Regulatory Capital

12 Months Ended

Dec. 31, 2019

Regulatory Capital Requirements [Abstract]

Regulatory Capital

NOTE 15 - REGULATORY CAPITAL

The Bank is subject to various regulatory capital requirements administered by the Federal Reserve and the FDIC. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines of the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 capital (as defined in the regulations) to total average assets (as defined), and minimum ratios of Tier 1 total capital (as defined) and common equity Tier 1 (“CET 1”) capital to risk-weighted assets (as defined).

The Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage, and CET 1 capital ratios as set forth in the table below to be categorized as well capitalized. At December 31, 2019 and December 31, 2018, the Bank was categorized as well capitalized under applicable regulatory requirements. There are no conditions or events since that notification that management believes have changed the Bank’s category. Management believes, at December 31, 2019, that the Company and the Bank met all capital adequacy requirements.

The following table compares the Bank’s actual capital amounts and ratios at December 31, 2019 and 2018 to their minimum regulatory capital requirements and well capitalized regulatory capital at those dates (dollars in thousands):

													To be Well Capitalized
													Under Prompt
					For Capital				For Capital Adequacy				Corrective
	Actual				Adequacy Purposes				with Capital Buffer				Action Provisions
Bank Only	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
At December 31, 2019
Total risk-based capital
(to risk-weighted assets)	$	209,535	14.64	%	$	114,502	8.00	%	$	150,283	10.50	%	$	143,127	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	196,013	13.70	%	$	85,876	6.00	%	$	121,658	8.50	%	$	114,502	8.00	%
Tier 1 leverage capital
(to average assets)	$	196,013	11.56	%	$	67,808	4.00	%	$	N/A	N/A		$	84,761	5.00	%
CET 1 capital
(to risk-weighted assets)	$	196,013	13.70	%	$	64,407	4.50	%	$	100,189	7.00	%	$	93,033	6.50	%
At December 31, 2018
Total risk-based capital
(to risk-weighted assets)	$	188,472	13.52	%	$	111,493	8.00	%	$	137,694	9.88	%	$	139,366	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	175,824	12.62	%	$	83,620	6.00	%	$	109,820	7.88	%	$	111,493	8.00	%
Tier 1 leverage capital
(to average assets)	$	175,824	10.67	%	$	65,884	4.00	%	$	N/A	N/A		$	82,355	5.00	%
CET 1 capital
(to risk-weighted assets)	$	175,824	12.62	%	$	62,715	4.50	%	$	88,846	6.38	%	$	90,588	6.50	%

In addition to the minimum CET 1, Tier 1, total capital, and leverage ratios, the Bank is required to maintain a capital conservation buffer consisting of additional CET 1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses on percentages of eligible retained income that could be utilized for such actions. At December 31, 2019, the Bank’s capital conservation buffer was 2.5%.

FS Bancorp, Inc. is a bank holding company registered with the Federal Reserve.  Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve.  Bank holding companies with less than $3.0 billion in assets are generally not subject to compliance with the Federal Reserve’s capital regulations, which are generally the same as the capital regulations applicable to the Bank. The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to the holding company’s subsidiary bank and expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations. If FS Bancorp, Inc. was subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets at December 31, 2019, FS Bancorp, Inc. would have exceeded all regulatory capital requirements. The regulatory capital ratios calculated for FS Bancorp Inc. at December 31, 2019 were 11.3% for Tier 1 leverage-based capital, 13.4% for Tier 1 risk-based capital, 14.3% for total risk-based capital, and 13.4% for CET 1 capital ratio, compared to 12.1%,  12.4%,  13.3%, and 12.4% at December 31, 2018, respectively.