
79,648
|
48,063
|
(43,007
|
)
|
K |
|
84,704
|
|||||||||||||
Accumulated other comprehensive loss,
net
|
(2,664
|
)
|
(1,232
|
)
|
1,232
|
L |
|
(2,664
|
)
|
|||||||||||
Unearned shares – Employee Stock
Ownership Plan
|
(919
|
)
|
(523
|
)
|
523
|
M |
|
(919
|
)
|
|||||||||||
Total stockholders' equity
|
133,129
|
68,676
|
(29,854
|
)
|
171,951
|
|||||||||||||||
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY
|
$
|
1,191,331
|
$
|
478,880
|
$
|
(31,116
|
)
|
$
|
1,639,095
|
(1)
|
FS Bancorp and Anchor information is as of September 30, 2018 and is unaudited. FS Bancorp's information is derived from its unaudited financial statements included in its Quarterly Report on Form 10-Q for September 30, 2018. Anchor's information is derived from its unaudited financial statements included in its Quarterly Report on Form 10-Q for September 30, 2018.
|
FS
Bancorp(2)
|
Anchor(2)
|
Pro Forma
Adjustments
|
Notes
|
Pro
Forma
|
||||||||||||||||
Interest income:
|
||||||||||||||||||||
Interest and fees on loans
|
$
|
40,015
|
$
|
16,674
|
$
|
1,640
|
N |
|
$
|
58,329
|
||||||||||
Other
|
2,578
|
625
|
(347
|
)
|
O |
|
2,856
|
|||||||||||||
Total interest income
|
42,593
|
17,299
|
1,293
|
61,185
|
||||||||||||||||
Interest expense:
|
||||||||||||||||||||
Deposits
|
4,525
|
2,664
|
--
|
7,189
|
||||||||||||||||
Subordinated note
|
508
|
--
|
--
|
508
|
||||||||||||||||
Other borrowings
|
1,280
|
580
|
--
|
1,860
|
||||||||||||||||
Total interest expense
|
6,313
|
3,244
|
--
|
9,557
|
||||||||||||||||
Net interest income
|
36,280
|
14,055
|
1,293
|
51,628
|
||||||||||||||||
Provision for loan losses
|
1,250
|
275
|
--
|
1,525
|
||||||||||||||||
Net interest income after
provision for loan losses
|
35,030
|
13,780
|
1,293
|
50,103
|
||||||||||||||||
Noninterest income:
|
||||||||||||||||||||
Service charges and other fees
|
2,045
|
2,054
|
--
|
4,099
|
||||||||||||||||
Income from sale of mortgage loans
|
12,467
|
16
|
--
|
12,483
|
||||||||||||||||
Other income
|
928
|
956
|
--
|
1,884
|
||||||||||||||||
Total noninterest income
|
15,440
|
3,026
|
--
|
18,466
|
||||||||||||||||
Noninterest expense:
|
||||||||||||||||||||
Compensation and employee benefits
|
21,759
|
6,355
|
--
|
28,114
|
||||||||||||||||
Operations
|
4,209
|
2,164
|
(89
|
)
|
P |
|
6,284
|
|||||||||||||
Occupancy and equipment
|
2,097
|
1,270
|
110
|
Q |
|
3,477
|
||||||||||||||
Data processing
|
1,944
|
1,495
|
--
|
3,439
|
||||||||||||||||
Loan costs
|
2,183
|
--
|
--
|
2,183
|
||||||||||||||||
Professional and board fees
|
1,321
|
--
|
--
|
1,321
|
||||||||||||||||
Other real estate owned, net
|
--
|
(93
|
)
|
--
|
(93
|
)
|
||||||||||||||
Acquisition/merger related costs
|
443
|
266
|
--
|
709
|
||||||||||||||||
Other expense
|
1,062
|
306
|
394
|
R |
|
1,762
|
||||||||||||||
Total noninterest expense
|
35,018
|
11,763
|
415
|
47,196
|
||||||||||||||||
Income before income taxes
|
15,452
|
5,043
|
878
|
21,373
|
||||||||||||||||
Income tax expense
|
2,822
|
1,206
|
189
|
S |
|
4,217
|
||||||||||||||
Net income
|
$
|
12,630
|
$
|
3,837
|
$
|
689
|
$
|
17,156
|
||||||||||||
Earnings per common share:
|
||||||||||||||||||||
Basic
|
$
|
3.52
|
$
|
1.54
|
$
|
--
|
T |
|
$
|
3.98
|
||||||||||
Diluted
|
3.35
|
1.54
|
--
|
T |
|
3.81
|
||||||||||||||
Average common shares
outstanding:
|
||||||||||||||||||||
Basic
|
3,590,383
|
2,484,011
|
(1,758,493
|
)
|
U |
|
4,315,901
|
|||||||||||||
Diluted
|
3,772,408
|
2,489,475
|
(1,763,957
|
)
|
U |
|
4,497,926
|
(2)
|
FS Bancorp and Anchor information is for the nine months ended September 30, 2018 and is unaudited. FS Bancorp's information is derived from its unaudited financial statements included in its Quarterly Report on Form 10-Q for September 30, 2018. Anchor's information is derived from the information contained in the proxy statement/prospectus and the unaudited financial information included in the financial information included in its Quarterly Report on Form 10-Q for the three months ended September 30, 2018.
|
FS
Bancorp(3)
|
Anchor(3)
|
Pro Forma
Adjustments
|
Notes
|
Pro
Forma
|
||||||||||||||||
Interest income:
|
||||||||||||||||||||
Interest and fees on loans
|
$
|
43,457
|
$
|
20,689
|
$
|
2,186
|
N |
|
$
|
66,332
|
||||||||||
Other Interest Income
|
2,724
|
657
|
(462
|
)
|
O |
|
2,919
|
|||||||||||||
Total interest income
|
46,181
|
21,346
|
1,724
|
69,251
|
||||||||||||||||
Interest expense:
|
||||||||||||||||||||
Deposits
|
3,920
|
3,163
|
--
|
7,083
|
||||||||||||||||
Subordinated note
|
679
|
--
|
--
|
679
|
||||||||||||||||
Other borrowings
|
334
|
520
|
--
|
854
|
||||||||||||||||
Total interest expense
|
4,933
|
3,683
|
--
|
8,616
|
||||||||||||||||
Net interest income
|
41,248
|
17,663
|
1,724
|
60,635
|
||||||||||||||||
Provision for loan losses
|
750
|
340
|
--
|
1,090
|
||||||||||||||||
Net interest income after
provision for loan losses
|
40,498
|
17,323
|
1,724
|
59,545
|
||||||||||||||||
Noninterest income:
|
||||||||||||||||||||
Service charges and other fees
|
3,548
|
2,777
|
--
|
6,325
|
||||||||||||||||
Income from sale of mortgage loans
|
17,985
|
241
|
--
|
18,226
|
||||||||||||||||
Gain on sale of mortgage servicing
rights
|
1,062
|
--
|
--
|
1,062
|
||||||||||||||||
Other income
|
1,479
|
1,264
|
--
|
2,743
|
||||||||||||||||
Total noninterest income
|
24,074
|
4,282
|
--
|
28,356
|
||||||||||||||||
Noninterest expense:
|
||||||||||||||||||||
Compensation and employee benefits
|
26,595
|
8,717
|
--
|
35,312
|
||||||||||||||||
Operations
|
6,205
|
3,550
|
(118
|
)
|
P |
|
9,637
|
|||||||||||||
Occupancy and equipment
|
2,672
|
1,809
|
146
|
Q |
|
4,627
|
||||||||||||||
Data processing
|
2,521
|
2,107
|
--
|
4,628
|
||||||||||||||||
Loan costs
|
2,652
|
--
|
--
|
2,652
|
||||||||||||||||
Professional and board fees
|
1,697
|
--
|
--
|
1,697
|
||||||||||||||||
Other real estate owned, net
|
--
|
(5
|
)
|
--
|
(5
|
)
|
||||||||||||||
Other expense
|
1,651
|
521
|
525
|
R |
|
2,697
|
||||||||||||||
Total noninterest expense
|
43,993
|
16,699
|
553
|
61,245
|
||||||||||||||||
Income before income taxes
|
20,579
|
4,906
|
1,171
|
26,656
|
||||||||||||||||
Income tax expense
|
6,494
|
3,908
|
416
|
S |
|
10,818
|
||||||||||||||
Net income
|
$
|
14,085
|
$
|
998
|
$
|
755
|
$
|
15,838
|
||||||||||||
Earnings per common share:
|
||||||||||||||||||||
Basic
|
$
|
4.55
|
$
|
0.41
|
$
|
--
|
T |
|
$
|
4.15
|
||||||||||
Diluted
|
4.28
|
0.41
|
--
|
T |
|
3.94
|
||||||||||||||
Average common shares outstanding:
|
||||||||||||||||||||
Basic
|
3,094,586
|
2,407,883
|
(1,682,365
|
)
|
U |
|
3,820,104
|
|||||||||||||
Diluted
|
3,291,700
|
2,424,781
|
(1,699,263
|
)
|
U |
|
4,017,218
|
(3)
|
Anchor information is for the twelve months ended December 31, 2017. FS Bancorp's information is derived from its audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2017. Anchor's information is derived from its audited financial statements for the year ended June 30, 2017 included in its Annual Report on Form 10-K and the unaudited financial statements included in its Quarterly Reports on Form 10-Q for the six months ended December 31, 2017 and 2016.
|
At
|
||||||||
September 30, 2018
|
||||||||
(In thousands)
|
||||||||
Pro forma purchase price of Anchor
|
||||||||
Fair value of FS Bancorp common stock at $46.54(1) per share for
|
||||||||
725,518 shares
|
$
|
33,766
|
||||||
Cash to be paid
|
30,805
|
|||||||
Total pro forma purchase price
|
$
|
64,571
|
||||||
Fair value of assets acquired:
|
||||||||
Cash
|
$
|
50,546
|
||||||
Investment securities available for sale
|
16,817
|
|||||||
Investment securities held to maturity
|
3,233
|
|||||||
Loans held for sale
|
999
|
|||||||
Loans receivable, net
|
368,184
|
|||||||
Other real estate owned
|
742
|
|||||||
Intangible assets - CDI
|
5,251
|
|||||||
Real estate
|
11,884
|
|||||||
Mortgage servicing rights
|
782
|
|||||||
Deferred tax asset
|
739
|
|||||||
Other assets
|
25,285
|
|||||||
Total assets and identifiable intangible assets acquired
|
$
|
484,462
|
||||||
Fair value of liabilities assumed:
|
||||||||
Deposits
|
$
|
364,677
|
||||||
Borrowings
|
36,718
|
|||||||
Accrued expenses and other liabilities
|
7,547
|
|||||||
Total liabilities assumed
|
$
|
408,942
|
||||||
Fair value of net assets and identifiable intangible assets acquired
|
$
|
75,520
|
||||||
Bargain purchase gain
|
$
|
(10,949
|
)
|
|||||
(1)
|
Stock price is as of the closing date.
|
Balance Sheet
At September 30, 2018
|
||||||||
(In thousands)
|
||||||||
A. Adjustments to Cash and cash equivalents
|
$
|
(36,698
|
)
|
|||||
To reflect cash used to purchase Anchor (2,484,030 Anchor common shares outstanding at September 30, 2018 at $12.40 cash consideration per share).
|
(30,805
|
)
|
||||||
To reflect projected cash used for merger costs. See Note 5 – Merger Costs.
|
(5,893
|
)
|
||||||
B. Adjustment to Securities held to maturity
To reflect the estimated fair market value of securities held to
maturity.
|
(54
|
)
|
||||||
C. Adjustments to Loans receivable, excluding allowance for loan losses and fees not yet recognized
|
(5,527
|
)
|
||||||
To reflect the discount on loans at merger date. FS Bancorp estimated the fair value using portfolio performance and yield compared to market and will receive an independent third party review at closing. Based on the due diligence, a total discount of approximately 1.48% of gross loans ($374,703 x 1.48% = $5,527) was calculated on the loans.
|
||||||||
D. Adjustments to Allowance for loan losses
|
(4,420
|
)
|
||||||
To remove the Anchor allowance for loan losses at period end date as the credit risk is accounted for in the fair value adjustment for the loans receivable in Adjustment C above.
|
||||||||
E. Adjustments to Intangible asset, net
|
5,251
|
|||||||
To record the estimated fair value of the core deposit intangible asset ("CDI") identified in the merger as estimated prior to close date and validated at close by an independent third party and to eliminate the Anchor core deposit intangible created in its prior acquisitions.
|
||||||||
F. Adjustments to Other assets
|
1,492
|
|||||||
To reflect the fair value of the other assets in the merger as follows:
|
||||||||
Deferred tax asset, net
|
(2,448
|
)
|
||||||
Subtotal of estimated fair value adjustments is $2.4 million at FS Bancorp's estimated statutory rate of 21.5%
|
||||||||
(Table continued on following page)
|
Balance Sheet (continued)
At September 30, 2018
|
||||||||
(In thousands)
|
||||||||
Fixed Assets
|
3,369
|
|||||||
Owned properties to reflect the estimated fair
market value of the owned properties.
|
||||||||
Mortgage Servicing Rights
|
554
|
|||||||
To reflect estimated fair value of mortgage servicing rights based on third-party valuation.
|
||||||||
Interest only strip
|
17
|
|||||||
To record fair market value of interest only strip.
|
||||||||
G. Adjustment to Deposits
|
$
|
(980
|
)
|
|||||
To reflect estimated fair market value of deposits based on current interest rates.
|
||||||||
H. Adjustment to Borrowings
|
(282
|
)
|
||||||
To reflect estimated fair market value of borrowings based on current interest rates.
|
||||||||
I. Adjustments to Common stock
|
(18
|
)
|
||||||
To record the issuance of FS Bancorp common stock as purchase price consideration and to eliminate the common stock of Anchor.
|
||||||||
Issuance of FS Bancorp common stock to Anchor shareholders (725,518 shares at $0.01 value)
|
7
|
|||||||
Elimination of the historical Anchor common stock
|
(25
|
)
|
||||||
J. Adjustment to Additional Paid-in Capital
|
11,416
|
|||||||
To eliminate the historical Anchor additional paid in capital
|
(22,343
|
)
|
||||||
To record additional paid-in capital for stock valued purchase price
|
33,766
|
|||||||
To record par value of FS Bancorp common stock to Anchor shareholders
|
(7
|
)
|
||||||
K. Adjustment to Retained earnings
|
(43,007
|
)
|
||||||
To eliminate the historical Anchor retained earnings
|
(48,063
|
)
|
||||||
To record estimated merger costs
|
(5,893
|
)
|
||||||
To record the bargain purchase gain
|
10,949
|
|||||||
To record the difference between the consideration transferred and the estimated fair value of net assets acquired and net liabilities assumed in the merger. See Note 3 – Allocation of Purchase Price of Anchor Bank, above.
|
||||||||
L. Adjustment to Accumulated other comprehensive loss
|
1,232
|
|||||||
To eliminate the historical Anchor accumulated other comprehensive loss.
|
||||||||
M. Adjustment to Employee Stock Ownership Plan
|
523
|
|||||||
To eliminate the historical Anchor unearned shares of the Employee Stock Ownership Plan.
|
Income Statements
(In thousands)
|
||||||||
For the Nine
Months Ended
September 30,
2018
|
For the Year
Ended
December 31,
2017
|
|||||||
N. Adjustments to Interest income: Interest and fees on loans
|
$
|
1,640
|
$
|
2,186
|
||||
To reflect the accretion of interest component of the loan discount resulting from the pro forma loan fair value adjustment in Adjustment C above. The accretion was calculated using an effective yield method over the weighted average life of five years at the merger date. The sum of the accumulated discount accretion for the first twelve months and subsequent nine months was estimated to be the accretion for the year ended December 31, 2017 and the nine months ended September 30, 2018, respectively.
|
||||||||
O. Adjustments to Interest income: Other
|
(347
|
)
|
(462
|
)
|
||||
To recognize the reduction in other cash reflected for the merger at an estimated yield of 1.5% annualized.
|
||||||||
P. Adjustments to Noninterest expense: Operations
|
(89
|
)
|
(118
|
)
|
||||
To reflect the elimination of the Director expenses at Anchor Bancorp.
|
||||||||
Q. Adjustments to Noninterst expense: Occupancy and equipment
|
110
|
146
|
||||||
To reflect additional depreciation expense based on estimated fair value adjustment.
|
||||||||
R. Adjustments to Noninterest expense: Other expense
|
394
|
525
|
||||||
To reflect estimated CDI amortization.
|
||||||||
S. Adjustments to Noninterest expense: Income tax expense
|
189
|
416
|
||||||
Adjusted the tax rate for additional income earned from the combined company to 21.5% for income in 2018 and 35.5% for additional income earned in 2017.
|
||||||||
At
September 30,
|
||||
2018
|
||||
(In thousands)
|
||||
Professional fees
|
$
|
1,500
|
||
Change of control payments
|
2,961
|
|||
Severance and retention plan
|
2,575
|
|||
Data processing, termination and conversion
|
471
|
|||
Pre-tax merger costs
|
7,507
|
|||
Income tax benefit at 21.5% rate
|
1,614
|
|||
Net merger costs
|
$
|
5,893
|