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Note 11 - Debt
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 11 – DEBT

 

Borrowings

 

The Bank is a member of the FHLB of Des Moines, which entitles it to certain benefits including a variety of borrowing options consisting of a secured credit line that allows both fixed and variable rate advances. The FHLB borrowings at December 31, 2023 and 2022, consisted of a warehouse securities credit line (“securities line”), which allows advances with interest rates fixed at the time of borrowing and a warehouse federal funds (“Fed Funds”) advance, which allows daily advances at variable interest rates. Credit capacity is primarily determined by the value of assets collateralized at the FHLB, funds on deposit at the FHLB, and stock owned by the Bank.

 

Credit is limited to 45% of the Company’s total assets and available pledged assets. The Bank entered into an Advances, Pledges and Security Agreement with the FHLB for which specific loans are pledged to secure these credit lines. At December 31, 2023, loans of approximately $1.07 billion were pledged to the FHLB. At December 31, 2023, the Bank’s total borrowing capacity was $686.2 million with the FHLB of Des Moines, with unused borrowing capacity of $681.9 million. In addition, all FHLB stock owned by the Company is collateral for credit lines.

 

The Bank maintains a short-term borrowing line with the FRB with total credit based on eligible collateral. The Bank can borrow under the Term Auction Facility and Term Deposit Facility at rates published by the San Francisco FRB. As of  December 31, 2023 and 2022, the Bank had approximately $631.1 million and $579.8 million, respectively, in pledged consumer loans with a borrowing capacity of $351.6 million and $205.8 million for the Term Auction Facility and Term Deposit Facility, respectively.  No borrowings were outstanding under either facility at either date. Additionally, securities with a carrying value of $77.0 million were pledged primarily to provide contingent liquidity through the BTFP at the FRB at December 31, 2023, with a current credit limit of $90.5 million and an outstanding balance of $89.9 million at December 31, 2023. The Bank also had $101.0 million unsecured Fed Funds lines of credit with other financial institutions of which none was outstanding at December 31, 2023.

 

Borrowings on these lines at the dates indicated were as follows:

 

  

December 31,

 
  

2023

  

2022

 

Federal Home Loan Bank - (interest rates ranging from 2.00% to 2.37% and 1.72% to 4.60% at December 31, 2023 and 2022, respectively)

 $3,896  $186,528 

FRB BTFP advance - (interest rate of 4.70% at December 31, 2023)

  89,850   — 

Total

 $93,746  $186,528 

 

Scheduled maturities of borrowings were as follows:

 

      

Interest

 

Years Ending December 31,

 

Balances

  

Rates

 

2024

 $93,746   4.60%

 

Subordinated Notes

 

On February 10, 2021, FS Bancorp completed the private placement of $50.0 million of its 3.75% fixed-to-floating rate subordinated notes due 2031 (the “Notes”) at an offering price equal to 100% of the aggregate principal amount of the Notes, resulting in net proceeds, after placement agent fees and offering expenses, of approximately $49.3 million. The interest rate on the Notes remains fixed equal to 3.75% for the first five years. After five years the interest rate changes to a floating interest rate tied to a Three-Month Term Secured Overnight Financing Rate (“SOFR”), plus a spread of 337 basis points. The Notes will mature on February 15, 2031. On or after February 15, 2026, the Company may redeem the Notes, in whole or in part.

 

The Notes are unsecured obligations and are subordinated in right of payment to all existing and future indebtedness, deposits and other liabilities of the Company's current and future subsidiaries, including the Bank’s deposits as well as the Company's subsidiaries' liabilities to general creditors and liabilities arising during the ordinary course of business. The Notes may be included in Tier 2 capital for the Company under current regulatory guidelines and interpretations.

 

The maximum balance at any month end and the average balances and weighted average interest rates on debt during the years indicated were as follows:

 

  

For the Year Ending December 31,

 
  

2023

  

2022

  

2021

 

Maximum balance:

            

FHLB advances and Fed Funds

 $74,895  $260,828  $102,528 

FRB Fed Funds

  —   —   — 

Fed Funds lines of credit with other financial institutions

  —   —   — 

Subordinated notes

  50,000   50,000   50,000 

FRB Paycheck Protection Program Liquidity Facility ("PPPLF")

  —   —   59,349 

FRB BTFP advance

  90,000   —   — 

Average balance:

            

FHLB advances and Fed Funds

  33,945   102,008   55,602 

FRB Fed Funds

  14,704   548   205 

Fed Funds lines of credit with other financial institutions

  11   15   11 

Subordinated notes

  50,000   50,000   44,699 

FRB PPPLF

  —   —   7,310 

FRB BTFP advance

  61,669   —   — 

Weighted average interest rates

            

FHLB advances and Fed Funds

  4.40

%

  2.98

%

  1.88

%

FRB Fed Funds

  5.42

%

  1.69

%

  0.25

%

Fed Funds lines of credit with other financial institutions

  5.62

%

  3.28

%

  0.49

%

Subordinated notes

  3.88

%

  3.75

%

  3.75

%

FRB PPPLF

  —

%

  —

%

  0.35

%

FRB BTFP advance

  4.71%  —%  —%