MOUNTLAKE TERRACE — 1st Security Bank of Washington has made the transition from a mutual bank to a stock-based savings bank with a $32 million capital infusion from an initial public offering.
FS Bancorp Inc. is now the holding company for 1st Security Bank, following the sale of 3,240,125 shares of common stock at $10 per share. FS Bancorp’s common stock started trading Tuesday on the Nasdaq Capital Market under the symbol FSBW. It closed the day at $10.01 per share on volume of 1,052,280 shares.
Unlike other local banks that raised capital through private investors, 1st Security Bank offered depositors with accounts as of June 30, 2007, “tier 1 rights” to buy 10 or more shares of stock at the initial public offering, said 1st Security Bank chief financial officer Matt Mullet. In a May 25 prospectus, the bank’s officers expected the IPO to bring in $20.8 million to $28.2 million. Instead, he said, the offering was oversubscribed and went “supermax” to raise $32.4 million.
After deducting fees and expenses, FS Bancorp netted $30,154,500 from the stock sale.
“That was encouraging to see,” said Joseph Adams, CEO of FS Bancorp and 1st Security Bank. “The underwriters say it shows a pent-up demand for quality local bank stocks.”
Mullet said FS Bancorp will use the capital infusion to expand the 1st Security “franchise” and help the bank grow. It will open a new full-service branch on Seattle’s Capitol Hill during the first quarter of 2013.
With its headquarters in Mountlake Terrace, 1st Security Bank has branches in Bothell, Lynnwood, Edmonds, Redmond, Poulsbo and Puyallup.
1st Security Bank traces its roots to 1936, when it served select employment groups in the Puget Sound area as Washington’s Credit Union. On April 1, 2004, it converted to a state-chartered mutual savings bank and operated 14 branch locations in the Puget Sound area with 132 full-time-equivalent workers.
As the economy began to cool in 2007, the bank said in a filing statement with the Securities and Exchange Commission, it posted losses of $4.1 million in 2007, $3.8 million in 2008 and $4.6 million in 2009. Bank officers responded by hiring a new management team, consolidated branches, aggressively cut expenses, actively managed delinquent loans and nonperforming assets and reduced staff to 86 full-time-equivalent workers.
In the SEC filing, 1st Security Bank said it recorded net earnings of $1.6 million for 2010 and $1.5 million for 2011.
The bank’s Employee Stock Ownership Plan was unable to purchase any shares in the IPO as a result of the oversubscription. The ESOP intends to purchase, subject to regulatory approval, up to 259,210 shares of FS Bancorp Inc. common stock in the aftermarket, equal to 8 percent of the shares sold in the IPO. Bank directors and executive officers whose orders were not filled in the IPO also intend to purchase shares in the aftermarket.
“Our board of directors and employees are grateful for the strong support and interest in our offering from our depositors,” Adams said in a statement.
FS Bancorp will mail full or partial refunds due to depositors as a result of the IPO oversubscription. It started mailing stock certificates to investors on Tuesday. Customers can get confirmation of stock allocation at allocations.kbw.com or by calling 855-824-9310 between 8 a.m. and 4 through July 13.
Kurt Batdorf: 425-339-3102; kbatdorf@heraldnet.com.
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