FS Bank Reports Net Loss

Financial Results Reflect a Shift in Momentum

First Sound Bank closed 2023 with a net loss of $952,000, reversing the $716,000 profit it reported the year before. The change was driven by higher operating costs, margin pressure, and a notable increase in reserves tied to credit risk.

The year was marked by active investment in the business. The bank expanded its commercial lending team and pursued loan growth across key segments. Those efforts increased expenses at a faster pace than revenue, putting pressure on overall performance.

Expenses Rise as the Bank Invests in Growth

Compensation and benefits climbed 22% year over year as new hires were brought on to support lending activity. Professional services expenses also rose sharply, increasing 51% as the bank relied more heavily on external expertise for strategic planning and regulatory support.

At the same time, the provision for loan losses increased to $793,000, more than double the prior year. The higher reserve reflected changes in loan balances, evolving risk characteristics, and a more cautious outlook amid economic uncertainty.

Loan Growth Continues, Credit Trends Tighten

Total loans increased 7.4% to $135.2 million, with growth concentrated in commercial real estate and construction. Deposits also moved higher, reaching $170.6 million by year-end, supported in part by growth in non-interest-bearing accounts.

Credit metrics, however, showed signs of normalization. Nonperforming loans rose to $2.2 million, representing 1.62% of total loans, up from 0.49% the previous year. While the increase remained manageable, it prompted the bank to reinforce reserves and sharpen its focus on credit oversight.

Margins Narrow, Capital Remains Strong

Net interest margin declined to 3.01% from 3.26% in 2022 as funding costs rose and competition intensified. Despite margin compression, capital levels stayed well above regulatory requirements. The bank reported a Tier 1 leverage ratio of 10.58% and a total risk-based capital ratio of 16.31%.

Focus Turns to Execution in 2024

Looking ahead, First Sound Bank plans to build on its commercial lending platform while maintaining a disciplined approach to risk. Management expects continued economic uncertainty but believes the bank’s capital position and balance sheet structure provide flexibility.

The year ahead will test how effectively last year’s investments translate into sustainable performance. With growth initiatives in place and tighter credit monitoring underway, the bank enters 2024 focused on stability and execution.