Mountlake Terrace bank completes $32M IPO

Another Pacific Northwest bank has completed a long-awaited initial public offering, a sign of investor confidence in the region's community banks.

FS Bancorp, the newly formed parent company of 1st Security Bank of Washington in Mountlake Terrace, said its stock began trading Tuesday at $10 a share on the Nasdaq Capital Market under the symbol "FSBW".

The IPO raised $32.4 million, the maximum amount possible in the offering, the company said.

The former mutual savings bank first registered its IPO in September 2008, but the implosion of Washington Mutual and the worst series of bank failures since the S&L crisis of the 1980s torpedoed 1st Security's chances.

The IPO was part of the conversion from a mutual structure to a stock holding company It's a switch other mutuals have been making, including Sound Community Bank in Seattle and First Federal Savings & Loan of Port Angeles.

1st Security Bank's successful IPO comes after another successful local bank IPO. HomeStreet, the holding company of Seattle-based HomeStreet Bank, ended a troubled chapter in February after raising $88.7 million in a twice-delayed IPO.

It's a new chapter for 1st Security Bank, which was chartered as Washington's Credit Union in 1936. The credit union converted in 2004 to a mutual savings bank, a structure that has since lost its advantages.

With $300.8 million in assets, 1st Security was the second largest Snohomish County-based bank as of March 31. The bank has a branch each in Canyon Park, Edmonds, Lynnwood, Poulsbo, Puyallup and Overlake.

About half of its lending is to consumers, mostly through a network of roofing, ventilation and window contractors.

The bank reported profit of $277,000 in the first quarter, down from $564,000 in the same period a year ago.

Proceeds from the IPO will allow the bank to diversify its business. In its prospectus, the bank said it plans to make more home loans, open a branch on Seattle's Capitol Hill in the first quarter of 2013 and expand lending to businesses and commercial real-estate investors.

1st Security Bank depositors who had at least $50 in their accounts as of June 30, 2007 had first crack at buying shares, and these depositors bought up all 3,240,125 shares of common stock.

The company said it would mail refunds to others who had placed orders for the IPO.

A stock-ownership plan for bank employees was not able to buy any IPO shares because of oversubscription by the depositors. The employee plan intends to buy 259,210 shares in the open market, the company said.

After operating under various regulatory enforcement orders since January 2005, 1st Security was freed of all such restrictions as of August 2011.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com

By Sanjay Bhatt Seattle Times staff reporter

By Sanjay Bhatt
Seattle Times staff reporter