10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017              OR

[]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from   to

Commission File Number:   001‑35589

FS BANCORP, INC.

(Exact name of registrant as specified in its charter)

Washington	45‑4585178
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

6920 220th Street SW, Mountlake Terrace, Washington  98043

(Address of principal executive offices; Zip Code)

(425) 771‑5299

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes [X]          No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes [X]          No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b‑2 of the Exchange Act.

Large accelerated filer [   ]	Accelerated filer [   ]
Non-accelerated filer [   ] (Do not check if a smaller reporting company)	Smaller reporting company [ X ]
Emerging growth company [ X ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).    Yes [   ]          No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of November 3, 2017, there were 3,674,902 outstanding shares of the registrant’s common stock.

FS Bancorp, Inc.

Form 10‑Q

Table of Contents

		Page Number
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at September 30, 2017 and December 31, 2016 (Unaudited)	3
	Consolidated Statements of Income for the Three and Nine  Months Ended September 30, 2017 and 2016 (Unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016 (Unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2017 and 2016 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Nine  Months Ended September 30, 2017 and 2016 (Unaudited)	7
	Notes to Consolidated Financial Statements	8 - 43
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44 - 53
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	53
PART II	OTHER INFORMATION	55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56
SIGNATURES		58

As used in this report, the terms “we,” “our,” “us,” “Company” and “FS Bancorp” refer to FS Bancorp, Inc. and its consolidated subsidiary, 1st Security Bank of Washington, unless the context indicates otherwise. When we refer to “Bank” in this report, we are referring to 1st Security Bank of Washington, the wholly owned subsidiary of FS Bancorp, Inc.

2

Item 1. Financial Statements

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts) (Unaudited)

	September 30,		December 31,
	2017		2016
ASSETS
Cash and due from banks	$	3,299	$	3,590
Interest-bearing deposits at other financial institutions		27,996		32,866
Total cash and cash equivalents		31,295		36,456
Certificates of deposit at other financial institutions		18,108		15,248
Securities available-for-sale, at fair value		78,103		81,875
Loans held for sale, at fair value		65,055		52,553
Loans receivable, net		753,854		593,317
Accrued interest receivable		3,217		2,524
Premises and equipment, net		15,463		16,012
Federal Home Loan Bank (“FHLB”) stock, at cost		3,047		2,719
Bank owned life insurance (“BOLI”), net		10,262		10,054
Servicing rights, held at the lower of cost or fair value		5,811		8,459
Goodwill		2,312		2,312
Core deposit intangible, net		1,417		1,717
Other assets		5,947		4,680
TOTAL ASSETS	$	993,891	$	827,926
LIABILITIES
Deposits:
Noninterest-bearing accounts	$	166,964	$	152,913
Interest-bearing accounts		673,614		559,680
Total deposits		840,578		712,593
Borrowings		10,270		12,670
Subordinated note:
Principal amount		10,000		10,000
Unamortized debt issuance costs		(160)		(175)
Total subordinated note less unamortized debt issuance costs		9,840		9,825
Other liabilities		14,964		11,805
Total liabilities		875,652		746,893
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued or outstanding		—		—
Common stock, $.01 par value; 45,000,000 shares authorized; 3,674,902 and 3,059,503 shares issued and outstanding at September 30, 2017, and December 31, 2016, respectively		37		31
Additional paid-in capital		54,463		27,334
Retained earnings		65,049		55,584
Accumulated other comprehensive loss, net of tax		(128)		(536)
Unearned shares – Employee Stock Ownership Plan (“ESOP”)		(1,182)		(1,380)
Total stockholders’ equity		118,239		81,033
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	993,891	$	827,926

See accompanying notes to these consolidated financial statements.

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FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share amounts) (Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
INTEREST INCOME
Loans receivable, including fees	$	11,715	$	9,241	$	31,488	$	26,014
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions		637		538		2,034		1,751
Total interest and dividend income		12,352		9,779		33,522		27,765
INTEREST EXPENSE
Deposits		1,045		808		2,793		2,411
Borrowings		114		50		259		177
Subordinated note		171		171		508		512
Total interest expense		1,330		1,029		3,560		3,100
NET INTEREST INCOME		11,022		8,750		29,962		24,665
PROVISION FOR LOAN LOSSES		450		600		450		1,800
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		10,572		8,150		29,512		22,865
NONINTEREST INCOME
Service charges and fee income		879		899		2,743		2,489
Gain on sale of loans		5,025		5,922		13,840		14,722
Gain on sale of investment securities		143		146		380		146
Gain on sale of mortgage servicing rights (“MSR”)		38		—		996		—
Earnings on cash surrender value of BOLI		68		71		208		211
Other noninterest income		274		210		637		557
Total noninterest income		6,427		7,248		18,804		18,125
NONINTEREST EXPENSE
Salaries and benefits		7,140		6,287		20,174		16,510
Operations		1,577		1,450		4,506		4,221
Occupancy		650		597		1,939		1,775
Data processing		651		537		1,811		1,576
Gain on sale of other real estate owned (“OREO”)		—		—		—		(150)
Loan costs		726		715		1,977		1,789
Professional and board fees		378		502		1,261		1,490
Federal Deposit Insurance Corporation (“FDIC”) insurance		175		98		428		306
Marketing and advertising		192		202		512		553
Acquisition costs		—		—		—		389
Amortization of core deposit intangible		100		140		300		382
(Recovery) impairment on servicing rights		—		(216)		1		(2)
Total noninterest expense		11,589		10,312		32,909		28,839
INCOME BEFORE PROVISION FOR INCOME TAXES		5,410		5,086		15,407		12,151
PROVISION FOR INCOME TAXES		1,956		1,629		5,001		4,198
NET INCOME	$	3,454	$	3,457	$	10,406	$	7,953
Basic earnings per share	$	1.13	$	1.21	$	3.53	$	2.74
Diluted earnings per share	$	1.07	$	1.18	$	3.31	$	2.66

See accompanying notes to these consolidated financial statements.

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FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)  (Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Net Income	$	3,454	$	3,457	$	10,406	$	7,953
Other comprehensive income, before tax:
Securities available-for-sale:
Unrealized holding gain during period		80		29		1,012		1,224
Income tax provision related to unrealized holding gain		(28)		(8)		(357)		(433)
Reclassification adjustment for realized gain included in net income		(143)		(146)		(380)		(146)
Income tax provision related to reclassification for realized gain		50		50		133		50
Other comprehensive (loss) income, net of tax		(41)		(75)		408		695
COMPREHENSIVE INCOME	$	3,413	$	3,382	$	10,814	$	8,648

See accompanying notes to these consolidated financial statements.

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FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share amounts) (Unaudited)

								Accumulated
				Additional				Other		Unearned		Total
	Common Stock			Paid-in		Retained		Comprehensive		ESOP		Stockholders’
	Shares	Amount		Capital		Earnings		Income, Net ofTax		Shares		Equity
BALANCE, January 1, 2016	3,242,120	$	32	$	30,692	$	46,175	$	78	$	(1,637)	$	75,340
Net income	—	$	—		—		7,953		—		—	$	7,953
Dividends paid ($0.26 per share)	—	$	—		—		(802)		—		—	$	(802)
Share-based compensation	—	$	—		588		—		—		—	$	588
Restricted stock awards	4,500	$	—		—		—		—		—	$	—
Common stock repurchased	(198,167)	$	(1)		(4,902)		—		—		—	$	(4,903)
Stock options exercised	9,300	$	—		157		—		—		—	$	157
Other comprehensive income, net of tax	—	$	—		—		—		695		—	$	695
ESOP shares allocated	—	$	—		331		—		—		198	$	529
BALANCE, September 30, 2016	3,057,753	$	31	$	26,866	$	53,326	$	773	$	(1,439)	$	79,557
BALANCE, January 1, 2017	3,059,503	$	31	$	27,334	$	55,584	$	(536)	$	(1,380)	$	81,033
Net income	—	$	—		—		10,406		—		—	$	10,406
Dividends paid ($0.31 per share)	—	$	—		—		(941)		—		—	$	(941)
Proceeds from public offering, net of expenses	587,234	$	6		25,612		—		—		—	$	25,618
Share-based compensation	—	$	—		496		—		—		—	$	496
Common stock repurchased	(6,198)	$	—		(275)		—		—		—	$	(275)
Stock options exercised	34,363	$	—		580		—		—		—	$	580
Other comprehensive income, net of tax	—	$	—		—		—		408		—	$	408
ESOP shares allocated	—	$	—		716		—		—		198	$	914
BALANCE, September 30, 2017	3,674,902	$	37	$	54,463	$	65,049	$	(128)	$	(1,182)	$	118,239

See accompanying notes to these consolidated financial statements.

6

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

	Nine Months Ended September 30,
	2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	10,406	$	7,953
Adjustments to reconcile net incometo net cash from operating activities
Provision for loan losses		450		1,800
Depreciation, amortization and accretion		2,577		3,779
Compensation expense related to stock options and restricted stock awards		496		588
ESOP compensation expense for allocated shares		914		529
Increase in cash surrender value of BOLI		(208)		(211)
Gain on sale of loans held for sale		(13,840)		(14,722)
Gain on sale of investment securities		(380)		(146)
Gain on sale of OREO		—		(150)
Gain on sale of MSR		(996)		—
Origination of loans held for sale		(520,358)		(584,073)
Proceeds from sale of loans held for sale		520,091		564,218
Impairment (recovery) of servicing rights		1		(2)
Changes in operating assets and liabilities
Accrued interest receivable		(693)		(450)
Other assets		(79)		(7,481)
Other liabilities		2,668		5,063
Net cash from (used by) operating activities		1,049		(23,305)
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities available-for-sale:
Proceeds from sale of investment securities		39,103		13,577
Maturities, prepayments, sales, and calls		6,531		9,039
Purchases		(41,320)		(47,432)
Maturities of certificates of deposit at other financial institutions		1,240		292
Purchase of certificates of deposit at other financial institutions		(4,102)		(1,882)
Loan originations and principal collections, net		(129,763)		(93,871)
Purchase of portfolio loans		(32,342)		—
Proceeds from sale of other real estate owned, net		—		682
Purchase of premises and equipment, net		(623)		(2,287)
FHLB stock, net		(328)		2,547
Proceeds from sale of MSR		4,827		—
Net cash received from acquisition		—		180,356
Net cash (used by) from investing activities		(156,777)		61,021
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		127,985		37,630
Borrowings, net		(2,400)		(77,740)
Dividends paid		(941)		(802)
Proceeds from stock options exercised		580		157
Common stock repurchased		(275)		(4,903)
Proceeds from issuance of common stock		25,618		—
Net cash from (used by) financing activities		150,567		(45,658)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(5,161)		(7,942)
CASH AND CASH EQUIVALENTS, beginning of period		36,456		24,455
CASH AND CASH EQUIVALENTS, end of period	$	31,295	$	16,513
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	3,528	$	2,931
Income taxes	$	5,800	$	4,420
Assets acquired in acquisition of branches (Note 2)	$	—	$	181,575
Liabilities assumed in acquisition of branches (Note 2)	$	—	$	186,393
SUPPLEMENTARY DISCLOSURES OF NONCASHOPERATING,INVESTING AND FINANCING ACTIVITIES
Change in unrealized gain on investment securities	$	631	$	1,079
Transfer portfolio loans to loans held for sale	$	1,886	$	—
Property received in settlement of loans	$	—	$	525
Retention of gross mortgage servicing rights from loan sales	$	3,569	$	2,927

See accompanying notes to these consolidated financial statements

7

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - FS Bancorp, Inc. (the “Company”) was incorporated in September 2011 as the proposed holding company for 1st Security Bank of Washington (the “Bank” or “1st Security Bank”) in connection with the Bank’s conversion from the mutual to stock form of ownership which was completed on July 9, 2012. The Bank is a community-based savings bank with 11 branches and seven loan production offices in suburban communities in the greater Puget Sound area which includes Snohomish, King, Pierce, Jefferson, Kitsap, and Clallam counties, and one loan production office in the market area of the Tri-Cities, Washington. The Bank provides loan and deposit services to customers who are predominantly small and middle-market businesses and individuals. The Bank acquired four retail bank branches from Bank of America, National Association (“Bank of America”) (two in Clallam and two in Jefferson counties) on January 22, 2016, and these branches opened as 1st Security Bank branches on January 25, 2016. The Company and its subsidiary are subject to regulation by certain federal and state agencies and undergo periodic examination by these regulatory agencies.

Pursuant to the Plan of Conversion (the “Plan”), the Company’s Board of Directors adopted an employee stock ownership plan (“ESOP”) which purchased 8% of the common stock in the open market or 259,210 shares. As provided for in the Plan, the Bank also established a liquidation account in the amount of retained earnings at December 31, 2011. The liquidation account is maintained for the benefit of eligible savings account holders at June 30, 2007, and supplemental eligible account holders as of March 31, 2012, who maintain deposit accounts at the Bank after the conversion. The conversion was accounted for as a change in corporate form with the historic basis of the Company’s assets, liabilities, and equity unchanged as a result.

Financial Statement Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10‑Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10‑K with all of the audited information and footnotes required by U.S. GAAP for complete financial statements for the year ended December 31, 2016, as filed with the SEC on March 16, 2017. In the opinion of management, all normal adjustments and recurring accruals considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.

The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, or any other future period. The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan and lease losses, fair value of financial instruments,  and the valuation of servicing rights.

Amounts presented in the consolidated financial statements and footnote tables are rounded and presented in thousands of dollars except per share amounts. In the narrative footnote discussion, amounts are rounded and presented in millions of dollars to one decimal point if the amounts are above $1.0 million. Amounts below $1.0 million are rounded and presented in dollars to the nearest thousands. Certain prior year amounts have been reclassified to conform to the 2017 presentation with no change to consolidated net income or stockholders’ equity previously reported.

Principles of Consolidation - The consolidated financial statements include the accounts of FS Bancorp, Inc. and its wholly owned subsidiary, 1st Security Bank of Washington. All material intercompany accounts have been eliminated in consolidation.

Segment Reporting - The Company operates in two business segments through the Bank: commercial and consumer banking and home lending. The Company’s business segments are determined based on the products and services provided, as well as the nature of the related business activities, and they reflect the manner in which financial information is regularly reviewed for the purpose of allocating resources and evaluating performance of the Company’s businesses. The results for these business segments are based on management’s accounting process, which assigns income statement

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FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

items and assets to each responsible operating segment. This process is dynamic and is based on management’s view of the Company’s operations. See Note 15 - Business Segments.

Subsequent Events - The Company has evaluated events and transactions subsequent to September 30, 2017, for potential recognition or disclosure.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), which creates Topic 606 and supersedes Topic 605, Revenue Recognition. In August 2015, FASB issued ASU No. 2015‑14, Revenue from Contracts with Customers (Topic 606), which postponed the effective date of 2014‑09. In March 2016, the FASB issued ASU 2016‑08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amended the principal versus agent implementation guidance set for in ASU 2014‑09. Among other things, ASU 2016‑08 clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued ASU No. 2016‑10, Revenue from Contracts with Customers (Topic 606):Identifying Performance Obligations and Licensing. The ASU amends certain aspects of the guidance set forth in the FASB’s new revenue standard related to identifying performance obligations and licensing implementation. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In May 2016, the FASB issued ASU No. 2016‑12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and adds some practical expedients, but does not change the core revenue recognition principle in Topic 606. The ASU is effective for public entities for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. For financial reporting purposes, the ASU allows for either full retrospective adoption, meaning the ASU is applied to all of the periods presented, or modified retrospective adoption, meaning the ASU is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. As a bank holding company, key revenue sources, such as interest income have been identified as out of the scope of this new guidance. The Company’s preliminary analysis suggests that the adoption of this accounting standard is not expected to have a material impact on the Company’s consolidated financial statements as substantially all of the Company’s other revenues are also excluded from the scope of the new guidance. New accounting guidance related to the adoption of this standard continues to be released by the FASB, which could impact the Company’s preliminary analysis of materiality and may change the preliminary conclusions reached as to the application of this new guidance.

In January 2016, the FASB issued ASU No. 2016‑01, Financial Instruments - Overall (Subtopic 825‑10), Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. This ASU requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. In addition, the amendments in this ASU require the exit price notion be used when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This ASU also eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The ASU also requires a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU No. 2016‑01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within

9

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

those fiscal years. Early adoption is permitted for certain provisions. The adoption of ASU No. 2016-01 is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842). ASU No. 2016‑02 requires lessees to recognize on the balance sheet the assets and liabilities arising from operating leases. A lessee should recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. A lessee should include payments to be made in an optional period only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. For a finance lease, interest payments should be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income. For operating leases, the lease cost should be allocated over the lease term on a generally straight-line basis. The amendments in ASU 2016‑02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in the ASU is permitted. Once adopted, we expect to report higher assets and liabilities as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain equipment under noncancelable operating lease agreements, however, based on current leases, the adoption of ASU 2016‑02 is expected to increase the new lease asset and related lease liability on our Consolidated Balance Sheets by less than 5% and not to have a material impact on our regulatory capital ratios.

In June 2016, the FASB issued ASU No. 2016‑13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of this ASU on the Company’s consolidated financial statements. Once adopted, we expect our allowance for loan losses to increase through a one‑time adjustment to retained earnings, however, until our evaluation is complete the magnitude of the increase will be unknown.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to address the appropriate classification of eight specific cash flow issues on the cash flow statement. Debt prepayment costs should be classified as an outflow for financing activities. Settlement of zero-coupon debt instruments divides the interest portion as an outflow for operating activities and the principal portion as an outflow for financing activities. Contingent consideration payments made after a business combination should be classified as outflows for financing and operating activities. Proceeds from the settlement of bank-owned life insurance policies should be classified as inflows from investing activities. Other specific areas are identified in the ASU as to the appropriate classification of the cash inflows or outflows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and must be applied using a retrospective transition method to each period presented. Adoption of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017‑04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU was issued to simplify the subsequent measurement of goodwill and the amendment eliminates Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by

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comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU is effective for annual reporting periods beginning after December 31, 2019. Early adoption of the ASU is permitted. The Company expects this ASU to provide a simplified method of measuring goodwill impairment and does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017‑08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310‑20):  Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The standard will take effect for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU No. 2017‑08 is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017‑09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU was issued to provide clarity as to when to apply modification accounting when there is a change in the terms or conditions of a share-based payment award. According to this ASU, an entity should account for the effects of a modification unless the fair value, vesting conditions, and balance sheet classification of the award is the same after the modification as compared to the original award prior to the modification. The standard is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2017‑09 is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting recognition and presentation requirements in ASC 815 to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The amendments in this ASU permit hedge accounting for hedging relationships involving nonfinancial risk and interest rate risk by removing certain limitations in cash flow and fair value hedging relationships. In addition, the ASU requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The adoption of ASU No. 2017-12 is not expected to have a material impact on the Company's consolidated financial statements. 

NOTE 2 - BUSINESS COMBINATION

On January 22, 2016, the Company’s wholly-owned subsidiary, 1st Security Bank, completed the purchase of four branches (“Branch Purchase”) from Bank of America. The Branch Purchase included four retail bank branches located in the communities of Port Angeles, Sequim, Port Townsend, and Hadlock, Washington. In accordance with the Purchase and Assumption Agreement, dated as of September 1, 2015, between Bank of America and 1st Security Bank, the Bank acquired $186.4 million of deposits, a small portfolio of performing loans, two owned bank branches, three leases associated with the bank branches and parking facilities and certain other assets of the branches. In consideration of the purchased assets and transferred liabilities, 1st Security Bank paid (a) the unpaid principal balance and accrued interest of $419,000 for the loans acquired, (b) the net book value, or approximately $778,000, for the bank facilities and certain other assets associated with the acquired branches, and (c) a deposit premium of 2.50% on substantially all of the deposits assumed, which equated to approximately $4.8 million. The transaction was settled with Bank of America paying cash of $180.4 million to 1st Security Bank for the difference between these amounts and the total deposits assumed.

The Branch Purchase was accounted for under the acquisition method of accounting and accordingly, the assets and liabilities were recorded at their fair values on January 22, 2016, the date of acquisition. Determining the fair value of

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assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as information relative to closing date fair values become available. During the second quarter of 2016, the Company completed a re-evaluation of the core deposit intangible because a portion of the core deposits were excluded from the original valuation. The updated valuation of the core deposit intangible increased the fair value adjustment by $100,000 to $2.2 million from $2.1 million resulting in a decrease of $100,000 to the fair value adjustment of goodwill. The impact to consolidated net income was an increase in the amortization of the core deposit intangible for the six months ended June 30, 2016 of $6,000 and was not considered material to the consolidated financial statements.

The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition:

	Acquired Book		Fair Value			Amount
January 22, 2016	Value		Adjustments			Recorded
Assets
Cash and cash equivalents	$	180,356	$	—		$	180,356
Loans receivable		417		—			417
Premises and equipment, net		697		267	(1)		964
Accrued interest receivable		2		—			2
Core deposit intangible		—		2,239	(2)		2,239
Goodwill		—		2,312	(3)		2,312
Other assets		103		—			103
Total assets acquired	$	181,575	$	4,818		$	186,393
Liabilities
Deposits:
Noninterest-bearing accounts	$	79,966	$	—		$	79,966
Interest-bearing accounts		106,398		—			106,398
Total deposits		186,364		—			186,364
Accrued interest payable		7		—			7
Other liabilities		22		—			22
Total liabilities assumed	$	186,393	$	—		$	186,393

Explanation of Fair Value Adjustments

(1) The fair value adjustment represents the difference between the fair value of the acquired branches and the book value of the assets acquired. The Company utilized third-party valuations but did not receive appraisals to assist in the determination of fair value.

(2) The fair value adjustment represents the value of the core deposit base assumed in the Branch Purchase based on a study performed by an independent consulting firm. This amount was recorded by the Company as an identifiable intangible asset and will be amortized as an expense on an accelerated basis over the average life of the core deposit base, which is estimated to be nine years.

(3) The fair value adjustment represents the value of the goodwill calculated from the purchase based on the purchase price, less the fair value of assets acquired net of liabilities assumed.

Goodwill - The acquired goodwill represents the excess purchase price over the estimated fair value of the net assets acquired and was recorded at $2.3 million on January 22, 2016.

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The following table summarizes the aggregate amount recognized for each major class of assets acquired and liabilities assumed by 1st Security Bank in the Branch Purchase:

	At January 22,
	2016
Purchase price (1)	$	6,015
Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash and cash equivalents		186,371
Acquired loans		417
Premises and equipment, net		964
Accrued interest receivable		2
Core deposit intangible		2,239
Other assets		103
Deposits		(186,364)
Accrued interest payable		(7)
Other liabilities		(22)
Total fair value of identifiable net assets		3,703
Goodwill	$	2,312

(1) Purchase price includes premium paid on the deposits, the aggregate net book value of all assets acquired, and the unpaid principal and accrued interest on loans acquired.

Core deposit intangible

The core deposit intangible represents the fair value of the acquired core deposit base. The core deposit intangible will be amortized on an accelerated basis over approximately nine years. Total amortization expense was $100,000 and $300,000 for the three and nine months ended September 30, 2017, and $140,000 and $382,000 for the same periods in 2016. Amortization expense for core deposit intangible is expected to be as follows at September 30, 2017:

Fourth Quarter 2017	$	100
2018		307
2019		235
2020		181
2021		166
Thereafter		428
Total	$	1,417

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - SECURITIES AVAILABLE-FOR-SALE

The following tables present the amortized costs, unrealized gains, unrealized losses, and estimated fair values of securities available-for-sale at September 30, 2017 and December 31, 2016:

	September 30, 2017
							Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Values
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	6,086	$	59	$	(23)	$	6,122
Corporate securities		7,123		29		(77)		7,075
Municipal bonds		11,342		213		(116)		11,439
Mortgage-backed securities		39,733		85		(344)		39,474
U.S. Small Business Administration securities		14,018		43		(68)		13,993
Total securities available-for-sale	$	78,302	$	429	$	(628)	$	78,103

	December 31, 2016
							Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Values
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	8,150	$	12	$	(94)	$	8,068
Corporate securities		7,654		14		(168)		7,500
Municipal bonds		15,183		164		(83)		15,264
Mortgage-backed securities		45,856		52		(713)		45,195
U.S. Small Business Administration securities		5,862		27		(41)		5,848
Total securities available-for-sale	$	82,705	$	269	$	(1,099)	$	81,875

At September 30, 2017, the Bank had pledged nine securities held at the FHLB of Des Moines with a carrying value of $10.9 million to secure Washington State public deposits of $5.2 million with a $2.0 million collateral requirement by the Washington Public Deposit Protection Commission.

Investment securities that were in an unrealized loss position at September 30, 2017 and December 31, 2016 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or the underlying collateral.

	September 30, 2017
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	3,014	$	(23)	$	—	$	—	$	3,014	$	(23)
Corporate securities		—		—		1,919		(77)		1,919		(77)
Municipal bonds		4,834		(116)		—		—		4,834		(116)
Mortgage-backed securities		22,266		(247)		4,773		(97)		27,039		(344)
U.S. Small Business Administration securities		9,425		(68)		—		—		9,425		(68)
Total	$	39,539	$	(454)	$	6,692	$	(174)	$	46,231	$	(628)

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	December 31, 2016
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	6,998	$	(94)	$	—	$	—	$	6,998	$	(94)
Corporate securities		5,048		(106)		1,438		(62)		6,486		(168)
Municipal bonds		6,741		(83)		—		—		6,741		(83)
Mortgage-backed securities		39,373		(713)		—		—		39,373		(713)
U.S. Small Business Administration securities		2,963		(41)		—		—		2,963		(41)
Total	$	61,123	$	(1,037)	$	1,438	$	(62)	$	62,561	$	(1,099)

There were 28 investments with unrealized losses of less than one year, and five investments with unrealized losses of more than one year at September 30, 2017. There were 48 investments with unrealized losses of less than one year, and two investments with unrealized losses of more than one year at December 31, 2016. The unrealized losses associated with these investments are believed to be caused by changes in market interest rates that are considered to be temporary and the Company does not intend to sell the securities, and it is not likely to be required to sell these securities prior to maturity. No other-than-temporary impairment was recorded for the nine months ended September 30, 2017, or for the year ended December 31, 2016.

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The contractual maturities of securities available-for-sale at September 30, 2017 and December 31, 2016 are listed below. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay the obligations; therefore, these securities are classified separately with no specific maturity date.

	September 30, 2017				December 31, 2016
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
U.S. agency securities
Due after one year through five years	$	—	$	—	$	4,000	$	3,956
Due after five years through ten years		4,086		4,141		4,150		4,112
Due after ten years		2,000		1,981		—		—
Subtotal		6,086		6,122		8,150		8,068
Corporate securities
Due after one year through five years		5,127		5,156		5,659		5,625
Due after five years through ten years		1,996		1,919		1,995		1,875
Subtotal		7,123		7,075		7,654		7,500
Municipal bonds
Due in one year or less		—		—		509		513
Due after one year through five years		2,013		2,059		5,326		5,386
Due after five years through ten years		3,297		3,420		7,476		7,492
Due after ten years		6,032		5,960		1,872		1,873
Subtotal		11,342		11,439		15,183		15,264
Mortgage-backed securities
Federal National Mortgage Association (“FNMA”)		22,287		22,187		23,522		23,197
Federal Home Loan Mortgage Corporation (“FHLMC”)		11,123		10,970		14,950		14,662
Government National Mortgage Association (“GNMA”)		6,323		6,317		7,384		7,336
Subtotal		39,733		39,474		45,856		45,195
U.S. Small Business Administration securities
Due after five years through ten years		12,069		12,051		5,862		5,848
Due after ten years		1,949		1,942		—		—
Subtotal		14,018		13,993		5,862		5,848
Total	$	78,302	$	78,103	$	82,705	$	81,875

The proceeds and resulting gains and losses, computed using specific identification, from sales of securities available-for-sale for the three and nine months ended September 30, 2017 and 2016 were as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2017						September 30, 2017
			Gross		Gross				Gross		Gross
	Proceeds		Gains		(Losses)		Proceeds		Gains		(Losses)
Securities available-for-sale	$	9,115	$	143	$	-	$	39,103	$	413	$	(33)

	Three Months Ended						Nine Months Ended
	September 30, 2016						September 30, 2016
			Gross		Gross				Gross		Gross
	Proceeds		Gains		(Losses)		Proceeds		Gains		(Losses)
Securities available-for-sale	$	13,577	$	149	$	(3)	$	13,577	$	149	$	(3)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

The composition of the loan portfolio was as follows at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017		2016
REAL ESTATE LOANS
Commercial	$	63,180	$	55,871
Construction and development		129,407		94,462
Home equity		24,026		20,081
One-to-four-family (excludes loans held for sale)		170,187		124,009
Multi-family		43,408		37,527
Total real estate loans		430,208		331,950
CONSUMER LOANS
Indirect home improvement		124,387		107,759
Solar		40,082		36,503
Marine		35,173		28,549
Other consumer		2,032		1,915
Total consumer loans		201,674		174,726
COMMERCIAL BUSINESS LOANS
Commercial and industrial		83,221		65,841
Warehouse lending		50,468		32,898
Total commercial business loans		133,689		98,739
Total loans receivable, gross		765,571		605,415
Allowance for loan losses		(10,598)		(10,211)
Deferred costs, fees, premiums, and discounts, net		(1,119)		(1,887)
Total loans receivable, net	$	753,854	$	593,317

Most of the Company’s commercial and multi-family real estate, construction, residential, and/or commercial business lending activities are with customers located in the greater Puget Sound area and near our one loan production office located in the Tri-Cities, Washington. The Company originates real estate, consumer and commercial business loans and has concentrations in these areas, however, indirect home improvement loans are originated through a network of home improvement contractors and dealers located throughout Washington, Oregon, Idaho, and California. The Company also originates solar loans through contractors and dealers in the state of California. Loans are generally secured by collateral and rights to collateral vary and are legally documented to the extent practicable. Local economic conditions may affect borrowers’ ability to meet the stated repayment terms.

The Company has defined its loan portfolio into three segments that reflect the structure of the lending function, the Company’s strategic plan and the manner in which management monitors performance and credit quality. The three loan portfolio segments are: (a) Real Estate Loans, (b) Consumer Loans and (c) Commercial Business Loans. Each of these segments is disaggregated into classes based on the risk characteristics of the borrower and/or the collateral type securing the loan. The following is a summary of each of the Company’s loan portfolio segments and classes:

Real Estate Loans

Commercial Lending. Loans originated by the Company primarily secured by income producing properties, including retail centers, warehouses, and office buildings located in our market areas.

Construction and Development Lending. Loans originated by the Company for the construction of, and secured by, commercial real estate, one-to-four-family, and multi-family residences and tracts of land for development that are

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

generally not pre-sold. A portion of the one-to-four-family construction portfolio are custom construction loans to the intended occupant of the residence.

Home Equity Lending. Loans originated by the Company secured by second mortgages on one-to-four-family residences,   including home equity lines of credit in our market areas.

One-to-Four-Family Real Estate Lending. One-to-four-family residential loans include owner occupied properties (including second homes), and non-owner occupied properties. These loans originated by the Company are secured by first mortgages on one-to-four-family residences in our market areas that the Company intends to hold (excludes loans held for sale).

Multi-Family Lending. Apartment term lending (five or more units) to current banking customers and community reinvestment loans for low to moderate income individuals in the Company’s footprint.

Consumer Loans

Indirect Home Improvement. Fixture secured loans for home improvement are originated by the Company through its network of home improvement contractors and dealers and are secured by the personal property installed in, on, or at the borrower’s real property, and may be perfected with a UCC‑2 financing statement filed in the county of the borrower’s residence. These indirect home improvement loans include replacement windows, siding, roofing, and other home fixture installations.

Solar. Fixture secured loans for solar related home improvement projects are originated by the Company through its network of contractors and dealers, and are secured by the personal property installed in, on, or at the borrower’s real property, and which may be perfected with a UCC‑2 financing statement filed in the county of the borrower’s residence.

Marine. Loans originated by the Company secured by boats to borrowers primarily located in its market areas.

Other Consumer. Loans originated by the Company, including automobiles, recreational vehicles, direct home improvement loans, loans on deposits, and other consumer loans, primarily consisting of personal lines of credit.

Commercial Business Loans

Commercial and Industrial Lending. Loans originated by the Company to local small and mid-sized businesses in our Puget Sound market area are secured primarily by accounts receivable, inventory, or personal property, and plant and equipment. Commercial and industrial loans are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.

Warehouse Lending. Loans originated by the Company’s mortgage and construction warehouse lending program through which the Company funds third-party lenders originating residential mortgage and construction loans for sale into the secondary market and speculative construction loans for residential properties built for sale to single family households. These loans are secured by the notes and assigned deeds of trust associated with the residential mortgage and construction loans on properties primarily located in the Company’s market areas.

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The following tables detail activity in the allowance for loan losses by loan categories at or for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30, 2017
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	4,144	$	2,669	$	2,453	$	877	$	10,143
Provision for loan losses		481		65		(130)		34		450
Charge-offs		(55)		(152)		(33)		—		(240)
Recoveries		35		208		2		—		245
Net (charge-offs) recoveries		(20)		56		(31)		—		5
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		4,605		2,790		2,292		911		10,598
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	210	$	—	$	551	$	—	$	761
Loans collectively evaluated for impairment		429,998		201,674		133,138		—		764,810
Ending balance	$	430,208	$	201,674	$	133,689	$	—	$	765,571

	At or For the Nine Months Ended September 30, 2017
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	3,547	$	2,082	$	2,675	$	1,907	$	10,211
Provision for loan losses		1,077		726		(357)		(996)		450
Charge-offs		(55)		(536)		(33)		—		(624)
Recoveries		36		518		7		—		561
Net charge-offs		(19)		(18)		(26)		—		(63)
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		4,605		2,790		2,292		911		10,598
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	210	$	—	$	551	$	—	$	761
Loans collectively evaluated for impairment		429,998		201,674		133,138		—		764,810
Ending balance	$	430,208	$	201,674	$	133,689	$	—	$	765,571

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	At or For the Three Months Ended September 30, 2016
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	3,477	$	2,039	$	1,823	$	1,612	$	8,951
Provision for loan losses		242		1		252		105		600
Charge-offs		(65)		(232)		—		—		(297)
Recoveries		64		262		6		—		332
Net (charge-offs) recoveries		(1)		30		6		—		35
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		3,718		2,070		2,081		1,717		9,586
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	209	$	—	$	—	$	—	$	209
Loans collectively evaluated for impairment		316,309		170,576		117,124		—		604,009
Ending balance	$	316,518	$	170,576	$	117,124	$	—	$	604,218

	At or For the Nine Months Ended September 30, 2016
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	2,874	$	1,681	$	1,396	$	1,834	$	7,785
Provision for loan losses		794		519		604		(117)		1,800
Charge-offs		(65)		(801)		—		—		(866)
Recoveries		115		671		81		—		867
Net recoveries (charge-offs)		50		(130)		81		—		1
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		3,718		2,070		2,081		1,717		9,586
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	209	$	—	$	—	$	—	$	209
Loans collectively evaluated for impairment		316,309		170,576		117,124		—		604,009
Ending balance	$	316,518	$	170,576	$	117,124	$	—	$	604,218

Nonaccrual and Past Due Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are automatically placed on nonaccrual once the loan is 90 days past due or sooner if, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, or as required by regulatory authorities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables provide information pertaining to the aging analysis of contractually past due loans and nonaccrual loans at September 30, 2017 and December 31, 2016:

	September 30, 2017
	30-59		60-89
	Days		Days		90 Days		Total				Total
	Past		Past		or More		Past				Loans		Non-
	Due		Due		Past Due		Due		Current		Receivable		Accrual
REAL ESTATE LOANS
Commercial	$	—	$	—	$	—	$	—	$	63,180	$	63,180	$	—
Construction and development		—		—		—		—		129,407		129,407		—
Home equity		111		16		138		265		23,761		24,026		154
One-to-four-family		—		—		—		—		170,187		170,187		142
Multi-family		—		—		—		—		43,408		43,408		—
Total real estate loans		111		16		138		265		429,943		430,208		296
CONSUMER LOANS
Indirect home improvement		261		77		174		512		123,875		124,387		316
Solar		83		22		81		186		39,896		40,082		81
Marine		—		—		—		—		35,173		35,173		9
Other consumer		7		—		1		8		2,024		2,032		11
Total consumer loans		351		99		256		706		200,968		201,674		417
COMMERCIAL BUSINESS LOANS
Commercial and industrial		—		—		—		—		83,221		83,221		551
Warehouse lending		—		—		—		—		50,468		50,468		—
Total commercial business loans		—		—		—		—		133,689		133,689		551
Total loans	$	462	$	115	$	394	$	971	$	764,600	$	765,571	$	1,264

	December 31, 2016
	30-59		60-89
	Days		Days		90 Days		Total				Total
	Past		Past		or More		Past				Loans		Non-
	Due		Due		Past Due		Due		Current		Receivable		Accrual
REAL ESTATE LOANS
Commercial	$	—	$	—	$	—	$	—	$	55,871	$	55,871	$	—
Construction and development		—		—		—		—		94,462		94,462		—
Home equity		34		—		210		244		19,837		20,081		210
One-to-four-family		—		—		—		—		124,009		124,009		—
Multi-family		—		—		—		—		37,527		37,527		—
Total real estate loans		34		—		210		244		331,706		331,950		210
CONSUMER LOANS
Indirect home improvement		268		278		167		713		107,046		107,759		435
Solar		92		—		69		161		36,342		36,503		69
Marine		8		—		—		8		28,541		28,549		—
Other consumer		3		2		4		9		1,906		1,915		7
Total consumer loans		371		280		240		891		173,835		174,726		511
COMMERCIAL BUSINESS LOANS
Commercial and industrial		—		—		—		—		65,841		65,841		—
Warehouse lending		—		—		—		—		32,898		32,898		—
Total commercial business loans		—		—		—		—		98,739		98,739		—
Total loans	$	405	$	280	$	450	$	1,135	$	604,280	$	605,415	$	721

There were no loans 90 days or more past due and still accruing interest at September 30, 2017 and December 31, 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables provide additional information about our impaired loans that have been segregated to reflect loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided at September 30, 2017 and December 31, 2016:

	September 30, 2017
	Unpaid
	Principal		Write-		Recorded		Related
	Balance		downs		Investment		Allowance
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	154	$	—	$	154	$	—
One-to-four-family		68		(12)		56		—
Total real estate loans		222		(12)		210		—
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		—		551		88
Total	$	773	$	(12)	$	761	$	88

	December 31, 2016
	Unpaid
	Principal		Write-		Recorded		Related
	Balance		downs		Investment		Allowance
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	137	$	—	$	137	$	—
One-to-four-family		69		(12)		57		—
Total	$	206	$	(12)	$	194	$	—

The following tables present the average recorded investment in loans individually evaluated for impairment and the interest income recognized and received for the three and nine months ended September 30, 2017 and 2016:

	Three Months Ended
	September 30, 2017				September 30, 2016
	Average Recorded		Interest Income		Average Recorded		Interest Income
	Investment		Recognized		Investment		Recognized
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	201	$	—	$	152	$	—
One-to-four-family		56		1		58		1
Total real estate loans		257		1		210		1
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		23		—		—
Total	$	808	$	24	$	210	$	1

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Nine Months Ended
	September 30, 2017				September 30, 2016
	Average Recorded		Interest Income		Average Recorded		Interest Income
	Investment		Recognized		Investment		Recognized
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	220	$	—	$	154	$	2
One-to-four-family		56		3		58		2
Total real estate loans		276		3		212		4
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		23		—		—
Total	$	827	$	26	$	212	$	4

Credit Quality Indicators

As part of the Company’s on-going monitoring of credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grading of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in the Company’s markets.

The Company utilizes a risk grading matrix to assign a risk grade to its real estate and commercial business loans. Loans are graded on a scale of 1 to 10, with loans in risk grades 1 to 6 considered “Pass” and loans in risk grades 7 to 10 are reported as classified loans in the Company’s allowance for loan loss analysis.

A description of the 10 risk grades is as follows:

Grades 1 and 2 - These grades include loans to very high quality borrowers with excellent or desirable business credit.

Grade 3 - This grade includes loans to borrowers of good business credit with moderate risk.

Grades 4 and 5 - These grades include “Pass” grade loans to borrowers of average credit quality and risk.

Grade 6 - This grade includes loans on management’s “Watch” list and is intended to be utilized on a temporary basis for “Pass” grade borrowers where frequent and thorough monitoring is required due to credit weaknesses and where significant risk-modifying action is anticipated in the near term.

Grade 7 - This grade is for “Other Assets Especially Mentioned” (“OAEM”) in accordance with regulatory guidelines and includes borrowers where performance is poor or significantly less than expected.

Grade 8 - This grade includes “Substandard” loans in accordance with regulatory guidelines which represent an unacceptable business credit where a loss is possible if loan weakness is not corrected.

Grade 9 - This grade includes “Doubtful” loans in accordance with regulatory guidelines where a loss is highly probable.

Grade 10 - This grade includes “Loss” loans in accordance with regulatory guidelines for which total loss is expected and when identified are charged off.

Consumer, Home Equity and One-to-Four-Family Real Estate Loans

Homogeneous loans are risk rated based upon the FDIC’s Uniform Retail Credit Classification and Account Management Policy. Loans classified under this policy at the Company are consumer loans which include indirect home improvement,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

solar, marine, other consumer, and one-to-four-family first and second liens. Under the Uniform Retail Credit Classification Policy, loans that are current or less than 90 days past due are graded “Pass” and risk rated “4” or “5” internally. Loans that are past due more than 90 days are classified “Substandard” and risk rated “8” internally until the loan has demonstrated consistent performance, typically six months of contractual payments. Closed-end loans that are 120 days past due and open-end loans that are 180 days past due are charged off based on the value of the collateral less cost to sell.

The following tables summarize risk rated loan balances by category at September 30, 2017 and December 31, 2016:

	September 30, 2017
					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss
	(1 - 5)		(6)		(7)		(8)		(9)		(10)		Total
REAL ESTATE LOANS
Commercial	$	56,533	$	5,072	$	1,575	$	—	$	—	$	—	$	63,180
Construction and development		129,407		—		—		—		—		—		129,407
Home equity		23,872		—		—		154		—		—		24,026
One-to-four-family		169,352		—		693		142		—		—		170,187
Multi-family		43,408		—		—		—		—		—		43,408
Total real estate loans		422,572		5,072		2,268		296		—		—		430,208
CONSUMER LOANS
Indirect home improvement		124,071		—		—		316		—		—		124,387
Solar		40,001		—		—		81		—		—		40,082
Marine		35,164		—		—		9		—		—		35,173
Other consumer		1,961		—		—		71		—		—		2,032
Total consumer loans		201,197		—		—		477		—		—		201,674
COMMERCIAL BUSINESS LOANS
Commercial and industrial		76,302		306		828		5,785		—		—		83,221
Warehouse lending		44,969		5,499		—		—		—		—		50,468
Total commercial business loans		121,271		5,805		828		5,785		—		—		133,689
Total loans	$	745,040	$	10,877	$	3,096	$	6,558	$	—	$	—	$	765,571

(1) At September 30, 2017, the Company had agreed to sell a substandard shared/syndicated national credit at a slight discount to market.  The $1.9 million loan was excluded from the substandard totals listed above as the loan was classified as held for sale at September 30, 2017.  The transaction settled in October 2017 at the September 30, 2017 fair value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	December 31, 2016
					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss
	(1 - 5)		(6)		(7)		(8)		(9)		(10)		Total
REAL ESTATE LOANS
Commercial	$	53,234	$	2,637	$	—	$	—	$	—	$	—	$	55,871
Construction and development		94,462		—		—		—		—		—		94,462
Home equity		19,871		—		—		210		—		—		20,081
One-to-four-family		124,009		—		—		—		—		—		124,009
Multi-family		37,527		—		—		—		—		—		37,527
Total real estate loans		329,103		2,637		—		210		—		—		331,950
CONSUMER LOANS
Indirect home improvement		107,324		—		—		435		—		—		107,759
Solar		36,434		—		—		69		—		—		36,503
Marine		28,549		—		—		—		—		—		28,549
Other consumer		1,813		—		—		102		—		—		1,915
Total consumer loans		174,120		—		—		606		—		—		174,726
COMMERCIAL BUSINESS LOANS
Commercial and industrial		58,105		525		—		7,211		—		—		65,841
Warehouse lending		32,898		—		—		—		—		—		32,898
Total commercial business loans		91,003		525		—		7,211		—		—		98,739
Total loans	$	594,226	$	3,162	$	—	$	8,027	$	—	$	—	$	605,415

Troubled Debt Restructured Loans

Troubled debt restructured (“TDR”) loans are loans for which the Company, for economic or legal reasons related to the borrower’s financial condition, has granted a significant concession to the borrower that it would otherwise not consider. The Company had one TDR loan on accrual and included in impaired loans at both September 30, 2017 and December 31, 2016, with a balance of $56,000 and $57,000, respectively, which was a one-to-four-family loan. The Company had no commitments to lend additional funds on this TDR loan at September 30, 2017.

For the three and nine months ended September 30, 2017 and 2016, there were no TDR loans that were modified in the previous 12 months that subsequently defaulted in the reporting period.

NOTE 5 - SERVICING RIGHTS

Loans serviced for others are not included on the Consolidated Balance Sheets. The unpaid principal balances of permanent loans serviced for others were $662.0 million and $977.1 million at September 30, 2017 and December 31, 2016, respectively, and are carried at the lower of cost or market.

During the quarter ended June 30, 2017, the Company sold a portion of its mortgage servicing rights (“MSR”) with a book value of $4.8 million, generating an associated gain of $958,000. During the third quarter of 2017, a $38,000 adjustment was made to mortgage servicing rights resulting in a revised gain of $996,000 due to better than expected prepayments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize servicing rights activity and the respective book value at or for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended
	September 30,
	2017		2016
Beginning balance	$	4,899	$	6,751
Additions		1,326		1,095
Servicing rights amortized		(414)		(408)
Recovery on servicing rights		—		216
Ending balance	$	5,811	$	7,654

	At or For the Nine Months Ended
	September 30,
	2017		2016
Beginning balance	$	8,459	$	5,811
Additions		3,569		2,927
Sales		(4,751)		—
Servicing rights amortized		(1,465)		(1,086)
(Impairment) recovery on servicing rights		(1)		2
Ending balance	$	5,811	$	7,654

The fair market value of the permanent servicing rights’ assets was $7.3 million and $11.7 million at September 30, 2017 and December 31, 2016, respectively. Fair value adjustments to servicing rights are mainly due to market based assumptions associated with discounted cash flows, loan prepayment speeds, and changes in interest rates. A significant change in prepayments of the loans in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of servicing rights.

The following provides valuation assumptions used in determining the fair value of MSR at the dates indicated:

	At September 30,
	2017		2016
Key assumptions:
Weighted average discount rate	9.5	%	9.5	%
Conditional prepayment rate (“CPR”)	11.3	%	16.4	%
Weighted average life in years	6.8		5.2

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Key economic assumptions and the sensitivity of the current fair value for single family MSR to immediate adverse changes in those assumptions at September 30, 2017 and December 31, 2016 were as follows:

				September 30, 2017			December 31, 2016
Aggregate portfolio principal balance				$	658,599		$	973,139
Weighted average rate of note					4.0	%		3.9	%
At September 30, 2017	Base			0.5%Adverse Rate Change			1.0%Adverse Rate Change
Conditional prepayment rate		11.3	%		18.2	%		25.4	%
Fair value MSR	$	7,283		$	5,764		$	4,682
Percentage of MSR		1.1	%		0.9	%		0.7	%
Discount rate		9.5	%		10.0	%		10.5	%
Fair value MSR	$	7,283		$	7,139		$	7,000
Percentage of MSR		1.1	%		1.1	%		1.1	%
At December 31, 2016	Base			0.5%Adverse Rate Change			1.0%Adverse Rate Change
Conditional prepayment rate		8.8	%		12.8	%		20.2	%
Fair value MSR	$	11,735		$	9,991		$	7,808
Percentage of MSR		1.2	%		1.0	%		0.8	%
Discount rate		9.5	%		10.0	%		10.5	%
Fair value MSR	$	11,735		$	11,480		$	11,235
Percentage of MSR		1.2	%		1.2	%		1.2	%

The above table shows the sensitivity to market rate changes for the par rate coupon for a conventional one-to-four-family FNMA/FHLMC/GNMA/FHLB serviced home loan. The above table references a 50 basis point and 100 basis point decrease in note rates.

These sensitivities are hypothetical and should be used with caution as the tables above demonstrate the Company’s methodology for estimating the fair value of MSR is highly sensitive to changes in key assumptions. For example, actual prepayment experience may differ and any difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, in these tables, the effects of a variation in a particular assumption on the fair value of the MSR is calculated without changing any other assumption; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may provide an incentive to refinance; however, this may also indicate a slowing economy and an increase in the unemployment rate, which reduces the number of borrowers who qualify for refinancing), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made at a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time.

The Company recorded $430,000 and $534,000 of gross contractually specified servicing fees, late fees, and other ancillary fees resulting from servicing of mortgage and commercial loans for the three months ended September 30, 2017 and 2016, respectively, and $1.8 million and $1.4 million for the nine months ended September 30, 2017 and 2016, respectively. The income, net of amortization, is reported in noninterest income on the Consolidated Statements of Income.

NOTE 6 - DERIVATIVES

The Company regularly enters into commitments to originate and sell loans held for sale. The Company has established a hedging strategy to protect itself against the risk of loss associated with interest rate movements on loan commitments. The Company enters into contracts to sell forward To-Be-Announced (“TBA”) mortgage-backed securities. These commitments and contracts are considered derivatives but have not been designated as hedging instruments for reporting purposes under U.S. GAAP. Rather, they are accounted for as free-standing derivatives, or economic hedges, with changes

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in the fair value of the derivatives reported in noninterest income. The Company recognizes all derivative instruments as either other assets or other liabilities on the Consolidated Balance Sheets and measures those instruments at fair value.

The following tables summarize the Company’s derivative instruments at the dates indicated:

	September 30, 2017
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	59,741	$	1,131	$	—
Mandatory and best effort forward commitments with investors		33,491		4		—
Forward TBA mortgage-backed securities		77,000		104		—
TBA mortgage-backed securities forward sales paired off with investors		32,500		—		140

	December 31, 2016
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	33,289	$	818	$	—
Mandatory and best effort forward commitments with investors		23,536		177		—
Forward TBA mortgage-backed securities		53,000		495		—
TBA mortgage-backed securities forward sales paired off with investors		44,000		747		—

The fair value of derivatives was impacted during the third quarter of 2017 by an increase in notional asset value partially offset by a decrease in the fair value on the derivative asset, specifically loan locks and loan commitments.

At September 30, 2017 and 2016, the Company had $77.0 million and $99.5 million of TBA trades with counterparties that required margin collateral of $485,000 and $872,000, respectively.  This collateral is included in interest-bearing deposits at other financial institutions on the Consolidated Balance Sheets.

Changes in the fair value of the derivatives recognized in other noninterest income on the Consolidated Statements of Income and included in gain on sale of loans resulted in net gains of $374,000 and $697,000 for the three months ended September 30, 2017 and 2016, respectively, and net (loss) gain of ($7,000) and $1.7 million for the nine months ended September 30, 2017 and 2016, respectively.

NOTE 7 - OTHER REAL ESTATE OWNED

There was no OREO activity for the three months ended September 30, 2017 and 2016. The following table presents the activity related to OREO at or for the nine months ended September 30, 2017 and 2016:

	At or For the Nine Months Ended
	September 30,
	2017		2016
Beginning balance	$	—	$	—
Net loans transferred to OREO		—		525
Capitalized costs		—		7
Gross proceeds from sale of OREO		—		(682)
Gain on sale of OREO		—		150
Ending balance	$	—	$	—

There were no OREO properties at September 30, 2017 and September 30, 2016. For the three and nine months ended September 30, 2017, and for the three months ended September 30, 2016, the Company recorded no net gain or loss on the disposal of OREO.  For the nine months ended September 30, 2016, the Company recorded a $150,000 net gain on the

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disposal of OREO. There were no holding costs associated with OREO for the three and nine months ended September 30, 2017 and 2016.

There were no mortgage loan properties in the process of foreclosure at September 30, 2017. At December 31, 2016, there was a $43,000 mortgage loan collateralized by residential real estate property in the process of foreclosure.

NOTE 8 - DEPOSITS

Deposits are summarized as follows at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017(1)		2016(1)
Noninterest-bearing checking	$	156,017	$	143,236
Interest-bearing checking		115,775		66,119
Savings		72,974		54,995
Money market(4)		236,036		242,849
Certificates of deposit less than $100,000(2)		143,169		93,791
Certificates of deposit of $100,000 through $250,000		73,733		74,832
Certificates of deposit of $250,000 and over(3)		31,927		27,094
Escrow accounts related to mortgages serviced		10,947		9,677
Total	$	840,578	$	712,593

(1) Includes $138.2 million of deposits acquired in the Branch Purchase at September 30, 2017 and $162.2 million at December 31, 2016.

(2) Includes $92.2 million of brokered deposits at September 30, 2017 and $47.1 million at December 31, 2016.

(3) Time deposits that meet or exceed the FDIC insurance limit.

(4) Includes $10.0 million of brokered deposits at September 30, 2017 and none at December 31, 2016.

Federal Reserve regulations require that the Bank maintain reserves in the form of cash on hand and deposit balances with the Federal Reserve Bank, based on a percentage of deposits. The amounts of such balances at September 30, 2017 and December 31, 2016 were $19.3 million and $10.7 million, respectively.

Scheduled maturities of time deposits at September 30, 2017 for future periods ending are as follows:

	At September 30, 2017
Maturing in 2017	$	81,162
Maturing in 2018		75,057
Maturing in 2019		45,868
Maturing in 2020		14,980
Maturing in 2021		15,816
Thereafter		15,946
Total	$	248,829

Interest expense by deposit category for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Interest-bearing checking	$	44	$	7	$	66	$	20
Savings and money market		356		257		937		757
Certificates of deposit		645		544		1,790		1,634
Total	$	1,045	$	808	$	2,793	$	2,411

29

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Commitments - The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the Consolidated Balance Sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

The following table provides a summary of the Company’s commitments at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017		2016
COMMITMENTS TO EXTEND CREDIT
REAL ESTATE LOANS
Commercial	$	108	$	108
Construction and development		82,115		57,016
One-to-four-family (includes loans held for sale)		117,997		79,870
Home equity		31,258		26,129
Multi-family		418		426
Total real estate loans		231,896		163,549
CONSUMER LOANS		10,025		8,527
COMMERCIAL BUSINESS LOANS
Commercial and industrial		46,912		31,775
Warehouse lending		58,231		51,102
Total commercial business loans		105,143		82,877
Total commitments to extend credit	$	347,064	$	254,953

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the amount of the total commitments do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon an extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial properties.

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Company is committed. The Company has established reserves for estimated losses from unfunded commitments of $237,000 at September 30, 2017 and $179,000 at December 31, 2016. One-to-four-family commitments included in the table above are accounted for as fair value derivatives and do not carry an associated loss reserve.

The Company also sells one-to-four-family loans to the FHLB of Des Moines that require a limited level of recourse if the loans default and exceed a certain loss exposure. Specific to that recourse, the FHLB established a first loss account (“FLA”) related to the loans and required a credit enhancement (“CE”) obligation by the Bank to be utilized after the FLA is used. Based on loans sold through September 30, 2017, the total loans sold to the FHLB were $40.5 million with the FLA being $433,000 and the CE obligation at $1.1 million or 2.6% of the loans outstanding. Management has established a holdback of 10% of the outstanding CE, or $110,000, which is a part of the off-balance sheet holdback for loans sold.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no outstanding delinquencies on the loans sold to the FHLB of Des Moines at September 30, 2017 and December 31, 2016.

Contingent liabilities for loans held for sale - In the ordinary course of business, loans are sold with limited recourse against the Company and may have to subsequently be repurchased due to defects that occurred during the origination of the loan. The defects are categorized as documentation errors, underwriting errors, early payoff, early payment defaults, breach of representation or warranty, servicing errors, and/or fraud. When a loan sold to an investor without recourse fails to perform according to its contractual terms, the investor will typically review the loan file to determine whether defects in the origination process occurred. If a defect is identified, the Company may be required to either repurchase the loan or indemnify the investor for losses sustained. If there are no such defects, the Company has no commitment to repurchase the loan. The Company has recorded reserves of $1.0 million and $955,000 to cover loss exposure related to these guarantees for one-to-four-family loans sold into the secondary market at September 30, 2017 and December 31, 2016, which is included in other liabilities on the Consolidated Balance Sheets.

The Company has entered into a severance agreement with its Chief Executive Officer. The severance agreement, subject to certain requirements, generally includes a lump sum payment to the Chief Executive Officer equal to 24 months of base compensation in the event his employment is involuntarily terminated, other than for cause or the executive terminates his employment with good reason, as defined in the severance agreement.

The Company has entered into change of control agreements with its Chief Financial Officer, Chief Operating Officer, Chief Lending Officer, and two Executive Vice Presidents of Home Lending. The change of control agreements, subject to certain requirements, generally remain in effect until canceled by either party upon at least 24 months prior written notice. Under the change of control agreements, the executive generally will be entitled to a change of control payment from the Company if the executive is involuntarily terminated within six months preceding or 12 months after a change in control (as defined in the change of control agreements). In such an event, the executives would each be entitled to receive a cash payment in an amount equal to 12 months of their then current salary, subject to certain requirements in the change of control agreements.

The Bank received 7,158 shares of Class B common stock in Visa, Inc. as a result of the Visa initial public offering (“IPO”) in March 2008. These Class B shares of stock held by the Bank could be converted to Class A shares at a conversion rate of 1.6483 when all litigation pending as of the date of the IPO is concluded. However, at September 30, 2017, the date that litigation will be concluded cannot be determined. Until such time, the stock cannot be redeemed or sold by the Bank; therefore, it is not readily marketable and has a current carrying value of $0. Visa, Inc. Class A stock’s market value at September 30, 2017 and December 31, 2016 was $105.24 per share and $77.73 per share, respectively.

Due to the nature of our activities, the Company is subject to various pending and threatened legal actions, which arise in the ordinary course of business. From time to time, subordination liens may create litigation which requires us to defend our lien rights. In the opinion of management, liabilities arising from these claims, if any, will not have a material effect on our financial position. The Company had no material pending legal actions at September 30, 2017.

NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. Consequently, the fair value of the Company’s consolidated financial instruments will change when interest rate levels change and that change may either be favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed interest rate obligations are less likely to prepay in a rising interest rate environment and more likely to prepay in a falling interest rate environment. Conversely, depositors who are receiving fixed interest rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors interest rates and maturities of assets and liabilities, and attempts to minimize interest rate risk by adjusting terms of new loans and deposits, and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

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FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting guidance regarding fair value measurements defines fair value and establishes a framework for measuring fair value in accordance with U.S. GAAP. Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The following definitions describe the levels of inputs that may be used to measure fair value:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Determination of Fair Market Values:

Securities Available-for-Sale - The fair value of securities available-for-sale are recorded on a recurring basis. The fair value of investments and mortgage-backed securities are provided by a third-party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid, and other market information, and for structured securities, cash flow, and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. Transfers between the fair value hierarchy are determined through the third-party service provider which, from time to time will transfer between levels based on market conditions per the related security. All models and processes used take into account market convention (Level 2).

Mortgage and Nonmortgage Loans Held for Sale - The fair value of loans held for sale reflects the value of commitments with investors and/or the relative price as delivered into a TBA mortgage-backed security (Level 2).

Derivative Instruments - The fair value of the interest rate lock commitments and forward sales commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. TBA mortgage-backed securities are fair valued on similar contracts in active markets (Level 2) while locks and forwards with customers and investors are fair valued using similar contracts in the market and changes in the market interest rates (Levels 2 and 3).

Impaired Loans - Fair value adjustments to impaired collateral dependent loans are recorded to reflect partial write-downs based on the current appraised value of the collateral or internally developed models, which contain management’s assumptions. Management will utilize discounted cash flow impairment for TDRs when the change in terms results in a discount to the overall cash flows to be received (Level 3).

The following tables present securities available-for-sale measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Securities Available-for-Sale
	Level 1		Level 2		Level 3		Total
At September 30, 2017
U.S. agency securities	$	—	$	6,122	$	—	$	6,122
Corporate securities		—		7,075		—		7,075
Municipal bonds		—		11,439		—		11,439
Mortgage-backed securities		—		39,474		—		39,474
U.S. Small Business Administration securities		—		13,993		—		13,993
Total	$	—	$	78,103	$	—	$	78,103

32

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Securities Available-for-Sale
	Level 1		Level 2		Level 3		Total
At December 31, 2016
U.S. agency securities	$	—	$	8,068	$	—	$	8,068
Corporate securities		—		7,500		—		7,500
Municipal bonds		—		15,264		—		15,264
Mortgage-backed securities		—		45,195		—		45,195
U.S. Small Business Administration securities		—		5,848		—		5,848
Total	$	—	$	81,875	$	—	$	81,875

The following table presents mortgage loans held for sale measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Mortgage Loans Held for Sale
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	65,055	$	—	$	65,055
December 31, 2016	$	—	$	52,553	$	—	$	52,553

The following tables present the fair value of interest rate lock commitments with customers, individual forward sale commitments with investors, and paired off commitments with investors measured at their fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Interest Rate Lock Commitments with Customers
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	—	$	1,131	$	1,131
December 31, 2016	$	—	$	—	$	818	$	818

	Individual Forward Sale Commitments with Investors
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	104	$	4	$	108
December 31, 2016	$	—	$	495	$	177	$	672

	Paired Off Commitments with Investors
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	(140)	$	—	$	(140)
December 31, 2016	$	—	$	747	$	—	$	747

The following table presents impaired loans measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded at September 30, 2017 and December 31, 2016. The amounts disclosed below represent the fair values at the time the nonrecurring fair value measurements were evaluated.

	Impaired Loans
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	—	$	761	$	761
December 31, 2016	$	—	$	—	$	194	$	194

33

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Quantitative Information about Level 3 Fair Value Measurements - Shown in the table below is the fair value of financial instruments measured under a Level 3 unobservable input on a recurring and nonrecurring basis at September 30, 2017:

		Significant	Range	Weighted
Level 3 Fair Value Instrument	Valuation Technique	Unobservable Inputs	(Weighted Average)	Average
RECURRING
Interest rate lock commitments with customers	Quoted market prices	Pull-through expectations	80% - 99%	95.0	%
Individual forward sale commitments with investors	Quoted market prices	Pull-through expectations	80% - 99%	95.0	%
NONRECURRING
Impaired loans	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 18.0%	11.6	%

An increase in the pull-through rate utilized in the fair value measurement of the interest rate lock commitments with customers and forward sale commitments with investors will result in positive fair value adjustments (and an increase in the fair value measurement). Conversely, a decrease in the pull-through rate will result in a negative fair value adjustment (and a decrease in the fair value measurement).

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine months ended September 30, 2017 and 2016:

									Net change in fair
									value for gains/
			Purchases						(losses) relating to
	Beginning		and		Sales and		Ending		items held at end of
Three Months Ended September 30,	Balance		Issuances		Settlements		Balance		period
2017
Interest rate lock commitments with customers	$	1,212	$	3,891	$	(3,972)	$	1,131	$	(81)
Individual forward sale commitments with investors		83		40		(119)		4		(79)
2016
Interest rate lock commitments with customers	$	2,058	$	5,763	$	(5,971)	$	1,850	$	(208)
Individual forward sale commitments with investors		(3)		(60)		23		(40)		(37)

									Net change in fair
									value for gains/
			Purchases						(losses) relating to
	Beginning		and		Sales and		Ending		items held at end of
Nine Months Ended September 30,	Balance		Issuances		Settlements		Balance		period
2017
Interest rate lock commitments with customers	$	818	$	11,440	$	(11,127)	$	1,131	$	313
Individual forward sale commitments with investors		177		(49)		(124)		4		(173)
2016
Interest rate lock commitments with customers	$	698	$	14,039	$	(12,887)	$	1,850	$	1,152
Individual forward sale commitments with investors		74		(267)		153		(40)		(114)

Gains (losses) on interest rate lock commitments carried at fair value are recorded in other noninterest income. Gains (losses) on forward sale commitments with investors carried at fair value are recorded within other noninterest income.

34

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Values of Financial Instruments - The following methods and assumptions were used by the Company in estimating the fair values of financial instruments disclosed in these financial statements:

Cash, and Cash Equivalents and Certificates of Deposit at Other Financial Institutions - The carrying amounts of cash and short-term instruments approximate their fair value (Level 1).

Federal Home Loan Bank stock - The par value of FHLB stock approximates its fair value (Level 2).

Bank-owned Life Insurance - The estimated fair value is equal to the cash surrender value of policies, net of surrender charges (Level 1).

Accrued Interest - The carrying amounts of accrued interest approximate its fair value (Level 2).

Loans Receivable, Net - For variable rate loans that re-price frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for fixed rate loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers or similar credit quality (Level 3).

Servicing Rights - The fair value of mortgage, commercial, and consumer servicing rights are estimated using net present value of expected cash flows using a third party model that incorporates assumptions used in the industry to value such rights, adjusted for factors such as weighted average prepayments speeds based on historical information where appropriate (Level 3).

Deposits - The fair value of deposits with no stated maturity date is included at the amount payable on demand. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation on interest rates currently offered on similar certificates (Level 2).

Borrowings - The carrying amounts of advances maturing within 90 days approximate their fair values. The fair values of long-term advances are estimated using discounted cash flow analyses based on the Bank’s current incremental borrowing rates for similar types of borrowing arrangements (Level 2).

Subordinated Note - The fair value of the Subordinated Note is based upon the average yield of debt issuances for similarly sized issuances (Level 2).

Off-Balance Sheet Instruments - The fair value of commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the customers. The majority of the Company’s off-balance sheet instruments consist of non-fee producing, variable-rate commitments, the Company has determined they do not have a distinguishable fair value. The fair value of loan lock commitments with customers and investors reflect an estimate of value based upon the interest rate lock date, the expected pull-through percentage for the commitment, and the interest rate at year end (Level 2 and 3).

35

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides estimated fair values of the Company’s financial instruments at September 30, 2017 and December 31, 2016:

	September 30,				December 31,
	2017				2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial Assets
Level 1 inputs:
Cash and cash equivalents	$	31,295	$	31,295	$	36,456	$	36,456
Certificates of deposit at other financial institutions		18,108		18,108		15,248		15,248
Level 2 inputs:
Securities available-for-sale, at fair value		78,103		78,103		81,875		81,875
Loans held for sale, at fair value		65,055		65,055		52,553		52,553
FHLB stock, at cost		3,047		3,047		2,719		2,719
Accrued interest receivable		3,217		3,217		2,524		2,524
Individual forward sale commitments with investors		104		104		495		495
Paired off commitments with investors		—		—		747		747
Level 3 inputs:
Loans receivable, gross		765,571		779,284		605,415		670,183
Servicing rights, held at lower of cost or fair value		5,811		7,289		8,459		11,741
Fair value interest rate locks with customers		1,131		1,131		818		818
Individual forward sale commitments with investors		4		4		177		177
Financial Liabilities
Level 2 inputs:
Deposits		840,578		844,288		712,593		718,970
Borrowings		10,270		9,049		12,670		12,660
Subordinated note		9,840		9,805		9,825		9,805
Accrued interest payable		217		217		192		192
Paired off commitments with investors		140		140		—		—

NOTE 11 - EMPLOYEE BENEFITS

Employee Stock Ownership Plan

On January 1, 2012, the Company established an ESOP for eligible employees of the Company and the Bank.  Employees of the Company and the Bank are eligible to participate in the ESOP if they have been credited with at least 1,000 hours of service during the employees’ first 12‑month period and based on anniversary date will be vested into the ESOP. After two years of working at least 1,000 hours in each of those two years, the employee will be 100% vested in the ESOP.

The ESOP borrowed $2.6 million from FS Bancorp, Inc. and used those funds to acquire 259,210 shares of FS Bancorp, Inc. common stock in the open market at an average price of $10.17 per share during the second half of 2012. It is anticipated that the Bank will make contributions to the ESOP in amounts necessary to amortize the ESOP loan payable to FS Bancorp, Inc. over a period of 10 years, bearing interest at 2.30%. Intercompany expenses associated with the ESOP are eliminated in consolidation. Shares purchased by the ESOP with the loan proceeds are held in a suspense account and allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to FS Bancorp, Inc. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank’s discretionary contributions to the ESOP and earnings on the ESOP assets. Payments of principal and interest are due annually on December 31, the Company’s fiscal year end. On December 31, 2016, the ESOP paid the fifth annual installment of principal in the amount of $257,000, plus accrued interest of $38,000 pursuant to the ESOP loan agreement.

36

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As shares are committed to be released from collateral, the Company reports compensation expense equal to the average daily market prices of the shares at September 30, 2017 for the prior 90 days. These shares become outstanding for earnings per share computations. The compensation expense is accrued monthly throughout the year. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.

Compensation expense related to the ESOP for the three months ended September 30, 2017 and 2016 was $360,000 and $204,000, respectively, and $914,000 and $529,000 for the nine months ended September 30, 2017 and 2016, respectively.

Shares held by the ESOP at September 30, 2017 and 2016 were as follows (shown as actual):

	Balances		Balances
	at September 30, 2017		at September 30, 2016
Allocated shares		126,589		102,359
Committed to be released shares		19,441		19,441
Unallocated shares		110,164		136,085
Total ESOP shares		256,194		257,885
Fair value of unallocated shares (in thousands)	$	5,180	$	3,703

NOTE 12 - EARNINGS PER SHARE

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For earnings per share calculations, the ESOP shares committed to be released are included as outstanding shares for both basic and diluted earnings per share.

The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the three end nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30,				At or For the Nine Months Ended September 30,
Numerator:	2017		2016		2017		2016
Net income (in thousands)	$	3,454	$	3,457	$	10,406	$	7,953
Denominator:
Basic weighted average common shares outstanding		3,051,744		2,851,147		2,949,092		2,901,572
Dilutive shares		187,584		87,292		192,685		84,102
Diluted weighted average common shares outstanding		3,239,328		2,938,439		3,141,777		2,985,674
Basic earnings per share	$	1.13	$	1.21	$	3.53	$	2.74
Diluted earnings per share	$	1.07	$	1.18	$	3.31	$	2.66

NOTE 13 - STOCK-BASED COMPENSATION

Stock Options and Restricted Stock

In September 2013, the shareholders of FS Bancorp, Inc. approved the FS Bancorp, Inc. 2013 Equity Incentive Plan (“Plan”). The Plan provides for the grant of stock options and restricted stock awards.

Total share-based compensation expense for the Plan was $138,000 and $496,000 for the three and nine months ended September 30, 2017, respectively, and $195,000 and $588,000 for the three and nine months ended September 30, 2016, respectively.

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FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

The Plan authorizes the grant of stock options totaling 324,013 shares to Company directors and employees in which 322,000 option share awards under the Plan were granted with an exercise price equal to the market price of FS Bancorp’s common stock at the grant date of May 8, 2014, of $16.89 per share. These option share awards were granted as non-qualified stock options, having a vesting period of five years, with 20% vesting on the anniversary date of each grant date, and a contractual life of 10 years. Any unexercised stock options will expire 10 years after the grant date or sooner in the event of the award recipient’s termination of service with the Company or the Bank.  At September 30, 2017, 2,013 option share awards are available to be granted.

The fair value of each option award is estimated on the grant date using a Black-Scholes Option pricing model that uses the following assumptions. The dividend yield is based on the current quarterly dividend in effect at the time of the grant. Historical employment data is used to estimate the forfeiture rate. The Company became a publicly held company in July 2012, therefore historical data was not available to calculate the volatility for FS Bancorp stock. Management utilized a proxy to determine the expected volatility of FS Bancorp’s stock at grant date for the majority of stock options granted in 2014. The proxy chosen was the NASDAQ Bank Index, or NASDAQ Bank (NASDAQ symbol: BANK). This index provides the volatility of the banking sector for NASDAQ traded banks. The majority of smaller banks are traded on the NASDAQ given the costs and daily interaction required with trading on the New York Stock Exchange. The Company utilized the comparable Treasury rate for the discount rate associated with the stock options granted. The Company elected to use Staff Accounting Bulletin 107, simplified expected term calculation for the “Share-Based Payments” method permitted by the SEC to calculate the expected term. This method uses the vesting term of an option along with the contractual term, setting the expected life at 6.5 years.

The following table presents a summary of the Company’s stock option plan awards during the nine months ended September 30, 2017 (shown as actual):

				Weighted-Average
		Weighted-		Remaining
		Average		Contractual Term In	Aggregate
	Shares	Exercise Price		Years	Intrinsic Value
Outstanding at January 1, 2017	295,850	$	16.89	7.36	$	5,638,901
Granted	—		—	—		—
Less exercised	34,363	$	16.89	—	$	919,380
Forfeited or expired	—		—	—		—
Outstanding at September 30, 2017	261,487	$	16.89	6.61	$	9,089,288
Expected to vest, assuming a 0.31% annual forfeiture rate	261,053	$	16.89	6.61	$	9,074,192
Exercisable at September 30, 2017	134,687	$	16.89	6.61	$	4,681,720

At September 30, 2017, there was $368,000 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. The cost is expected to be recognized over the remaining weighted-average vesting period of 1.6 years.

Restricted Stock Awards

The Plan authorizes the grant of restricted stock awards totaling 129,605 shares to Company directors and employees, and 125,105 shares were granted on May 8, 2014 at a grant date fair value of $16.89 per share. The remaining 4,500 restricted stock awards were granted January 1, 2016 at a grant date fair value of $26.00 per share. Compensation expense is recognized over the vesting period of the awards based on the fair value of the restricted stock. The restricted stock awards’ fair value is equal to the value on the grant date. Shares awarded as restricted stock vest ratably over a three-year period for directors and a five-year period for employees, beginning at the grant date. Any unvested restricted stock awards will expire after vesting or sooner in the event of the award recipient’s termination of service with the Company or the Bank.

38

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a summary of the Company’s nonvested awards during the nine months ended September 30, 2017 (shown as actual):

		Weighted-Average
		Grant-Date Fair Value		Weighted-Average
Nonvested Shares	Shares	Per Share		Grant-Date Fair Value
Nonvested at January 1, 2017	68,763	$	17.49	$	1,202,401
Granted	—		—		—
Less vested	31,921	$	17.32	$	552,810
Forfeited or expired	—		—		—
Nonvested at September 30, 2017	36,842	$	17.63	$	649,591

At September 30, 2017, there was $508,000 of total unrecognized compensation costs related to nonvested shares granted as restricted stock awards. The cost is expected to be recognized over the remaining weighted-average vesting period of 1.6 years.

NOTE 14 - REGULATORY CAPITAL

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. 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 ratios as set forth in the table below to be categorized as well capitalized. At September 30, 2017 and December 31, 2016, 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 September 30 2017, that the Company and the Bank met all capital adequacy requirements.

39

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table compares the Bank’s actual capital amounts and ratios at September 30, 2017 and December 31, 2016 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				Corrective
	Actual				Adequacy Purposes				Action Provisions
Bank Only	Amount		Ratio		Amount		Ratio		Amount		Ratio
At September 30, 2017
Total risk-based capital
(to risk-weighted assets)	$	130,246	16.14	%	$	64,556	8.00	%	$	80,696	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	120,150	14.89	%	$	48,417	6.00	%	$	64,556	8.00	%
Tier 1 leverage capital
(to average assets)	$	120,150	12.50	%	$	38,459	4.00	%	$	48,074	5.00	%
CET 1 capital
(to risk-weighted assets)	$	120,150	14.89	%	$	36,313	4.50	%	$	52,452	6.50	%
At December 31, 2016
Total risk-based capital
(to risk-weighted assets)	$	93,309	13.87	%	$	53,813	8.00	%	$	67,266	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	84,876	12.62	%	$	40,360	6.00	%	$	53,813	8.00	%
Tier 1 leverage capital
(to average assets)	$	84,876	10.33	%	$	32,862	4.00	%	$	41,078	5.00	%
CET 1 capital
(to risk-weighted assets)	$	84,876	12.62	%	$	30,270	4.50	%	$	43,723	6.50	%

In addition to the minimum CET 1, Tier 1 and total capital ratios, the Bank has to maintain a capital conservation buffer consisting of additional CET 1 capital above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement was phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented to an amount equal to 2.5% of risk-weighted assets in January 2019. At September 30, 2017, the Bank’s CET1 capital exceeded the required capital conservation buffer of 1.25%.

FS Bancorp, Inc. is a bank holding company subject to the capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. For a bank holding company with less than $1.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company’s subsidiary banks to be well capitalized under the prompt corrective action regulations. If FS Bancorp, Inc. was subject to regulatory guidelines for bank holding companies with $1.0 billion or more in assets, at September 30, 2017, the Company would have exceeded all regulatory capital requirements. The regulatory capital ratios calculated for FS Bancorp, Inc. at September 30, 2017 were 11.9% for Tier 1 leverage-based capital, 14.2% for Tier 1 risk-based capital, 15.5% for total risk-based capital, and 14.2% for CET 1 capital ratio.

NOTE 15 - BUSINESS SEGMENTS

The Company’s business segments are determined based on the products and services provided, as well as the nature of the related business activities, and they reflect the manner in which financial information is currently evaluated by management. This process is dynamic and is based on management’s current view of the Company’s operations and is not necessarily comparable with similar information for other financial institutions. We define our business segments by

40

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

product type and customer segment which we have organized into two lines of business: commercial and consumer banking and home lending.

We use various management accounting methodologies to assign certain income statement items to the responsible operating segment, including:

a funds transfer pricing (“FTP”) system, which allocates interest income credits and funding charges between the segments, assigning to each segment a funding credit for its liabilities, such as deposits, and a charge to fund its assets;

a cost per loan serviced allocation based on the number of loans being serviced on the balance sheet and the number of loans serviced for third parties;

an allocation based upon the square footage utilized by the home lending segment in Company owned locations;

an allocation of charges for services rendered to the segments by centralized functions, such as corporate overhead, which are generally based on the number of full time employees (“FTEs”) in each segment; and

an allocation of the Company’s consolidated income taxes which are based on the effective tax rate applied to the segment’s pretax income or loss.

The FTP methodology is based on management’s estimated cost of originating funds including the cost of overhead for deposit generation.

A description of the Company’s business segments and the products and services that they provide is as follows:

Commercial and Consumer Banking Segment

The commercial and consumer banking segment provides diversified financial products and services to our commercial and consumer customers through Bank branches, ATMs, online banking platforms, mobile banking apps, and telephone banking. These products and services include deposit products; residential, consumer, business and commercial real estate lending portfolios and cash management services. We originate consumer loans, commercial and multi-family real estate loans, construction loans on residential and multi-family construction, and commercial business loans. At September 30, 2017, our retail deposit branch network consisted of 11 branches in the Pacific Northwest. At September 30, 2017 and December 31, 2016, our deposits totaled $840.6 million and $712.6 million, respectively. This segment is also responsible for the management of our investment portfolio and other assets of the Bank.

Home Lending Segment

The home lending segmentoriginates one-to-four-family residential mortgage loans primarily for sale in the secondary markets as well as originating adjustable rate mortgage (“ARM”) loans held for investment. The majority of our mortgage loans are sold to or securitized by FNMA, FHLMC, GNMA or FHLB, while we retain the right to service these loans. Loans originated under the guidelines of the Federal Housing Administration or FHA, US Department of Veterans Affairs or VA, and United States Department of Agriculture or USDA are generally sold servicing released to a correspondent bank or mortgage company. We have the option to sell loans on a servicing-released or servicing-retained basis to securitizers and correspondent lenders. A small percentage of our loans are brokered to other lenders. On occasion, we may sell a portion of our MSR portfolio. We manage the loan funding and the interest rate risk associated with the secondary market loan sales and the retained one-to-four-family mortgage servicing rights within this business segment. One-to-four-family loans originated for investment are allocated to the home lending segment with a corresponding provision expense and FTP for cost of funds.

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FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment Financial Results

The tables below summarize the financial results for each segment based primarily on the number of FTEs and assets within each segment for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30, 2017
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	812	$	10,210	$	11,022
Provision for loan losses		(127)		(323)		(450)
Noninterest income		5,014		1,413		6,427
Noninterest expense		(4,586)		(7,003)		(11,589)
Income before provision for income taxes		1,113		4,297		5,410
Provision for income taxes		(407)		(1,549)		(1,956)
Net income	$	706	$	2,748	$	3,454
Total average assets at period end	$	220,898	$	744,820	$	965,718
FTEs		119		204		323

	At or For the Three Months Ended September 30, 2016
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	793	$	7,957	$	8,750
Provision for loan losses		(16)		(584)		(600)
Noninterest income		5,982		1,266		7,248
Noninterest expense		(3,861)		(6,451)		(10,312)
Income before provision for income taxes		2,898		2,188		5,086
Provision for income taxes		(948)		(681)		(1,629)
Net income	$	1,950	$	1,507	$	3,457
Total average assets at period end	$	168,722	$	634,735	$	803,457
FTEs		110		195		305

42

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	At or For the Nine Months Ended September 30, 2017
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	1,857	$	28,105	$	29,962
Provision for loan losses		(324)		(126)		(450)
Noninterest income		14,863		3,941		18,804
Noninterest expense		(12,985)		(19,924)		(32,909)
Income before provision for income taxes		3,411		11,996		15,407
Provision for income taxes		(1,107)		(3,894)		(5,001)
Net income	$	2,304	$	8,102	$	10,406
Total average assets at period end	$	196,765	$	706,017	$	902,782
FTEs		119		204		323

	At or For the Nine Months Ended September 30, 2016
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	1,706	$	22,959	$	24,665
Provision for loan losses		(142)		(1,658)		(1,800)
Noninterest income		14,852		3,273		18,125
Noninterest expense		(10,593)		(18,246)		(28,839)
Income before provision for income taxes		5,823		6,328		12,151
Provision for income taxes		(2,012)		(2,186)		(4,198)
Net income	$	3,811	$	4,142	$	7,953
Total average assets at period end	$	147,873	$	642,283	$	790,156
FTEs		110		195		305

(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.

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Item 2.             Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report may contain forward-looking statements, which can be identified by the use of words such as “believes,” “expects,” “anticipates,” “estimates,” or similar expressions. Forward-looking statements include, but are not limited to:

· statements of our goals, intentions, and expectations;

· statements regarding our business plans, prospects, growth, and operating strategies;

· statements regarding the quality of our loan and investment portfolios; and

· estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:

· general economic conditions, either nationally or in our market area, that are worse than expected;

· the credit risks of lending activities, including changes in the level and trend of loan delinquencies, write offs, changes in our allowance for loan losses, and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets;

· secondary market conditions and our ability to sell loans in the secondary market;

· fluctuations in the demand for loans, the number of unsold homes, land and other properties, and fluctuations in real estate values in our market area;

· increases in premiums for deposit insurance;

· the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;

· changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments;

· increased competitive pressures among financial services companies;

· our ability to execute our plans to grow our residential construction lending, our home lending operations, our warehouse lending, and the geographic expansion of our indirect home improvement lending;

· our ability to attract and retain deposits;

· our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

· our ability to control operating costs and expenses;

· changes in consumer spending, borrowing, and savings habits;

· our ability to successfully manage our growth;

· legislative or regulatory changes that adversely affect our business, including the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act, changes in regulation policies and principles, an increase in regulatory capital requirements or change in the interpretation of regulatory capital or other rules, including as a result of Basel III;

· adverse changes in the securities markets;

· changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board;

· costs and effects of litigation, including settlements and judgments;

· our ability to implement our branch expansion strategy;

· inability of key third-party vendors to perform their obligations to us; and

· other economic, competitive, governmental, regulatory, and technical factors affecting our operations, pricing, products, and services and other risks described elsewhere in this Form 10‑Q and our other reports filed with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10‑K for the year ended December 31, 2016.

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Any of the forward-looking statements made in this Form 10‑Q and in other public statements may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. The Company undertakes no obligation to update or revise any forward-looking statement included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements.

Overview

FS Bancorp, Inc. and its subsidiary bank, 1st Security Bank of Washington have been serving the Puget Sound area since 1936. Originally chartered as a credit union, known as Washington’s Credit Union, the credit union served various select employment groups. On April 1, 2004, the credit union converted to a Washington state-chartered mutual savings bank. On July 9, 2012, the Bank converted from mutual to stock ownership and became the wholly owned subsidiary of FS Bancorp, Inc.

The Company is relationship-driven, delivering banking and financial services to local families, local and regional businesses and industry niches within distinct Puget Sound area communities, and one loan production office located in the Tri-Cities, Washington. On January 22, 2016, the Company completed the Branch Purchase and acquired $186.4 million in deposits and $419,000 in loans based on financial information at that date. The four branches acquired are located in the communities of Port Angeles, Sequim, Port Townsend, and Hadlock, Washington. The Branch Purchase expanded our Puget Sound-focused retail footprint onto the Olympic Peninsula and provided an opportunity to extend our unique brand of community banking into those communities.

The Company also maintains its long-standing indirect consumer lending platform which operates throughout the West Coast. The Company emphasizes long-term relationships with families and businesses within the communities served, working with them to meet their financial needs. The Company is also actively involved in community activities and events within these market areas, which further strengthens our relationships within those markets.

The Company focuses on diversifying revenues, expanding lending channels, and growing the banking franchise. Management remains focused on building diversified revenue streams based upon credit, interest rate, and concentration risks. Our business plan remains as follows:

· Growing and diversifying our loan portfolio;

· Maintaining strong asset quality;

· Emphasizing lower cost core deposits to reduce the costs of funding our loan growth;

· Capturing our customers’ full relationship by offering a wide range of products and services by leveraging our well-established involvement in our communities and by selectively emphasizing products and services designed to meet our customers’ banking needs; and

· Expanding the Company’s markets.

The Company is a diversified lender with a focus on the origination of indirect home improvement loans, also referred to as fixture secured loans, commercial real estate mortgage loans, home loans, commercial business loans, and second mortgage/home equity loan products. Consumer loans, in particular indirect home improvement loans to finance window replacement, gutter replacement, siding replacement, solar panels, and other improvement renovations, represent the largest portion of the loan portfolio and have traditionally been the mainstay of our lending strategy. At September 30, 2017, consumer loans represented 26.3% of the Company’s total gross loan portfolio, down from 28.9% at December 31, 2016, as real estate and commercial business loan originations have increased at a faster pace than consumer loan originations.

Indirect home improvement lending is dependent on the Bank’s relationships with home improvement contractors and dealers. The Company funded $24.6 million, or 1,490 loans during the quarter ended September 30, 2017, using its indirect home improvement contractor/dealer network located throughout Washington, Oregon, Idaho, and California with four contractors/dealers responsible for 45.5% of the funded loans dollar volume. During the nine months ended September 30,

45

2017, the Company originated $15.5 million in the state of California, and at September 30, 2017, held $42.9 million in California originated consumer loans. Management has established a concentration limit of no more than 100% of the Bank’s total risk-based capital for loans originated in California. At September 30, 2017, the limit was $130.2 million.

The Company originates one-to-four-family residential mortgage loans through referrals from real estate agents, financial planners, builders, and from existing customers. Walk-in customers are also an important source of the Company’s loan originations. During the nine months ended, the Company originated $603.4 million of one-to-four-family loans which includes loans held for sale (“HFS”), loans held for investment, fixed seconds, and loans brokered to other institutions through the home lending segment, including brokered loans of $5.7 million.  During the nine months ended September 30, 2017, $511.8 million of the loans originated were sold to investors, of which $321.3 million were sold to the FNMA, FHLMC, FHLB, and/or GNMA with servicing rights retained for the purpose of further developing these customer relationships. At September 30, 2017, one-to-four-family residential mortgage loans held for investment, which excludes loans held for sale of $65.1 million, totaled $170.2 million, or 22.2%, of the total gross loan portfolio.

The Company generally underwrites the one-to-four-family loans based on the applicant’s ability to repay. This includes employment and credit history and the appraised value of the subject property. The Company lends up to 100% of the lesser of the appraised value or purchase price for one-to-four-family first mortgage loans. For first mortgage loans with a loan-to-value ratio in excess of 80%, the Company generally requires either private mortgage insurance or government sponsored insurance in order to mitigate the higher risk level associated with higher loan-to-value loans. Fixed-rate loans secured by one-to-four-family residences have contractual maturities of up to 30 years and are generally fully amortizing, with payments due monthly. Adjustable-rate mortgage loans may pose different credit risks than fixed-rate loans, primarily because as interest rates increase, the borrower’s payments rise, increasing the potential for default. Properties securing the one-to-four-family loans are appraised by independent fee appraisers who are selected in accordance with industry and regulatory standards. The Company requires borrowers to obtain title and hazard insurance, and flood insurance, if necessary. Loans are generally underwritten to the secondary market guidelines with additional requirements as determined by the internal underwriting department.

Since 2012, the Company has had an emphasis on diversifying lending products by expanding commercial real estate, commercial business and residential lending, while maintaining the current volume of production and historical growth of the consumer loan portfolio. The Company’s lending strategies are intended to take advantage of: (1) historical strength in indirect consumer lending, (2) recent market consolidation that has created new lending opportunities and the availability of experienced bankers, and (3) strength in relationship lending. Retail deposits will continue to serve as an important funding source.

The Company is significantly affected by prevailing economic conditions, as well as government policies and regulations concerning, among other things, monetary and fiscal affairs. Retail deposits serve as an important funding source. Deposit flows are influenced by a number of factors, including interest rates paid on time deposits, other investments, account maturities, and the overall level of personal income and savings. Lending activities are influenced by the demand for funds, the number and quality of lenders, and regional economic cycles. Sources of funds for lending activities include primarily deposits, including brokered deposits, borrowings, payments on loans, and income provided from operations.

The Company’s earnings are primarily dependent upon net interest income, the difference between interest income and interest expense. Interest income is a function of the balances of loans and investments outstanding during a given period and the yield earned on these loans and investments. Interest expense is a function of the amount of deposits and borrowings outstanding during the same period and interest rates paid on these deposits and borrowings. Another significant influence on the Company’s earnings is fee income from home lending activities. The Company’s earnings are also affected by the provision for loan losses, service charges and fees, gains from sales of assets, operating expenses and income taxes.

Critical Accounting Policies and Estimates

Certain of the Company’s accounting policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex, or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but are not limited to,

46

changes in interest rates, changes in the performance of the economy, and changes in the financial condition of borrowers. Management believes that its critical accounting policies include the following:

Allowance for Loan and Lease Losses. The allowance for loan and lease losses (“ALLL”) is the amount estimated by management as necessary to cover probable losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. A high degree of judgment is necessary when determining the amount of the allowance for loan losses. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions, and other factors related to the collectability of the loan portfolio. Although the Company believes it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. As the Company adds new products to the loan portfolio and expands the Company’s market area, management intends to enhance and adapt our methodology to keep pace with the size and complexity of the loan portfolio. Changes in any of the above factors could have a significant effect on the calculation of the allowance for loan losses in any given period. Management believes that its systematic methodology continues to be appropriate given the Company’s increased size and level of complexity.

Troubled Debt Restructured Loans. TDRs are loans whose terms have been modified or restructured due to a borrower’s financial difficulty, including but not limited to: a reduction in the stated interest rate; an extension of the maturity at an interest rate below current market; a reduction in the face amount of the debt; a reduction in the accrued interest; or re-aging, extensions, deferrals and renewals. TDR loans are considered impaired loans and are individually evaluated for impairment. TDR loans can be classified as either accrual or non-accrual. TDR loans are classified as non-performing loans unless they have been performing in accordance with their modified terms for a period of at least six months in which case they are placed on accrual status.

Servicing Rights. Servicing assets are recognized as separate assets when rights are acquired through the purchase or through the sale of financial assets. Generally, purchased servicing rights are capitalized at the cost to acquire the rights. For sales of mortgage, commercial and consumer loans, a portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage, commercial, or consumer servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds, and default rates and losses.

Servicing assets are evaluated quarterly for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type, and investor type. Impairment is recognized through a valuation allowance to the extent that fair value is less than the capitalized amount. If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as a recovery and an increase to income. Capitalized servicing rights are stated separately on the Consolidated Balance Sheets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Derivatives and Hedging Activity. ASC 815, “Derivatives and Hedging,” requires that derivatives of the Company be recorded in the consolidated financial statements at fair value. Management considers its accounting policy for derivatives to be critical because these instruments have certain interest rate risk characteristics that change in value based upon changes in the capital markets. The Company’s derivatives are primarily the result of its home lending activities in the form of commitments to extend credit, commitments to sell loans, TBA MBS trades and option contracts to mitigate the risk of the commitments to extend credit. Estimates of the percentage of commitments to extend credit on loans to be held for sale that may not fund are based upon historical data and current market trends. The fair value adjustments of the derivatives are recorded on the Consolidated Statements of Income with offsets to other assets or other liabilities on the Consolidated Balance Sheets.

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Income Taxes. Income taxes are reflected in the Company’s consolidated financial statements to show the tax effects of the operations and transactions reported in the consolidated financial statements and consist of taxes currently payable plus deferred taxes. Accounting Standards Codification, ASC 740, “Accounting for Income Taxes,” requires the asset and liability approach for financial accounting and reporting for deferred income taxes. Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of assets and liabilities. They are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled and are determined using the assets and liability method of accounting. The deferred income provision represents the difference between net deferred tax asset/liability at the beginning and end of the reported period. In formulating the deferred tax asset, the Company is required to estimate income and taxes in the jurisdiction in which the Company operates. This process involves estimating the actual current tax exposure for the reported period together with assessing temporary differences resulting from differing treatment of items, such as depreciation and the provision for loan losses, for tax and financial reporting purposes.

Deferred tax liabilities occur when taxable income is smaller than reported income on the income statements due to accounting valuation methods that differ from tax, as well as tax rate estimates and payments made quarterly and adjusted to actual at the end of the year. Deferred tax liabilities are temporary differences payable in future periods. The Company had a net deferred tax liability of $1.4 million, and $1.2 million, at September 30, 2017 and December 31, 2016, respectively.

Comparison of Financial Condition at September 30, 2017 and December 31, 2016

Assets. Total assets increased $166.0 million, or 20.0%, to $993.9 million at September 30, 2017, from $827.9 million at December 31, 2016, primarily as a result of a $160.5 million, or 27.1% increase in loans receivable, net, a $12.5 million, or 23.8% increase in loans HFS, a $2.9 million, or 18.8% increase in certificates of deposit at other financial institutions, and a $1.3 million, or 27.1% increase in other assets, partially offset by a $5.2 million, or 14.2% decrease in cash and cash equivalents, a $3.8 million, or 4.6% decrease in securities available-for-sale, and a $2.6 million, or 31.3% decrease in servicing rights.

Loans receivable, net increased $160.5 million, or 27.1% to $753.9 million at September 30, 2017, from $593.3 million at December 31, 2016. The increase in loans receivable, net was primarily a result of increases in real estate and commercial business loans. Real estate loan increases included one-to-four-family loans held for investment of $46.2 million, construction and development loans of $34.9 million, commercial real estate loans of $7.3 million, multi-family loans of $5.9 million, and home equity loans of $3.9 million. Changes in commercial business lending included a $17.6 million increase in commercial business loans associated with our warehouse lending program and a $17.4 million increase in commercial and industrial loans. Growth in consumer lending was $26.9 million, reflecting growth in the Bank’s long established indirect home improvement lending platform.

Loans HFS, consisting of one-to-four-family loans and one commercial and industrial loan, increased by $12.5 million, or 23.8% to $65.1 million at September 30, 2017, from $52.6 million at December 31, 2016 due to increased loan originations. The Company will continue selling one-to-four-family loans into the secondary market for asset/liability management purposes.

One-to-four-family loans originated through the home lending segment which includes loans HFS, loans held for investment, fixed seconds, and loans brokered to other institutions increased $27.3 million, or 12.6% to $244.1 million during the quarter ended September 30, 2017, compared to $232.9 million for the same quarter one year ago. One-to-four-family loans originated through the home lending segment increased $19.3 million, or 3.3% to $603.4 million during the nine months ended September 30, 2017, compared to $584.1 million during the nine months ended September 30, 2016. Originations of one-to-four-family loans to purchase a home (purchase production) increased by $68.0 million, or 17.2% with $464.3 million in loan purchase production closing during the nine months ended September 30, 2017, up from $396.3 million for the nine months ended September 30, 2016. One-to-four-family loan originations for refinance (refinance production) decreased $58.9 million, or 30.1% with $136.6 million in refinance production closing during the nine months ended September 30, 2017, down from $195.5 million for the nine months ended September 30, 2016. During the quarter ended September 30, 2017, the Company sold $204.3 million of one-to-four-family loans, compared to sales of $205.1 million for the same quarter one year ago. In addition, the margin on loans sold increased to 2.53% for the nine months ended September 30, 2017, from 2.48% for the nine months ended September 30, 2016.

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Purchase production was 76.1% of the total one-to-four-family loan originations versus 23.9% for refinance production during the third quarter of 2017, compared to 60.9% in purchase production versus 39.1% in refinance production during the same period 2016. Purchase production for the nine months ended September 30, 2017 was 77.3% of the total one-to-four-family loan originations versus 22.7% for refinance production, compared to 67.0% in purchase volume versus 33.0% in refinances for the nine months ended September 30, 2016. The increase in originations and purchase activity was primarily associated with the strong home purchase demand in the Pacific Northwest, while the decline in refinance activity reflects the rise in mortgage interest rates over the past year.

The ALLL at September 30, 2017 increased to $10.6 million, or 1.4% of gross loans receivable, excluding loans HFS, compared to $10.2 million, or 1.7% of gross loans receivable, excluding loans HFS, at December 31, 2016. Non-performing loans, consisting of non-accrual loans, increased to $1.3 million at September 30, 2017, from $721,000 at December 31, 2016. At September 30, 2017, non-performing loans consisted of $551,000 of commercial and industrial loans, $316,000 of indirect home improvement loans, $154,000 of home equity loans, $142,000 of one-to-four-family loans, $81,000 of solar loans, $11,000 of other consumer loans, and $9,000 of marine loans. Non-performing loans to total gross loans was 0.2% at September 30, 2017, compared to 0.1% at December 31, 2016. Substandard loans decreased $1.5 million, or 18.3%, to $6.6 million at September 30, 2017, compared to $8.0 million at December 31, 2016, primarily due to the transfer of $1.9 million in substandard shared national credits to loans HFS sold at a slight discount to market early in October 2017.  The Company recorded the expected discount based on the sales price as a loan charge-off during the third quarter of 2017.  The Company had no OREO at September 30, 2017, or at December 31, 2016.

The Company sold $9.0 million of securities AFS during the third quarter of 2017 realizing a gain of $143,000. Those sales primarily provided additional funds for loan growth during the quarter. The sales of lower coupon investments enabled us to capitalize on the lower Treasury rates for a gain during the third quarter of 2017. The average yield on sold securities AFS during the quarter was 2.48%.

Liabilities. Total liabilities increased $128.8 million, or 17.2%, to $875.7 million at September 30, 2017, from $746.9 million at December 31, 2016, due primarily to an increase in deposits. Total deposits increased $128.0 million, or 18.0%, to $840.6 million at September 30, 2017, from $712.6 million at December 31, 2016. Relationship-based transactional accounts (noninterest-bearing checking, interest-bearing checking, and escrow accounts) increased $63.7 million, or 29.1%, to $282.7 million at September 30, 2017, from $219.0 million at December 31, 2016. Money market and savings accounts increased $11.2 million, or 3.7%, to $309.0 million at September 30, 2017, from $297.8 million at December 31, 2016. Time deposits increased $53.1 million, or 27.1%, to $248.8 million at September 30, 2017, from $195.7 million at December 31, 2016. Non-retail certificates of deposit which includes brokered certificates of deposit, online certificates of deposit, and public funds increased $39.4 million, or 65.5%, to $99.7 million at September 30, 2017, compared to $60.2 million at December 31, 2016. Wholesale funding (brokered deposits) were utilized to bridge short-term asset growth such as loans HFS and pay down higher cost short-term Federal Home Loan Bank (“FHLB”) Fed Funds advances. Approximately $138.2 million of the acquired deposits from the Branch Purchase remain at 1st Security Bank at September 30, 2017. These branch locations have attracted new deposits with an aggregated total of $220.8 million, including public funds at September 30, 2017. Management remains focused on growth in lower cost relationship-based deposits to fund long-term asset growth.

Borrowings decreased $2.4 million, or 18.9%, to $10.3 million at September 30, 2017, from $12.7 million at December 31, 2016, primarily due to the repayment of FHLB Fed Funds advances.

Stockholders’ Equity. Total stockholders’ equity increased $37.2 million, or 45.9% to $118.2 million at September 30, 2017, from $81.0 million at December 31, 2016. The increase in stockholders’ equity during the nine months ended September 30, 2017, was primarily due to the issuance during the third quarter of 2017 of 587,234 shares of common stock at a price of $47.00 per share for net proceeds of $25.6 million and net income of $10.4 million.  Book value per common share was $33.52 at September 30, 2017, compared to $28.32 at December 31, 2016.

Net proceeds received from the stock offering were used to fund the majority of a $26.0 million contribution to the Bank at the end of the third quarter 2017 to provide additional Tier 1 capital for growth planned over the next 24 months.  Management expects continued lending growth due to strong economic factors in the Pacific Northwest and, specifically, the communities we serve.

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We have common shares outstanding of 3,527,896 that were calculated using shares outstanding of 3,674,902 at September 30, 2017, less 36,842 unvested restricted stock shares, and 110,164 unallocated ESOP shares. Common shares of 2,861,135 were calculated using shares outstanding at December 31, 2016 of 3,059,503, less 68,763 unvested restricted stock shares, and 129,605 unallocated ESOP shares.

Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2017 and 2016

General. Net income was unchanged at $3.5 million, for both the three months ended September 30, 2017 and 2016 as the $2.4 million increase in net interest income, after provision for loan losses was offset by a decline in noninterest income, an increase in noninterest expense, and an increase in provision for income taxes.  Net income for the nine months ended September 30, 2017, increased $2.5 million, or 30.8%, to $10.4 million, from $8.0 million for the nine months ended September 30, 2016. The increase in net income was primarily a result of a $6.6 million, or 29.1% increase in net interest income, after provision for loan losses, partially offset by a $4.1 million, or 14.1% increase in noninterest expense.

The following table sets forth the average balances of all major categories of interest-earning assets and interest-bearing liabilities to calculate the comparison of results of operations for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Average Balances	2017		2016		2017		2016
Assets
Loans receivable, net (1)	$	803,399	$	643,989	$	725,247	$	600,343
Securities available-for-sale, at fair value		79,377		83,643		90,206		80,214
Interest-bearing deposits and certificates of deposit at other financial institutions		42,990		36,744		46,153		74,573
FHLB stock, at cost		4,034		1,407		3,658		2,004
Total interest-earning assets		929,800		765,783		865,264		757,134
Noninterest-earning assets (2)		35,868		37,674		37,501		33,022
Total assets	$	965,668	$	803,457	$	902,765	$	790,156
Liabilities and stockholders’ equity
Interest-bearing accounts	$	642,811	$	532,069	$	603,449	$	517,625
Borrowings		34,372		20,239		27,994		28,660
Subordinated note		9,837		9,817		9,832		9,812
Total interest-bearing liabilities		687,020		562,125		641,275		556,097
Noninterest-bearing accounts		169,367		153,209		163,079		147,848
Other noninterest-bearing liabilities		13,966		12,048		11,318		11,222
Stockholders’ equity		95,315		76,075		87,093		74,989
Total liabilities and stockholders’ equity	$	965,668	$	803,457	$	902,765	$	790,156

(1) Includes loans held for sale

(2) Includes BOLI, goodwill, and CDI

Net Interest Income. Net interest income increased $2.3 million, or 26.0%, to $11.0 million for the three months ended September 30, 2017, from $8.8 million for the three months ended September 30, 2016. The increase in net interest income was primarily due to a $2.5 million, or 26.8% increase in loans receivable interest income, due to an increase in the average loans receivable, net balance.

Net interest income increased $5.3 million, or 21.5%, to $30.0 million for the nine months ended September 30, 2017, from $24.7 million for the nine months ended September 30, 2016. The increase in net interest income was primarily due to a $5.5 million, or 21.0% increase in loans receivable interest income, due to an increase in the average loans receivable, net balance.

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The net interest margin (“NIM”) increased 15 basis points to 4.70% for the three months ended September 30, 2017, from 4.55% for the three months ended September 30, 2016, and increased 27 basis points to 4.63% for the nine months ended September 30, 2017, from 4.36% for the nine months ended September 30, 2016. The increased NIM reflects growth in higher yielding loans, compared to short term investments and cash. Management remains focused on matching deposit duration with the duration of earning assets where appropriate.

Interest Income. Interest income for the three months ended September 30, 2017, increased $2.6 million, or 26.3%, to $12.4 million, from $9.8 million for the three months ended September 30, 2016. The increase during the period was primarily attributable to the increase in the average balance of loans receivable to $803.4 million for the three months ended September 30, 2017, compared to $644.0 million for the three months ended September 30, 2016. The average yield on interest-earning assets increased 18 basis points to 5.27% for the three months ended September 30, 2017, compared to 5.09% for the three months ended September 30, 2016. The increase in average yield on interest-earning assets compared to the same period a year earlier primarily reflects the growth in the loan portfolio and the proportionally larger level of loans in the average interest-earning asset mix.

Interest income for the nine months ended September 30, 2017, increased $5.8 million, or 20.7%, to $33.5 million, from $27.8 million for the nine months ended September 30, 2016. The increase during the period was primarily attributable to the increase in the average balance of loans receivable to $725.2 million for the nine months ended September 30, 2017, compared to $600.3 million for the nine months ended September 30, 2016. The average yield on interest-earning assets increased 27 basis points to 5.18% for the nine months ended September 30, 2017, compared to 4.91% for the nine months ended September 30, 2016. The increase in average yield on interest-earning assets compared to the same period a year earlier primarily reflects the growth in the loan portfolio and the proportionally larger level of loans in the average interest-earning asset mix.

Interest Expense. Interest expense increased $301,000, or 29.3%, to $1.3 million for the three months ended September 30, 2017, from $1.0 million for the same period of the prior year. The average cost of funds increased four basis points to 0.61% for the three months ended September 30, 2017, compared to 0.57% for the three months ended September 30, 2016 primarily due to the growth in interest-bearing deposits. The average cost of deposits increased four basis points to 0.51% for the three months ended September 30, 2017, compared to 0.47% for the three months ended September 30, 2016, reflecting rising interest rates over the last year and the increase in non-retail certificates of deposit.

Interest expense increased $460,000, or 14.8%, to $3.6 million for the nine months ended September 30, 2017, from $3.1 million for the same period of the prior year, primarily due to growth in deposits. The average cost of funds was unchanged at 0.59% for the nine months ended September 30, 2017 and 2016. The average cost of deposits was also unchanged at 0.48% for both the nine months ended September 30, 2017 and 2016, reflecting steady deposit interest rates year over year. Management remains focused on matching deposit duration with the duration of earning assets where appropriate.

Provision for Loan Losses For the three and nine months ended September 30, 2017, the provision for loan losses was $450,000, compared to $600,000 and $1.8 million, for the three and nine months ended September 30, 2016, respectively. The reduced provision for loan losses for the three and nine months ended September 30, 2017 was a result of the low level of charge-offs and the relatively low level of delinquent, nonperforming and classified loans, as well as the increasing percentage of real estate loans and improving real estate values in our market areas. Management also reviewed during the quarter the historical loss activity over the past 17 quarters and incorporated the decrease in the level of historical loss as a factor in determining a reduction in the required unallocated allowance for loan and lease losses at September 30, 2017.  During the three months ended September 30, 2017, net recoveries totaled $5,000 compared to $35,000 during the three months ended September 30, 2016. Net charge-offs totaled $63,000 during the nine months ended September 30, 2017, compared to net recoveries of $1,000 during the nine months ended September 30, 2016.

Noninterest Income. Noninterest income decreased $821,000, or 11.3%, to $6.4 million for the three months ended September 30, 2017, from $7.2 million for the three months ended September 30, 2016. The decrease during the period was due to an $897,000 reduction in gain on sale of loans, primarily associated with a decrease in the volume of loans/locks fair valued, and a reduction of gain on sale margins associated with the product mix in the Pacific Northwest, partially offset by a $64,000 increase in other noninterest income. 

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Noninterest income increased $679,000, or 3.7%, to $18.8 million for the nine months ended September 30, 2017, from $18.1 million for the nine months ended September 30, 2016. The increase during the period was primarily due to increases in gain on sale of servicing rights of $996,000, service charges and fee income of $254,000, and gain on sale of investment securities of $234,000, primarily offset by a decrease in gain on sale of loans of $882,000 primarily associated with a decrease in the volume of loans/locks fair valued, and a reduction of gain on sale margins associated with the product mix in the Pacific Northwest.

Noninterest Expense. Noninterest expense increased $1.3 million, or 12.4%, to $11.6 million for the three months ended September 30, 2017, from $10.3 million for the three months ended September 30, 2016. The increase in noninterest expense was primarily a result of an $853,000 increase in salaries and benefits, which included $42,000 in incentives and commissions for the loan production staff associated with continued strong loan production growth, a $216,000 decrease in recovery of mortgage servicing rights, a $127,000 increase in operations, and a $114,000 increase in data processing, partially offset by a $124,000 decrease in professional and board fees.

Noninterest expense increased $4.1 million 14.1%, to $32.9 million for the nine months ended September 30, 2017, from $28.8 million for the nine months ended September 30, 2016. The increase in noninterest expense was primarily a result of a $3.7 million increase in salaries and benefits, which included $935,000 in incentives and commissions for the loan production staff, a $285,000 increase in operations, a $235,000 increase in data processing, a $188,000 increase in loan costs, and a $164,000 increase in occupancy expense, partially offset by a $389,000 decrease in acquisition costs and a $229,000 decrease in professional and board fees.

The efficiency ratio, which is noninterest expense as a percentage of net interest income and noninterest income, weakened slightly to 66.4% for the three months ended September 30, 2017, compared to 64.5% for the three months ended September 30, 2016, and 67.5% for the nine months ended September 30, 2017, compared to 67.4% for the nine months ended September 30, 2016, representing a greater increase in noninterest expense as compared to a smaller increase in interest and noninterest income.

Provision for Income Tax. For the three months ended September 30, 2017, the Company recorded a provision for income tax expense of $2.0 million on pre-tax income as compared to $1.6 million for the three months ended September 30, 2016.  The effective tax rates for the three months ended September 30, 2017 and 2016 were 36.2% and 32.0%, respectively. For the nine months ended September 30, 2017, the Company recorded a provision for income tax expense of $5.0 million on pre-tax income as compared to $4.2 million for the nine months ended September 30, 2016. The effective tax rates for the nine months ended September 30, 2017 and 2016 were 32.5% and 34.5%, respectively.

Liquidity

Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit runoff that may occur in the normal course of business. The Company relies on a number of different sources in order to meet its potential liquidity demands. The primary sources are increases in deposit accounts, FHLB advances, purchases of Fed Funds, sale of securities available-for-sale, cash flows from loan payments, sales of one-to-four-family loans HFS, and maturing securities.

At September 30, 2017, the Bank’s total borrowing capacity was $247.1 million with the FHLB of Des Moines, with unused borrowing capacity of $235.8 million. The FHLB borrowing limit is based on certain categories of loans, primarily real estate loans that qualify as collateral for FHLB advances. At September 30, 2017, the Bank held approximately $320.1 million in loans that qualify as collateral for FHLB advances. In addition to the availability of liquidity from the FHLB of Des Moines, the Bank maintained a short-term borrowing line with the Federal Reserve Bank, with a current limit of $96.0 million, and a combined credit limit of $43.0 million in written Fed Funds lines of credit through correspondent banking relationships at September 30, 2017. The Federal Reserve Bank borrowing limit is based on certain categories of loans, primarily consumer loans that qualify as collateral for Federal Reserve Bank line of credit. At September 30, 2017, the Bank held approximately $195.3 million in loans that qualify as collateral for the Federal Reserve Bank line of credit.

At September 30, 2017, $10.3 million in FHLB advances were outstanding, and no advances were outstanding against the Federal Reserve Bank line of credit, or the Fed Funds lines of credit. The Bank’s Asset Liability Management Policy permits management to utilize brokered deposits up to 20% of Bank deposits or $168.8 million at September 30, 2017.

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Total brokered deposits at September 30, 2017 were $102.2 million. Management utilizes brokered deposits to mitigate interest rate risk and liquidity risk exposure when appropriate.

Liquidity management is both a daily and long-term function of Company management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and Fed Funds. On a longer term basis, a strategy is maintained of investing in various lending products and investment securities, including U.S. Government obligations and federal agency securities. The Company uses sources of funds primarily to meet ongoing commitments, pay maturing deposits, fund withdrawals, and to fund loan commitments. At September 30, 2017, the approved outstanding loan commitments, including unused lines of credit amounted to $347.1 million, including undisbursed construction and development loans in process totaling $82.1 million. Certificates of deposit scheduled to mature in three months or less at September 30, 2017, totaled $81.2 million. It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this management strategy, the Company believes that a majority of maturing relationship deposits will remain with the Bank.

As a separate legal entity from the Bank, FS Bancorp, Inc. must provide for its own liquidity. Sources of capital and liquidity for FS Bancorp, Inc. include distributions from the Bank and the issuance of debt or equity securities. Dividends and other capital distributions from the Bank are subject to regulatory notice. At September 30, 2017, FS Bancorp, Inc. had $3.7 million in cash to meet liquidity needs.

Commitments and Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the financing needs of its customers. For information regarding our commitments and off-balance sheet arrangements, see Note 9 of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.

Capital Resources

The Bank is subject to minimum capital requirements imposed by the FDIC. Based on its capital levels at September 30, 2017, the Bank exceeded these requirements as of that date. Consistent with our goals to operate a sound and profitable organization, our policy is for the Bank to maintain a well capitalized status under the capital categories of the FDIC. Based on capital levels at September 30, 2017, the Bank was considered to be well capitalized. At September 30, 2017, the Bank exceeded all regulatory capital requirements with Tier 1 leverage-based capital, Tier 1 risk-based capital, total risk-based capital, and common equity Tier 1 capital ratios of 12.5%, 14.9%, 16.1%, and 14.9%, respectively. For additional information regarding the Bank’s regulatory capital compliance, see the discussion included in Note 14 to the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.

For a bank holding company with less than $1 billion in consolidated assets, such as FS Bancorp, Inc., the capital guidelines apply on a bank only basis and the Federal Reserve requires the holding company’s subsidiary banks to be well capitalized under the prompt corrective action regulations. If FS Bancorp, Inc. was subject to regulatory guidelines for bank holding companies with $1 billion or more in assets, at September 30, 2017, FS Bancorp, Inc. would have exceeded all regulatory capital requirements.

Item 3.             Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4.             Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures

An evaluation of the disclosure controls and procedures (as defined in Rule 13a‑15(e) of the Securities Exchange Act of 1934 (the “Act”)) at September 30, 2017 was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officerand several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures in effect at September 30, 2017 were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s

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management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)Changes in Internal Controls

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a‑15(f) of the Act) that occurred during the three months ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by override of the control. The design of any control procedure is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

Item 1.             Legal Proceedings

In the normal course of business, the Company occasionally becomes involved in various legal proceedings. In the opinion of management, any liability from such proceedings would not have a material adverse effect on the business or financial condition of the Company.

Item 1A.          Risk Factors

There have been no material changes to the risk factors set forth in Part I. Item 1A of the Company’s Annual Report on Form 10‑K for the year ended December 31, 2016.

Item 2.             Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c) Not applicable

Item 3.               Defaults Upon Senior Securities

Not applicable.

Item 4.                Mine Safety Disclosures

Not applicable.

Item 5.                Other Information

Not applicable.

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Item 6.                  Exhibits

3.1	Articles of Incorporation of FS Bancorp, Inc. (1)
3.2	Bylaws of FS Bancorp, Inc. (2)
4.1	Form of Common Stock Certificate of FS Bancorp, Inc. (1)
10.1	Severance Agreement between 1st Security Bank of Washington and Joseph C. Adams (1)
10.2	Form of Change of Control Agreement between 1st Security Bank of Washington and each of Joseph C. Adams, Matthew D. Mullet, Drew B. Ness, and Dennis V. O’Leary (1)
10.3	FS Bancorp, Inc. 2013 Equity Incentive Plan (the “2013 Plan”) (3)
10.4	Form of Incentive Stock Option Agreement under the 2013 Plan (3)
10.5	Form of Non-Qualified Stock Option Agreement under the 2013 Plan (3)
10.6	Form of Restricted Stock Agreement under the 2013 Plan (3)
10.7	Purchase and Assumption Agreement between Bank of America, National Association and 1st Security Bank dated September 1, 2015 (4)
10.8	Subordinated Loan Agreement dated September 30, 2015 by and among Community Funding CLO, Ltd. and the Company (5)
10.9	Form of change of control agreement with Donn C. Costa and Debbie L. Steck (6)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the Company’s Quarterly Report on Form 10‑Q for the quarter ended September 30, 2017 formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income; (4) Consolidated Statements of Changes in Stockholders’ Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements.
(1)	Filed as an exhibit to the Registrant’s Registration Statement on Form S‑1 (333‑177125) filed on October 3, 2011, and incorporated by reference.
(2)	Filed as an exhibit to the Registrant’s Current Report on Form 8‑K filed on July 10, 2013 (File No. 001‑35589).
(3)	Filed as an exhibit to the Registrant’s Registration Statement on Form S‑8 (333‑192990) filed on December 20, 2013, and incorporated by reference.
(4)	Filed as an exhibit to the Registrant’s Current Report on Form 8‑K filed on September 2, 2015 (File No. 001‑35589).
(5)	Filed as an exhibit to the Registrant’s Current Report on Form 8‑K filed on October 19, 2015 (File No. 001‑35589).
(6)	Filed as an exhibit to the Registrant’s Current Report on Form 8‑K filed on February 1, 2016 (File No. 001‑35589).

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Exhibit Index

Exhibit No.	Description
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the Company’s Quarterly Report on Form 10‑Q for the quarter ended September 30, 2017 formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income; (4) Consolidated Statements of Changes in Stockholders’ Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements.

57

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FS BANCORP, INC.
Date: November 13, 2017	By:	/s/Joseph C. Adams
		Joseph C. Adams,
		Chief Executive Officer
		(Duly Authorized Officer)
Date: November 13, 2017	By:	/s/Matthew D. Mullet
		Matthew D. Mullet
		Secretary, Treasurer and
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

58

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph C. Adams, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of FS Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15-(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 13, 2017	/s/Joseph C. Adams
		Joseph C. Adams
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Matthew D. Mullet, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of FS Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15-(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 13, 2017	/s/Matthew D. Mullet
		Matthew D. Mullet
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C.  SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q of FS Bancorp, Inc. (the “Company”) for the quarter ended September 30, 2017 (the “Report”), I, Joseph C. Adams, in my capacity as Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in the Report.

Date:	November 13, 2017	/s/Joseph C. Adams
		Joseph C. Adams
		Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C.  SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q of FS Bancorp, Inc. (the “Company”) for the quarter ended September 30, 2017 (the “Report”), I, Matthew D. Mullet, in my capacity as Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in the Report.

Date:	November 13, 2017	/s/Matthew D. Mullet
		Matthew D. Mullet
		Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 03, 2017
Document And Entity Information
Entity Registrant Name	FS Bancorp, Inc.
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Entity Central Index Key	0001530249
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		3,674,902
Entity Filer Category	Smaller Reporting Company
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 3,299	$ 3,590
Interest-bearing deposits at other financial institutions	27,996	32,866
Cash and Cash Equivalents, at Carrying Value	31,295	36,456
Certificates of deposit at other financial institutions	18,108	15,248
Securities available-for-sale, at fair value	78,103	81,875
Loans held for sale, at fair value	65,055	52,553
Loans receivable, net	753,854	593,317
Accrued interest receivable	3,217	2,524
Premises and equipment, net	15,463	16,012
Federal Home Loan Bank (“FHLB”) stock, at cost	3,047	2,719
Bank owned life insurance (“BOLI”), net	10,262	10,054
Servicing rights, held at the lower of cost or fair value	5,811	8,459
Goodwill	2,312	2,312
Core deposit intangible, net	1,417	1,717
Other assets	5,947	4,680
TOTAL ASSETS	993,891	827,926
LIABILITIES
Noninterest-bearing accounts	166,964	152,913
Interest-bearing accounts	673,614	559,680
Total deposits	840,578	712,593
Borrowings	10,270	12,670
Principal amount	10,000	10,000
Unamortized debt issuance costs	(160)	(175)
Total subordinated note less unamortized debt issuance costs	9,840	9,825
Other liabilities	14,964	11,805
Total liabilities	875,652	746,893
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued or outstanding	0	0
Common stock, $.01 par value; 45,000,000 shares authorized; 3,674,902 and 3,059,503 shares issued and outstanding at September 30, 2017, and December 31, 2016, respectively	37	31
Additional paid in capital	54,463	27,334
Retained Earnings (Accumulated Deficit)	65,049	55,584
Accumulated other comprehensive (loss) income, net of tax	(128)	(536)
Unearned shares - Employee Stock Ownership Plan (“ESOP”)	(1,182)	(1,380)
Total stockholders’ equity	118,239	81,033
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 993,891	$ 827,926

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Items Included in Consolidated Statement of Financial Condition [Abstract]
Preferred stock par value, in dollars per share	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock par value, in dollars per share	$ 0.01	$ 0.01
Common stock, shares authorized	45,000,000	45,000,000
Common stock, shares issued	3,674,902	3,059,503
Common stock, shares outstanding	3,674,902	3,059,503

XML

Consolidated Statements of Income - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Loans receivable, including fees	$ 11,715,000	$ 9,241,000	$ 31,488,000	$ 26,014,000
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions	637,000	538,000	2,034,000	1,751,000
Total interest and dividend income	12,352,000	9,779,000	33,522,000	27,765,000
Deposits	1,045,000	808,000	2,793,000	2,411,000
Borrowings	114,000	50,000	259,000	177,000
Subordinated note	171,000	171,000	508,000	512,000
Total interest expense	1,330,000	1,029,000	3,560,000	3,100,000
NET INTEREST INCOME	11,022,000	8,750,000	29,962,000	24,665,000
PROVISION FOR LOAN LOSSES	450,000	600,000	450,000	1,800,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	10,572,000	8,150,000	29,512,000	22,865,000
Service charges and fee income	879,000	899,000	2,743,000	2,489,000
Gain on sale of loans	5,025,000	5,922,000	13,840,000	14,722,000
Gain on sale of investment securities	143,000	146,000	380,000	146,000
Gain on sale of mortgage servicing rights (“MSR”)	38,000	0	996,000	0
Earnings on cash surrender value of BOLI	68,000	71,000	208,000	211,000
Other noninterest income	274,000	210,000	637,000	557,000
Total noninterest income	6,427,000	7,248,000	18,804,000	18,125,000
Salaries and benefits	7,140,000	6,287,000	20,174,000	16,510,000
Operations	1,577,000	1,450,000	4,506,000	4,221,000
Occupancy	650,000	597,000	1,939,000	1,775,000
Data processing	651,000	537,000	1,811,000	1,576,000
Gain on sale of other real estate owned (“OREO”)	0	0	0	(150,000)
Loan costs	726,000	715,000	1,977,000	1,789,000
Professional and board fees	378,000	502,000	1,261,000	1,490,000
Federal Deposit Insurance Corporation (“FDIC”) insurance	175,000	98,000	428,000	306,000
Marketing and advertising	192,000	202,000	512,000	553,000
Acquisition costs	0	0	0	389,000
Amortization of core deposit intangible	100,000	140,000	300,000	382,000
(Recovery) impairment on servicing rights	0	(216,000)	1,000	(2,000)
Total noninterest expense	11,589,000	10,312,000	32,909,000	28,839,000
INCOME BEFORE PROVISION FOR INCOME TAXES	5,410,000	5,086,000	15,407,000	12,151,000
PROVISION FOR INCOME TAXES	1,956,000	1,629,000	5,001,000	4,198,000
NET INCOME	$ 3,454,000	$ 3,457,000	$ 10,406,000	$ 7,953,000
Basic earnings per share (in dollars per share)	$ 1.13	$ 1.21	$ 3.53	$ 2.74
Diluted earnings per share (in dollars per share)	$ 1.07	$ 1.18	$ 3.31	$ 2.66

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 3,454	$ 3,457	$ 10,406	$ 7,953
Securities available-for-sale:
Unrealized holding gain during period	80	29	1,012	1,224
Income tax provision related to unrealized holding gain	(28)	(8)	(357)	(433)
Reclassification adjustment for realized gain included in net income	(143)	(146)	(380)	(146)
Income tax provision related to reclassification for realized gain	50	50	133	50
Other comprehensive income (loss), net of tax	(41)	(75)	408	695
COMPREHENSIVE INCOME	$ 3,413	$ 3,382	$ 10,814	$ 8,648

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income	Unearned ESOP Shares	Total
Beginning Balance at (in shares) at Dec. 31, 2015	3,242,120
Beginning balance at Dec. 31, 2015	$ 32	$ 30,692	$ 46,175	$ 78	$ (1,637)	$ 75,340
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			7,953			7,953
Dividends paid ($0.26 and $0.31 per share for the 9 months ended September 30, 2016 and 2017, respectively)			(802)			(802)
Share-based compensation		588				588
Restricted stock awards (in shares)	4,500
Common stock repurchased (in shares)	(198,167)
Common stock repurchased	$ (1)	(4,902)				(4,903)
Stock options shares exercised (in shares)	9,300
Stock options exercised		157				157
Other comprehensive income, net of tax				695		695
ESOP shares allocated		331			198	529
Ending Balance at (in shares) at Sep. 30, 2016	3,057,753
Ending balance at Sep. 30, 2016	$ 31	26,866	53,326	773	(1,439)	79,557
Beginning Balance at (in shares) at Dec. 31, 2016	3,059,503
Beginning balance at Dec. 31, 2016	$ 31	27,334	55,584	(536)	(1,380)	81,033
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			10,406			10,406
Dividends paid ($0.26 and $0.31 per share for the 9 months ended September 30, 2016 and 2017, respectively)			(941)			(941)
Proceeds from public offering, net of expenses (in shares)	587,234
Proceeds from public offering, net of expenses	$ 6	25,612				25,618
Share-based compensation		496				496
Common stock repurchased (in shares)	(6,198)
Common stock repurchased		(275)				(275)
Stock options shares exercised (in shares)	34,363
Stock options exercised		580				580
Other comprehensive income, net of tax				408		408
ESOP shares allocated		716			198	914
Ending Balance at (in shares) at Sep. 30, 2017	3,674,902
Ending balance at Sep. 30, 2017	$ 37	$ 54,463	$ 65,049	$ (128)	$ (1,182)	$ 118,239

XML

Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Statement of Stockholders' Equity [Abstract]
Dividends paid (in dollars per share)	$ 0.31	$ 0.26

XML

Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 10,406,000	$ 7,953,000
Adjustments to reconcile net income to net cash from operating activities
Provision for loan losses	450,000	1,800,000
Depreciation, amortization and accretion	2,577,000	3,779,000
Compensation expense related to stock options and restricted stock awards	496,000	588,000
ESOP compensation expense for allocated shares	914,000	529,000
Increase in cash surrender value of BOLI	(208,000)	(211,000)
Gain on sale of loans held for sale	(13,840,000)	(14,722,000)
Gain on sale of investment securities	(380,000)	(146,000)
Gain on sale of OREO	0	(150,000)
Gain on sale of MSR	(996,000)	0
Origination of loans held for sale	(520,358,000)	(584,073,000)
Proceeds from sale of loans held for sale	520,091,000	564,218,000
Impairment (recovery) of servicing rights	1,000	(2,000)
Changes in operating assets and liabilities
Accrued interest receivable	(693,000)	(450,000)
Other assets	(79,000)	(7,481,000)
Other liabilities	2,668,000	5,063,000
Net cash from (used by) operating activities	1,049,000	(23,305,000)
Activity in securities available-for-sale:
Proceeds from Sale of Available-for-sale Securities	39,103,000	13,577,000
Maturities, prepayments, sales, and calls	6,531,000	9,039,000
Purchases	(41,320,000)	(47,432,000)
Maturities of certificates of deposit at other financial institutions	1,240,000	292,000
Purchase of certificates of deposit at other financial institutions	(4,102,000)	(1,882,000)
Loan originations and principal collections, net	(129,763,000)	(93,871,000)
Purchase of portfolio loans	(32,342,000)	0
Proceeds from sale of other real estate owned, net	0	682,000
Purchase of premises and equipment, net	(623,000)	(2,287,000)
FHLB stock, net	(328,000)	2,547,000
Proceeds from sale of MSR	4,827,000	0
Net cash received from acquisition	0	180,356,000
Net cash (used by) from investing activities	(156,777,000)	61,021,000
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	127,985,000	37,630,000
Proceeds from (Repayments of) Debt	(2,400,000)	(77,740,000)
Dividends paid	(941,000)	(802,000)
Proceeds from stock options exercised	580,000	157,000
Common stock repurchased	(275,000)	(4,903,000)
Proceeds from issuance of common stock	25,618,000	0
Net cash from (used by) financing activities	150,567,000	(45,658,000)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(5,161,000)	(7,942,000)
CASH AND CASH EQUIVALENTS, beginning of period	36,456,000	24,455,000
CASH AND CASH EQUIVALENTS, end of period	31,295,000	16,513,000
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Interest	3,528,000	2,931,000
Income taxes	5,800,000	4,420,000
Total assets acquired	0	181,575,000
Total liabilities assumed	0	186,393,000
SUPPLEMENTARY DISCLOSURES OF NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES
Change in unrealized gain on investment securities	631,000	1,079,000
Transfer portfolio loans to loans held for sale	1,886,000	0
Property received in settlement of loans	0	525,000
Retention of gross mortgage servicing rights from loan sales	$ 3,569,000	$ 2,927,000

XML

Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - FS Bancorp, Inc. (the “Company”) was incorporated in September 2011 as the proposed holding company for 1st Security Bank of Washington (the “Bank” or “1st Security Bank”) in connection with the Bank’s conversion from the mutual to stock form of ownership which was completed on July 9, 2012. The Bank is a community-based savings bank with 11 branches and seven loan production offices in suburban communities in the greater Puget Sound area which includes Snohomish, King, Pierce, Jefferson, Kitsap, and Clallam counties, and one loan production office in the market area of the Tri-Cities, Washington. The Bank provides loan and deposit services to customers who are predominantly small and middle-market businesses and individuals. The Bank acquired four retail bank branches from Bank of America, National Association (“Bank of America”) (two in Clallam and two in Jefferson counties) on January 22, 2016, and these branches opened as 1st Security Bank branches on January 25, 2016. The Company and its subsidiary are subject to regulation by certain federal and state agencies and undergo periodic examination by these regulatory agencies.

Pursuant to the Plan of Conversion (the “Plan”), the Company’s Board of Directors adopted an employee stock ownership plan (“ESOP”) which purchased 8% of the common stock in the open market or 259,210 shares. As provided for in the Plan, the Bank also established a liquidation account in the amount of retained earnings at December 31, 2011. The liquidation account is maintained for the benefit of eligible savings account holders at June 30, 2007, and supplemental eligible account holders as of March 31, 2012, who maintain deposit accounts at the Bank after the conversion. The conversion was accounted for as a change in corporate form with the historic basis of the Company’s assets, liabilities, and equity unchanged as a result.

Financial Statement Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10‑Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10‑K with all of the audited information and footnotes required by U.S. GAAP for complete financial statements for the year ended December 31, 2016, as filed with the SEC on March 16, 2017. In the opinion of management, all normal adjustments and recurring accruals considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.

The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, or any other future period. The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan and lease losses, fair value of financial instruments,  and the valuation of servicing rights.

Amounts presented in the consolidated financial statements and footnote tables are rounded and presented in thousands of dollars except per share amounts. In the narrative footnote discussion, amounts are rounded and presented in millions of dollars to one decimal point if the amounts are above $1.0 million. Amounts below $1.0 million are rounded and presented in dollars to the nearest thousands. Certain prior year amounts have been reclassified to conform to the 2017 presentation with no change to consolidated net income or stockholders’ equity previously reported.

Principles of Consolidation - The consolidated financial statements include the accounts of FS Bancorp, Inc. and its wholly owned subsidiary, 1st Security Bank of Washington. All material intercompany accounts have been eliminated in consolidation.

Segment Reporting - The Company operates in two business segments through the Bank: commercial and consumer banking and home lending. The Company’s business segments are determined based on the products and services provided, as well as the nature of the related business activities, and they reflect the manner in which financial information is regularly reviewed for the purpose of allocating resources and evaluating performance of the Company’s businesses. The results for these business segments are based on management’s accounting process, which assigns income statement items and assets to each responsible operating segment. This process is dynamic and is based on management’s view of the Company’s operations. See Note 15 - Business Segments.

Subsequent Events - The Company has evaluated events and transactions subsequent to September 30, 2017, for potential recognition or disclosure.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), which creates Topic 606 and supersedes Topic 605, Revenue Recognition. In August 2015, FASB issued ASU No. 2015‑14, Revenue from Contracts with Customers (Topic 606), which postponed the effective date of 2014‑09. In March 2016, the FASB issued ASU 2016‑08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amended the principal versus agent implementation guidance set for in ASU 2014‑09. Among other things, ASU 2016‑08 clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued ASU No. 2016‑10, Revenue from Contracts with Customers (Topic 606):Identifying Performance Obligations and Licensing. The ASU amends certain aspects of the guidance set forth in the FASB’s new revenue standard related to identifying performance obligations and licensing implementation. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In May 2016, the FASB issued ASU No. 2016‑12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and adds some practical expedients, but does not change the core revenue recognition principle in Topic 606. The ASU is effective for public entities for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. For financial reporting purposes, the ASU allows for either full retrospective adoption, meaning the ASU is applied to all of the periods presented, or modified retrospective adoption, meaning the ASU is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. As a bank holding company, key revenue sources, such as interest income have been identified as out of the scope of this new guidance. The Company’s preliminary analysis suggests that the adoption of this accounting standard is not expected to have a material impact on the Company’s consolidated financial statements as substantially all of the Company’s other revenues are also excluded from the scope of the new guidance. New accounting guidance related to the adoption of this standard continues to be released by the FASB, which could impact the Company’s preliminary analysis of materiality and may change the preliminary conclusions reached as to the application of this new guidance.

In January 2016, the FASB issued ASU No. 2016‑01, Financial Instruments - Overall (Subtopic 825‑10), Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. This ASU requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. In addition, the amendments in this ASU require the exit price notion be used when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This ASU also eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The ASU also requires a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU No. 2016‑01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for certain provisions. The adoption of ASU No. 2016-01 is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842). ASU No. 2016‑02 requires lessees to recognize on the balance sheet the assets and liabilities arising from operating leases. A lessee should recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. A lessee should include payments to be made in an optional period only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. For a finance lease, interest payments should be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income. For operating leases, the lease cost should be allocated over the lease term on a generally straight-line basis. The amendments in ASU 2016‑02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in the ASU is permitted. Once adopted, we expect to report higher assets and liabilities as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain equipment under noncancelable operating lease agreements, however, based on current leases, the adoption of ASU 2016‑02 is expected to increase the new lease asset and related lease liability on our Consolidated Balance Sheets by less than 5% and not to have a material impact on our regulatory capital ratios.

In June 2016, the FASB issued ASU No. 2016‑13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of this ASU on the Company’s consolidated financial statements. Once adopted, we expect our allowance for loan losses to increase through a one‑time adjustment to retained earnings, however, until our evaluation is complete the magnitude of the increase will be unknown.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to address the appropriate classification of eight specific cash flow issues on the cash flow statement. Debt prepayment costs should be classified as an outflow for financing activities. Settlement of zero-coupon debt instruments divides the interest portion as an outflow for operating activities and the principal portion as an outflow for financing activities. Contingent consideration payments made after a business combination should be classified as outflows for financing and operating activities. Proceeds from the settlement of bank-owned life insurance policies should be classified as inflows from investing activities. Other specific areas are identified in the ASU as to the appropriate classification of the cash inflows or outflows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and must be applied using a retrospective transition method to each period presented. Adoption of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017‑04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU was issued to simplify the subsequent measurement of goodwill and the amendment eliminates Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU is effective for annual reporting periods beginning after December 31, 2019. Early adoption of the ASU is permitted. The Company expects this ASU to provide a simplified method of measuring goodwill impairment and does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017‑08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310‑20):  Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The standard will take effect for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU No. 2017‑08 is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017‑09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU was issued to provide clarity as to when to apply modification accounting when there is a change in the terms or conditions of a share-based payment award. According to this ASU, an entity should account for the effects of a modification unless the fair value, vesting conditions, and balance sheet classification of the award is the same after the modification as compared to the original award prior to the modification. The standard is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2017‑09 is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting recognition and presentation requirements in ASC 815 to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The amendments in this ASU permit hedge accounting for hedging relationships involving nonfinancial risk and interest rate risk by removing certain limitations in cash flow and fair value hedging relationships. In addition, the ASU requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The adoption of ASU No. 2017-12 is not expected to have a material impact on the Company's consolidated financial statements.  

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Business Combination

9 Months Ended

Sep. 30, 2017

Business Combination [Abstract]

Business Combination

NOTE 2 - BUSINESS COMBINATION

On January 22, 2016, the Company’s wholly-owned subsidiary, 1st Security Bank, completed the purchase of four branches (“Branch Purchase”) from Bank of America. The Branch Purchase included four retail bank branches located in the communities of Port Angeles, Sequim, Port Townsend, and Hadlock, Washington. In accordance with the Purchase and Assumption Agreement, dated as of September 1, 2015, between Bank of America and 1st Security Bank, the Bank acquired $186.4 million of deposits, a small portfolio of performing loans, two owned bank branches, three leases associated with the bank branches and parking facilities and certain other assets of the branches. In consideration of the purchased assets and transferred liabilities, 1st Security Bank paid (a) the unpaid principal balance and accrued interest of $419,000 for the loans acquired, (b) the net book value, or approximately $778,000, for the bank facilities and certain other assets associated with the acquired branches, and (c) a deposit premium of 2.50% on substantially all of the deposits assumed, which equated to approximately $4.8 million. The transaction was settled with Bank of America paying cash of $180.4 million to 1st Security Bank for the difference between these amounts and the total deposits assumed.

The Branch Purchase was accounted for under the acquisition method of accounting and accordingly, the assets and liabilities were recorded at their fair values on January 22, 2016, the date of acquisition. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as information relative to closing date fair values become available. During the second quarter of 2016, the Company completed a re-evaluation of the core deposit intangible because a portion of the core deposits were excluded from the original valuation. The updated valuation of the core deposit intangible increased the fair value adjustment by $100,000 to $2.2 million from $2.1 million resulting in a decrease of $100,000 to the fair value adjustment of goodwill. The impact to consolidated net income was an increase in the amortization of the core deposit intangible for the six months ended June 30, 2016 of $6,000 and was not considered material to the consolidated financial statements.

The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition:

	Acquired Book		Fair Value			Amount
January 22, 2016	Value		Adjustments			Recorded
Assets
Cash and cash equivalents	$	180,356	$	—		$	180,356
Loans receivable		417		—			417
Premises and equipment, net		697		267	(1)		964
Accrued interest receivable		2		—			2
Core deposit intangible		—		2,239	(2)		2,239
Goodwill		—		2,312	(3)		2,312
Other assets		103		—			103
Total assets acquired	$	181,575	$	4,818		$	186,393
Liabilities
Deposits:
Noninterest-bearing accounts	$	79,966	$	—		$	79,966
Interest-bearing accounts		106,398		—			106,398
Total deposits		186,364		—			186,364
Accrued interest payable		7		—			7
Other liabilities		22		—			22
Total liabilities assumed	$	186,393	$	—		$	186,393

Explanation of Fair Value Adjustments

(1) The fair value adjustment represents the difference between the fair value of the acquired branches and the book value of the assets acquired. The Company utilized third-party valuations but did not receive appraisals to assist in the determination of fair value.

(2) The fair value adjustment represents the value of the core deposit base assumed in the Branch Purchase based on a study performed by an independent consulting firm. This amount was recorded by the Company as an identifiable intangible asset and will be amortized as an expense on an accelerated basis over the average life of the core deposit base, which is estimated to be nine years.

(3) The fair value adjustment represents the value of the goodwill calculated from the purchase based on the purchase price, less the fair value of assets acquired net of liabilities assumed.

Goodwill - The acquired goodwill represents the excess purchase price over the estimated fair value of the net assets acquired and was recorded at $2.3 million on January 22, 2016.

The following table summarizes the aggregate amount recognized for each major class of assets acquired and liabilities assumed by 1st Security Bank in the Branch Purchase:

	At January 22,
	2016
Purchase price (1)	$	6,015
Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash and cash equivalents		186,371
Acquired loans		417
Premises and equipment, net		964
Accrued interest receivable		2
Core deposit intangible		2,239
Other assets		103
Deposits		(186,364)
Accrued interest payable		(7)
Other liabilities		(22)
Total fair value of identifiable net assets		3,703
Goodwill	$	2,312

(1) Purchase price includes premium paid on the deposits, the aggregate net book value of all assets acquired, and the unpaid principal and accrued interest on loans acquired.

Core deposit intangible

The core deposit intangible represents the fair value of the acquired core deposit base. The core deposit intangible will be amortized on an accelerated basis over approximately nine years. Total amortization expense was $100,000 and $300,000 for the three and nine months ended September 30, 2017, and $140,000 and $382,000 for the same periods in 2016. Amortization expense for core deposit intangible is expected to be as follows at September 30, 2017:

Fourth Quarter 2017	$	100
2018		307
2019		235
2020		181
2021		166
Thereafter		428
Total	$	1,417

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Securities Available-for-sale

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 3 - SECURITIES AVAILABLE-FOR-SALE

The following tables present the amortized costs, unrealized gains, unrealized losses, and estimated fair values of securities available-for-sale at September 30, 2017 and December 31, 2016:

	September 30, 2017
							Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Values
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	6,086	$	59	$	(23)	$	6,122
Corporate securities		7,123		29		(77)		7,075
Municipal bonds		11,342		213		(116)		11,439
Mortgage-backed securities		39,733		85		(344)		39,474
U.S. Small Business Administration securities		14,018		43		(68)		13,993
Total securities available-for-sale	$	78,302	$	429	$	(628)	$	78,103

	December 31, 2016
							Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Values
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	8,150	$	12	$	(94)	$	8,068
Corporate securities		7,654		14		(168)		7,500
Municipal bonds		15,183		164		(83)		15,264
Mortgage-backed securities		45,856		52		(713)		45,195
U.S. Small Business Administration securities		5,862		27		(41)		5,848
Total securities available-for-sale	$	82,705	$	269	$	(1,099)	$	81,875

At September 30, 2017, the Bank had pledged nine securities held at the FHLB of Des Moines with a carrying value of $10.9 million to secure Washington State public deposits of $5.2 million with a $2.0 million collateral requirement by the Washington Public Deposit Protection Commission.

Investment securities that were in an unrealized loss position at September 30, 2017 and December 31, 2016 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or the underlying collateral.

	September 30, 2017
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	3,014	$	(23)	$	—	$	—	$	3,014	$	(23)
Corporate securities		—		—		1,919		(77)		1,919		(77)
Municipal bonds		4,834		(116)		—		—		4,834		(116)
Mortgage-backed securities		22,266		(247)		4,773		(97)		27,039		(344)
U.S. Small Business Administration securities		9,425		(68)		—		—		9,425		(68)
Total	$	39,539	$	(454)	$	6,692	$	(174)	$	46,231	$	(628)

	December 31, 2016
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	6,998	$	(94)	$	—	$	—	$	6,998	$	(94)
Corporate securities		5,048		(106)		1,438		(62)		6,486		(168)
Municipal bonds		6,741		(83)		—		—		6,741		(83)
Mortgage-backed securities		39,373		(713)		—		—		39,373		(713)
U.S. Small Business Administration securities		2,963		(41)		—		—		2,963		(41)
Total	$	61,123	$	(1,037)	$	1,438	$	(62)	$	62,561	$	(1,099)

There were 28 investments with unrealized losses of less than one year, and five investments with unrealized losses of more than one year at September 30, 2017. There were 48 investments with unrealized losses of less than one year, and two investments with unrealized losses of more than one year at December 31, 2016. The unrealized losses associated with these investments are believed to be caused by changes in market interest rates that are considered to be temporary and the Company does not intend to sell the securities, and it is not likely to be required to sell these securities prior to maturity. No other-than-temporary impairment was recorded for the nine months ended September 30, 2017, or for the year ended December 31, 2016.

The contractual maturities of securities available-for-sale at September 30, 2017 and December 31, 2016 are listed below. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay the obligations; therefore, these securities are classified separately with no specific maturity date.

	September 30, 2017				December 31, 2016
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
U.S. agency securities
Due after one year through five years	$	—	$	—	$	4,000	$	3,956
Due after five years through ten years		4,086		4,141		4,150		4,112
Due after ten years		2,000		1,981		—		—
Subtotal		6,086		6,122		8,150		8,068
Corporate securities
Due after one year through five years		5,127		5,156		5,659		5,625
Due after five years through ten years		1,996		1,919		1,995		1,875
Subtotal		7,123		7,075		7,654		7,500
Municipal bonds
Due in one year or less		—		—		509		513
Due after one year through five years		2,013		2,059		5,326		5,386
Due after five years through ten years		3,297		3,420		7,476		7,492
Due after ten years		6,032		5,960		1,872		1,873
Subtotal		11,342		11,439		15,183		15,264
Mortgage-backed securities
Federal National Mortgage Association (“FNMA”)		22,287		22,187		23,522		23,197
Federal Home Loan Mortgage Corporation (“FHLMC”)		11,123		10,970		14,950		14,662
Government National Mortgage Association (“GNMA”)		6,323		6,317		7,384		7,336
Subtotal		39,733		39,474		45,856		45,195
U.S. Small Business Administration securities
Due after five years through ten years		12,069		12,051		5,862		5,848
Due after ten years		1,949		1,942		—		—
Subtotal		14,018		13,993		5,862		5,848
Total	$	78,302	$	78,103	$	82,705	$	81,875

The proceeds and resulting gains and losses, computed using specific identification, from sales of securities available-for-sale for the three and nine months ended September 30, 2017 and 2016 were as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2017						September 30, 2017
			Gross		Gross				Gross		Gross
	Proceeds		Gains		(Losses)		Proceeds		Gains		(Losses)
Securities available-for-sale	$	9,115	$	143	$	-	$	39,103	$	413	$	(33)

	Three Months Ended						Nine Months Ended
	September 30, 2016						September 30, 2016
			Gross		Gross				Gross		Gross
	Proceeds		Gains		(Losses)		Proceeds		Gains		(Losses)
Securities available-for-sale	$	13,577	$	149	$	(3)	$	13,577	$	149	$	(3)

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Loans Receivable and Allowance For Loan Losses

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Loans Receivable and Allowance For Loan Losses

NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

The composition of the loan portfolio was as follows at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017		2016
REAL ESTATE LOANS
Commercial	$	63,180	$	55,871
Construction and development		129,407		94,462
Home equity		24,026		20,081
One-to-four-family (excludes loans held for sale)		170,187		124,009
Multi-family		43,408		37,527
Total real estate loans		430,208		331,950
CONSUMER LOANS
Indirect home improvement		124,387		107,759
Solar		40,082		36,503
Marine		35,173		28,549
Other consumer		2,032		1,915
Total consumer loans		201,674		174,726
COMMERCIAL BUSINESS LOANS
Commercial and industrial		83,221		65,841
Warehouse lending		50,468		32,898
Total commercial business loans		133,689		98,739
Total loans receivable, gross		765,571		605,415
Allowance for loan losses		(10,598)		(10,211)
Deferred costs, fees, premiums, and discounts, net		(1,119)		(1,887)
Total loans receivable, net	$	753,854	$	593,317

Most of the Company’s commercial and multi-family real estate, construction, residential, and/or commercial business lending activities are with customers located in the greater Puget Sound area and near our one loan production office located in the Tri-Cities, Washington. The Company originates real estate, consumer and commercial business loans and has concentrations in these areas, however, indirect home improvement loans are originated through a network of home improvement contractors and dealers located throughout Washington, Oregon, Idaho, and California. The Company also originates solar loans through contractors and dealers in the state of California. Loans are generally secured by collateral and rights to collateral vary and are legally documented to the extent practicable. Local economic conditions may affect borrowers’ ability to meet the stated repayment terms.

The Company has defined its loan portfolio into three segments that reflect the structure of the lending function, the Company’s strategic plan and the manner in which management monitors performance and credit quality. The three loan portfolio segments are: (a) Real Estate Loans, (b) Consumer Loans and (c) Commercial Business Loans. Each of these segments is disaggregated into classes based on the risk characteristics of the borrower and/or the collateral type securing the loan. The following is a summary of each of the Company’s loan portfolio segments and classes:

Real Estate Loans

Commercial Lending. Loans originated by the Company primarily secured by income producing properties, including retail centers, warehouses, and office buildings located in our market areas.

Construction and Development Lending. Loans originated by the Company for the construction of, and secured by, commercial real estate, one-to-four-family, and multi-family residences and tracts of land for development that are generally not pre-sold. A portion of the one-to-four-family construction portfolio are custom construction loans to the intended occupant of the residence.

Home Equity Lending. Loans originated by the Company secured by second mortgages on one-to-four-family residences,   including home equity lines of credit in our market areas.

One-to-Four-Family Real Estate Lending. One-to-four-family residential loans include owner occupied properties (including second homes), and non-owner occupied properties. These loans originated by the Company are secured by first mortgages on one-to-four-family residences in our market areas that the Company intends to hold (excludes loans held for sale).

Multi-Family Lending. Apartment term lending (five or more units) to current banking customers and community reinvestment loans for low to moderate income individuals in the Company’s footprint.

Consumer Loans

Indirect Home Improvement. Fixture secured loans for home improvement are originated by the Company through its network of home improvement contractors and dealers and are secured by the personal property installed in, on, or at the borrower’s real property, and may be perfected with a UCC‑2 financing statement filed in the county of the borrower’s residence. These indirect home improvement loans include replacement windows, siding, roofing, and other home fixture installations.

Solar. Fixture secured loans for solar related home improvement projects are originated by the Company through its network of contractors and dealers, and are secured by the personal property installed in, on, or at the borrower’s real property, and which may be perfected with a UCC‑2 financing statement filed in the county of the borrower’s residence.

Marine. Loans originated by the Company secured by boats to borrowers primarily located in its market areas.

Other Consumer. Loans originated by the Company, including automobiles, recreational vehicles, direct home improvement loans, loans on deposits, and other consumer loans, primarily consisting of personal lines of credit.

Commercial Business Loans

Commercial and Industrial Lending. Loans originated by the Company to local small and mid-sized businesses in our Puget Sound market area are secured primarily by accounts receivable, inventory, or personal property, and plant and equipment. Commercial and industrial loans are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.

Warehouse Lending. Loans originated by the Company’s mortgage and construction warehouse lending program through which the Company funds third-party lenders originating residential mortgage and construction loans for sale into the secondary market and speculative construction loans for residential properties built for sale to single family households. These loans are secured by the notes and assigned deeds of trust associated with the residential mortgage and construction loans on properties primarily located in the Company’s market areas.

The following tables detail activity in the allowance for loan losses by loan categories at or for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30, 2017
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	4,144	$	2,669	$	2,453	$	877	$	10,143
Provision for loan losses		481		65		(130)		34		450
Charge-offs		(55)		(152)		(33)		—		(240)
Recoveries		35		208		2		—		245
Net (charge-offs) recoveries		(20)		56		(31)		—		5
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		4,605		2,790		2,292		911		10,598
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	210	$	—	$	551	$	—	$	761
Loans collectively evaluated for impairment		429,998		201,674		133,138		—		764,810
Ending balance	$	430,208	$	201,674	$	133,689	$	—	$	765,571

	At or For the Nine Months Ended September 30, 2017
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	3,547	$	2,082	$	2,675	$	1,907	$	10,211
Provision for loan losses		1,077		726		(357)		(996)		450
Charge-offs		(55)		(536)		(33)		—		(624)
Recoveries		36		518		7		—		561
Net charge-offs		(19)		(18)		(26)		—		(63)
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		4,605		2,790		2,292		911		10,598
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	210	$	—	$	551	$	—	$	761
Loans collectively evaluated for impairment		429,998		201,674		133,138		—		764,810
Ending balance	$	430,208	$	201,674	$	133,689	$	—	$	765,571

	At or For the Three Months Ended September 30, 2016
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	3,477	$	2,039	$	1,823	$	1,612	$	8,951
Provision for loan losses		242		1		252		105		600
Charge-offs		(65)		(232)		—		—		(297)
Recoveries		64		262		6		—		332
Net (charge-offs) recoveries		(1)		30		6		—		35
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		3,718		2,070		2,081		1,717		9,586
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	209	$	—	$	—	$	—	$	209
Loans collectively evaluated for impairment		316,309		170,576		117,124		—		604,009
Ending balance	$	316,518	$	170,576	$	117,124	$	—	$	604,218

	At or For the Nine Months Ended September 30, 2016
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	2,874	$	1,681	$	1,396	$	1,834	$	7,785
Provision for loan losses		794		519		604		(117)		1,800
Charge-offs		(65)		(801)		—		—		(866)
Recoveries		115		671		81		—		867
Net recoveries (charge-offs)		50		(130)		81		—		1
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		3,718		2,070		2,081		1,717		9,586
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	209	$	—	$	—	$	—	$	209
Loans collectively evaluated for impairment		316,309		170,576		117,124		—		604,009
Ending balance	$	316,518	$	170,576	$	117,124	$	—	$	604,218

Nonaccrual and Past Due Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are automatically placed on nonaccrual once the loan is 90 days past due or sooner if, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, or as required by regulatory authorities.

The following tables provide information pertaining to the aging analysis of contractually past due loans and nonaccrual loans at September 30, 2017 and December 31, 2016:

	September 30, 2017
	30-59		60-89
	Days		Days		90 Days		Total				Total
	Past		Past		or More		Past				Loans		Non-
	Due		Due		Past Due		Due		Current		Receivable		Accrual
REAL ESTATE LOANS
Commercial	$	—	$	—	$	—	$	—	$	63,180	$	63,180	$	—
Construction and development		—		—		—		—		129,407		129,407		—
Home equity		111		16		138		265		23,761		24,026		154
One-to-four-family		—		—		—		—		170,187		170,187		142
Multi-family		—		—		—		—		43,408		43,408		—
Total real estate loans		111		16		138		265		429,943		430,208		296
CONSUMER LOANS
Indirect home improvement		261		77		174		512		123,875		124,387		316
Solar		83		22		81		186		39,896		40,082		81
Marine		—		—		—		—		35,173		35,173		9
Other consumer		7		—		1		8		2,024		2,032		11
Total consumer loans		351		99		256		706		200,968		201,674		417
COMMERCIAL BUSINESS LOANS
Commercial and industrial		—		—		—		—		83,221		83,221		551
Warehouse lending		—		—		—		—		50,468		50,468		—
Total commercial business loans		—		—		—		—		133,689		133,689		551
Total loans	$	462	$	115	$	394	$	971	$	764,600	$	765,571	$	1,264

	December 31, 2016
	30-59		60-89
	Days		Days		90 Days		Total				Total
	Past		Past		or More		Past				Loans		Non-
	Due		Due		Past Due		Due		Current		Receivable		Accrual
REAL ESTATE LOANS
Commercial	$	—	$	—	$	—	$	—	$	55,871	$	55,871	$	—
Construction and development		—		—		—		—		94,462		94,462		—
Home equity		34		—		210		244		19,837		20,081		210
One-to-four-family		—		—		—		—		124,009		124,009		—
Multi-family		—		—		—		—		37,527		37,527		—
Total real estate loans		34		—		210		244		331,706		331,950		210
CONSUMER LOANS
Indirect home improvement		268		278		167		713		107,046		107,759		435
Solar		92		—		69		161		36,342		36,503		69
Marine		8		—		—		8		28,541		28,549		—
Other consumer		3		2		4		9		1,906		1,915		7
Total consumer loans		371		280		240		891		173,835		174,726		511
COMMERCIAL BUSINESS LOANS
Commercial and industrial		—		—		—		—		65,841		65,841		—
Warehouse lending		—		—		—		—		32,898		32,898		—
Total commercial business loans		—		—		—		—		98,739		98,739		—
Total loans	$	405	$	280	$	450	$	1,135	$	604,280	$	605,415	$	721

There were no loans 90 days or more past due and still accruing interest at September 30, 2017 and December 31, 2016.

The following tables provide additional information about our impaired loans that have been segregated to reflect loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided at September 30, 2017 and December 31, 2016:

	September 30, 2017
	Unpaid
	Principal		Write-		Recorded		Related
	Balance		downs		Investment		Allowance
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	154	$	—	$	154	$	—
One-to-four-family		68		(12)		56		—
Total real estate loans		222		(12)		210		—
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		—		551		88
Total	$	773	$	(12)	$	761	$	88

	December 31, 2016
	Unpaid
	Principal		Write-		Recorded		Related
	Balance		downs		Investment		Allowance
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	137	$	—	$	137	$	—
One-to-four-family		69		(12)		57		—
Total	$	206	$	(12)	$	194	$	—

The following tables present the average recorded investment in loans individually evaluated for impairment and the interest income recognized and received for the three and nine months ended September 30, 2017 and 2016:

	Three Months Ended
	September 30, 2017				September 30, 2016
	Average Recorded		Interest Income		Average Recorded		Interest Income
	Investment		Recognized		Investment		Recognized
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	201	$	—	$	152	$	—
One-to-four-family		56		1		58		1
Total real estate loans		257		1		210		1
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		23		—		—
Total	$	808	$	24	$	210	$	1

	Nine Months Ended
	September 30, 2017				September 30, 2016
	Average Recorded		Interest Income		Average Recorded		Interest Income
	Investment		Recognized		Investment		Recognized
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	220	$	—	$	154	$	2
One-to-four-family		56		3		58		2
Total real estate loans		276		3		212		4
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		23		—		—
Total	$	827	$	26	$	212	$	4

Credit Quality Indicators

As part of the Company’s on-going monitoring of credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grading of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in the Company’s markets.

The Company utilizes a risk grading matrix to assign a risk grade to its real estate and commercial business loans. Loans are graded on a scale of 1 to 10, with loans in risk grades 1 to 6 considered “Pass” and loans in risk grades 7 to 10 are reported as classified loans in the Company’s allowance for loan loss analysis.

A description of the 10 risk grades is as follows:

Grades 1 and 2 - These grades include loans to very high quality borrowers with excellent or desirable business credit.

Grade 3 - This grade includes loans to borrowers of good business credit with moderate risk.

Grades 4 and 5 - These grades include “Pass” grade loans to borrowers of average credit quality and risk.

Grade 6 - This grade includes loans on management’s “Watch” list and is intended to be utilized on a temporary basis for “Pass” grade borrowers where frequent and thorough monitoring is required due to credit weaknesses and where significant risk-modifying action is anticipated in the near term.

Grade 7 - This grade is for “Other Assets Especially Mentioned” (“OAEM”) in accordance with regulatory guidelines and includes borrowers where performance is poor or significantly less than expected.

Grade 8 - This grade includes “Substandard” loans in accordance with regulatory guidelines which represent an unacceptable business credit where a loss is possible if loan weakness is not corrected.

Grade 9 - This grade includes “Doubtful” loans in accordance with regulatory guidelines where a loss is highly probable.

Grade 10 - This grade includes “Loss” loans in accordance with regulatory guidelines for which total loss is expected and when identified are charged off.

Consumer, Home Equity and One-to-Four-Family Real Estate Loans

Homogeneous loans are risk rated based upon the FDIC’s Uniform Retail Credit Classification and Account Management Policy. Loans classified under this policy at the Company are consumer loans which include indirect home improvement, solar, marine, other consumer, and one-to-four-family first and second liens. Under the Uniform Retail Credit Classification Policy, loans that are current or less than 90 days past due are graded “Pass” and risk rated “4” or “5” internally. Loans that are past due more than 90 days are classified “Substandard” and risk rated “8” internally until the loan has demonstrated consistent performance, typically six months of contractual payments. Closed-end loans that are 120 days past due and open-end loans that are 180 days past due are charged off based on the value of the collateral less cost to sell.

The following tables summarize risk rated loan balances by category at September 30, 2017 and December 31, 2016:

	September 30, 2017
					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss
	(1 - 5)		(6)		(7)		(8)		(9)		(10)		Total
REAL ESTATE LOANS
Commercial	$	56,533	$	5,072	$	1,575	$	—	$	—	$	—	$	63,180
Construction and development		129,407		—		—		—		—		—		129,407
Home equity		23,872		—		—		154		—		—		24,026
One-to-four-family		169,352		—		693		142		—		—		170,187
Multi-family		43,408		—		—		—		—		—		43,408
Total real estate loans		422,572		5,072		2,268		296		—		—		430,208
CONSUMER LOANS
Indirect home improvement		124,071		—		—		316		—		—		124,387
Solar		40,001		—		—		81		—		—		40,082
Marine		35,164		—		—		9		—		—		35,173
Other consumer		1,961		—		—		71		—		—		2,032
Total consumer loans		201,197		—		—		477		—		—		201,674
COMMERCIAL BUSINESS LOANS
Commercial and industrial		76,302		306		828		5,785		—		—		83,221
Warehouse lending		44,969		5,499		—		—		—		—		50,468
Total commercial business loans		121,271		5,805		828		5,785		—		—		133,689
Total loans	$	745,040	$	10,877	$	3,096	$	6,558	$	—	$	—	$	765,571

(1) At September 30, 2017, the Company had agreed to sell a substandard shared/syndicated national credit at a slight discount to market.  The $1.9 million loan was excluded from the substandard totals listed above as the loan was classified as held for sale at September 30, 2017.  The transaction settled in October 2017 at the September 30, 2017 fair value.

	December 31, 2016
					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss
	(1 - 5)		(6)		(7)		(8)		(9)		(10)		Total
REAL ESTATE LOANS
Commercial	$	53,234	$	2,637	$	—	$	—	$	—	$	—	$	55,871
Construction and development		94,462		—		—		—		—		—		94,462
Home equity		19,871		—		—		210		—		—		20,081
One-to-four-family		124,009		—		—		—		—		—		124,009
Multi-family		37,527		—		—		—		—		—		37,527
Total real estate loans		329,103		2,637		—		210		—		—		331,950
CONSUMER LOANS
Indirect home improvement		107,324		—		—		435		—		—		107,759
Solar		36,434		—		—		69		—		—		36,503
Marine		28,549		—		—		—		—		—		28,549
Other consumer		1,813		—		—		102		—		—		1,915
Total consumer loans		174,120		—		—		606		—		—		174,726
COMMERCIAL BUSINESS LOANS
Commercial and industrial		58,105		525		—		7,211		—		—		65,841
Warehouse lending		32,898		—		—		—		—		—		32,898
Total commercial business loans		91,003		525		—		7,211		—		—		98,739
Total loans	$	594,226	$	3,162	$	—	$	8,027	$	—	$	—	$	605,415

Troubled Debt Restructured Loans

Troubled debt restructured (“TDR”) loans are loans for which the Company, for economic or legal reasons related to the borrower’s financial condition, has granted a significant concession to the borrower that it would otherwise not consider. The Company had one TDR loan on accrual and included in impaired loans at both September 30, 2017 and December 31, 2016, with a balance of $56,000 and $57,000, respectively, which was a one-to-four-family loan. The Company had no commitments to lend additional funds on this TDR loan at September 30, 2017.

For the three and nine months ended September 30, 2017 and 2016, there were no TDR loans that were modified in the previous 12 months that subsequently defaulted in the reporting period.

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Servicing Rights

9 Months Ended

Sep. 30, 2017

Fair Value, Off-balance Sheet Risk [Abstract]

Servicing Rights

NOTE 5 - SERVICING RIGHTS

Loans serviced for others are not included on the Consolidated Balance Sheets. The unpaid principal balances of permanent loans serviced for others were $662.0 million and $977.1 million at September 30, 2017 and December 31, 2016, respectively, and are carried at the lower of cost or market.

During the quarter ended June 30, 2017, the Company sold a portion of its mortgage servicing rights (“MSR”) with a book value of $4.8 million, generating an associated gain of $958,000. During the third quarter of 2017, a $38,000 adjustment was made to mortgage servicing rights resulting in a revised gain of $996,000 due to better than expected prepayments.

The following tables summarize servicing rights activity and the respective book value at or for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended
	September 30,
	2017		2016
Beginning balance	$	4,899	$	6,751
Additions		1,326		1,095
Servicing rights amortized		(414)		(408)
Recovery on servicing rights		—		216
Ending balance	$	5,811	$	7,654

	At or For the Nine Months Ended
	September 30,
	2017		2016
Beginning balance	$	8,459	$	5,811
Additions		3,569		2,927
Sales		(4,751)		—
Servicing rights amortized		(1,465)		(1,086)
(Impairment) recovery on servicing rights		(1)		2
Ending balance	$	5,811	$	7,654

The fair market value of the permanent servicing rights’ assets was $7.3 million and $11.7 million at September 30, 2017 and December 31, 2016, respectively. Fair value adjustments to servicing rights are mainly due to market based assumptions associated with discounted cash flows, loan prepayment speeds, and changes in interest rates. A significant change in prepayments of the loans in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of servicing rights.

The following provides valuation assumptions used in determining the fair value of MSR at the dates indicated:

	At September 30,
	2017		2016
Key assumptions:
Weighted average discount rate	9.5	%	9.5	%
Conditional prepayment rate (“CPR”)	11.3	%	16.4	%
Weighted average life in years	6.8		5.2

Key economic assumptions and the sensitivity of the current fair value for single family MSR to immediate adverse changes in those assumptions at September 30, 2017 and December 31, 2016 were as follows:

				September 30, 2017			December 31, 2016
Aggregate portfolio principal balance				$	658,599		$	973,139
Weighted average rate of note					4.0	%		3.9	%
At September 30, 2017	Base			0.5%Adverse Rate Change			1.0%Adverse Rate Change
Conditional prepayment rate		11.3	%		18.2	%		25.4	%
Fair value MSR	$	7,283		$	5,764		$	4,682
Percentage of MSR		1.1	%		0.9	%		0.7	%
Discount rate		9.5	%		10.0	%		10.5	%
Fair value MSR	$	7,283		$	7,139		$	7,000
Percentage of MSR		1.1	%		1.1	%		1.1	%
At December 31, 2016	Base			0.5%Adverse Rate Change			1.0%Adverse Rate Change
Conditional prepayment rate		8.8	%		12.8	%		20.2	%
Fair value MSR	$	11,735		$	9,991		$	7,808
Percentage of MSR		1.2	%		1.0	%		0.8	%
Discount rate		9.5	%		10.0	%		10.5	%
Fair value MSR	$	11,735		$	11,480		$	11,235
Percentage of MSR		1.2	%		1.2	%		1.2	%

The above table shows the sensitivity to market rate changes for the par rate coupon for a conventional one-to-four-family FNMA/FHLMC/GNMA/FHLB serviced home loan. The above table references a 50 basis point and 100 basis point decrease in note rates.

These sensitivities are hypothetical and should be used with caution as the tables above demonstrate the Company’s methodology for estimating the fair value of MSR is highly sensitive to changes in key assumptions. For example, actual prepayment experience may differ and any difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, in these tables, the effects of a variation in a particular assumption on the fair value of the MSR is calculated without changing any other assumption; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may provide an incentive to refinance; however, this may also indicate a slowing economy and an increase in the unemployment rate, which reduces the number of borrowers who qualify for refinancing), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made at a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time.

The Company recorded $430,000 and $534,000 of gross contractually specified servicing fees, late fees, and other ancillary fees resulting from servicing of mortgage and commercial loans for the three months ended September 30, 2017 and 2016, respectively, and $1.8 million and $1.4 million for the nine months ended September 30, 2017 and 2016, respectively. The income, net of amortization, is reported in noninterest income on the Consolidated Statements of Income.

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Derivatives

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

NOTE 6 - DERIVATIVES

The Company regularly enters into commitments to originate and sell loans held for sale. The Company has established a hedging strategy to protect itself against the risk of loss associated with interest rate movements on loan commitments. The Company enters into contracts to sell forward To-Be-Announced (“TBA”) mortgage-backed securities. These commitments and contracts are considered derivatives but have not been designated as hedging instruments for reporting purposes under U.S. GAAP. Rather, they are accounted for as free-standing derivatives, or economic hedges, with changes in the fair value of the derivatives reported in noninterest income. The Company recognizes all derivative instruments as either other assets or other liabilities on the Consolidated Balance Sheets and measures those instruments at fair value.

The following tables summarize the Company’s derivative instruments at the dates indicated:

	September 30, 2017
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	59,741	$	1,131	$	—
Mandatory and best effort forward commitments with investors		33,491		4		—
Forward TBA mortgage-backed securities		77,000		104		—
TBA mortgage-backed securities forward sales paired off with investors		32,500		—		140

	December 31, 2016
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	33,289	$	818	$	—
Mandatory and best effort forward commitments with investors		23,536		177		—
Forward TBA mortgage-backed securities		53,000		495		—
TBA mortgage-backed securities forward sales paired off with investors		44,000		747		—

The fair value of derivatives was impacted during the third quarter of 2017 by an increase in notional asset value partially offset by a decrease in the fair value on the derivative asset, specifically loan locks and loan commitments.

At September 30, 2017 and 2016, the Company had $77.0 million and $99.5 million of TBA trades with counterparties that required margin collateral of $485,000 and $872,000, respectively.  This collateral is included in interest-bearing deposits at other financial institutions on the Consolidated Balance Sheets.

Changes in the fair value of the derivatives recognized in other noninterest income on the Consolidated Statements of Income and included in gain on sale of loans resulted in net gains of $374,000 and $697,000 for the three months ended September 30, 2017 and 2016, respectively, and net (loss) gain of ($7,000) and $1.7 million for the nine months ended September 30, 2017 and 2016, respectively.

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Other Real Estate Owned

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Other Real Estate Owned

NOTE 7 - OTHER REAL ESTATE OWNED

There was no OREO activity for the three months ended September 30, 2017 and 2016. The following table presents the activity related to OREO at or for the nine months ended September 30, 2017 and 2016:

	At or For the Nine Months Ended
	September 30,
	2017		2016
Beginning balance	$	—	$	—
Net loans transferred to OREO		—		525
Capitalized costs		—		7
Gross proceeds from sale of OREO		—		(682)
Gain on sale of OREO		—		150
Ending balance	$	—	$	—

There were no OREO properties at September 30, 2017 and September 30, 2016. For the three and nine months ended September 30, 2017, and for the three months ended September 30, 2016, the Company recorded no net gain or loss on the disposal of OREO.  For the nine months ended September 30, 2016, the Company recorded a $150,000 net gain on the disposal of OREO. There were no holding costs associated with OREO for the three and nine months ended September 30, 2017 and 2016.

There were no mortgage loan properties in the process of foreclosure at September 30, 2017. At December 31, 2016, there was a $43,000 mortgage loan collateralized by residential real estate property in the process of foreclosure.

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Deposits

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Deposits

NOTE 8 - DEPOSITS

Deposits are summarized as follows at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017(1)		2016(1)
Noninterest-bearing checking	$	156,017	$	143,236
Interest-bearing checking		115,775		66,119
Savings		72,974		54,995
Money market(4)		236,036		242,849
Certificates of deposit less than $100,000(2)		143,169		93,791
Certificates of deposit of $100,000 through $250,000		73,733		74,832
Certificates of deposit of $250,000 and over(3)		31,927		27,094
Escrow accounts related to mortgages serviced		10,947		9,677
Total	$	840,578	$	712,593

(1) Includes $138.2 million of deposits acquired in the Branch Purchase at September 30, 2017 and $162.2 million at December 31, 2016.

(2) Includes $92.2 million of brokered deposits at September 30, 2017 and $47.1 million at December 31, 2016.

(3) Time deposits that meet or exceed the FDIC insurance limit.

(4) Includes $10.0 million of brokered deposits at September 30, 2017 and none at December 31, 2016.

Federal Reserve regulations require that the Bank maintain reserves in the form of cash on hand and deposit balances with the Federal Reserve Bank, based on a percentage of deposits. The amounts of such balances at September 30, 2017 and December 31, 2016 were $19.3 million and $10.7 million, respectively.

Scheduled maturities of time deposits at September 30, 2017 for future periods ending are as follows:

	At September 30, 2017
Maturing in 2017	$	81,162
Maturing in 2018		75,057
Maturing in 2019		45,868
Maturing in 2020		14,980
Maturing in 2021		15,816
Thereafter		15,946
Total	$	248,829

Interest expense by deposit category for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Interest-bearing checking	$	44	$	7	$	66	$	20
Savings and money market		356		257		937		757
Certificates of deposit		645		544		1,790		1,634
Total	$	1,045	$	808	$	2,793	$	2,411

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Commitments - The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the Consolidated Balance Sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

The following table provides a summary of the Company’s commitments at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017		2016
COMMITMENTS TO EXTEND CREDIT
REAL ESTATE LOANS
Commercial	$	108	$	108
Construction and development		82,115		57,016
One-to-four-family (includes loans held for sale)		117,997		79,870
Home equity		31,258		26,129
Multi-family		418		426
Total real estate loans		231,896		163,549
CONSUMER LOANS		10,025		8,527
COMMERCIAL BUSINESS LOANS
Commercial and industrial		46,912		31,775
Warehouse lending		58,231		51,102
Total commercial business loans		105,143		82,877
Total commitments to extend credit	$	347,064	$	254,953

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the amount of the total commitments do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon an extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial properties.

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Company is committed. The Company has established reserves for estimated losses from unfunded commitments of $237,000 at September 30, 2017 and $179,000 at December 31, 2016. One-to-four-family commitments included in the table above are accounted for as fair value derivatives and do not carry an associated loss reserve.

The Company also sells one-to-four-family loans to the FHLB of Des Moines that require a limited level of recourse if the loans default and exceed a certain loss exposure. Specific to that recourse, the FHLB established a first loss account (“FLA”) related to the loans and required a credit enhancement (“CE”) obligation by the Bank to be utilized after the FLA is used. Based on loans sold through September 30, 2017, the total loans sold to the FHLB were $40.5 million with the FLA being $433,000 and the CE obligation at $1.1 million or 2.6% of the loans outstanding. Management has established a holdback of 10% of the outstanding CE, or $110,000, which is a part of the off-balance sheet holdback for loans sold. There were no outstanding delinquencies on the loans sold to the FHLB of Des Moines at September 30, 2017 and December 31, 2016.

Contingent liabilities for loans held for sale - In the ordinary course of business, loans are sold with limited recourse against the Company and may have to subsequently be repurchased due to defects that occurred during the origination of the loan. The defects are categorized as documentation errors, underwriting errors, early payoff, early payment defaults, breach of representation or warranty, servicing errors, and/or fraud. When a loan sold to an investor without recourse fails to perform according to its contractual terms, the investor will typically review the loan file to determine whether defects in the origination process occurred. If a defect is identified, the Company may be required to either repurchase the loan or indemnify the investor for losses sustained. If there are no such defects, the Company has no commitment to repurchase the loan. The Company has recorded reserves of $1.0 million and $955,000 to cover loss exposure related to these guarantees for one-to-four-family loans sold into the secondary market at September 30, 2017 and December 31, 2016, which is included in other liabilities on the Consolidated Balance Sheets.

The Company has entered into a severance agreement with its Chief Executive Officer. The severance agreement, subject to certain requirements, generally includes a lump sum payment to the Chief Executive Officer equal to 24 months of base compensation in the event his employment is involuntarily terminated, other than for cause or the executive terminates his employment with good reason, as defined in the severance agreement.

The Company has entered into change of control agreements with its Chief Financial Officer, Chief Operating Officer, Chief Lending Officer, and two Executive Vice Presidents of Home Lending. The change of control agreements, subject to certain requirements, generally remain in effect until canceled by either party upon at least 24 months prior written notice. Under the change of control agreements, the executive generally will be entitled to a change of control payment from the Company if the executive is involuntarily terminated within six months preceding or 12 months after a change in control (as defined in the change of control agreements). In such an event, the executives would each be entitled to receive a cash payment in an amount equal to 12 months of their then current salary, subject to certain requirements in the change of control agreements.

The Bank received 7,158 shares of Class B common stock in Visa, Inc. as a result of the Visa initial public offering (“IPO”) in March 2008. These Class B shares of stock held by the Bank could be converted to Class A shares at a conversion rate of 1.6483 when all litigation pending as of the date of the IPO is concluded. However, at September 30, 2017, the date that litigation will be concluded cannot be determined. Until such time, the stock cannot be redeemed or sold by the Bank; therefore, it is not readily marketable and has a current carrying value of $0. Visa, Inc. Class A stock’s market value at September 30, 2017 and December 31, 2016 was $105.24 per share and $77.73 per share, respectively.

Due to the nature of our activities, the Company is subject to various pending and threatened legal actions, which arise in the ordinary course of business. From time to time, subordination liens may create litigation which requires us to defend our lien rights. In the opinion of management, liabilities arising from these claims, if any, will not have a material effect on our financial position. The Company had no material pending legal actions at September 30, 2017.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. Consequently, the fair value of the Company’s consolidated financial instruments will change when interest rate levels change and that change may either be favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed interest rate obligations are less likely to prepay in a rising interest rate environment and more likely to prepay in a falling interest rate environment. Conversely, depositors who are receiving fixed interest rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors interest rates and maturities of assets and liabilities, and attempts to minimize interest rate risk by adjusting terms of new loans and deposits, and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

Accounting guidance regarding fair value measurements defines fair value and establishes a framework for measuring fair value in accordance with U.S. GAAP. Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The following definitions describe the levels of inputs that may be used to measure fair value:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Determination of Fair Market Values:

Securities Available-for-Sale - The fair value of securities available-for-sale are recorded on a recurring basis. The fair value of investments and mortgage-backed securities are provided by a third-party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid, and other market information, and for structured securities, cash flow, and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. Transfers between the fair value hierarchy are determined through the third-party service provider which, from time to time will transfer between levels based on market conditions per the related security. All models and processes used take into account market convention (Level 2).

Mortgage and Nonmortgage Loans Held for Sale - The fair value of loans held for sale reflects the value of commitments with investors and/or the relative price as delivered into a TBA mortgage-backed security (Level 2).

Derivative Instruments - The fair value of the interest rate lock commitments and forward sales commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. TBA mortgage-backed securities are fair valued on similar contracts in active markets (Level 2) while locks and forwards with customers and investors are fair valued using similar contracts in the market and changes in the market interest rates (Levels 2 and 3).

Impaired Loans - Fair value adjustments to impaired collateral dependent loans are recorded to reflect partial write-downs based on the current appraised value of the collateral or internally developed models, which contain management’s assumptions. Management will utilize discounted cash flow impairment for TDRs when the change in terms results in a discount to the overall cash flows to be received (Level 3).

The following tables present securities available-for-sale measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Securities Available-for-Sale
	Level 1		Level 2		Level 3		Total
At September 30, 2017
U.S. agency securities	$	—	$	6,122	$	—	$	6,122
Corporate securities		—		7,075		—		7,075
Municipal bonds		—		11,439		—		11,439
Mortgage-backed securities		—		39,474		—		39,474
U.S. Small Business Administration securities		—		13,993		—		13,993
Total	$	—	$	78,103	$	—	$	78,103

	Securities Available-for-Sale
	Level 1		Level 2		Level 3		Total
At December 31, 2016
U.S. agency securities	$	—	$	8,068	$	—	$	8,068
Corporate securities		—		7,500		—		7,500
Municipal bonds		—		15,264		—		15,264
Mortgage-backed securities		—		45,195		—		45,195
U.S. Small Business Administration securities		—		5,848		—		5,848
Total	$	—	$	81,875	$	—	$	81,875

The following table presents mortgage loans held for sale measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Mortgage Loans Held for Sale
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	65,055	$	—	$	65,055
December 31, 2016	$	—	$	52,553	$	—	$	52,553

The following tables present the fair value of interest rate lock commitments with customers, individual forward sale commitments with investors, and paired off commitments with investors measured at their fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Interest Rate Lock Commitments with Customers
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	—	$	1,131	$	1,131
December 31, 2016	$	—	$	—	$	818	$	818

	Individual Forward Sale Commitments with Investors
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	104	$	4	$	108
December 31, 2016	$	—	$	495	$	177	$	672

	Paired Off Commitments with Investors
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	(140)	$	—	$	(140)
December 31, 2016	$	—	$	747	$	—	$	747

The following table presents impaired loans measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded at September 30, 2017 and December 31, 2016. The amounts disclosed below represent the fair values at the time the nonrecurring fair value measurements were evaluated.

	Impaired Loans
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	—	$	761	$	761
December 31, 2016	$	—	$	—	$	194	$	194

Quantitative Information about Level 3 Fair Value Measurements - Shown in the table below is the fair value of financial instruments measured under a Level 3 unobservable input on a recurring and nonrecurring basis at September 30, 2017:

		Significant	Range	Weighted
Level 3 Fair Value Instrument	Valuation Technique	Unobservable Inputs	(Weighted Average)	Average
RECURRING
Interest rate lock commitments with customers	Quoted market prices	Pull-through expectations	80% - 99%	95.0	%
Individual forward sale commitments with investors	Quoted market prices	Pull-through expectations	80% - 99%	95.0	%
NONRECURRING
Impaired loans	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 18.0%	11.6	%

An increase in the pull-through rate utilized in the fair value measurement of the interest rate lock commitments with customers and forward sale commitments with investors will result in positive fair value adjustments (and an increase in the fair value measurement). Conversely, a decrease in the pull-through rate will result in a negative fair value adjustment (and a decrease in the fair value measurement).

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine months ended September 30, 2017 and 2016:

									Net change in fair
									value for gains/
			Purchases						(losses) relating to
	Beginning		and		Sales and		Ending		items held at end of
Three Months Ended September 30,	Balance		Issuances		Settlements		Balance		period
2017
Interest rate lock commitments with customers	$	1,212	$	3,891	$	(3,972)	$	1,131	$	(81)
Individual forward sale commitments with investors		83		40		(119)		4		(79)
2016
Interest rate lock commitments with customers	$	2,058	$	5,763	$	(5,971)	$	1,850	$	(208)
Individual forward sale commitments with investors		(3)		(60)		23		(40)		(37)

									Net change in fair
									value for gains/
			Purchases						(losses) relating to
	Beginning		and		Sales and		Ending		items held at end of
Nine Months Ended September 30,	Balance		Issuances		Settlements		Balance		period
2017
Interest rate lock commitments with customers	$	818	$	11,440	$	(11,127)	$	1,131	$	313
Individual forward sale commitments with investors		177		(49)		(124)		4		(173)
2016
Interest rate lock commitments with customers	$	698	$	14,039	$	(12,887)	$	1,850	$	1,152
Individual forward sale commitments with investors		74		(267)		153		(40)		(114)

Gains (losses) on interest rate lock commitments carried at fair value are recorded in other noninterest income. Gains (losses) on forward sale commitments with investors carried at fair value are recorded within other noninterest income.

Fair Values of Financial Instruments - The following methods and assumptions were used by the Company in estimating the fair values of financial instruments disclosed in these financial statements:

Cash, and Cash Equivalents and Certificates of Deposit at Other Financial Institutions - The carrying amounts of cash and short-term instruments approximate their fair value (Level 1).

Federal Home Loan Bank stock - The par value of FHLB stock approximates its fair value (Level 2).

Bank-owned Life Insurance - The estimated fair value is equal to the cash surrender value of policies, net of surrender charges (Level 1).

Accrued Interest - The carrying amounts of accrued interest approximate its fair value (Level 2).

Loans Receivable, Net - For variable rate loans that re-price frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for fixed rate loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers or similar credit quality (Level 3).

Servicing Rights - The fair value of mortgage, commercial, and consumer servicing rights are estimated using net present value of expected cash flows using a third party model that incorporates assumptions used in the industry to value such rights, adjusted for factors such as weighted average prepayments speeds based on historical information where appropriate (Level 3).

Deposits - The fair value of deposits with no stated maturity date is included at the amount payable on demand. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation on interest rates currently offered on similar certificates (Level 2).

Borrowings - The carrying amounts of advances maturing within 90 days approximate their fair values. The fair values of long-term advances are estimated using discounted cash flow analyses based on the Bank’s current incremental borrowing rates for similar types of borrowing arrangements (Level 2).

Subordinated Note - The fair value of the Subordinated Note is based upon the average yield of debt issuances for similarly sized issuances (Level 2).

Off-Balance Sheet Instruments - The fair value of commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the customers. The majority of the Company’s off-balance sheet instruments consist of non-fee producing, variable-rate commitments, the Company has determined they do not have a distinguishable fair value. The fair value of loan lock commitments with customers and investors reflect an estimate of value based upon the interest rate lock date, the expected pull-through percentage for the commitment, and the interest rate at year end (Level 2 and 3).

The following table provides estimated fair values of the Company’s financial instruments at September 30, 2017 and December 31, 2016:

	September 30,				December 31,
	2017				2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial Assets
Level 1 inputs:
Cash and cash equivalents	$	31,295	$	31,295	$	36,456	$	36,456
Certificates of deposit at other financial institutions		18,108		18,108		15,248		15,248
Level 2 inputs:
Securities available-for-sale, at fair value		78,103		78,103		81,875		81,875
Loans held for sale, at fair value		65,055		65,055		52,553		52,553
FHLB stock, at cost		3,047		3,047		2,719		2,719
Accrued interest receivable		3,217		3,217		2,524		2,524
Individual forward sale commitments with investors		104		104		495		495
Paired off commitments with investors		—		—		747		747
Level 3 inputs:
Loans receivable, gross		765,571		779,284		605,415		670,183
Servicing rights, held at lower of cost or fair value		5,811		7,289		8,459		11,741
Fair value interest rate locks with customers		1,131		1,131		818		818
Individual forward sale commitments with investors		4		4		177		177
Financial Liabilities
Level 2 inputs:
Deposits		840,578		844,288		712,593		718,970
Borrowings		10,270		9,049		12,670		12,660
Subordinated note		9,840		9,805		9,825		9,805
Accrued interest payable		217		217		192		192
Paired off commitments with investors		140		140		—		—

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Employee Benefits

9 Months Ended

Sep. 30, 2017

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plans

NOTE 11 - EMPLOYEE BENEFITS

Employee Stock Ownership Plan

On January 1, 2012, the Company established an ESOP for eligible employees of the Company and the Bank.  Employees of the Company and the Bank are eligible to participate in the ESOP if they have been credited with at least 1,000 hours of service during the employees’ first 12‑month period and based on anniversary date will be vested into the ESOP. After two years of working at least 1,000 hours in each of those two years, the employee will be 100% vested in the ESOP.

The ESOP borrowed $2.6 million from FS Bancorp, Inc. and used those funds to acquire 259,210 shares of FS Bancorp, Inc. common stock in the open market at an average price of $10.17 per share during the second half of 2012. It is anticipated that the Bank will make contributions to the ESOP in amounts necessary to amortize the ESOP loan payable to FS Bancorp, Inc. over a period of 10 years, bearing interest at 2.30%. Intercompany expenses associated with the ESOP are eliminated in consolidation. Shares purchased by the ESOP with the loan proceeds are held in a suspense account and allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to FS Bancorp, Inc. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank’s discretionary contributions to the ESOP and earnings on the ESOP assets. Payments of principal and interest are due annually on December 31, the Company’s fiscal year end. On December 31, 2016, the ESOP paid the fifth annual installment of principal in the amount of $257,000, plus accrued interest of $38,000 pursuant to the ESOP loan agreement.

As shares are committed to be released from collateral, the Company reports compensation expense equal to the average daily market prices of the shares at September 30, 2017 for the prior 90 days. These shares become outstanding for earnings per share computations. The compensation expense is accrued monthly throughout the year. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.

Compensation expense related to the ESOP for the three months ended September 30, 2017 and 2016 was $360,000 and $204,000, respectively, and $914,000 and $529,000 for the nine months ended September 30, 2017 and 2016, respectively.

Shares held by the ESOP at September 30, 2017 and 2016 were as follows (shown as actual):

	Balances		Balances
	at September 30, 2017		at September 30, 2016
Allocated shares		126,589		102,359
Committed to be released shares		19,441		19,441
Unallocated shares		110,164		136,085
Total ESOP shares		256,194		257,885
Fair value of unallocated shares (in thousands)	$	5,180	$	3,703

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Earnings Per Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 12 - EARNINGS PER SHARE

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For earnings per share calculations, the ESOP shares committed to be released are included as outstanding shares for both basic and diluted earnings per share.

The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the three end nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30,				At or For the Nine Months Ended September 30,
Numerator:	2017		2016		2017		2016
Net income (in thousands)	$	3,454	$	3,457	$	10,406	$	7,953
Denominator:
Basic weighted average common shares outstanding		3,051,744		2,851,147		2,949,092		2,901,572
Dilutive shares		187,584		87,292		192,685		84,102
Diluted weighted average common shares outstanding		3,239,328		2,938,439		3,141,777		2,985,674
Basic earnings per share	$	1.13	$	1.21	$	3.53	$	2.74
Diluted earnings per share	$	1.07	$	1.18	$	3.31	$	2.66

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

NOTE 13 - STOCK-BASED COMPENSATION

Stock Options and Restricted Stock

In September 2013, the shareholders of FS Bancorp, Inc. approved the FS Bancorp, Inc. 2013 Equity Incentive Plan (“Plan”). The Plan provides for the grant of stock options and restricted stock awards.

Total share-based compensation expense for the Plan was $138,000 and $496,000 for the three and nine months ended September 30, 2017, respectively, and $195,000 and $588,000 for the three and nine months ended September 30, 2016, respectively.

Stock Options

The Plan authorizes the grant of stock options totaling 324,013 shares to Company directors and employees in which 322,000 option share awards under the Plan were granted with an exercise price equal to the market price of FS Bancorp’s common stock at the grant date of May 8, 2014, of $16.89 per share. These option share awards were granted as non-qualified stock options, having a vesting period of five years, with 20% vesting on the anniversary date of each grant date, and a contractual life of 10 years. Any unexercised stock options will expire 10 years after the grant date or sooner in the event of the award recipient’s termination of service with the Company or the Bank.  At September 30, 2017, 2,013 option share awards are available to be granted.

The fair value of each option award is estimated on the grant date using a Black-Scholes Option pricing model that uses the following assumptions. The dividend yield is based on the current quarterly dividend in effect at the time of the grant. Historical employment data is used to estimate the forfeiture rate. The Company became a publicly held company in July 2012, therefore historical data was not available to calculate the volatility for FS Bancorp stock. Management utilized a proxy to determine the expected volatility of FS Bancorp’s stock at grant date for the majority of stock options granted in 2014. The proxy chosen was the NASDAQ Bank Index, or NASDAQ Bank (NASDAQ symbol: BANK). This index provides the volatility of the banking sector for NASDAQ traded banks. The majority of smaller banks are traded on the NASDAQ given the costs and daily interaction required with trading on the New York Stock Exchange. The Company utilized the comparable Treasury rate for the discount rate associated with the stock options granted. The Company elected to use Staff Accounting Bulletin 107, simplified expected term calculation for the “Share-Based Payments” method permitted by the SEC to calculate the expected term. This method uses the vesting term of an option along with the contractual term, setting the expected life at 6.5 years.

The following table presents a summary of the Company’s stock option plan awards during the nine months ended September 30, 2017 (shown as actual):

				Weighted-Average
		Weighted-		Remaining
		Average		Contractual Term In	Aggregate
	Shares	Exercise Price		Years	Intrinsic Value
Outstanding at January 1, 2017	295,850	$	16.89	7.36	$	5,638,901
Granted	—		—	—		—
Less exercised	34,363	$	16.89	—	$	919,380
Forfeited or expired	—		—	—		—
Outstanding at September 30, 2017	261,487	$	16.89	6.61	$	9,089,288
Expected to vest, assuming a 0.31% annual forfeiture rate	261,053	$	16.89	6.61	$	9,074,192
Exercisable at September 30, 2017	134,687	$	16.89	6.61	$	4,681,720

At September 30, 2017, there was $368,000 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. The cost is expected to be recognized over the remaining weighted-average vesting period of 1.6 years.

Restricted Stock Awards

The Plan authorizes the grant of restricted stock awards totaling 129,605 shares to Company directors and employees, and 125,105 shares were granted on May 8, 2014 at a grant date fair value of $16.89 per share. The remaining 4,500 restricted stock awards were granted January 1, 2016 at a grant date fair value of $26.00 per share. Compensation expense is recognized over the vesting period of the awards based on the fair value of the restricted stock. The restricted stock awards’ fair value is equal to the value on the grant date. Shares awarded as restricted stock vest ratably over a three-year period for directors and a five-year period for employees, beginning at the grant date. Any unvested restricted stock awards will expire after vesting or sooner in the event of the award recipient’s termination of service with the Company or the Bank.

The following table presents a summary of the Company’s nonvested awards during the nine months ended September 30, 2017 (shown as actual):

		Weighted-Average
		Grant-Date Fair Value		Weighted-Average
Nonvested Shares	Shares	Per Share		Grant-Date Fair Value
Nonvested at January 1, 2017	68,763	$	17.49	$	1,202,401
Granted	—		—		—
Less vested	31,921	$	17.32	$	552,810
Forfeited or expired	—		—		—
Nonvested at September 30, 2017	36,842	$	17.63	$	649,591

At September 30, 2017, there was $508,000 of total unrecognized compensation costs related to nonvested shares granted as restricted stock awards. The cost is expected to be recognized over the remaining weighted-average vesting period of 1.6 years.

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Regulatory Capital

9 Months Ended

Sep. 30, 2017

Regulatory Capital Requirements [Abstract]

Regulatory Capital

NOTE 14 - REGULATORY CAPITAL

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. 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 ratios as set forth in the table below to be categorized as well capitalized. At September 30, 2017 and December 31, 2016, 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 September 30 2017, that the Company and the Bank met all capital adequacy requirements.

The following table compares the Bank’s actual capital amounts and ratios at September 30, 2017 and December 31, 2016 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				Corrective
	Actual				Adequacy Purposes				Action Provisions
Bank Only	Amount		Ratio		Amount		Ratio		Amount		Ratio
At September 30, 2017
Total risk-based capital
(to risk-weighted assets)	$	130,246	16.14	%	$	64,556	8.00	%	$	80,696	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	120,150	14.89	%	$	48,417	6.00	%	$	64,556	8.00	%
Tier 1 leverage capital
(to average assets)	$	120,150	12.50	%	$	38,459	4.00	%	$	48,074	5.00	%
CET 1 capital
(to risk-weighted assets)	$	120,150	14.89	%	$	36,313	4.50	%	$	52,452	6.50	%
At December 31, 2016
Total risk-based capital
(to risk-weighted assets)	$	93,309	13.87	%	$	53,813	8.00	%	$	67,266	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	84,876	12.62	%	$	40,360	6.00	%	$	53,813	8.00	%
Tier 1 leverage capital
(to average assets)	$	84,876	10.33	%	$	32,862	4.00	%	$	41,078	5.00	%
CET 1 capital
(to risk-weighted assets)	$	84,876	12.62	%	$	30,270	4.50	%	$	43,723	6.50	%

In addition to the minimum CET 1, Tier 1 and total capital ratios, the Bank has to maintain a capital conservation buffer consisting of additional CET 1 capital above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement was phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented to an amount equal to 2.5% of risk-weighted assets in January 2019. At September 30, 2017, the Bank’s CET1 capital exceeded the required capital conservation buffer of 1.25%.

FS Bancorp, Inc. is a bank holding company subject to the capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. For a bank holding company with less than $1.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company’s subsidiary banks to be well capitalized under the prompt corrective action regulations. If FS Bancorp, Inc. was subject to regulatory guidelines for bank holding companies with $1.0 billion or more in assets, at September 30, 2017, the Company would have exceeded all regulatory capital requirements. The regulatory capital ratios calculated for FS Bancorp, Inc. at September 30, 2017 were 11.9% for Tier 1 leverage-based capital, 14.2% for Tier 1 risk-based capital, 15.5% for total risk-based capital, and 14.2% for CET 1 capital ratio.

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Business Segments

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Business Segments

NOTE 15 - BUSINESS SEGMENTS

The Company’s business segments are determined based on the products and services provided, as well as the nature of the related business activities, and they reflect the manner in which financial information is currently evaluated by management. This process is dynamic and is based on management’s current view of the Company’s operations and is not necessarily comparable with similar information for other financial institutions. We define our business segments by product type and customer segment which we have organized into two lines of business: commercial and consumer banking and home lending.

We use various management accounting methodologies to assign certain income statement items to the responsible operating segment, including:

a funds transfer pricing (“FTP”) system, which allocates interest income credits and funding charges between the segments, assigning to each segment a funding credit for its liabilities, such as deposits, and a charge to fund its assets;

a cost per loan serviced allocation based on the number of loans being serviced on the balance sheet and the number of loans serviced for third parties;

an allocation based upon the square footage utilized by the home lending segment in Company owned locations;

an allocation of charges for services rendered to the segments by centralized functions, such as corporate overhead, which are generally based on the number of full time employees (“FTEs”) in each segment; and

an allocation of the Company’s consolidated income taxes which are based on the effective tax rate applied to the segment’s pretax income or loss.

The FTP methodology is based on management’s estimated cost of originating funds including the cost of overhead for deposit generation.

A description of the Company’s business segments and the products and services that they provide is as follows:

Commercial and Consumer Banking Segment

The commercial and consumer banking segment provides diversified financial products and services to our commercial and consumer customers through Bank branches, ATMs, online banking platforms, mobile banking apps, and telephone banking. These products and services include deposit products; residential, consumer, business and commercial real estate lending portfolios and cash management services. We originate consumer loans, commercial and multi-family real estate loans, construction loans on residential and multi-family construction, and commercial business loans. At September 30, 2017, our retail deposit branch network consisted of 11 branches in the Pacific Northwest. At September 30, 2017 and December 31, 2016, our deposits totaled $840.6 million and $712.6 million, respectively. This segment is also responsible for the management of our investment portfolio and other assets of the Bank.

Home Lending Segment

The home lending segmentoriginates one-to-four-family residential mortgage loans primarily for sale in the secondary markets as well as originating adjustable rate mortgage (“ARM”) loans held for investment. The majority of our mortgage loans are sold to or securitized by FNMA, FHLMC, GNMA or FHLB, while we retain the right to service these loans. Loans originated under the guidelines of the Federal Housing Administration or FHA, US Department of Veterans Affairs or VA, and United States Department of Agriculture or USDA are generally sold servicing released to a correspondent bank or mortgage company. We have the option to sell loans on a servicing-released or servicing-retained basis to securitizers and correspondent lenders. A small percentage of our loans are brokered to other lenders. On occasion, we may sell a portion of our MSR portfolio. We manage the loan funding and the interest rate risk associated with the secondary market loan sales and the retained one-to-four-family mortgage servicing rights within this business segment. One-to-four-family loans originated for investment are allocated to the home lending segment with a corresponding provision expense and FTP for cost of funds.

Segment Financial Results

The tables below summarize the financial results for each segment based primarily on the number of FTEs and assets within each segment for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30, 2017
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	812	$	10,210	$	11,022
Provision for loan losses		(127)		(323)		(450)
Noninterest income		5,014		1,413		6,427
Noninterest expense		(4,586)		(7,003)		(11,589)
Income before provision for income taxes		1,113		4,297		5,410
Provision for income taxes		(407)		(1,549)		(1,956)
Net income	$	706	$	2,748	$	3,454
Total average assets at period end	$	220,898	$	744,820	$	965,718
FTEs		119		204		323

	At or For the Three Months Ended September 30, 2016
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	793	$	7,957	$	8,750
Provision for loan losses		(16)		(584)		(600)
Noninterest income		5,982		1,266		7,248
Noninterest expense		(3,861)		(6,451)		(10,312)
Income before provision for income taxes		2,898		2,188		5,086
Provision for income taxes		(948)		(681)		(1,629)
Net income	$	1,950	$	1,507	$	3,457
Total average assets at period end	$	168,722	$	634,735	$	803,457
FTEs		110		195		305

	At or For the Nine Months Ended September 30, 2017
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	1,857	$	28,105	$	29,962
Provision for loan losses		(324)		(126)		(450)
Noninterest income		14,863		3,941		18,804
Noninterest expense		(12,985)		(19,924)		(32,909)
Income before provision for income taxes		3,411		11,996		15,407
Provision for income taxes		(1,107)		(3,894)		(5,001)
Net income	$	2,304	$	8,102	$	10,406
Total average assets at period end	$	196,765	$	706,017	$	902,782
FTEs		119		204		323

	At or For the Nine Months Ended September 30, 2016
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	1,706	$	22,959	$	24,665
Provision for loan losses		(142)		(1,658)		(1,800)
Noninterest income		14,852		3,273		18,125
Noninterest expense		(10,593)		(18,246)		(28,839)
Income before provision for income taxes		5,823		6,328		12,151
Provision for income taxes		(2,012)		(2,186)		(4,198)
Net income	$	3,811	$	4,142	$	7,953
Total average assets at period end	$	147,873	$	642,283	$	790,156
FTEs		110		195		305

(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.

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Financial Statement Presentation

Financial Statement Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10‑Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10‑K with all of the audited information and footnotes required by U.S. GAAP for complete financial statements for the year ended December 31, 2016, as filed with the SEC on March 16, 2017. In the opinion of management, all normal adjustments and recurring accruals considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.

The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, or any other future period. The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan and lease losses, fair value of financial instruments,  and the valuation of servicing rights.

Amounts presented in the consolidated financial statements and footnote tables are rounded and presented in thousands of dollars except per share amounts. In the narrative footnote discussion, amounts are rounded and presented in millions of dollars to one decimal point if the amounts are above $1.0 million. Amounts below $1.0 million are rounded and presented in dollars to the nearest thousands. Certain prior year amounts have been reclassified to conform to the 2017 presentation with no change to consolidated net income or stockholders’ equity previously reported.

Principles of Consolidation

Principles of Consolidation - The consolidated financial statements include the accounts of FS Bancorp, Inc. and its wholly owned subsidiary, 1st Security Bank of Washington. All material intercompany accounts have been eliminated in consolidation.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting - The Company operates in two business segments through the Bank: commercial and consumer banking and home lending. The Company’s business segments are determined based on the products and services provided, as well as the nature of the related business activities, and they reflect the manner in which financial information is regularly reviewed for the purpose of allocating resources and evaluating performance of the Company’s businesses. The results for these business segments are based on management’s accounting process, which assigns income statement items and assets to each responsible operating segment. This process is dynamic and is based on management’s view of the Company’s operations. See Note 15 - Business Segments.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events - The Company has evaluated events and transactions subsequent to September 30, 2017, for potential recognition or disclosure.

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), which creates Topic 606 and supersedes Topic 605, Revenue Recognition. In August 2015, FASB issued ASU No. 2015‑14, Revenue from Contracts with Customers (Topic 606), which postponed the effective date of 2014‑09. In March 2016, the FASB issued ASU 2016‑08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amended the principal versus agent implementation guidance set for in ASU 2014‑09. Among other things, ASU 2016‑08 clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued ASU No. 2016‑10, Revenue from Contracts with Customers (Topic 606):Identifying Performance Obligations and Licensing. The ASU amends certain aspects of the guidance set forth in the FASB’s new revenue standard related to identifying performance obligations and licensing implementation. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In May 2016, the FASB issued ASU No. 2016‑12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and adds some practical expedients, but does not change the core revenue recognition principle in Topic 606. The ASU is effective for public entities for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. For financial reporting purposes, the ASU allows for either full retrospective adoption, meaning the ASU is applied to all of the periods presented, or modified retrospective adoption, meaning the ASU is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. As a bank holding company, key revenue sources, such as interest income have been identified as out of the scope of this new guidance. The Company’s preliminary analysis suggests that the adoption of this accounting standard is not expected to have a material impact on the Company’s consolidated financial statements as substantially all of the Company’s other revenues are also excluded from the scope of the new guidance. New accounting guidance related to the adoption of this standard continues to be released by the FASB, which could impact the Company’s preliminary analysis of materiality and may change the preliminary conclusions reached as to the application of this new guidance.

In January 2016, the FASB issued ASU No. 2016‑01, Financial Instruments - Overall (Subtopic 825‑10), Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. This ASU requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. In addition, the amendments in this ASU require the exit price notion be used when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This ASU also eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The ASU also requires a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU No. 2016‑01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for certain provisions. The adoption of ASU No. 2016-01 is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842). ASU No. 2016‑02 requires lessees to recognize on the balance sheet the assets and liabilities arising from operating leases. A lessee should recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. A lessee should include payments to be made in an optional period only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. For a finance lease, interest payments should be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income. For operating leases, the lease cost should be allocated over the lease term on a generally straight-line basis. The amendments in ASU 2016‑02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in the ASU is permitted. Once adopted, we expect to report higher assets and liabilities as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain equipment under noncancelable operating lease agreements, however, based on current leases, the adoption of ASU 2016‑02 is expected to increase the new lease asset and related lease liability on our Consolidated Balance Sheets by less than 5% and not to have a material impact on our regulatory capital ratios.

In June 2016, the FASB issued ASU No. 2016‑13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of this ASU on the Company’s consolidated financial statements. Once adopted, we expect our allowance for loan losses to increase through a one‑time adjustment to retained earnings, however, until our evaluation is complete the magnitude of the increase will be unknown.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to address the appropriate classification of eight specific cash flow issues on the cash flow statement. Debt prepayment costs should be classified as an outflow for financing activities. Settlement of zero-coupon debt instruments divides the interest portion as an outflow for operating activities and the principal portion as an outflow for financing activities. Contingent consideration payments made after a business combination should be classified as outflows for financing and operating activities. Proceeds from the settlement of bank-owned life insurance policies should be classified as inflows from investing activities. Other specific areas are identified in the ASU as to the appropriate classification of the cash inflows or outflows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and must be applied using a retrospective transition method to each period presented. Adoption of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017‑04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU was issued to simplify the subsequent measurement of goodwill and the amendment eliminates Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU is effective for annual reporting periods beginning after December 31, 2019. Early adoption of the ASU is permitted. The Company expects this ASU to provide a simplified method of measuring goodwill impairment and does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017‑08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310‑20):  Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The standard will take effect for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU No. 2017‑08 is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017‑09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU was issued to provide clarity as to when to apply modification accounting when there is a change in the terms or conditions of a share-based payment award. According to this ASU, an entity should account for the effects of a modification unless the fair value, vesting conditions, and balance sheet classification of the award is the same after the modification as compared to the original award prior to the modification. The standard is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2017‑09 is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting recognition and presentation requirements in ASC 815 to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The amendments in this ASU permit hedge accounting for hedging relationships involving nonfinancial risk and interest rate risk by removing certain limitations in cash flow and fair value hedging relationships. In addition, the ASU requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The adoption of ASU No. 2017-12 is not expected to have a material impact on the Company's consolidated financial statements.

Loan Portfolio Segment

The Company has defined its loan portfolio into three segments that reflect the structure of the lending function, the Company’s strategic plan and the manner in which management monitors performance and credit quality. The three loan portfolio segments are: (a) Real Estate Loans, (b) Consumer Loans and (c) Commercial Business Loans. Each of these segments is disaggregated into classes based on the risk characteristics of the borrower and/or the collateral type securing the loan. The following is a summary of each of the Company’s loan portfolio segments and classes:

Real Estate Loans

Commercial Lending. Loans originated by the Company primarily secured by income producing properties, including retail centers, warehouses, and office buildings located in our market areas.

Construction and Development Lending. Loans originated by the Company for the construction of, and secured by, commercial real estate, one-to-four-family, and multi-family residences and tracts of land for development that are generally not pre-sold. A portion of the one-to-four-family construction portfolio are custom construction loans to the intended occupant of the residence.

Home Equity Lending. Loans originated by the Company secured by second mortgages on one-to-four-family residences,   including home equity lines of credit in our market areas.

One-to-Four-Family Real Estate Lending. One-to-four-family residential loans include owner occupied properties (including second homes), and non-owner occupied properties. These loans originated by the Company are secured by first mortgages on one-to-four-family residences in our market areas that the Company intends to hold (excludes loans held for sale).

Multi-Family Lending. Apartment term lending (five or more units) to current banking customers and community reinvestment loans for low to moderate income individuals in the Company’s footprint.

Consumer Loans

Indirect Home Improvement. Fixture secured loans for home improvement are originated by the Company through its network of home improvement contractors and dealers and are secured by the personal property installed in, on, or at the borrower’s real property, and may be perfected with a UCC‑2 financing statement filed in the county of the borrower’s residence. These indirect home improvement loans include replacement windows, siding, roofing, and other home fixture installations.

Solar. Fixture secured loans for solar related home improvement projects are originated by the Company through its network of contractors and dealers, and are secured by the personal property installed in, on, or at the borrower’s real property, and which may be perfected with a UCC‑2 financing statement filed in the county of the borrower’s residence.

Marine. Loans originated by the Company secured by boats to borrowers primarily located in its market areas.

Other Consumer. Loans originated by the Company, including automobiles, recreational vehicles, direct home improvement loans, loans on deposits, and other consumer loans, primarily consisting of personal lines of credit.

Commercial Business Loans

Commercial and Industrial Lending. Loans originated by the Company to local small and mid-sized businesses in our Puget Sound market area are secured primarily by accounts receivable, inventory, or personal property, and plant and equipment. Commercial and industrial loans are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.

Warehouse Lending. Loans originated by the Company’s mortgage and construction warehouse lending program through which the Company funds third-party lenders originating residential mortgage and construction loans for sale into the secondary market and speculative construction loans for residential properties built for sale to single family households. These loans are secured by the notes and assigned deeds of trust associated with the residential mortgage and construction loans on properties primarily located in the Company’s market areas.

Nonaccrual and Past Due Loans

Nonaccrual and Past Due Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are automatically placed on nonaccrual once the loan is 90 days past due or sooner if, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, or as required by regulatory authorities.

Credit Quality Indicators

The Company utilizes a risk grading matrix to assign a risk grade to its real estate and commercial business loans. Loans are graded on a scale of 1 to 10, with loans in risk grades 1 to 6 considered “Pass” and loans in risk grades 7 to 10 are reported as classified loans in the Company’s allowance for loan loss analysis.

A description of the 10 risk grades is as follows:

Grades 1 and 2 - These grades include loans to very high quality borrowers with excellent or desirable business credit.

Grade 3 - This grade includes loans to borrowers of good business credit with moderate risk.

Grades 4 and 5 - These grades include “Pass” grade loans to borrowers of average credit quality and risk.

Grade 6 - This grade includes loans on management’s “Watch” list and is intended to be utilized on a temporary basis for “Pass” grade borrowers where frequent and thorough monitoring is required due to credit weaknesses and where significant risk-modifying action is anticipated in the near term.

Grade 7 - This grade is for “Other Assets Especially Mentioned” (“OAEM”) in accordance with regulatory guidelines and includes borrowers where performance is poor or significantly less than expected.

Grade 8 - This grade includes “Substandard” loans in accordance with regulatory guidelines which represent an unacceptable business credit where a loss is possible if loan weakness is not corrected.

Grade 9 - This grade includes “Doubtful” loans in accordance with regulatory guidelines where a loss is highly probable.

Grade 10 - This grade includes “Loss” loans in accordance with regulatory guidelines for which total loss is expected and when identified are charged off.

Consumer, Home Equity and One-to-Four-Family Real Estate Loans

Homogeneous loans are risk rated based upon the FDIC’s Uniform Retail Credit Classification and Account Management Policy. Loans classified under this policy at the Company are consumer loans which include indirect home improvement, solar, marine, other consumer, and one-to-four-family first and second liens. Under the Uniform Retail Credit Classification Policy, loans that are current or less than 90 days past due are graded “Pass” and risk rated “4” or “5” internally. Loans that are past due more than 90 days are classified “Substandard” and risk rated “8” internally until the loan has demonstrated consistent performance, typically six months of contractual payments. Closed-end loans that are 120 days past due and open-end loans that are 180 days past due are charged off based on the value of the collateral less cost to sell.

Derivatives

The Company regularly enters into commitments to originate and sell loans held for sale. The Company has established a hedging strategy to protect itself against the risk of loss associated with interest rate movements on loan commitments. The Company enters into contracts to sell forward To-Be-Announced (“TBA”) mortgage-backed securities. These commitments and contracts are considered derivatives but have not been designated as hedging instruments for reporting purposes under U.S. GAAP. Rather, they are accounted for as free-standing derivatives, or economic hedges, with changes in the fair value of the derivatives reported in noninterest income. The Company recognizes all derivative instruments as either other assets or other liabilities on the Consolidated Balance Sheets and measures those instruments at fair value.

Loan Commitments

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Determination of Fair Market Values

Determination of Fair Market Values:

Securities Available-for-Sale - The fair value of securities available-for-sale are recorded on a recurring basis. The fair value of investments and mortgage-backed securities are provided by a third-party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid, and other market information, and for structured securities, cash flow, and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. Transfers between the fair value hierarchy are determined through the third-party service provider which, from time to time will transfer between levels based on market conditions per the related security. All models and processes used take into account market convention (Level 2).

Mortgage and Nonmortgage Loans Held for Sale - The fair value of loans held for sale reflects the value of commitments with investors and/or the relative price as delivered into a TBA mortgage-backed security (Level 2).

Derivative Instruments - The fair value of the interest rate lock commitments and forward sales commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. TBA mortgage-backed securities are fair valued on similar contracts in active markets (Level 2) while locks and forwards with customers and investors are fair valued using similar contracts in the market and changes in the market interest rates (Levels 2 and 3).

Impaired Loans - Fair value adjustments to impaired collateral dependent loans are recorded to reflect partial write-downs based on the current appraised value of the collateral or internally developed models, which contain management’s assumptions. Management will utilize discounted cash flow impairment for TDRs when the change in terms results in a discount to the overall cash flows to be received (Level 3).

Employee Stock Ownership Plan

es of the Company and the Bank.  Employees of the Company and the Bank are eligible to participate in the ESOP if they have been credited with at least 1,000 hours of service during the employees’ first 12‑month period and based on anniversary date will be vested into the ESOP. After two years of working at least 1,000 hours in each of those two years, the employee will be 100% vested in the ESOP.

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Business Combination (Tables)

9 Months Ended

Sep. 30, 2017

Business Combination [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition:

	Acquired Book		Fair Value			Amount
January 22, 2016	Value		Adjustments			Recorded
Assets
Cash and cash equivalents	$	180,356	$	—		$	180,356
Loans receivable		417		—			417
Premises and equipment, net		697		267	(1)		964
Accrued interest receivable		2		—			2
Core deposit intangible		—		2,239	(2)		2,239
Goodwill		—		2,312	(3)		2,312
Other assets		103		—			103
Total assets acquired	$	181,575	$	4,818		$	186,393
Liabilities
Deposits:
Noninterest-bearing accounts	$	79,966	$	—		$	79,966
Interest-bearing accounts		106,398		—			106,398
Total deposits		186,364		—			186,364
Accrued interest payable		7		—			7
Other liabilities		22		—			22
Total liabilities assumed	$	186,393	$	—		$	186,393

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

The following table summarizes the aggregate amount recognized for each major class of assets acquired and liabilities assumed by 1st Security Bank in the Branch Purchase:

	At January 22,
	2016
Purchase price (1)	$	6,015
Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash and cash equivalents		186,371
Acquired loans		417
Premises and equipment, net		964
Accrued interest receivable		2
Core deposit intangible		2,239
Other assets		103
Deposits		(186,364)
Accrued interest payable		(7)
Other liabilities		(22)
Total fair value of identifiable net assets		3,703
Goodwill	$	2,312

(1) Purchase price includes premium paid on the deposits, the aggregate net book value of all assets acquired, and the unpaid principal and accrued interest on loans acquired.

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Amortization expense for core deposit intangible is expected to be as follows at September 30, 2017:

Fourth Quarter 2017	$	100
2018		307
2019		235
2020		181
2021		166
Thereafter		428
Total	$	1,417

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Securities Available-for-sale (Tables)

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities Reconciliation

The following tables present the amortized costs, unrealized gains, unrealized losses, and estimated fair values of securities available-for-sale at September 30, 2017 and December 31, 2016:

	September 30, 2017
							Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Values
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	6,086	$	59	$	(23)	$	6,122
Corporate securities		7,123		29		(77)		7,075
Municipal bonds		11,342		213		(116)		11,439
Mortgage-backed securities		39,733		85		(344)		39,474
U.S. Small Business Administration securities		14,018		43		(68)		13,993
Total securities available-for-sale	$	78,302	$	429	$	(628)	$	78,103

	December 31, 2016
							Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Values
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	8,150	$	12	$	(94)	$	8,068
Corporate securities		7,654		14		(168)		7,500
Municipal bonds		15,183		164		(83)		15,264
Mortgage-backed securities		45,856		52		(713)		45,195
U.S. Small Business Administration securities		5,862		27		(41)		5,848
Total securities available-for-sale	$	82,705	$	269	$	(1,099)	$	81,875

Schedule of Unrealized Loss on Investments

Investment securities that were in an unrealized loss position at September 30, 2017 and December 31, 2016 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or the underlying collateral.

	September 30, 2017
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	3,014	$	(23)	$	—	$	—	$	3,014	$	(23)
Corporate securities		—		—		1,919		(77)		1,919		(77)
Municipal bonds		4,834		(116)		—		—		4,834		(116)
Mortgage-backed securities		22,266		(247)		4,773		(97)		27,039		(344)
U.S. Small Business Administration securities		9,425		(68)		—		—		9,425		(68)
Total	$	39,539	$	(454)	$	6,692	$	(174)	$	46,231	$	(628)

	December 31, 2016
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
SECURITIES AVAILABLE-FOR-SALE
U.S. agency securities	$	6,998	$	(94)	$	—	$	—	$	6,998	$	(94)
Corporate securities		5,048		(106)		1,438		(62)		6,486		(168)
Municipal bonds		6,741		(83)		—		—		6,741		(83)
Mortgage-backed securities		39,373		(713)		—		—		39,373		(713)
U.S. Small Business Administration securities		2,963		(41)		—		—		2,963		(41)
Total	$	61,123	$	(1,037)	$	1,438	$	(62)	$	62,561	$	(1,099)

Schedule of Available for Sale Securities by Contractual Maturity

The contractual maturities of securities available-for-sale at September 30, 2017 and December 31, 2016 are listed below. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay the obligations; therefore, these securities are classified separately with no specific maturity date.

	September 30, 2017				December 31, 2016
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
U.S. agency securities
Due after one year through five years	$	—	$	—	$	4,000	$	3,956
Due after five years through ten years		4,086		4,141		4,150		4,112
Due after ten years		2,000		1,981		—		—
Subtotal		6,086		6,122		8,150		8,068
Corporate securities
Due after one year through five years		5,127		5,156		5,659		5,625
Due after five years through ten years		1,996		1,919		1,995		1,875
Subtotal		7,123		7,075		7,654		7,500
Municipal bonds
Due in one year or less		—		—		509		513
Due after one year through five years		2,013		2,059		5,326		5,386
Due after five years through ten years		3,297		3,420		7,476		7,492
Due after ten years		6,032		5,960		1,872		1,873
Subtotal		11,342		11,439		15,183		15,264
Mortgage-backed securities
Federal National Mortgage Association (“FNMA”)		22,287		22,187		23,522		23,197
Federal Home Loan Mortgage Corporation (“FHLMC”)		11,123		10,970		14,950		14,662
Government National Mortgage Association (“GNMA”)		6,323		6,317		7,384		7,336
Subtotal		39,733		39,474		45,856		45,195
U.S. Small Business Administration securities
Due after five years through ten years		12,069		12,051		5,862		5,848
Due after ten years		1,949		1,942		—		—
Subtotal		14,018		13,993		5,862		5,848
Total	$	78,302	$	78,103	$	82,705	$	81,875

Schedule of Realized Gain (Loss)

The proceeds and resulting gains and losses, computed using specific identification, from sales of securities available-for-sale for the three and nine months ended September 30, 2017 and 2016 were as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2017						September 30, 2017
			Gross		Gross				Gross		Gross
	Proceeds		Gains		(Losses)		Proceeds		Gains		(Losses)
Securities available-for-sale	$	9,115	$	143	$	-	$	39,103	$	413	$	(33)

	Three Months Ended						Nine Months Ended
	September 30, 2016						September 30, 2016
			Gross		Gross				Gross		Gross
	Proceeds		Gains		(Losses)		Proceeds		Gains		(Losses)
Securities available-for-sale	$	13,577	$	149	$	(3)	$	13,577	$	149	$	(3)

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Loans Receivable and Allowance For Loan Losses (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

The composition of the loan portfolio was as follows at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017		2016
REAL ESTATE LOANS
Commercial	$	63,180	$	55,871
Construction and development		129,407		94,462
Home equity		24,026		20,081
One-to-four-family (excludes loans held for sale)		170,187		124,009
Multi-family		43,408		37,527
Total real estate loans		430,208		331,950
CONSUMER LOANS
Indirect home improvement		124,387		107,759
Solar		40,082		36,503
Marine		35,173		28,549
Other consumer		2,032		1,915
Total consumer loans		201,674		174,726
COMMERCIAL BUSINESS LOANS
Commercial and industrial		83,221		65,841
Warehouse lending		50,468		32,898
Total commercial business loans		133,689		98,739
Total loans receivable, gross		765,571		605,415
Allowance for loan losses		(10,598)		(10,211)
Deferred costs, fees, premiums, and discounts, net		(1,119)		(1,887)
Total loans receivable, net	$	753,854	$	593,317

Allowance for Credit Losses on Financing Receivables

The following tables detail activity in the allowance for loan losses by loan categories at or for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30, 2017
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	4,144	$	2,669	$	2,453	$	877	$	10,143
Provision for loan losses		481		65		(130)		34		450
Charge-offs		(55)		(152)		(33)		—		(240)
Recoveries		35		208		2		—		245
Net (charge-offs) recoveries		(20)		56		(31)		—		5
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		4,605		2,790		2,292		911		10,598
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	210	$	—	$	551	$	—	$	761
Loans collectively evaluated for impairment		429,998		201,674		133,138		—		764,810
Ending balance	$	430,208	$	201,674	$	133,689	$	—	$	765,571

	At or For the Nine Months Ended September 30, 2017
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	3,547	$	2,082	$	2,675	$	1,907	$	10,211
Provision for loan losses		1,077		726		(357)		(996)		450
Charge-offs		(55)		(536)		(33)		—		(624)
Recoveries		36		518		7		—		561
Net charge-offs		(19)		(18)		(26)		—		(63)
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		4,605		2,790		2,292		911		10,598
Ending balance	$	4,605	$	2,790	$	2,292	$	911	$	10,598
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	210	$	—	$	551	$	—	$	761
Loans collectively evaluated for impairment		429,998		201,674		133,138		—		764,810
Ending balance	$	430,208	$	201,674	$	133,689	$	—	$	765,571

	At or For the Three Months Ended September 30, 2016
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	3,477	$	2,039	$	1,823	$	1,612	$	8,951
Provision for loan losses		242		1		252		105		600
Charge-offs		(65)		(232)		—		—		(297)
Recoveries		64		262		6		—		332
Net (charge-offs) recoveries		(1)		30		6		—		35
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		3,718		2,070		2,081		1,717		9,586
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	209	$	—	$	—	$	—	$	209
Loans collectively evaluated for impairment		316,309		170,576		117,124		—		604,009
Ending balance	$	316,518	$	170,576	$	117,124	$	—	$	604,218

	At or For the Nine Months Ended September 30, 2016
					Commercial
	Real Estate		Consumer		Business		Unallocated		Total
ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	2,874	$	1,681	$	1,396	$	1,834	$	7,785
Provision for loan losses		794		519		604		(117)		1,800
Charge-offs		(65)		(801)		—		—		(866)
Recoveries		115		671		81		—		867
Net recoveries (charge-offs)		50		(130)		81		—		1
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
Period end amount allocated to:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		3,718		2,070		2,081		1,717		9,586
Ending balance	$	3,718	$	2,070	$	2,081	$	1,717	$	9,586
LOANS RECEIVABLE
Loans individually evaluated for impairment	$	209	$	—	$	—	$	—	$	209
Loans collectively evaluated for impairment		316,309		170,576		117,124		—		604,009
Ending balance	$	316,518	$	170,576	$	117,124	$	—	$	604,218

Past Due Financing Receivables

The following tables provide information pertaining to the aging analysis of contractually past due loans and nonaccrual loans at September 30, 2017 and December 31, 2016:

	September 30, 2017
	30-59		60-89
	Days		Days		90 Days		Total				Total
	Past		Past		or More		Past				Loans		Non-
	Due		Due		Past Due		Due		Current		Receivable		Accrual
REAL ESTATE LOANS
Commercial	$	—	$	—	$	—	$	—	$	63,180	$	63,180	$	—
Construction and development		—		—		—		—		129,407		129,407		—
Home equity		111		16		138		265		23,761		24,026		154
One-to-four-family		—		—		—		—		170,187		170,187		142
Multi-family		—		—		—		—		43,408		43,408		—
Total real estate loans		111		16		138		265		429,943		430,208		296
CONSUMER LOANS
Indirect home improvement		261		77		174		512		123,875		124,387		316
Solar		83		22		81		186		39,896		40,082		81
Marine		—		—		—		—		35,173		35,173		9
Other consumer		7		—		1		8		2,024		2,032		11
Total consumer loans		351		99		256		706		200,968		201,674		417
COMMERCIAL BUSINESS LOANS
Commercial and industrial		—		—		—		—		83,221		83,221		551
Warehouse lending		—		—		—		—		50,468		50,468		—
Total commercial business loans		—		—		—		—		133,689		133,689		551
Total loans	$	462	$	115	$	394	$	971	$	764,600	$	765,571	$	1,264

	December 31, 2016
	30-59		60-89
	Days		Days		90 Days		Total				Total
	Past		Past		or More		Past				Loans		Non-
	Due		Due		Past Due		Due		Current		Receivable		Accrual
REAL ESTATE LOANS
Commercial	$	—	$	—	$	—	$	—	$	55,871	$	55,871	$	—
Construction and development		—		—		—		—		94,462		94,462		—
Home equity		34		—		210		244		19,837		20,081		210
One-to-four-family		—		—		—		—		124,009		124,009		—
Multi-family		—		—		—		—		37,527		37,527		—
Total real estate loans		34		—		210		244		331,706		331,950		210
CONSUMER LOANS
Indirect home improvement		268		278		167		713		107,046		107,759		435
Solar		92		—		69		161		36,342		36,503		69
Marine		8		—		—		8		28,541		28,549		—
Other consumer		3		2		4		9		1,906		1,915		7
Total consumer loans		371		280		240		891		173,835		174,726		511
COMMERCIAL BUSINESS LOANS
Commercial and industrial		—		—		—		—		65,841		65,841		—
Warehouse lending		—		—		—		—		32,898		32,898		—
Total commercial business loans		—		—		—		—		98,739		98,739		—
Total loans	$	405	$	280	$	450	$	1,135	$	604,280	$	605,415	$	721

There were no loans 90 days or more past due and still accruing interest at September 30, 2017 and December 31, 2016.

Impaired Financing Receivables

The following tables provide additional information about our impaired loans that have been segregated to reflect loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided at September 30, 2017 and December 31, 2016:

	September 30, 2017
	Unpaid
	Principal		Write-		Recorded		Related
	Balance		downs		Investment		Allowance
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	154	$	—	$	154	$	—
One-to-four-family		68		(12)		56		—
Total real estate loans		222		(12)		210		—
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		—		551		88
Total	$	773	$	(12)	$	761	$	88

	December 31, 2016
	Unpaid
	Principal		Write-		Recorded		Related
	Balance		downs		Investment		Allowance
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	137	$	—	$	137	$	—
One-to-four-family		69		(12)		57		—
Total	$	206	$	(12)	$	194	$	—

The following tables present the average recorded investment in loans individually evaluated for impairment and the interest income recognized and received for the three and nine months ended September 30, 2017 and 2016:

	Three Months Ended
	September 30, 2017				September 30, 2016
	Average Recorded		Interest Income		Average Recorded		Interest Income
	Investment		Recognized		Investment		Recognized
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	201	$	—	$	152	$	—
One-to-four-family		56		1		58		1
Total real estate loans		257		1		210		1
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		23		—		—
Total	$	808	$	24	$	210	$	1

	Nine Months Ended
	September 30, 2017				September 30, 2016
	Average Recorded		Interest Income		Average Recorded		Interest Income
	Investment		Recognized		Investment		Recognized
WITH NO RELATED ALLOWANCE RECORDED
Home equity	$	220	$	—	$	154	$	2
One-to-four-family		56		3		58		2
Total real estate loans		276		3		212		4
WITH AN ALLOWANCE RECORDED
Commercial business loans		551		23		—		—
Total	$	827	$	26	$	212	$	4

Financing Receivable Credit Quality Indicators

The following tables summarize risk rated loan balances by category at September 30, 2017 and December 31, 2016:

	September 30, 2017
					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss
	(1 - 5)		(6)		(7)		(8)		(9)		(10)		Total
REAL ESTATE LOANS
Commercial	$	56,533	$	5,072	$	1,575	$	—	$	—	$	—	$	63,180
Construction and development		129,407		—		—		—		—		—		129,407
Home equity		23,872		—		—		154		—		—		24,026
One-to-four-family		169,352		—		693		142		—		—		170,187
Multi-family		43,408		—		—		—		—		—		43,408
Total real estate loans		422,572		5,072		2,268		296		—		—		430,208
CONSUMER LOANS
Indirect home improvement		124,071		—		—		316		—		—		124,387
Solar		40,001		—		—		81		—		—		40,082
Marine		35,164		—		—		9		—		—		35,173
Other consumer		1,961		—		—		71		—		—		2,032
Total consumer loans		201,197		—		—		477		—		—		201,674
COMMERCIAL BUSINESS LOANS
Commercial and industrial		76,302		306		828		5,785		—		—		83,221
Warehouse lending		44,969		5,499		—		—		—		—		50,468
Total commercial business loans		121,271		5,805		828		5,785		—		—		133,689
Total loans	$	745,040	$	10,877	$	3,096	$	6,558	$	—	$	—	$	765,571

(1) At September 30, 2017, the Company had agreed to sell a substandard shared/syndicated national credit at a slight discount to market.  The $1.9 million loan was excluded from the substandard totals listed above as the loan was classified as held for sale at September 30, 2017.  The transaction settled in October 2017 at the September 30, 2017 fair value.

	December 31, 2016
					Special
	Pass		Watch		Mention		Substandard		Doubtful		Loss
	(1 - 5)		(6)		(7)		(8)		(9)		(10)		Total
REAL ESTATE LOANS
Commercial	$	53,234	$	2,637	$	—	$	—	$	—	$	—	$	55,871
Construction and development		94,462		—		—		—		—		—		94,462
Home equity		19,871		—		—		210		—		—		20,081
One-to-four-family		124,009		—		—		—		—		—		124,009
Multi-family		37,527		—		—		—		—		—		37,527
Total real estate loans		329,103		2,637		—		210		—		—		331,950
CONSUMER LOANS
Indirect home improvement		107,324		—		—		435		—		—		107,759
Solar		36,434		—		—		69		—		—		36,503
Marine		28,549		—		—		—		—		—		28,549
Other consumer		1,813		—		—		102		—		—		1,915
Total consumer loans		174,120		—		—		606		—		—		174,726
COMMERCIAL BUSINESS LOANS
Commercial and industrial		58,105		525		—		7,211		—		—		65,841
Warehouse lending		32,898		—		—		—		—		—		32,898
Total commercial business loans		91,003		525		—		7,211		—		—		98,739
Total loans	$	594,226	$	3,162	$	—	$	8,027	$	—	$	—	$	605,415

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Servicing Rights (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value, Off-balance Sheet Risk [Abstract]

Summary of servicing rights activity

The following tables summarize servicing rights activity and the respective book value at or for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended
	September 30,
	2017		2016
Beginning balance	$	4,899	$	6,751
Additions		1,326		1,095
Servicing rights amortized		(414)		(408)
Recovery on servicing rights		—		216
Ending balance	$	5,811	$	7,654

	At or For the Nine Months Ended
	September 30,
	2017		2016
Beginning balance	$	8,459	$	5,811
Additions		3,569		2,927
Sales		(4,751)		—
Servicing rights amortized		(1,465)		(1,086)
(Impairment) recovery on servicing rights		(1)		2
Ending balance	$	5,811	$	7,654

Valuation assumptions used in determining the fair value of servicing rights

The following provides valuation assumptions used in determining the fair value of MSR at the dates indicated:

	At September 30,
	2017		2016
Key assumptions:
Weighted average discount rate	9.5	%	9.5	%
Conditional prepayment rate (“CPR”)	11.3	%	16.4	%
Weighted average life in years	6.8		5.2

Key economic assumptions and the sensitivity of the current fair value for single family mortgage servicing rights

Key economic assumptions and the sensitivity of the current fair value for single family MSR to immediate adverse changes in those assumptions at September 30, 2017 and December 31, 2016 were as follows:

				September 30, 2017			December 31, 2016
Aggregate portfolio principal balance				$	658,599		$	973,139
Weighted average rate of note					4.0	%		3.9	%
At September 30, 2017	Base			0.5%Adverse Rate Change			1.0%Adverse Rate Change
Conditional prepayment rate		11.3	%		18.2	%		25.4	%
Fair value MSR	$	7,283		$	5,764		$	4,682
Percentage of MSR		1.1	%		0.9	%		0.7	%
Discount rate		9.5	%		10.0	%		10.5	%
Fair value MSR	$	7,283		$	7,139		$	7,000
Percentage of MSR		1.1	%		1.1	%		1.1	%
At December 31, 2016	Base			0.5%Adverse Rate Change			1.0%Adverse Rate Change
Conditional prepayment rate		8.8	%		12.8	%		20.2	%
Fair value MSR	$	11,735		$	9,991		$	7,808
Percentage of MSR		1.2	%		1.0	%		0.8	%
Discount rate		9.5	%		10.0	%		10.5	%
Fair value MSR	$	11,735		$	11,480		$	11,235
Percentage of MSR		1.2	%		1.2	%		1.2	%

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Derivatives (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The following tables summarize the Company’s derivative instruments at the dates indicated:

	September 30, 2017
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	59,741	$	1,131	$	—
Mandatory and best effort forward commitments with investors		33,491		4		—
Forward TBA mortgage-backed securities		77,000		104		—
TBA mortgage-backed securities forward sales paired off with investors		32,500		—		140

	December 31, 2016
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	33,289	$	818	$	—
Mandatory and best effort forward commitments with investors		23,536		177		—
Forward TBA mortgage-backed securities		53,000		495		—
TBA mortgage-backed securities forward sales paired off with investors		44,000		747		—

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Other Real Estate Owned (Tables)

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Schedule of Other Real Estate Owned

There was no OREO activity for the three months ended September 30, 2017 and 2016. The following table presents the activity related to OREO at or for the nine months ended September 30, 2017 and 2016:

	At or For the Nine Months Ended
	September 30,
	2017		2016
Beginning balance	$	—	$	—
Net loans transferred to OREO		—		525
Capitalized costs		—		7
Gross proceeds from sale of OREO		—		(682)
Gain on sale of OREO		—		150
Ending balance	$	—	$	—

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Deposits (Tables)

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Schedule of Deposit Liabilities

Deposits are summarized as follows at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017(1)		2016(1)
Noninterest-bearing checking	$	156,017	$	143,236
Interest-bearing checking		115,775		66,119
Savings		72,974		54,995
Money market(4)		236,036		242,849
Certificates of deposit less than $100,000(2)		143,169		93,791
Certificates of deposit of $100,000 through $250,000		73,733		74,832
Certificates of deposit of $250,000 and over(3)		31,927		27,094
Escrow accounts related to mortgages serviced		10,947		9,677
Total	$	840,578	$	712,593

(1) Includes $138.2 million of deposits acquired in the Branch Purchase at September 30, 2017 and $162.2 million at December 31, 2016.

(2) Includes $92.2 million of brokered deposits at September 30, 2017 and $47.1 million at December 31, 2016.

(3) Time deposits that meet or exceed the FDIC insurance limit.

(4) Includes $10.0 million of brokered deposits at September 30, 2017 and none at December 31, 2016.

Schedule of Maturities of Time Deposits for Future Periods

Scheduled maturities of time deposits at September 30, 2017 for future periods ending are as follows:

	At September 30, 2017
Maturing in 2017	$	81,162
Maturing in 2018		75,057
Maturing in 2019		45,868
Maturing in 2020		14,980
Maturing in 2021		15,816
Thereafter		15,946
Total	$	248,829

Schedule of Interest Expense by Deposit Category

Interest expense by deposit category for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Interest-bearing checking	$	44	$	7	$	66	$	20
Savings and money market		356		257		937		757
Certificates of deposit		645		544		1,790		1,634
Total	$	1,045	$	808	$	2,793	$	2,411

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Commitments to Extend Credit

The following table provides a summary of the Company’s commitments at September 30, 2017 and December 31, 2016:

	September 30,		December 31,
	2017		2016
COMMITMENTS TO EXTEND CREDIT
REAL ESTATE LOANS
Commercial	$	108	$	108
Construction and development		82,115		57,016
One-to-four-family (includes loans held for sale)		117,997		79,870
Home equity		31,258		26,129
Multi-family		418		426
Total real estate loans		231,896		163,549
CONSUMER LOANS		10,025		8,527
COMMERCIAL BUSINESS LOANS
Commercial and industrial		46,912		31,775
Warehouse lending		58,231		51,102
Total commercial business loans		105,143		82,877
Total commitments to extend credit	$	347,064	$	254,953

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule Of Available For Sale Securities Measured At Fair Value On A Recurring Basis

The following tables present securities available-for-sale measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Securities Available-for-Sale
	Level 1		Level 2		Level 3		Total
At September 30, 2017
U.S. agency securities	$	—	$	6,122	$	—	$	6,122
Corporate securities		—		7,075		—		7,075
Municipal bonds		—		11,439		—		11,439
Mortgage-backed securities		—		39,474		—		39,474
U.S. Small Business Administration securities		—		13,993		—		13,993
Total	$	—	$	78,103	$	—	$	78,103

	Securities Available-for-Sale
	Level 1		Level 2		Level 3		Total
At December 31, 2016
U.S. agency securities	$	—	$	8,068	$	—	$	8,068
Corporate securities		—		7,500		—		7,500
Municipal bonds		—		15,264		—		15,264
Mortgage-backed securities		—		45,195		—		45,195
U.S. Small Business Administration securities		—		5,848		—		5,848
Total	$	—	$	81,875	$	—	$	81,875

Fair Value, Mortgage Loans Held for Sale

The following table presents mortgage loans held for sale measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Mortgage Loans Held for Sale
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	65,055	$	—	$	65,055
December 31, 2016	$	—	$	52,553	$	—	$	52,553

Schedule of Interest Rate Lock Commitments Measured at Fair Value on Recurring Basis

The following tables present the fair value of interest rate lock commitments with customers, individual forward sale commitments with investors, and paired off commitments with investors measured at their fair value on a recurring basis at September 30, 2017 and December 31, 2016:

	Interest Rate Lock Commitments with Customers
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	—	$	1,131	$	1,131
December 31, 2016	$	—	$	—	$	818	$	818

Forward Sale Commitments with Investors Measured at Fair Value On A Recurring Basis

	Individual Forward Sale Commitments with Investors
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	104	$	4	$	108
December 31, 2016	$	—	$	495	$	177	$	672

Paired Off Commitments with Investors Measured at Fair Value On A Recurring Basis

	Paired Off Commitments with Investors
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	(140)	$	—	$	(140)
December 31, 2016	$	—	$	747	$	—	$	747

Schedule of Impaired Loans and Other Real Estate Owned

The following table presents impaired loans measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded at September 30, 2017 and December 31, 2016. The amounts disclosed below represent the fair values at the time the nonrecurring fair value measurements were evaluated.

	Impaired Loans
	Level 1		Level 2		Level 3		Total
September 30, 2017	$	—	$	—	$	761	$	761
December 31, 2016	$	—	$	—	$	194	$	194

Schedule of Fair Value of Financial Instruments Measured under a Level 3 Unobservable Input

Quantitative Information about Level 3 Fair Value Measurements - Shown in the table below is the fair value of financial instruments measured under a Level 3 unobservable input on a recurring and nonrecurring basis at September 30, 2017:

		Significant	Range	Weighted
Level 3 Fair Value Instrument	Valuation Technique	Unobservable Inputs	(Weighted Average)	Average
RECURRING
Interest rate lock commitments with customers	Quoted market prices	Pull-through expectations	80% - 99%	95.0	%
Individual forward sale commitments with investors	Quoted market prices	Pull-through expectations	80% - 99%	95.0	%
NONRECURRING
Impaired loans	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 18.0%	11.6	%

Fair Value, Instruments Classified in Shareholders' Equity Measured on Recurring Basis, Unobservable Input Reconciliation

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine months ended September 30, 2017 and 2016:

									Net change in fair
									value for gains/
			Purchases						(losses) relating to
	Beginning		and		Sales and		Ending		items held at end of
Three Months Ended September 30,	Balance		Issuances		Settlements		Balance		period
2017
Interest rate lock commitments with customers	$	1,212	$	3,891	$	(3,972)	$	1,131	$	(81)
Individual forward sale commitments with investors		83		40		(119)		4		(79)
2016
Interest rate lock commitments with customers	$	2,058	$	5,763	$	(5,971)	$	1,850	$	(208)
Individual forward sale commitments with investors		(3)		(60)		23		(40)		(37)

									Net change in fair
									value for gains/
			Purchases						(losses) relating to
	Beginning		and		Sales and		Ending		items held at end of
Nine Months Ended September 30,	Balance		Issuances		Settlements		Balance		period
2017
Interest rate lock commitments with customers	$	818	$	11,440	$	(11,127)	$	1,131	$	313
Individual forward sale commitments with investors		177		(49)		(124)		4		(173)
2016
Interest rate lock commitments with customers	$	698	$	14,039	$	(12,887)	$	1,850	$	1,152
Individual forward sale commitments with investors		74		(267)		153		(40)		(114)

Fair Value, by Balance Sheet Grouping

The following table provides estimated fair values of the Company’s financial instruments at September 30, 2017 and December 31, 2016:

	September 30,				December 31,
	2017				2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial Assets
Level 1 inputs:
Cash and cash equivalents	$	31,295	$	31,295	$	36,456	$	36,456
Certificates of deposit at other financial institutions		18,108		18,108		15,248		15,248
Level 2 inputs:
Securities available-for-sale, at fair value		78,103		78,103		81,875		81,875
Loans held for sale, at fair value		65,055		65,055		52,553		52,553
FHLB stock, at cost		3,047		3,047		2,719		2,719
Accrued interest receivable		3,217		3,217		2,524		2,524
Individual forward sale commitments with investors		104		104		495		495
Paired off commitments with investors		—		—		747		747
Level 3 inputs:
Loans receivable, gross		765,571		779,284		605,415		670,183
Servicing rights, held at lower of cost or fair value		5,811		7,289		8,459		11,741
Fair value interest rate locks with customers		1,131		1,131		818		818
Individual forward sale commitments with investors		4		4		177		177
Financial Liabilities
Level 2 inputs:
Deposits		840,578		844,288		712,593		718,970
Borrowings		10,270		9,049		12,670		12,660
Subordinated note		9,840		9,805		9,825		9,805
Accrued interest payable		217		217		192		192
Paired off commitments with investors		140		140		—		—

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Employee Benefits (Tables)

9 Months Ended

Sep. 30, 2017

Compensation and Retirement Disclosure [Abstract]

Schedule of Shares Under ESOP

Shares held by the ESOP at September 30, 2017 and 2016 were as follows (shown as actual):

	Balances		Balances
	at September 30, 2017		at September 30, 2016
Allocated shares		126,589		102,359
Committed to be released shares		19,441		19,441
Unallocated shares		110,164		136,085
Total ESOP shares		256,194		257,885
Fair value of unallocated shares (in thousands)	$	5,180	$	3,703

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the three end nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30,				At or For the Nine Months Ended September 30,
Numerator:	2017		2016		2017		2016
Net income (in thousands)	$	3,454	$	3,457	$	10,406	$	7,953
Denominator:
Basic weighted average common shares outstanding		3,051,744		2,851,147		2,949,092		2,901,572
Dilutive shares		187,584		87,292		192,685		84,102
Diluted weighted average common shares outstanding		3,239,328		2,938,439		3,141,777		2,985,674
Basic earnings per share	$	1.13	$	1.21	$	3.53	$	2.74
Diluted earnings per share	$	1.07	$	1.18	$	3.31	$	2.66

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock Option Awards

The following table presents a summary of the Company’s stock option plan awards during the nine months ended September 30, 2017 (shown as actual):

				Weighted-Average
		Weighted-		Remaining
		Average		Contractual Term In	Aggregate
	Shares	Exercise Price		Years	Intrinsic Value
Outstanding at January 1, 2017	295,850	$	16.89	7.36	$	5,638,901
Granted	—		—	—		—
Less exercised	34,363	$	16.89	—	$	919,380
Forfeited or expired	—		—	—		—
Outstanding at September 30, 2017	261,487	$	16.89	6.61	$	9,089,288
Expected to vest, assuming a 0.31% annual forfeiture rate	261,053	$	16.89	6.61	$	9,074,192
Exercisable at September 30, 2017	134,687	$	16.89	6.61	$	4,681,720

Summary of Nonvested Awards

The following table presents a summary of the Company’s nonvested awards during the nine months ended September 30, 2017 (shown as actual):

		Weighted-Average
		Grant-Date Fair Value		Weighted-Average
Nonvested Shares	Shares	Per Share		Grant-Date Fair Value
Nonvested at January 1, 2017	68,763	$	17.49	$	1,202,401
Granted	—		—		—
Less vested	31,921	$	17.32	$	552,810
Forfeited or expired	—		—		—
Nonvested at September 30, 2017	36,842	$	17.63	$	649,591

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Regulatory Capital (Tables)

9 Months Ended

Sep. 30, 2017

Regulatory Capital Requirements [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

The following table compares the Bank’s actual capital amounts and ratios at September 30, 2017 and December 31, 2016 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				Corrective
	Actual				Adequacy Purposes				Action Provisions
Bank Only	Amount		Ratio		Amount		Ratio		Amount		Ratio
At September 30, 2017
Total risk-based capital
(to risk-weighted assets)	$	130,246	16.14	%	$	64,556	8.00	%	$	80,696	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	120,150	14.89	%	$	48,417	6.00	%	$	64,556	8.00	%
Tier 1 leverage capital
(to average assets)	$	120,150	12.50	%	$	38,459	4.00	%	$	48,074	5.00	%
CET 1 capital
(to risk-weighted assets)	$	120,150	14.89	%	$	36,313	4.50	%	$	52,452	6.50	%
At December 31, 2016
Total risk-based capital
(to risk-weighted assets)	$	93,309	13.87	%	$	53,813	8.00	%	$	67,266	10.00	%
Tier 1 risk-based capital
(to risk-weighted assets)	$	84,876	12.62	%	$	40,360	6.00	%	$	53,813	8.00	%
Tier 1 leverage capital
(to average assets)	$	84,876	10.33	%	$	32,862	4.00	%	$	41,078	5.00	%
CET 1 capital
(to risk-weighted assets)	$	84,876	12.62	%	$	30,270	4.50	%	$	43,723	6.50	%

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Business Segments (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The tables below summarize the financial results for each segment based primarily on the number of FTEs and assets within each segment for the three and nine months ended September 30, 2017 and 2016:

	At or For the Three Months Ended September 30, 2017
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	812	$	10,210	$	11,022
Provision for loan losses		(127)		(323)		(450)
Noninterest income		5,014		1,413		6,427
Noninterest expense		(4,586)		(7,003)		(11,589)
Income before provision for income taxes		1,113		4,297		5,410
Provision for income taxes		(407)		(1,549)		(1,956)
Net income	$	706	$	2,748	$	3,454
Total average assets at period end	$	220,898	$	744,820	$	965,718
FTEs		119		204		323

	At or For the Three Months Ended September 30, 2016
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	793	$	7,957	$	8,750
Provision for loan losses		(16)		(584)		(600)
Noninterest income		5,982		1,266		7,248
Noninterest expense		(3,861)		(6,451)		(10,312)
Income before provision for income taxes		2,898		2,188		5,086
Provision for income taxes		(948)		(681)		(1,629)
Net income	$	1,950	$	1,507	$	3,457
Total average assets at period end	$	168,722	$	634,735	$	803,457
FTEs		110		195		305

	At or For the Nine Months Ended September 30, 2017
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	1,857	$	28,105	$	29,962
Provision for loan losses		(324)		(126)		(450)
Noninterest income		14,863		3,941		18,804
Noninterest expense		(12,985)		(19,924)		(32,909)
Income before provision for income taxes		3,411		11,996		15,407
Provision for income taxes		(1,107)		(3,894)		(5,001)
Net income	$	2,304	$	8,102	$	10,406
Total average assets at period end	$	196,765	$	706,017	$	902,782
FTEs		119		204		323

	At or For the Nine Months Ended September 30, 2016
	Home Lending		Commercial and Consumer Banking		Total
Condensed income statement:
Net interest income (1)	$	1,706	$	22,959	$	24,665
Provision for loan losses		(142)		(1,658)		(1,800)
Noninterest income		14,852		3,273		18,125
Noninterest expense		(10,593)		(18,246)		(28,839)
Income before provision for income taxes		5,823		6,328		12,151
Provision for income taxes		(2,012)		(2,186)		(4,198)
Net income	$	3,811	$	4,142	$	7,953
Total average assets at period end	$	147,873	$	642,283	$	790,156
FTEs		110		195		305

(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.

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Basis of Presentation and Summary of Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2017 segment item shares	Sep. 30, 2016 shares	Jan. 22, 2016 item	Jul. 09, 2012 shares
Schedule of Accounting Policies [Line Items]
Percentage of common shares purchased under ESOP				8.00%
Total ESOP shares | shares	256,194	257,885		259,210
Number of business segments | segment	2
Puget Sound [Member]
Schedule of Accounting Policies [Line Items]
Number of bank branches	11
Number of Loan Production Facilities	7
Tri-Cities, Washington [Member]
Schedule of Accounting Policies [Line Items]
Number of Loan Production Facilities	1
Clallam County [Member]
Schedule of Accounting Policies [Line Items]
Number of bank branches			2
Jefferson County [Member]
Schedule of Accounting Policies [Line Items]
Number of bank branches			2
Bank of America
Schedule of Accounting Policies [Line Items]
Number of bank branches			4

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Business Combination (Narrative) (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)	Mar. 31, 2016 USD ($)	Jan. 22, 2016 USD ($) lease item
Business Acquisition [Line Items]
Deposits			$ 138,200	$ 162,200
Bank of America
Business Acquisition [Line Items]
Number of bank branches | item						4
Number of owned bank branches acquired | item						2
Deposits						$ 186,364
Number of leases acquired with the bank branches | lease						3
Loans and associated interest receivables						$ 419,000
Facilities and other assets, net of other liabilities						$ 778,000
Deposit premium (as a percent)						2.50%
Deposit premium						$ 4,800
Cash and cash equivalents						186,371
Increase in amortization of core deposit intangible		$ 6,000
Core deposit intangible increase in fair value	$ 100,000
Core deposit intangible					$ 2,100
Decrease in fair value adjustment of goodwill	$ 100,000
Bank of America | Carrying Amount
Business Acquisition [Line Items]
Deposits						186,364
Cash and cash equivalents						180,356
Core deposit intangible						$ 2,239

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Business Combination - Estimated Fair Values of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Jan. 22, 2016	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Mar. 31, 2016
Business Acquisition [Line Items]
Goodwill		$ 2,312	$ 2,312
Total assets acquired		0		$ 181,575
Noninterest-bearing accounts		166,964	152,913
Interest-bearing accounts		673,614	559,680
Total deposits		138,200	$ 162,200
Total liabilities assumed		$ 0		$ 186,393
Bank of America
Business Acquisition [Line Items]
Cash and cash equivalents	$ 186,371
Premises and equipment, net	964
Accrued interest receivable	2
Core deposit intangible					$ 2,100
Goodwill	2,312
Other assets	103
Total deposits	186,364
Accrued interest payable	7
Other liabilities	$ 22
Estimated amortization period	9 years
Purchase Accounting Adjustment [Member] | Bank of America
Business Acquisition [Line Items]
Cash and cash equivalents	$ 0
Loans receivable	0
Premises and equipment, net	267
Accrued interest receivable	0
Core deposit intangible	2,239
Goodwill	2,312
Other assets	0
Total assets acquired	4,818
Noninterest-bearing accounts	0
Interest-bearing accounts	0
Total deposits	0
Accrued interest payable	0
Other liabilities	0
Total liabilities assumed	0
Carrying Amount | Bank of America
Business Acquisition [Line Items]
Cash and cash equivalents	180,356
Loans receivable	417
Premises and equipment, net	964
Accrued interest receivable	2
Core deposit intangible	2,239
Goodwill	2,312
Other assets	103
Total assets acquired	186,393
Noninterest-bearing accounts	79,966
Interest-bearing accounts	106,398
Total deposits	186,364
Accrued interest payable	7
Other liabilities	22
Total liabilities assumed	186,393
Bank of America
Business Acquisition [Line Items]
Cash and cash equivalents	180,356
Loans receivable	417
Premises and equipment, net	697
Accrued interest receivable	2
Core deposit intangible	0
Goodwill	0
Other assets	103
Total assets acquired	181,575
Noninterest-bearing accounts	79,966
Interest-bearing accounts	106,398
Total deposits	186,364
Accrued interest payable	7
Other liabilities	22
Total liabilities assumed	$ 186,393

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Business Combination (Amount Recognized for Assets Acquired and Liabilities Assumed) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Jan. 22, 2016
Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Deposits	$ (138,200)	$ (162,200)
Goodwill	$ 2,312	$ 2,312
Bank of America
Business Acquisition [Line Items]
Purchase price			$ 6,015
Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash and cash equivalents			186,371
Acquired loans			417
Premises and equipment, net			964
Accrued interest receivable			2
Core deposit intangible, net			2,239
Other assets			103
Deposits			(186,364)
Accrued interest payable			(7)
Other liabilities			(22)
Total fair value of identifiable net assets			3,703
Goodwill			2,312
Bank of America
Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash and cash equivalents			180,356
Premises and equipment, net			697
Accrued interest receivable			2
Other assets			103
Deposits			(186,364)
Accrued interest payable			(7)
Other liabilities			(22)
Goodwill			$ 0

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Business Combination - Expected Amortization Expense (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Business Combinations [Abstract]
Amortization of intangible assets	$ 100,000	$ 140,000	$ 300,000	$ 382,000
2017	100,000		100,000
2018	307,000		307,000
2019	235,000		235,000
2020	181,000		181,000
2021	166,000		166,000
Thereafter	428,000		428,000
Total	$ 1,417,000		$ 1,417,000		$ 1,717,000

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Schedule of Available-for-sale Securities Reconciliation (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 78,302	$ 82,705
Unrealized Gains	429	269
Unrealized Losses	(628)	(1,099)
Estimated Fair Values	78,103	81,875
U.S. agency securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6,086	8,150
Unrealized Gains	59	12
Unrealized Losses	(23)	(94)
Estimated Fair Values	6,122	8,068
Corporate securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	7,123	7,654
Unrealized Gains	29	14
Unrealized Losses	(77)	(168)
Estimated Fair Values	7,075	7,500
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,342	15,183
Unrealized Gains	213	164
Unrealized Losses	(116)	(83)
Estimated Fair Values	11,439	15,264
Mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	39,733	45,856
Unrealized Gains	85	52
Unrealized Losses	(344)	(713)
Estimated Fair Values	39,474	45,195
U.S. Small Business Administration securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	14,018	5,862
Unrealized Gains	43	27
Unrealized Losses	(68)	(41)
Estimated Fair Values	$ 13,993	$ 5,848

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Securities Available-for-sale - Narrative (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017 USD ($) security	Sep. 30, 2016 USD ($) security	Sep. 30, 2017 USD ($) security	Sep. 30, 2016 USD ($) security	Dec. 31, 2016 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Investments with unrealized losses of less than one year | security	28		28		48
Investments with unrealized losses of more than one year | security	5	2	5	2
Pledged securities for FHLB	$ 10,900,000		$ 10,900,000
Public deposits	5,200,000		5,200,000
Collateral requirement	2,000,000		2,000,000
Other than temporary impairment losses, investments			0		$ 0
Proceeds from Sale of Available-for-sale Securities	9,115,000	$ 13,577,000	39,103,000	$ 13,577,000
Available-for-sale Securities, Gross Gains	143,000	149,000	413,000	149,000
Available-for-sale Securities, Gross Losses	$ 0	$ 3,000	$ 33,000	$ 3,000
1st Security Bank of Washington
Schedule of Available-for-sale Securities [Line Items]
Number of securities pledged and held at FHLB | security	9		9

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Securities Available-for-sale - Investments with Unrealized Losses Policy (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value
Unrealized loss position, Less than 12 Months, Fair Value	$ 39,539	$ 61,123
Unrealized loss position, 12 Months or Longer, Fair Value	6,692	1,438
Unrealized loss position, Fair Value	46,231	62,561
Unrealized Losses
Unrealized loss position, Less than 12 Months, Unrealized Losses	(454)	(1,037)
Unrealized loss position, 12 Months or Longer, Unrealized Losses	(174)	(62)
Unrealized loss position, Unrealized Losses	(628)	(1,099)
U.S. agency securities
Fair Value
Unrealized loss position, Less than 12 Months, Fair Value	3,014	6,998
Unrealized loss position, 12 Months or Longer, Fair Value	0	0
Unrealized loss position, Fair Value	3,014	6,998
Unrealized Losses
Unrealized loss position, Less than 12 Months, Unrealized Losses	(23)	(94)
Unrealized loss position, 12 Months or Longer, Unrealized Losses	0	0
Unrealized loss position, Unrealized Losses	(23)	(94)
Corporate securities
Fair Value
Unrealized loss position, Less than 12 Months, Fair Value	0	5,048
Unrealized loss position, 12 Months or Longer, Fair Value	1,919	1,438
Unrealized loss position, Fair Value	1,919	6,486
Unrealized Losses
Unrealized loss position, Less than 12 Months, Unrealized Losses	0	(106)
Unrealized loss position, 12 Months or Longer, Unrealized Losses	(77)	(62)
Unrealized loss position, Unrealized Losses	(77)	(168)
Municipal bonds
Fair Value
Unrealized loss position, Less than 12 Months, Fair Value	4,834	6,741
Unrealized loss position, 12 Months or Longer, Fair Value	0	0
Unrealized loss position, Fair Value	4,834	6,741
Unrealized Losses
Unrealized loss position, Less than 12 Months, Unrealized Losses	(116)	(83)
Unrealized loss position, 12 Months or Longer, Unrealized Losses	0	0
Unrealized loss position, Unrealized Losses	(116)	(83)
Mortgage-backed securities
Fair Value
Unrealized loss position, Less than 12 Months, Fair Value	22,266	39,373
Unrealized loss position, 12 Months or Longer, Fair Value	4,773	0
Unrealized loss position, Fair Value	27,039	39,373
Unrealized Losses
Unrealized loss position, Less than 12 Months, Unrealized Losses	(247)	(713)
Unrealized loss position, 12 Months or Longer, Unrealized Losses	(97)	0
Unrealized loss position, Unrealized Losses	(344)	(713)
U.S. Small Business Administration securities
Fair Value
Unrealized loss position, Less than 12 Months, Fair Value	9,425	2,963
Unrealized loss position, 12 Months or Longer, Fair Value	0	0
Unrealized loss position, Fair Value	9,425	2,963
Unrealized Losses
Unrealized loss position, Less than 12 Months, Unrealized Losses	(68)	(41)
Unrealized loss position, 12 Months or Longer, Unrealized Losses	0	0
Unrealized loss position, Unrealized Losses	$ (68)	$ (41)

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Securities Available-for-sale (Schedule of Available for Sale Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Amortized Cost
Total	$ 78,302	$ 82,705
Fair Value
Total	78,103	81,875
U.S. agency securities
Amortized Cost
Due after one year through five years	0	4,000
Due after five years through ten years	4,086	4,150
Due after ten years	2,000	0
Subtotal	6,086	8,150
Fair Value
Due after one year through five years	0	3,956
Due after five years through ten years	4,141	4,112
Due after ten years	1,981	0
Subtotal	6,122	8,068
Corporate securities
Amortized Cost
Due after one year through five years	5,127	5,659
Due after five years through ten years	1,996	1,995
Subtotal	7,123	7,654
Fair Value
Due after one year through five years	5,156	5,625
Due after five years through ten years	1,919	1,875
Subtotal	7,075	7,500
Municipal bonds
Amortized Cost
Due in one year or less	0	509
Due after one year through five years	2,013	5,326
Due after five years through ten years	3,297	7,476
Due after ten years	6,032	1,872
Subtotal	11,342	15,183
Fair Value
Due in one year or less	0	513
Due after one year through five years	2,059	5,386
Due after five years through ten years	3,420	7,492
Due after ten years	5,960	1,873
Subtotal	11,439	15,264
Mortgage-backed securities
Amortized Cost
Mortgage-backed securities	39,733	45,856
Fair Value
Mortgage-backed securities	39,474	45,195
Mortgage-backed securities | Federal National Mortgage Association (“FNMA”)
Amortized Cost
Mortgage-backed securities	22,287	23,522
Fair Value
Mortgage-backed securities	22,187	23,197
Mortgage-backed securities | Federal Home Loan Mortgage Corporation (“FHLMC”)
Amortized Cost
Mortgage-backed securities	11,123	14,950
Fair Value
Mortgage-backed securities	10,970	14,662
Mortgage-backed securities | Government National Mortgage Association (“GNMA”)
Amortized Cost
Mortgage-backed securities	6,323	7,384
Fair Value
Mortgage-backed securities	6,317	7,336
U.S. Small Business Administration securities
Amortized Cost
Due after five years through ten years	12,069	5,862
Due after ten years	1,949	0
Subtotal	14,018	5,862
Fair Value
Due after five years through ten years	12,051	5,848
Due after ten years	1,942	0
Subtotal	$ 13,993	$ 5,848

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Loans Receivable and Allowance For Loan Losses - Composition of Loan Portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 765,571	$ 605,415
Allowance for loan losses	(10,598)	(10,211)
Deferred costs, fees, and discounts, net	(1,119)	(1,887)
Loans receivable, net	753,854	593,317
CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	201,674	174,726
Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	124,387	107,759
Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	40,082	36,503
Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	35,173	28,549
Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,032	1,915
COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	133,689	98,739
Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	83,221	65,841
Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	50,468	32,898
Residential Portfolio Segment | REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	430,208	331,950
Residential Portfolio Segment | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	63,180	55,871
Residential Portfolio Segment | Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	129,407	94,462
Residential Portfolio Segment | Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	24,026	20,081
Residential Portfolio Segment | One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	170,187	124,009
Residential Portfolio Segment | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 43,408	$ 37,527

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Loans Receivable and Allowance For Loan Losses - Narrative (Details)	Sep. 30, 2017 segment item	Dec. 31, 2016 segment item
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loan portfolio segments | segment	3	3
Multi-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of units in real estate property | item	5	5

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Loans Receivable and Allowance For Loan Losses - Schedule of Allowance for Loan Losses by Loan Categories (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Real Estate
Beginning balance	$ 10,143	$ 8,951	$ 10,211	$ 7,785
Provision for loan loss	450	600	450	1,800
Charge-offs	(240)	(297)	(624)	(866)
Recoveries	245	332	561	867
Net recoveries (charge-offs)	5	35	(63)	1
Loans individually evaluated for impairment	0	0	0	0
Loans collectively evaluated for impairment	10,598	9,586	10,598	9,586
Ending balance	10,598	9,586	10,598	9,586
LOANS RECEIVABLE
Loans individually evaluated for impairment	761	209	761	209
Loans collectively evaluated for impairment	764,810	604,009	764,810	604,009
Total loans receivable	765,571	604,218	765,571	604,218	$ 605,415
Real Estate
Real Estate
Beginning balance	4,144	3,477	3,547	2,874
Provision for loan loss	481	242	1,077	794
Charge-offs	(55)	(65)	(55)	(65)
Recoveries	35	64	36	115
Net recoveries (charge-offs)	(20)	(1)	(19)	50
Loans individually evaluated for impairment	0	0	0	0
Loans collectively evaluated for impairment	4,605	3,718	4,605	3,718
Ending balance	4,605	3,718	4,605	3,718
LOANS RECEIVABLE
Loans individually evaluated for impairment	210	209	210	209
Loans collectively evaluated for impairment	429,998	316,309	429,998	316,309
Total loans receivable	430,208	316,518	430,208	316,518
CONSUMER LOANS
Real Estate
Beginning balance	2,669	2,039	2,082	1,681
Provision for loan loss	65	1	726	519
Charge-offs	(152)	(232)	(536)	(801)
Recoveries	208	262	518	671
Net recoveries (charge-offs)	56	30	(18)	(130)
Loans individually evaluated for impairment	0	0	0	0
Loans collectively evaluated for impairment	2,790	2,070	2,790	2,070
Ending balance	2,790	2,070	2,790	2,070
LOANS RECEIVABLE
Loans individually evaluated for impairment	0	0	0	0
Loans collectively evaluated for impairment	201,674	170,576	201,674	170,576
Total loans receivable	201,674	170,576	201,674	170,576	174,726
COMMERCIAL BUSINESS LOANS
Real Estate
Beginning balance	2,453	1,823	2,675	1,396
Provision for loan loss	(130)	252	(357)	604
Charge-offs	(33)	0	(33)	0
Recoveries	2	6	7	81
Net recoveries (charge-offs)	(31)	6	(26)	81
Loans individually evaluated for impairment	0	0	0	0
Loans collectively evaluated for impairment	2,292	2,081	2,292	2,081
Ending balance	2,292	2,081	2,292	2,081
LOANS RECEIVABLE
Loans individually evaluated for impairment	551	0	551	0
Loans collectively evaluated for impairment	133,138	117,124	133,138	117,124
Total loans receivable	133,689	117,124	133,689	117,124	$ 98,739
Unallocated Financing Receivables [Member]
Real Estate
Beginning balance	877	1,612	1,907	1,834
Provision for loan loss	34	105	(996)	(117)
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Net recoveries (charge-offs)	0	0	0	0
Loans individually evaluated for impairment	0	0	0	0
Loans collectively evaluated for impairment	911	1,717	911	1,717
Ending balance	911	1,717	911	1,717
LOANS RECEIVABLE
Loans individually evaluated for impairment	0	0	0	0
Loans collectively evaluated for impairment	0	0	0	0
Total loans receivable	$ 0	$ 0	$ 0	$ 0

XML

Loans Receivable and Allowance For Loan Losses - Schedule of Aging Analysis of Past Due Loans (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	$ 0	$ 0
Total Past Due	971,000	1,135,000
Current	764,600,000	604,280,000
Total loans receivable	765,571,000	605,415,000	$ 604,218,000
REAL ESTATE LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans receivable	430,208,000	331,950,000
Total real estate loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	265,000	244,000
Current	429,943,000	331,706,000
Total loans receivable	430,208,000	331,950,000
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	63,180,000	55,871,000
Total loans receivable	63,180,000	55,871,000
Construction and development
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	129,407,000	94,462,000
Total loans receivable	129,407,000	94,462,000
Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	265,000	244,000
Current	23,761,000	19,837,000
Total loans receivable	24,026,000	20,081,000
One-to-four-family (1)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	170,187,000	124,009,000
Total loans receivable	170,187,000	124,009,000
Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	43,408,000	37,527,000
Total loans receivable	43,408,000	37,527,000
CONSUMER LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	706,000	891,000
Current	200,968,000	173,835,000
Total loans receivable	201,674,000	174,726,000	170,576,000
Indirect home improvement
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	512,000	713,000
Current	123,875,000	107,046,000
Total loans receivable	124,387,000	107,759,000
Solar
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	186,000	161,000
Current	39,896,000	36,342,000
Total loans receivable	40,082,000	36,503,000
Marine
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	8,000
Current	35,173,000	28,541,000
Total loans receivable	35,173,000	28,549,000
Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	8,000	9,000
Current	2,024,000	1,906,000
Total loans receivable	2,032,000	1,915,000
COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	133,689,000	98,739,000
Total loans receivable	133,689,000	98,739,000	$ 117,124,000
Commercial and industrial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	83,221,000	65,841,000
Total loans receivable	83,221,000	65,841,000
Warehouse lending
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	50,468,000	32,898,000
Total loans receivable	50,468,000	32,898,000
30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	462,000	405,000
30-59 Days Past Due | Total real estate loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	111,000	34,000
30-59 Days Past Due | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
30-59 Days Past Due | Construction and development
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
30-59 Days Past Due | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	111,000	34,000
30-59 Days Past Due | One-to-four-family (1)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
30-59 Days Past Due | Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
30-59 Days Past Due | CONSUMER LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	351,000	371,000
30-59 Days Past Due | Indirect home improvement
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	261,000	268,000
30-59 Days Past Due | Solar
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	83,000	92,000
30-59 Days Past Due | Marine
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	8,000
30-59 Days Past Due | Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	7,000	3,000
30-59 Days Past Due | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
30-59 Days Past Due | Commercial and industrial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
30-59 Days Past Due | Warehouse lending
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	115,000	280,000
60-89 Days Past Due | Total real estate loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	16,000	0
60-89 Days Past Due | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due | Construction and development
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	16,000	0
60-89 Days Past Due | One-to-four-family (1)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due | Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due | CONSUMER LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	99,000	280,000
60-89 Days Past Due | Indirect home improvement
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	77,000	278,000
60-89 Days Past Due | Solar
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	22,000	0
60-89 Days Past Due | Marine
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due | Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	2,000
60-89 Days Past Due | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due | Commercial and industrial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
60-89 Days Past Due | Warehouse lending
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	394,000	450,000
90 Days or More Past Due | Total real estate loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	138,000	210,000
90 Days or More Past Due | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due | Construction and development
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	138,000	210,000
90 Days or More Past Due | One-to-four-family (1)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due | Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due | CONSUMER LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	256,000	240,000
90 Days or More Past Due | Indirect home improvement
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	174,000	167,000
90 Days or More Past Due | Solar
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	81,000	69,000
90 Days or More Past Due | Marine
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due | Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,000	4,000
90 Days or More Past Due | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due | Commercial and industrial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
90 Days or More Past Due | Warehouse lending
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Non-Accrual
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,264,000	721,000
Non-Accrual | Total real estate loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	296,000	210,000
Non-Accrual | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Non-Accrual | Construction and development
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Non-Accrual | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	154,000	210,000
Non-Accrual | One-to-four-family (1)
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	142,000	0
Non-Accrual | Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Non-Accrual | CONSUMER LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	417,000	511,000
Non-Accrual | Indirect home improvement
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	316,000	435,000
Non-Accrual | Solar
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	81,000	69,000
Non-Accrual | Marine
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	9,000	0
Non-Accrual | Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	11,000	7,000
Non-Accrual | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	551,000	0
Non-Accrual | Commercial and industrial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	551,000	0
Non-Accrual | Warehouse lending
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 0	$ 0

XML

Loans Receivable and ALlowance For Loan Losses - Schedule of Financing Receivables, Related Allowance Recorded and No Related Allowance Recorder (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Unpaid Principal Balance, with no related allowance recorded	$ 222		$ 222		$ 206
Impaired Financing Receivable, Unpaid Principal Balance, Total	773		773
Impaired Financing Receivable, Write-downs [Abstract]
Write-downs with no related allowance recorded	(12)		(12)		(12)
Write-downs	(12)		(12)
Impaired Financing Receivable, Recorded Investment [Abstract]
Recorded Investment, with no related allowance recorded	210		210		194
Recorded Investment	761		761
Impaired Financing Receivable Related Allowance Abstract
Related Allowance, with no related allowance recorded	0		0
Related Allowance	(88)		(88)		0
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Average Recorded Investment, with no related allowance recorded	257	$ 210	276	$ 212
Average Recorded Investment, with related allowance recorded	808	210	827	212
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Interest Income Recognized, with no related allowance recorded	1	1	3	4
Interest Income Recognized, with related allowance recorded	24	1	26	4
Home equity
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Unpaid Principal Balance, with no related allowance recorded	154		154		137
Impaired Financing Receivable, Write-downs [Abstract]
Write-downs with no related allowance recorded	0		0		0
Impaired Financing Receivable, Recorded Investment [Abstract]
Recorded Investment, with no related allowance recorded	154		154		137
Impaired Financing Receivable Related Allowance Abstract
Related Allowance, with no related allowance recorded	0		0
Related Allowance					0
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Average Recorded Investment, with no related allowance recorded	201	152	220	154
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Interest Income Recognized, with no related allowance recorded	0	0	0	2
One-to-four-family (1)
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Unpaid Principal Balance, with no related allowance recorded	68		68		69
Impaired Financing Receivable, Write-downs [Abstract]
Write-downs with no related allowance recorded	(12)		(12)		(12)
Impaired Financing Receivable, Recorded Investment [Abstract]
Recorded Investment, with no related allowance recorded	56		56		57
Impaired Financing Receivable Related Allowance Abstract
Related Allowance, with no related allowance recorded	0		0
Related Allowance					$ 0
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Average Recorded Investment, with no related allowance recorded	56	58	56	58
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Interest Income Recognized, with no related allowance recorded	1	1	3	2
COMMERCIAL BUSINESS LOANS
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Unpaid Principal Balance, with no related allowance recorded	551		551
Impaired Financing Receivable, Write-downs [Abstract]
Write-downs with no related allowance recorded	0		0
Impaired Financing Receivable, Recorded Investment [Abstract]
Recorded Investment, with related allowance recorded	551		551
Impaired Financing Receivable Related Allowance Abstract
Related Allowance, with related allowance recorded	88		88
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Average Recorded Investment, with related allowance recorded	551	0	551	0
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Interest Income Recognized, with related allowance recorded	$ 23	$ 0	$ 23	$ 0

XML

Loans Receivable and Allowance For Loan Losses - Schedule of Loans by Credit Quality Indicator (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 765,571	$ 605,415	$ 604,218
Loan held for sale	1,900
REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	430,208	331,950
Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	63,180	55,871
Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	129,407	94,462
Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	24,026	20,081
One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	170,187	124,009
Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	43,408	37,527
CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	201,674	174,726	170,576
Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	124,387	107,759
Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	40,082	36,503
Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	35,173	28,549
Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,032	1,915
COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	133,689	98,739	$ 117,124
Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	83,221	65,841
Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	50,468	32,898
Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	745,040	594,226
Pass | REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	422,572	329,103
Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	56,533	53,234
Pass | Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	129,407	94,462
Pass | Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	23,872	19,871
Pass | One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	169,352	124,009
Pass | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	43,408	37,527
Pass | CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	201,197	174,120
Pass | Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	124,071	107,324
Pass | Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	40,001	36,434
Pass | Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	35,164	28,549
Pass | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,961	1,813
Pass | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	121,271	91,003
Pass | Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	76,302	58,105
Pass | Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	44,969	32,898
Watch
Financing Receivable, Recorded Investment [Line Items]
Total loans	10,877	3,162
Watch | REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,072	2,637
Watch | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,072	2,637
Watch | Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Watch | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,805	525
Watch | Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	306	525
Watch | Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,499	0
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	3,096	0
Special Mention | REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,268	0
Special Mention | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,575	0
Special Mention | Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	693	0
Special Mention | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Special Mention | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	828	0
Special Mention | Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	828	0
Special Mention | Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	6,558	8,027
Substandard | REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	296	210
Substandard | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Substandard | Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Substandard | Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	154	210
Substandard | One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	142	0
Substandard | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Substandard | CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	477	606
Substandard | Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	316	435
Substandard | Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	81	69
Substandard | Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	9	0
Substandard | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	71	102
Substandard | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,785	7,211
Substandard | Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,785	7,211
Substandard | Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Doubtful | Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | REAL ESTATE LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Construction and development
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Home equity
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | One-to-four-family (1)
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | CONSUMER LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Indirect home improvement
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Solar
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Marine
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | COMMERCIAL BUSINESS LOANS
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss | Warehouse lending
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 0	$ 0

XML

Loans Receivable and Allowance For Loan Losses - Schedule of Troubled Debt Restructurings Accrual and Non-accrual (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017 USD ($) contract item	Sep. 30, 2016 contract	Sep. 30, 2017 USD ($) contract loan item	Sep. 30, 2016 contract	Dec. 31, 2016 USD ($) loan item
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Number of Contracts with Additional Funding Commitments | item	0		0		0
TDR loans on accrual
Financing Receivable, Modifications [Line Items]
Number of TDR loans modified in previous 12 months | contract	0	0	0	0
TDR loans on accrual | loan			1		1
Financing Receivable, Modifications, Recorded Investment | $	$ 56,000		$ 56,000		$ 57,000

XML

Servicing Rights - Narrative (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Off-balance Sheet Risks, Disclosure Information [Line Items]
Servicing asset	$ 5,811,000			$ 5,811,000		$ 8,459,000
Contractually specified servicing fees, late fees, and other ancillary fees	430,000		$ 534,000	1,800,000	$ 1,400,000
Servicing Asset at Fair Value, Disposals				4,751,000	0
Gain on sale of mortgage servicing rights (“MSR”)	38,000	$ 958,000	$ 0	996,000	$ 0
Adjustment to gain on sale of mortgage servicing rights	38,000
Revised gain on sale of mortgage servicing rights	996,000
Mortgage, commercial and consumer servicing rIghts
Off-balance Sheet Risks, Disclosure Information [Line Items]
The unpaid principal balances of mortgage loans serviced	662,000,000			662,000,000		977,100,000
Mortgage servicing rights
Off-balance Sheet Risks, Disclosure Information [Line Items]
Fair market value of servicing rights' assets	$ 7,300,000			$ 7,300,000		$ 11,700,000

XML

Servicing Rights - Schedule of Servicing Rights (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Servicing Asset at Fair Value, Amount [Roll Forward]
Sales			$ (4,751)	$ 0
Mortgage, commercial and consumer servicing rIghts
Servicing Asset at Fair Value, Amount [Roll Forward]
Beginning balance	$ 4,899	$ 6,751	8,459	5,811
Additions	1,326	1,095	3,569	2,927
Servicing rights amortized	(414)	(408)	(1,465)	(1,086)
Impairment on servicing rights	0	216	(1)	2
Ending balance	$ 5,811	$ 7,654	$ 5,811	$ 7,654

XML

Servicing Rights - Valuation Assumptions (Details) - Mortgage, commercial and consumer servicing rIghts	9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Off-balance Sheet Risks, Disclosure Information [Line Items]
Weighted average discount rate	9.50%	9.50%	9.50%
Conditional prepayment rate (“CPR”)	11.30%	16.40%	8.80%
Weighted average life in years	6 years 9 months 18 days	5 years 2 months 12 days

XML

Servicing Rights - Changes in Valuation Assumptions (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Off-balance Sheet Risks, Disclosure Information [Line Items]
Basis Points Drop in Note Rate, Assumption One	0.50%		0.50%
Basis Points Drop in Note Rate, Assumption Two	1.00%		1.00%
Mortgage, commercial and consumer servicing rIghts
Off-balance Sheet Risks, Disclosure Information [Line Items]
Aggregate portfolio principal balance	$ 658,599.0		$ 973,139.0
Weighted average rate of note	4.00%		3.90%
Conditional prepayment rate	11.30%	16.40%	8.80%
Conditional prepayment rate, 0.5% Adverse Change	18.20%		12.80%
Conditional prepayment rate, 1.0% Adverse Change	25.40%		20.20%
Fair value MSR	$ 7,283.0		$ 11,735.0
Fair value MSR, 0.5% Adverse Change	5,764.0		9,991.0
Fair value of MSR, 1.0% Adverse Change	$ 4,682.0		$ 7,808.0
Percentage of MSR	1.10%		1.20%
Percentage of MSR, 0.5% Adverse Change	0.90%		1.00%
Percentage of MSR, 1.0% Adverse Change	0.70%		0.80%
Discount rate	9.50%	9.50%	9.50%
Discount rate, 0.5% Adverse Change	10.00%		10.00%
Discount rate, 1.0% Adverse Change	10.50%		10.50%
Fair value MSR, 0.5% Adverse Change	$ 7,139.0		$ 11,480.0
Fair value MSR, 1.0% Adverse Change	$ 7,000.0		$ 11,235.0
Percentage of MSR, 0.5% Adverse Change	1.10%		1.20%
Percentage of MSR, 1.0% Adverse Change	1.10%		1.20%

XML

Derivatives (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Derivative [Line Items]
Margin collateral	$ 485,000	$ 872,000	$ 485,000	$ 872,000
Derivative instruments, (loss) gain on sale of loans	(374,000)	(697,000)	7,000	(1,700,000)
Not Designated as Hedging Instrument | Fallout adjusted interest rate lock commitments with customers
Derivative [Line Items]
Notional	59,741,000		59,741,000		$ 33,289,000
Asset	1,131,000		1,131,000		818,000
Liability	0		0		0
Not Designated as Hedging Instrument | Mandatory and best effort forward commitments with investors
Derivative [Line Items]
Notional	33,491,000		33,491,000		23,536,000
Asset	4,000		4,000		177,000
Liability	0		0		0
Not Designated as Hedging Instrument | Mortgage-backed securities
Derivative [Line Items]
Notional	77,000,000	$ 99,500,000	77,000,000	$ 99,500,000	53,000,000
Asset	104,000		104,000		495,000
Liability	0		0		0
Not Designated as Hedging Instrument | TBA mortgage-backed securities forward sales paired off with investors
Derivative [Line Items]
Notional	32,500,000		32,500,000		44,000,000
Asset	0		0		747,000
Liability	$ 140,000		$ 140,000		$ 0

XML

Other Real Estate Owned (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Other Real Estate [Roll Forward]
Net loans transferred to OREO			$ 0	$ 525
Capitalized costs			0	7
Gross proceeds from sale of OREO			0	(682)
Gains losses on sales of investment real estate	$ 0	$ 0	0	150
Ending balance	$ 0	$ 0	$ 0	$ 0

XML

Other Real Estate Owned - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($) property	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($) property	Dec. 31, 2016 USD ($)
Banking and Thrift [Abstract]
Number of other real estate owned properties | property	0	0	0	0
Gain on sale of OREO	$ 0	$ 0	$ 0	$ 150,000
Other real estate owned holding costs (recovery)	0	$ 0	0	$ 0
Mortgage Loans in Process of Foreclosure, Amount	$ 0		$ 0		$ 43,000

XML

Deposits - Schedule of Deposit Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Banking and Thrift [Abstract]
Noninterest-bearing checking	$ 156,017	$ 143,236
Interest-bearing checking	115,775	66,119
Savings	72,974	54,995
Money market (4)	236,036	242,849
Certificates of deposit less than $100,000	143,169	93,791
Certificates of deposit of $100,000 through $250,000	73,733	74,832
Certificates of deposit of $250,000 and over	31,927	27,094
Escrow accounts related to mortgages serviced	10,947	9,677
Total deposits	840,578	712,593
Remaining Branch Purchase Deposits	138,200	162,200
Certificate of Deposit, Brokered	92,200	47,100
Interest-bearing Domestic Deposit, Brokered	10,000	0
Federal Reserve Bank, Reserve Requirements, Cash and Federal Reserve Bank Deposits	$ 19,300	$ 10,700

XML

Deposits (Schedule of Maturities of Time Deposits for Future Periods) (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Banking and Thrift [Abstract]
2017	$ 81,162
2018	75,057
2019	45,868
2020	14,980
2021	15,816
Thereafter	15,946
Total	$ 248,829

XML

Deposits - Schedule of Interest Expense by Deposit Category (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Banking and Thrift [Abstract]
Interest-bearing checking	$ 44	$ 7	$ 66	$ 20
Savings and money market	356	257	937	757
Certificates of deposit	645	544	1,790	1,634
Total	$ 1,045	$ 808	$ 2,793	$ 2,411

XML

Commitments and Contingencies - Schedule of Commitments to Extend Credit (Details) - Commitments to Extend Credit - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	$ 347,064	$ 254,953
REAL ESTATE LOANS
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	231,896	163,549
Commercial
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	108	108
Construction and development
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	82,115	57,016
One-to-four-family (1)
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	117,997	79,870
Home equity
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	31,258	26,129
Commercial/Multi-family
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	418	426
Other consumer
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	10,025	8,527
COMMERCIAL BUSINESS LOANS
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	105,143	82,877
Commercial and industrial
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	46,912	31,775
Warehouse lending
Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments	$ 58,231	$ 51,102

XML

Commitments and Contingencies - Narrative (Details)	1 Months Ended	9 Months Ended
	Mar. 31, 2008 shares	Sep. 30, 2017 USD ($) action $ / shares	Dec. 31, 2016 USD ($) $ / shares
Loss Contingencies [Line Items]
Amount of loans sold to FHLB		$ 40,500,000
FLA established		433,000
Bank recourse obligation		$ 1,100,000
Bank recourse obligation, percentage of loans outstanding		2.60%
Reserve as a percentage of outstanding CE		10.00%
Reserve for loans sold		$ 110,000
Outstanding Delinquencies On Loans Sold to Federal Home Loan Bank		$ 0	$ 0
Severance agreement, period of base compensation disbursed as lump sum payment (in months)		24 months
Change of control agreement, notice required to cancel agreement (in months)		24 months
Change of control agreement, executive payment, period following change in control (in months)		12 months
Pending material legal actions | action		0
Visa, Inc.
Loss Contingencies [Line Items]
Market value of stock (in dollars per share) | $ / shares		$ 105.24	$ 77.73
Visa, Inc. | Bank
Loss Contingencies [Line Items]
Common stock, conversion ratio	1.6483
Carrying value of stock		$ 0
Visa, Inc. | Bank | Class B Common Stock
Loss Contingencies [Line Items]
Number of shares received in an IPO | shares	7,158
Maximum
Loss Contingencies [Line Items]
Change of control agreement, executive payment, period prior to change in control (in months)		6 months
Change of control agreement, period of base compensation disbursed as lump sum payment (in months)		12 months
Commitments to Extend Credit
Loss Contingencies [Line Items]
Reserve for estimated losses		$ 237,000	$ 179,000
Guarantee on loans sold
Loss Contingencies [Line Items]
Reserve for estimated losses		$ 1,000,000	$ 955,000

XML

Fair Value of Financial Instruments - Schedule of Available for Sale Securities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	$ 78,103	$ 81,875
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	78,103	81,875
Fair Value, Measurements, Recurring | U.S. agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	6,122	8,068
Fair Value, Measurements, Recurring | Corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	7,075	7,500
Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	11,439	15,264
Fair Value, Measurements, Recurring | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	39,474	45,195
Fair Value, Measurements, Recurring | U.S. Small Business Administration securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	13,993	5,848
Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 1 | U.S. agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 1 | Corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 1 | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 1 | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 1 | U.S. Small Business Administration securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	78,103	81,875
Fair Value, Measurements, Recurring | Level 2 | U.S. agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	6,122	8,068
Fair Value, Measurements, Recurring | Level 2 | Corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	7,075	7,500
Fair Value, Measurements, Recurring | Level 2 | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	11,439	15,264
Fair Value, Measurements, Recurring | Level 2 | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	39,474	45,195
Fair Value, Measurements, Recurring | Level 2 | U.S. Small Business Administration securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	13,993	5,848
Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 3 | U.S. agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 3 | Corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 3 | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 3 | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	0	0
Fair Value, Measurements, Recurring | Level 3 | U.S. Small Business Administration securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale, at fair value	$ 0	$ 0

XML

Fair Value of Financial Instruments - Schedule of Mortgage loans held for sale (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale, at fair value	$ 65,055	$ 52,553
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale, at fair value	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale, at fair value	65,055	52,553
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale, at fair value	$ 0	$ 0

XML

Fair Value of Financial Instruments - Schedule of Interest Rate Lock Commitments Measured at Fair Value on Recurring Basis (Details) - Fair Value, Measurements, Recurring - Fallout adjusted interest rate lock commitments with customers - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest Rate Lock Commitments with Customers	$ 1,131	$ 818
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest Rate Lock Commitments with Customers	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest Rate Lock Commitments with Customers	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest Rate Lock Commitments with Customers	$ 1,131	$ 818

XML

Fair Value of Financial Instruments - Forward Sale Commitments with Investors (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Individual Forward Sale Commitments with Investors	$ 108	$ 672
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Individual Forward Sale Commitments with Investors	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Individual Forward Sale Commitments with Investors	104	495
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Individual Forward Sale Commitments with Investors	$ 4	$ 177

XML

Fair Value of Financial Instruments - Paired Off Commitments with Investors (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Paired Off Commitments with Investors	$ (140)	$ 747
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Paired Off Commitments with Investors	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Paired Off Commitments with Investors	(140)	747
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Paired Off Commitments with Investors	$ 0	$ 0

XML

Fair Value of Financial Instruments - Schedule of Impaired Loans and OREO (Details) - Fair Value, Measurements, Nonrecurring - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	$ 761	$ 194
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	$ 761	$ 194

XML

Fair Value of Financial Instruments - Discount Rate (Details) - Level 3	9 Months Ended
	Sep. 30, 2017
Fair Value, Measurements, Recurring | Fallout adjusted interest rate lock commitments with customers | Quoted Market Prices | Minimum | Pull-through expectations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	80.00%
Fair Value, Measurements, Recurring | Fallout adjusted interest rate lock commitments with customers | Quoted Market Prices | Maximum | Pull-through expectations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	99.00%
Fair Value, Measurements, Recurring | Fallout adjusted interest rate lock commitments with customers | Quoted Market Prices | Weighted Average | Pull-through expectations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	95.00%
Fair Value, Measurements, Recurring | Mandatory and best effort forward commitments with investors | Quoted Market Prices | Minimum | Pull-through expectations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	80.00%
Fair Value, Measurements, Recurring | Mandatory and best effort forward commitments with investors | Quoted Market Prices | Maximum | Pull-through expectations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	99.00%
Fair Value, Measurements, Recurring | Mandatory and best effort forward commitments with investors | Quoted Market Prices | Weighted Average | Pull-through expectations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	95.00%
Fair Value, Measurements, Nonrecurring | Fair Value of Underlying Collateral | Weighted Average | Discount applied to the obtained appraisal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	11.60%
Fair Value, Measurements, Nonrecurring | Impaired Loans | Fair Value of Underlying Collateral | Minimum | Discount applied to the obtained appraisal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	0.00%
Fair Value, Measurements, Nonrecurring | Impaired Loans | Fair Value of Underlying Collateral | Maximum | Discount applied to the obtained appraisal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 Fair Value Instrument	18.00%

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Fair Value of Financial Instruments - Fair Value Level 3 Rollforward (Details) - Level 3 - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Fallout adjusted interest rate lock commitments with customers
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance	$ 1,212	$ 2,058	$ 818	$ 698
Purchases and Issuances	3,891	5,763	11,440	14,039
Sales and Settlements	(3,972)	(5,971)	(11,127)	(12,887)
Ending Balance	1,131	1,850	1,131	1,850
Net change in fair value for gains/(losses) relating to items held at end of period	(81)	(208)	313	1,152
Mandatory and best effort forward commitments with investors
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance	83	(3)	177	74
Purchases and Issuances	40	(60)	(49)	(267)
Sales and Settlements	(119)	23	(124)	153
Ending Balance	4	(40)	4	(40)
Net change in fair value for gains/(losses) relating to items held at end of period	$ (79)	$ (37)	$ (173)	$ (114)

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Fair Value of Financial Instruments - Fair Value By Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Subordinated Debt, Net of Unamortized Debt Issuance Costs	$ 9,840	$ 9,825
Certificates of deposit at other financial institutions	18,108	15,248
Securities available-for-sale, at fair value	78,103	81,875
Carrying Amount | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Deposits	840,578	712,593
Fair Value | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Deposits	844,288	718,970
Financial Assets | Carrying Amount | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	31,295	36,456
Certificates of deposit at other financial institutions	18,108	15,248
Financial Assets | Carrying Amount | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	78,103	81,875
Loans held for sale, at fair value	65,055	52,553
FHLB stock, at cost	3,047	2,719
Accrued interest receivable	3,217	2,524
Forward sale commitments with investors	104	495
Paired off commitments with investors	0	747
Financial Assets | Carrying Amount | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Forward sale commitments with investors	4	177
Loans receivable, gross	765,571	605,415
Servicing rights, held at lower of cost or fair value	5,811	8,459
Fair value interest rate locks with customers	1,131	818
Financial Assets | Fair Value | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	31,295	36,456
Certificates of deposit at other financial institutions	18,108	15,248
Financial Assets | Fair Value | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	78,103	81,875
Loans held for sale, at fair value	65,055	52,553
FHLB stock, at cost	3,047	2,719
Accrued interest receivable	3,217	2,524
Forward sale commitments with investors	104	495
Paired off commitments with investors	0	747
Financial Assets | Fair Value | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Forward sale commitments with investors	4	177
Loans receivable, gross	779,284	670,183
Servicing rights, held at lower of cost or fair value	7,289	11,741
Fair value interest rate locks with customers	1,131	818
Financial Liabilities | Carrying Amount | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Subordinated Debt, Net of Unamortized Debt Issuance Costs	9,840	9,825
Paired off commitments with investors	140	0
Borrowings	10,270	12,670
Accrued interest payable	217	192
Financial Liabilities | Fair Value | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Subordinated Debt, Net of Unamortized Debt Issuance Costs	9,805	9,805
Paired off commitments with investors	140	0
Borrowings	9,049	12,660
Accrued interest payable	$ 217	$ 192

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Employee Benefits - Narrative (Details) - USD ($)		3 Months Ended		6 Months Ended	9 Months Ended		12 Months Ended
	Jan. 02, 2012	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2012	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2012	Jul. 09, 2012
Compensation and Retirement Disclosure [Abstract]
Employee Stock Ownership Plan (ESOP), Requisite Service Period	1000 hours
Employee stock ownership plan (ESOP), requisite service period and 12 months					1000 hours
Employee stock ownership plan (ESOP), debt structure, employer loan, amount									$ 2,600,000
Employee stock ownership plan shares purchased				259,210
Employee stock ownership plan (ESOP), weighted average purchase price of shares purchased (in dollars per share)				$ 10.17
Amortization period of ESOP loan								10 years
Employee stock ownership plan (ESOP), debt structure, employer loan, interest rate								2.30%
Employee stock ownership plan (ESOP), periodic installment payments from esop, amount paid							$ 257,000
Employee stock ownership plan (ESOP), interest payments from esop							$ 38,000
ESOP compensation expense for allocated shares		$ 360,000	$ 204,000		$ 914,000	$ 529,000

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Employee Benefits - Schedule of Shares Under ESOP (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Sep. 30, 2016	Jul. 09, 2012
Employee Stock Ownership Plan (ESOP), Shares in ESOP [Abstract]
Allocated shares	126,589	102,359
Committed to be released shares	19,441	19,441
Unallocated shares	110,164	136,085
Total ESOP shares	256,194	257,885	259,210
Fair value of unallocated shares (in thousands)	$ 5,180	$ 3,703

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Earnings Per Share - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Net income	$ 3,454	$ 3,457	$ 10,406	$ 7,953
Denominator for basic earnings per share- weighted average common shares outstanding (shares)	3,051,744	2,851,147	2,949,092	2,901,572
Dilutive shares (in shares)	187,584	87,292	192,685	84,102
Denominator for diluted earnings per share- weighted average common shares outstanding (shares)	3,239,328	2,938,439	3,141,777	2,985,674
Basic earnings per share (in dollars per share)	$ 1.13	$ 1.21	$ 3.53	$ 2.74
Diluted earnings per share (in dollars per share)	$ 1.07	$ 1.18	$ 3.31	$ 2.66

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Stock-Based Compensation - Narrative (Details) - 2013 Equity Incentive Plan - USD ($)				3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 01, 2016	May 08, 2014	Sep. 18, 2013	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense				$ 138,000	$ 195,000	$ 496,000	$ 588,000
Granted (in shares)						0
Stock option, fair value assumption, expected life								7 years 4 months 10 days
Remaining weighted-average vesting period						6 years 7 months 10 days
Equity Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)			324,013
Granted (in shares)			322,000
Market price per share (in dollars per share)		$ 16.89
Shares available for grant				2,013		2,013
Award vesting period		5 years
Annual award vesting percentage		20.00%
Award contractual life		10 years
Expiration period		10 years
Stock option, fair value assumption, expected life		6 years 6 months
Unrecognized compensation cost, nonvested awards				$ 368,000		$ 368,000
Remaining weighted-average vesting period						1 year 7 months 6 days
Restricted stock awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)			129,605
Shares	4,500	125,105
Market price per share (in dollars per share)	$ 26.00	$ 16.89
Award vesting period		5 years
Unrecognized compensation cost, nonvested awards				$ 508,000		$ 508,000
Weighted-average vesting period						1 year 7 months 6 days
Restricted stock awards | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period		3 years

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Stock-Based Compensation (Stock Option Activity) (Details) - 2013 Equity Incentive Plan - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Shares
Outstanding, beginning balance (in shares)	295,850
Granted, Shares	0
Less exercised (in shares)	34,363
Outstanding, ending balance (in shares)	261,487	295,850
Expected to vest, assuming a 0.31% annual forfeiture rate (in shares)	261,053
Exercisable (in shares)	134,687
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expected Forfeiture Rate	0.31%
Weighted-Average Exercise Price
Outstanding, beginning balance (in dollars per share)	$ 16.89
Granted (in dollars per share)	0.00
Less exercised (in dollars per share)	16.89
Outstanding, ending balance (in dollars per share)	16.89	$ 16.89
Expected to vest, assuming a 0.31% annual forfeiture rate (in dollars per share)	16.89
Exercisable (in dollars per share)	$ 16.89
Weighted-Average Remaining Contractual Term In Years
Outstanding, beginning balance		7 years 4 months 10 days
Outstanding, ending balance	6 years 7 months 10 days
Expected to vest, assuming a 0.31% annual forfeiture rate, Weighted Average Remaining Contractual Term	6 years 7 months 10 days
Exercisable	6 years 7 months 10 days
Aggregate Intrinsic Value
Beginning balance	$ 5,638,901
Granted	$ 0
Less exercised	$ 919,380
Ending balance	9,089,288	$ 5,638,901
Expected to vest, assuming a 0.31% annual forfeiture rate	9,074,192
Exercisable	$ 4,681,720

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Stock-Based Compensation - Restricted Stock Awards (Details) - Restricted stock awards	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Shares
Nonvested, Beginning balance (in shares) | shares	68,763
Granted (shares) | shares	0
Less vested (in shares) | shares	31,921
Nonvested, Ending balance (in shares) | shares	36,842
Weighted-Average Grant-Date Fair Value Per Share
Nonvested, Beginning balance (in dollars per share) | $ / shares	$ 17.49
Granted (in dollars per share) | $ / shares	0.00
Less vested (in dollars per share) | $ / shares	17.32
Nonvested, Ending balance (in dollars per share) | $ / shares	$ 17.63
Weighted-Average Grant-Date Fair Value
Nonvested, Beginning balance | $	$ 1,202,401
Granted | $	0
Less vested | $	552,810
Nonvested, Endng balance | $	$ 649,591
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | shares	0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value | $ / shares	$ 0.00
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Forfeited in Period | $	$ 0
2013 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms	1 year 7 months 6 days

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Regulatory Capital - Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Jan. 01, 2016
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total risk-based capital, Ratio	15.50%
Tier 1 risk-based capital, Ratio	14.20%
Tier 1 leverage capital, Ratio	11.90%
CET 1 capital, Ratio	14.20%
Bank
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 to Risk Weighted Assets, Capital Conservation Buffer, Phased in	1.25%		0.625%
Common Equity Tier 1 to Risk Weighted Assets, Capital Conservation Buffer	2.50%
Total risk-based capital, Amount	$ 130,246	$ 93,309
Total risk-based capital, Ratio	16.14%	13.87%
Total risk-based capital, For Capital Adequacy Purposes, Amount	$ 64,556	$ 53,813
Total risk-based capital, For Capital Adequacy Purposes, Ratio	8.00%	8.00%
Total risk-based capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 80,696	$ 67,266
Total risk-based capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Tier 1 risk-based capital, Amount	$ 120,150	$ 84,876
Tier 1 risk-based capital, Ratio	14.89%	12.62%
Tier 1 risk-based capital, For Capital Adequacy Purposes, Amount	$ 48,417	$ 40,360
Tier 1 risk-based capital, For Capital Adequacy Purposes, Ratio	6.00%	6.00%
Tier 1 risk-based capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 64,556	$ 53,813
Tier 1 risk-based capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	8.00%	8.00%
Tier 1 leverage capital	$ 120,150	$ 84,876
Tier 1 leverage capital, Ratio	12.50%	10.33%
Tier 1 leverage capital, For Capital Adequacy Purposes, Amount	$ 38,459	$ 32,862
Tier 1 leverage capital, For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier 1 leverage capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 48,074	$ 41,078
Tier 1 leverage capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%
CET 1 capital, Amount	$ 120,150	$ 84,876
CET 1 capital, Ratio	14.89%	12.62%
CET 1 capital, For Capital Adequacy Purposes, Amount	$ 36,313	$ 30,270
CET 1 capital, For Capital Adequacy Purposes, Ratio	4.50%	4.50%
CET 1 capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 52,452	$ 43,723
CET 1 capital, To be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.50%	6.50%

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Regulatory Capital - Regulatory Capital Ratios Policy (Details)	Sep. 30, 2017	Dec. 31, 2016	Jan. 01, 2016
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 leverage capital, Ratio	11.90%
Tier 1 risk-based capital, Ratio	14.20%
Total risk-based capital, Ratio	15.50%
CET 1 capital, Ratio	14.20%
Bank
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
CET 1 capital conversion buffer phased in	1.25%		0.625%
Tier 1 leverage capital, Ratio	12.50%	10.33%
Tier 1 risk-based capital, Ratio	14.89%	12.62%
Total risk-based capital, Ratio	16.14%	13.87%
CET 1 capital, Ratio	14.89%	12.62%

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Business Segments - Narrative (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) segment item	Dec. 31, 2016 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments | segment	2
Deposits	$ 840,578	$ 712,593
Commercial and Consumer Banking
Segment Reporting Information [Line Items]
Deposits	$ 840,600	$ 712,600
Commercial and Consumer Banking | Retail Deposit | Pacific Northwest
Segment Reporting Information [Line Items]
Number of bank branches | item	11

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Business Segments - Segment Financial Results (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) employee	Sep. 30, 2016 USD ($) employee	Sep. 30, 2017 USD ($) employee	Sep. 30, 2016 USD ($) employee
Segment Reporting Information [Line Items]
Net interest income	$ 11,022	$ 8,750	$ 29,962	$ 24,665
Provision for loan losses	(450)	(600)	(450)	(1,800)
Noninterest income	6,427	7,248	18,804	18,125
Noninterest expense	(11,589)	(10,312)	(32,909)	(28,839)
INCOME BEFORE PROVISION FOR INCOME TAXES	5,410	5,086	15,407	12,151
Provision for income taxes	(1,956)	(1,629)	(5,001)	(4,198)
NET INCOME	3,454	3,457	10,406	7,953
Total average assets at quarter end	$ 965,718	$ 803,457	$ 902,782	$ 790,156
FTEs | employee	323	305	323	305
Home Lending
Segment Reporting Information [Line Items]
Net interest income	$ 812	$ 793	$ 1,857	$ 1,706
Provision for loan losses	(127)	(16)	(324)	(142)
Noninterest income	5,014	5,982	14,863	14,852
Noninterest expense	(4,586)	(3,861)	(12,985)	(10,593)
INCOME BEFORE PROVISION FOR INCOME TAXES	1,113	2,898	3,411	5,823
Provision for income taxes	(407)	(948)	(1,107)	(2,012)
NET INCOME	706	1,950	2,304	3,811
Total average assets at quarter end	$ 220,898	$ 168,722	$ 196,765	$ 147,873
FTEs | employee	119	110	119	110
Commercial and Consumer Banking
Segment Reporting Information [Line Items]
Net interest income	$ 10,210	$ 7,957	$ 28,105	$ 22,959
Provision for loan losses	(323)	(584)	(126)	(1,658)
Noninterest income	1,413	1,266	3,941	3,273
Noninterest expense	(7,003)	(6,451)	(19,924)	(18,246)
INCOME BEFORE PROVISION FOR INCOME TAXES	4,297	2,188	11,996	6,328
Provision for income taxes	(1,549)	(681)	(3,894)	(2,186)
NET INCOME	2,748	1,507	8,102	4,142
Total average assets at quarter end	$ 744,820	$ 634,735	$ 706,017	$ 642,283
FTEs | employee	204	195	204	195