FS Bancorp, Inc. Reports Second Quarter Net Income of $7.7 Million or $0.99 Per Diluted Share and Declares 50th Consecutive Quarterly Cash Dividend in Addition to a Special Dividend 

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MOUNTLAKE TERRACE, Wash., July 22, 2025 (GLOBE NEWSWIRE) -- FS Bancorp, Inc. ( FSBW) (the “Company”), the holding company for 1st Security Bank of Washington (the “Bank”) today reported 2025 second quarter net income of $7.7 million, or $0.99 per diluted share, compared to $9.0 million, or $1.13 per diluted share, for the comparable quarter one year ago. For the six months ended June 30, 2025, net income was $15.7 million, or $1.99 per diluted share, compared to net income of $17.4 million, or $2.20 per diluted share, for the comparable six-month period in 2024.

“We are proud of the balance sheet growth this quarter driven by solid loan demand. Additionally, our share repurchase activity reflects our continued confidence and commitment to delivering long-term value to our shareholders,” stated Phillip Whittington, CFO.

“We are pleased to announce that our Board of Directors has approved our 50th consecutive quarterly cash dividend of $0.28 per common share, demonstrating our continued commitment to delivering value to our shareholders. In recognition of this milestone, the Board also approved a special dividend of $0.22 per common share. Both dividends will be paid on August 21, 2025, to shareholders of record as of August 7, 2025,” noted Matthew Mullet, President.

2025 Second Quarter Highlights

  • Net income was $7.7 million for the second quarter of 2025, compared to $8.0 million for the previous quarter, and $9.0 million for the comparable quarter one year ago;
  • Total deposits decreased $61.8 million, or 2.4%, to $2.55 billion at June 30, 2025, primarily due to a decrease of $59.1 million in brokered deposits, compared to $2.62 billion at March 31, 2025, and increased $170.6 million, or 7.2%, from $2.38 billion at June 30, 2024. Noninterest-bearing deposits were $654.1 million at June 30, 2025, $676.7 million at March 31, 2025, and $623.3 million at June 30, 2024;
  • Borrowings increased $165.5 million, or 240.5% to $234.3 million at June 30, 2025, compared to $68.8 million at March 31, 2025, and increased $52.4 million, or 28.8%, from $181.9 million at June 30, 2024;
  • Loans receivable, net increased $81.2 million, or 3.2%, to $2.58 billion at June 30, 2025, compared to $2.50 billion at March 31, 2025, and increased $125.1 million, or 5.1%, from $2.46 billion at June 30, 2024;
  • Consumer loans were $606.3 million at June 30, 2025, a decrease of $2.6 million, or 0.4%, from $608.9 million in the previous quarter, and a decrease of $35.4 million, or 5.5%, from $641.7 million in the comparable quarter one year ago. During the three months ended June 30, 2025, consumer loan originations included 82.5% of home improvement loans originated with a Fair Isaac Corporation (“FICO”) score above 720;
  • Repurchased 132,282 shares of the Company's common stock in the second quarter of 2025 at an average price of $38.92 per share with $725,000 remaining for future purchases under the existing share repurchase plan at June 30, 2025. In addition, as previously announced on July 9, 2025, the Board approved a new share repurchase plan authorizing the repurchase of up to $5.0 million in shares of the Company's outstanding common stock;
  • Book value per share increased $0.43 to $39.55 at June 30, 2025, compared to $39.12 at March 31, 2025, and increased $2.40 from $37.15 at June 30, 2024. Tangible book value per share (non-GAAP financial measure) increased $0.50 to $37.46 at June 30, 2025, compared to $36.96 at March 31, 2025, and increased $2.80 from $34.66 at June 30, 2024. See, “Non-GAAP Financial Measures;”
  • Segment reporting in the second quarter of 2025 reflected net income of $7.4 million for the Commercial and Consumer Banking segment and $351,000 for the Home Lending segment, compared to net income of $7.8 million and $242,000 in the prior quarter, and net income of $8.0 million and $1.0 million in the second quarter of 2024, respectively; and
  • Regulatory capital ratios at the Bank were 14.1% for total risk-based capital and 11.2% for Tier 1 leverage capital at June 30, 2025, compared to 14.4% for total risk-based capital and 11.3% for Tier 1 leverage capital at March 31, 2025.

Segment Reporting

The Company operates through two reportable segments: Commercial and Consumer Banking and Home Lending. The Commercial and Consumer Banking segment provides diversified financial products and services to our commercial and consumer customers. These products and services include deposit products; residential, consumer, business and commercial real estate lending and cash management services. This segment also manages the Bank's investment portfolio and other assets. The Home Lending segment originates one-to-four-family residential mortgage loans primarily for sale in the secondary markets as well as loans held for investment.

The tables below provide a summary of segment reporting at or for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

At or For the Three Months Ended June 30, 2025
Condensed income statement:Commercial and Consumer BankingHome LendingTotal
Net interest income(1)$29,179$2,933$32,112
Provision for credit losses(1,849)(172)(2,021)
Noninterest income(2)2,2972,8735,170
Noninterest expense(3)(20,313)(5,189)(25,502)
Income before provision for income taxes9,3144459,759
Provision for income taxes(1,937)(94)(2,031)
Net income$7,377$351$7,728
Total average assets for period ended$2,466,917$649,443$3,116,360
Full-time employees ("FTEs")452115567
At or Three Months Ended June 30, 2024
Condensed income statement:Commercial and Consumer BankingHome LendingTotal
Net interest income(1)$28,051$2,350$30,401
(Provision) recovery for credit losses(1,214)137(1,077)
Noninterest income(2)2,2693,5995,868
Noninterest expense(3)(19,043)(4,814)(23,857)
Income before provision for income taxes10,0631,27211,335
Provision for income taxes(2,113)(263)(2,376)
Net income$7,950$1,009$8,959
Total average assets for period ended$2,359,741$588,090$2,947,831
FTEs450121571
At or For the Six Months Ended June 30, 2025
Condensed income statement:Commercial and Consumer BankingHome LendingTotal
Net interest income(1)$57,586$5,507$63,093
Provision for credit losses(3,170)(443)(3,613)
Noninterest income(2)4,5425,75410,296
Noninterest expense(3)(40,489)(10,067)(50,556)
Income before provision for income taxes18,46975119,220
Provision for income taxes(3,314)(157)(3,471)
Net income$15,155$594$15,749
Total average assets for period ended$2,440,654$634,013$3,074,667
FTEs452115567
At or For the Six Months Ended June 30, 2024
Condensed income statement:Commercial and Consumer BankingHome LendingTotal
Net interest income(1)$56,137$4,610$60,747
Provision for credit losses(2,465)(11)(2,476)
Noninterest income(2)4,6626,31710,979
Noninterest expense(3)(38,051)(9,335)(47,386)
Income before provision for income taxes20,2831,58121,864
Provision for income taxes(4,182)(326)(4,508)
Net income$16,101$1,255$17,356
Total average assets for period ended$2,380,803$572,386$2,953,189
FTEs450121571

__________________________

(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.
(2)Noninterest income includes activity from certain residential mortgage loans that were initially originated for sale and measured at fair value and subsequently transferred to loans held for investment. Gains and losses from changes in fair value for these loans are reported in earnings as a component of noninterest income. For the three and six months ended June 30, 2025, the Company recorded a net increase in fair value of $3,000 and $266,000, respectively, compared to a net increase in fair value of $184,000 and $186,000, respectively for the three and six months ended June 30, 2024. As of June 30, 2025 and 2024, there were $13.2 million and $13.9 million, respectively, in residential mortgage loans recorded at fair value as they were previously transferred from loans held for sale to loans held for investment.
(3)Noninterest expense includes allocated overhead expense from general corporate activities. Allocation is determined based on a combination of segment assets and FTEs. For the three and six months ended June 30, 2025 and 2024, the Home Lending segment included allocated overhead expenses of $1.8 million and $3.7 million, compared to $1.5 million and $3.0 million, respectively.

Asset Summary

The following table presents the components and changes in total assets as of the dates indicated.

ASSETSLinked QuarterPrior Year
(Dollars in thousands)June 30,March 31,June 30,ChangeQuarter Change
202520252024$%$%
Cash and due from banks$15,168$18,657$20,005$(3,489)(19)%$(4,837)(24)%
Interest-bearing deposits at other financial institutions18,02744,08413,006(26,057)(59)5,02139
Total cash and cash equivalents33,19562,74133,011(29,546)(47)1841
Certificates of deposit at other financial institutions2481,23412,707(986)(80)(12,459)(98)
Securities available-for-sale, at fair value302,692291,133221,18211,559481,51037
Securities held-to-maturity, net31,56210,4348,45521,12820223,107273
Loans held for sale, at fair value53,63031,03853,81122,59273(181)
Loans receivable, net2,582,2722,501,1172,457,18481,1553125,0885
Accrued interest receivable14,27014,40613,792(136)(1)4783
Premises and equipment, net30,09829,45129,999647299
Operating lease right-of-use7,9694,9795,7842,990602,18538
Federal Home Loan Bank stock, at cost11,5795,25610,3226,3231201,25712
Deferred tax asset, net7,7827,0094,590773113,19270
Bank owned life insurance (“BOLI”), net38,26238,77838,201(516)(1)61
MSRs, held at the lower of cost or fair value8,6528,9269,352(274)(3)(700)(7)
Goodwill3,5923,5923,592
Core deposit intangible, net12,07112,87915,483(808)(6)(3,412)(22)
Other assets38,13943,10523,912(4,966)(12)14,22759
TOTAL ASSETS$3,176,013$3,066,078$2,941,377$109,9354%$234,6368%

The increase in total assets reflects the Company's continued focus on balance sheet growth through loan origination and selective investment activity, funded by a combination of on-balance sheet liquidity and borrowings.

Prior
LOAN PORTFOLIOLinkedYear
(Dollars in thousands)QuarterQuarter
COMMERCIAL REAL ESTATEJune 30, 2025March 31, 2025June 30, 2024$$
(“CRE”) LOANSAmountPercentAmountPercentAmountPercentChangeChange
CRE owner occupied$180,2506.8%$164,9116.5%$177,7237.1%$15,339$2,527
CRE non-owner occupied171,9796.6174,1886.9181,6817.3(2,209)(9,702)
Commercial and speculative construction and development300,72311.5288,97811.4220,7938.911,74579,930
Multi-family263,18510.1244,9409.7239,6759.618,24523,510
Total CRE loans916,13735.0873,01734.5819,87232.943,12096,265
RESIDENTIAL REAL ESTATE LOANS
One-to-four-family (excludes HFS)639,88124.4637,29925.2588,96623.72,58250,915
Home equity85,6133.373,8462.973,7493.011,76711,864
Residential custom construction54,0242.148,8101.953,4162.15,214608
Total residential real estate loans779,51829.8759,95530.0716,13128.819,56363,387
CONSUMER LOANS
Indirect home improvement530,37520.3532,03821.0563,62122.6(1,663)(33,246)
Marine72,7652.873,7372.974,6273.0(972)(1,862)
Other consumer3,1510.13,1180.13,4400.133(289)
Total consumer loans606,29123.2608,89324.0641,68825.7(2,602)(35,397)
COMMERCIAL BUSINESS LOANS
Commercial and industrial (“C&I”)294,56311.3274,95610.9285,18311.619,6079,380
Warehouse lending17,9520.715,9490.625,5481.02,003(7,596)
Total commercial business loans312,51512.0290,90511.5310,73112.621,6101,784
Total loans receivable, gross2,614,461100.0%2,532,770100.0%2,488,422100.0%81,691126,039
Allowance for credit losses on loans(32,189)(31,653)(31,238)(536)(951)
Total loans receivable, net$2,582,272$2,501,117$2,457,184$81,155$125,088

The composition of CRE loans at the dates indicated were as follows:

(Dollars in thousands)June 30, 2025March 31, 2025June 30, 2024
CRE by Type:AmountAmountAmount
CRE non-owner occupied:
Office$39,141$39,406$41,380
Retail38,65235,52037,507
Hospitality/restaurant26,48927,37728,314
Self-storage19,07519,09219,141
Mixed use18,38718,86818,062
Industrial14,44415,03317,163
Senior housing/assisted living7,4487,5067,675
Other3,6706,5796,847
Land2,2062,3143,021
Education/worship2,4672,4932,571
Total CRE non-owner occupied171,979174,188181,681
CRE owner occupied:
Industrial77,41966,61863,970
Office40,15640,44741,978
Retail19,47020,53520,885
Other9,4838,5298,354
Hospitality/restaurant7,2307,30610,800
Automobile related7,2157,2668,200
Mixed use5,5485,5795,680
Agriculture4,6523,9903,639
Education/worship4,6304,6414,610
Car wash4,4479,607
Total CRE owner occupied180,250164,911177,723
Total$352,229$339,099$359,404

The following table includes CRE loans repricing or maturing within the next two years, excluding loans that reprice simultaneously with changes to the prime rate:

Current
(Dollars inWeighted
thousands)For the Quarter EndedAverage
CRE by type:Sep 30, 2025Dec 31, 2025Mar 31, 2026Jun 30, 2026Sep 30, 2026Dec 31, 2026Mar 31, 2027Jun 30, 2027TotalRate
Agriculture$716$314$178$265$287$$$$1,7606.28%
Apartment13,6791,12813,7889,7477,0624,11749,5214.96%
Hotel / hospitality2,3931131,2431033,8525.26%
Industrial10,0029765861,57813,41226326,8175.12%
Mixed use2417,1013797,7218.14%
Office15,0156,0555151,6295547,6952,8571,21335,5335.50%
Other1,9212408841,4853,5158,0454.80%
Retail1,0204213,4483,3993,0272,80114,1164.26%
Education/worship1,3142,4673,7815.18%
Senior housing and assisted living2,1421,3723,5144.76%
Total$22,620$30,290$13,458$20,959$14,633$20,020$23,516$9,164$154,6605.22%

The composition of construction loans at the dates indicated were as follows:

(Dollars in thousands)June 30, 2025March 31, 2025June 30, 2024
Construction Types:AmountPercentAmountPercentAmountPercent
Commercial construction – retail$8,4472.4%$8,1572.4%$8,6983.2%
Commercial construction – office9,0832.66,4871.94,7371.7
Commercial construction – self storage16,5534.716,0124.710,0003.6
Commercial construction – hotel3,6731.04020.17,8072.8
Multi-family23,1196.531,2759.330,96011.3
Custom construction – single family residential and single family manufactured residential45,57012.841,14312.246,10616.8
Custom construction – land, lot and acquisition and development8,4542.47,6672.37,3102.7
Speculative residential construction – vertical200,37556.5186,04255.1131,29447.9
Speculative residential construction – land, lot and acquisition and development39,47311.140,60312.027,29710.0
Total$354,747100.0%$337,788100.0%$274,209100.0%

Originations of one-to-four-family loans to purchase and refinance a home for the periods indicated were as follows:

(Dollars inPrior Year
thousands)For the Three Months EndedLinked QuarterQuarter
June 30, 2025March 31, 2025June 30, 2024$%$%
AmountPercentAmountPercentAmountPercentChangeChangeChangeChange
Purchase$170,85485.7%$120,71983.0%$193,71592.3%$50,13541.5$(22,861)(11.8)%
Refinance28,47014.324,67717.016,1737.73,79315.412,29776.0%
Total$199,324100.0%$145,396100.0%$209,888100.0%$53,92837.1$(10,564)(5.0)%
(Dollars in thousands)For the Six Months Ended June 30,
20252024
AmountPercentAmountPercent$ Change% Change
Purchase$290,73784.3%$329,29290.5%$(38,555)(11.7)%
Refinance53,98315.734,5459.519,43856.3%
Total$344,720100.0%$363,837100.0%$(19,117)(5.3)%

During the quarter ended June 30, 2025, the Company sold $127.1 million of one-to-four-family loans compared to $91.9 million during the previous quarter and $164.5 million during the same quarter one year ago. The increase in the volume of loans sold during the current quarter compared to the prior quarter was primarily due to seasonal factors, including the spring homebuying season. This increased demand for homes generally results in a higher volume of loan originations and, consequently, more loans available for sale. Gross margins on home loan sales decreased to 3.06% for the quarter ended June 30, 2025, compared to 3.26% in the previous quarter and increased from 2.96% in the same quarter one year ago. Gross margins are defined as the margin on loans sold (cash sales) without the impact of deferred costs.

Liabilities and Equity Summary

The following table summarizes the components and changes in deposits, borrowings, equity, and book value per common share at the dates indicated.

(Dollars in thousands)LinkedPrior Year
DepositsJune 30, 2025March 31, 2025June 30, 2024QuarterQuarter
Transactional deposits:AmountPercentAmountPercentAmountPercent$ Change$ Change
Noninterest-bearing checking$643,57325.2%$659,41725.2%$613,13725.7%$(15,844)$30,436
Interest-bearing checking:
Retail deposits181,2407.1171,3966.6166,8397.09,84414,401
Brokered deposits30,0201.230,0731.1(53)30,020
Total interest-bearing checking211,2608.3201,4697.7166,8397.09,79144,421
Escrow accounts related to mortgages serviced(1)10,4960.417,2890.710,2120.4(6,793)284
Subtotal865,32933.9878,17533.6790,18833.1(12,846)75,141
Savings and money market:
Savings159,6016.3160,3326.1151,3986.4(731)8,203
Money market:
Retail deposits350,54813.6343,09813.1339,94614.27,45010,602
Brokered deposits2510.12514,0490.2(3,798)
Total money market350,79913.7343,34913.1343,99514.47,4506,804
Subtotal510,40020.0503,68119.2495,39320.86,71915,007
Certificates of deposit:
Retail CDs891,35534.9881,63033.7823,86634.69,72567,489
Nonretail CDs:
Online CDs3,4230.19,3540.49,3540.4(5,931)(5,931)
Public CDs2,1140.12,4400.12,9830.1(326)(869)
Brokered CDs280,75411.0339,87113.0261,01911.0(59,117)19,735
Total nonretail CDs286,29111.2351,66513.5273,35611.5(65,374)12,935
Subtotal1,177,64646.11,233,29547.21,097,22246.1(55,649)80,424
Total deposits$2,553,375100.0%$2,615,151100.0%$2,382,803100.0%$(61,776)$170,572
Borrowings(2)$234,305$68,805$181,895$165,500$52,410
Equity$297,203$298,840$284,026$(1,637)$13,177
Book value per common share$39.55$39.12$37.15$0.43$2.40

__________________________

(1)Primarily noninterest-bearing accounts based on applicable state law.
(2)Comprised of FHLB advances and Federal Reserve Bank borrowings.

At June 30, 2025, the Bank had uninsured deposits of approximately $677.2 million, compared to approximately $679.4 million at March 31, 2025, and $586.6 million at June 30, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

In reference to the table above, the linked quarter decrease in stockholders’ equity at June 30, 2025, compared to March 31, 2025, was primarily due to share repurchases of $5.1 million, cash dividends paid of $2.1 million, and $525,000 in equity award compensation, partially offset by net income of $7.7 million. Stockholders’ equity was also impacted by a decline in unrealized fair value on securities available for sale of $1.2 million, net of tax, and fair value and cash flow hedges of $1.6 million, net of tax, reflecting changes in market interest rates during the quarter, resulting in a $2.8 million decrease in accumulated other comprehensive loss, net of tax.

The Bank is considered “well capitalized” under the capital requirement established by the Federal Deposit Insurance Corporation (“FDIC”) and the Company exceeded all regulatory capital requirements. At June 30, 2025, capital ratios presented for the Bank and the Company were as follows:

At June 30, 2025
BankCompany
Total risk-based capital (to risk-weighted assets)14.07%14.16%
Tier 1 leverage capital (to average assets)11.18%9.65%
CET 1 capital (to risk-weighted assets)12.82%11.07%

Credit Quality

The following table summarizes the changes in the ACL on loans, nonperforming loans, and substandard loans at the dates indicated.

ACL ON LOANSJune 30,March 31,June 30,LinkedPrior Year
(Dollars in thousands)202520252024QuarterQuarter
AmountAmountAmount$ Change$ Change
Beginning ACL balance$(31,653)$(31,870)$(31,479)$217$(174)
Provision(1,715)(1,505)(1,001)(210)(714)
Charge-offs
Indirect1,5551,579825(24)730
Marine432015723(114)
Other42373359
Commercial business433733(433)(733)
Subtotal1,6402,0691,748(429)(108)
Recoveries
Indirect(330)(340)(307)10(23)
Marine(54)(3)(110)(51)56
Other(7)(4)(4)(3)(3)
Commercial business(70)(85)(70)15
Subtotal(461)(347)(506)(114)45
Ending ACL balance$(32,189)$(31,653)$(31,238)$(536)$(951)
NONPERFORMING LOANSJune 30,March 31,June 30,LinkedPrior Year
(Dollars in thousands)202520252024QuarterQuarter
CRE LOANSAmountAmountAmount$ Change$ Change
CRE$2,046$1,196$1,116$850$930
Commercial and speculative construction and development9,0836,4874,7372,5964,346
Total CRE loans11,1297,6835,8533,4465,276
RESIDENTIAL REAL ESTATE LOANS
One-to-four-family (excludes HFS)1,8091,1341706751,639
Home equity251252156(1)95
Total residential real estate loans2,0601,3863266741,734
CONSUMER LOANS
Indirect home improvement3,3652,8212,3195441,046
Marine567648327(81)240
Other consumer1316127
Total consumer loans3,9453,4702,6524751,293
COMMERCIAL BUSINESS LOANS
C&I1,8621,9322,575(70)(713)
Total nonperforming loans$18,996$14,471$11,406$4,525$7,590

The increase in nonaccrual loans during the period was partly driven by a single commercial construction loan, which remains in active development. Ongoing construction disbursements on this loan contributed to a $2.6 million increase from the prior quarter and a $4.3 million increase compared to the same period last year. Increases in consumer loan delinquencies also contributed to the overall rise in nonaccrual loans between the periods.

CRITICIZED LOANSJune 30,March 31,June 30,LinkedPrior Year
(Dollars in thousands)202520252024QuarterQuarter
CRE LOANSAmountAmountAmount$ Change$ Change
CRE$2,046$2,040$3,926$6$(1,880)
Commercial and speculative construction and development9,0836,4874,7372,5964,346
Total CRE loans11,1298,5278,6632,6022,466
RESIDENTIAL REAL ESTATE LOANS
One-to-four-family (excludes HFS)4,3833,7282,8546551,529
Home equity251252156(1)95
Total residential real estate loans4,6343,9803,0106541,624
CONSUMER LOANS
Indirect home improvement3,3652,8212,3195441,046
Marine567649327(82)240
Other consumer1316127
Total consumer loans3,9453,4712,6524741,293
COMMERCIAL BUSINESS LOANS
C&I5,2207,5249,954(2,304)(4,734)
Total criticized loans$24,928$23,502$24,279$1,426$649

Operating Results

Net interest income increased $1.7 million to $32.1 million for the three months ended June 30, 2025, from $30.4 million for the three months ended June 30, 2024, primarily due to an increase in total interest income of $2.8 million, partially offset by an increase in interest expense of $1.1 million. The $2.8 million increase in total interest income was primarily due to an increase of $2.6 million in interest income on loans receivable, including fees, primarily as a result of net loan growth. The $1.1 million increase in total interest expense was primarily the result of higher average balances of deposits and borrowings to fund asset growth.

For the six months ended June 30, 2025, net interest income increased $2.3 million to $63.1 million, from $60.7 million for the six months ended June 30, 2024, with a $4.7 million increase in total interest income, partially offset by a $2.3 million increase in interest expense for the same reasons mentioned above.

NIM (annualized) increased one basis point to 4.30% for the three months ended June 30, 2025, from 4.29% for the same period in the prior year and increased four basis points from 4.27% to 4.31% for the six months ended June 30, 2025. The change in NIM for the three and six months ended June 30, 2025, compared to the same period in 2024, reflects the increased yields on interest-earning assets, as a result of loan growth and repricing activity. The improvement also reflects a favorable shift in the asset mix and disciplined management of deposit and funding costs.

The average total cost of funds, including noninterest-bearing checking, increased one basis point to 2.39% for the three months ended June 30, 2025, from 2.38% for the three months ended June 30, 2024. This increase was predominantly due to higher average balances in borrowings. The average cost of funds increased eight basis points to 2.38% for the six months ended June 30, 2025, from 2.30% for the six months ended June 30, 2024, primarily for the same reason noted above as well as growth in the deposit mix from the prior year.

For the three and six months ended June 30, 2025, the provision for credit losses on loans was $2.0 million and $3.6 million, compared to $1.1 million and $2.5 million for the three and six months ended June 30, 2024, respectively. The provision for credit losses on loans reflects net loan growth and an increase in net charge-off activity.

During the three months ended June 30, 2025, net charge-offs decreased $63,000 to $1.2 million, compared to the same period the prior year. During the six months ended June 30, 2025, net charge-offs increased $184,000, to $2.9 million, compared to $2.7 million during the six months ended June 30, 2024. The increase was primarily due to a $1.2 million increase in net charge-offs on indirect home improvement loans, partially offset by a $693,000 decrease in net charge-offs on commercial business loans and a $271,000 decrease in net charge-offs on marine loans. Management attributes the increase in net charge-offs for the current six month period to continued volatile economic conditions.

Total noninterest income decreased $698,000 to $5.2 million for the three months ended June 30, 2025, from $5.9 million for the three months ended June 30, 2024. The decrease primarily reflects a $491,000 decrease in gain on sale of loans, primarily due to a decrease of loans available for sale, a $156,000 decrease in service charges and fee income and a $151,000 decrease in gain on sale of investment securities due to no sales activity in the current quarter compared to the same period last year. Total noninterest income decreased $683,000, to $10.3 million, for the six months ended June 30, 2025, from $11.0 million for the six months ended June 30, 2024. This decrease was primarily the result of a $629,000 decrease in gain on sale of loans, a $464,000 decrease in service charges and fee income, and a net decrease of $368,000 from no activity in gain on sales of MSRs and loss on sale of investment securities compared to an $8.2 million net gain on sale of MSRs, offset by the $7.8 million loss on sale of investment securities that occurred in the first half of 2024. These decreases in total noninterest income were partially offset by a $755,000 increase in other noninterest income as result of sales of nonmarketable equity securities at a $312,000 gain, bank owned life insurance proceeds of $195,000, and a $101,000 increase in brokered loans fees.

Total noninterest expense was $25.5 million for the three months ended June 30, 2025, compared to $23.9 million for the three months ended June 30, 2024. The $1.6 million increase was primarily due to a $710,000 increase in salaries and benefits, primarily due to competitive wage adjustments, a $305,000 increase in operations expense, and a $267,000 increase in professional and board fees. Total noninterest expense increased $3.2 million to $50.6 million for the six months ended June 30, 2025, compared to $47.4 million for the six months ended June 30, 2024. Increases during the six month period ended June 30, 2025, compared to the same period last year included $1.7 million in salaries and benefits, $742,000 in operations expense, and $531,000 in professional and board fees.

About FS Bancorp

FS Bancorp, Inc., a Washington corporation, is the holding company for 1st Security Bank of Washington. The Bank offers a range of loan and deposit services primarily to small- and middle-market businesses and individuals in Washington and Oregon. It operates through 27 bank branches, one headquarters office that provides loans and deposit services, and loan production offices in various suburban communities in the greater Puget Sound area, the Kennewick-Pasco-Richland metropolitan area of Washington, also known as the Tri-Cities, and in Vancouver, Washington. Additionally, the Bank services home mortgage customers across the Northwest, focusing on markets in Washington State including the Puget Sound, Tri-Cities, and Vancouver.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause the Company’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels; labor shortages, the effects of inflation, recessionary pressures or slowing economic growth; changes in interest rates and the duration of such changes, including actions by the Federal Reserve, which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity; the impact of inflation and monetary and fiscal policy responses thereto and their impact on consumer and business behavior; geopolitical developments and international conflicts including but not limited to tensions or instability in Eastern Europe, the Middle east, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors; the effects of a federal government shutdown, debt ceiling standoff, or other fiscal policy uncertainty; increased competitive pressures, including repricing and competitors' pricing initiatives, and their impact on our market position, loan, and deposit products; adverse changes in the securities markets, the Company’s ability to execute its plans to grow its residential construction lending, mortgage banking, and warehouse lending operations, and the geographic expansion of its indirect home improvement lending; challenges arising from expanding into new geographic markets, products, or services; secondary market conditions for loans and the Company’s ability to originate loans for sale and sell loans in the secondary market; volatility in the mortgage industry; fluctuations in deposits; liquidity issues, including our ability to borrow funds or raise additional capital, if necessary; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; the ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity; legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulation, tax laws, or consumer protection laws; vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; environmental, social and governance goals; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, domestic political unrest and other external events on our business; and other factors described in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other reports filed with or furnished to the SEC which are available on its website at www.fsbwa.com and on the SEC's website at www.sec.gov.

Any of the forward-looking statements that the Company makes in this press release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be incorrect because of the inaccurate assumptions the Company might make, because of the factors illustrated above or because of other factors that cannot be foreseen by the Company. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

FS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) (Unaudited)
LinkedPrior Year
June 30,March 31,June 30,QuarterQuarter
ASSETS202520252024% Change% Change
Cash and due from banks$15,168$18,657$20,005(19)(24)
Interest-bearing deposits at other financial institutions18,02744,08413,006(59)39
Total cash and cash equivalents33,19562,74133,011(47)1
Certificates of deposit at other financial institutions2481,23412,707(80)(98)
Securities available-for-sale, at fair value302,692291,133221,182437
Securities held-to-maturity, net31,56210,4348,455202273
Loans held for sale, at fair value53,63031,03853,81173
Loans receivable, net2,582,2722,501,1172,457,18435
Accrued interest receivable14,27014,40613,792(1)3
Premises and equipment, net30,09829,45129,9992
Operating lease right-of-use7,9694,9795,7846038
Federal Home Loan Bank stock, at cost11,5795,25610,32212012
Deferred tax asset, net7,7827,0094,5901170
Bank owned life insurance (“BOLI”), net38,26238,77838,201(1)
MSRs, held at the lower of cost or fair value8,6528,9269,352(3)(7)
Goodwill3,5923,5923,592
Core deposit intangible, net12,07112,87915,483(6)(22)
Other assets38,13943,10523,912(12)59
TOTAL ASSETS$3,176,013$3,066,078$2,941,37748
LIABILITIES
Deposits:
Noninterest-bearing accounts$654,069$676,706$623,349(3)5
Interest-bearing accounts1,899,3061,938,4451,759,454(2)8
Total deposits2,553,3752,615,1512,382,803(2)7
Borrowings234,30568,805181,89524129
Subordinated notes:
Principal amount50,00050,00050,000
Unamortized debt issuance costs(373)(389)(439)(4)(15)
Total subordinated notes less unamortized debt issuance costs49,62749,61149,561
Operating lease liability8,1385,1495,9795836
Other liabilities33,36528,52237,11317(10)
Total liabilities2,878,8102,767,2382,657,35148
COMMITMENTS AND CONTINGENCIES
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; 7,618,543 shares issued and outstanding at June 30, 2025, 7,742,907 at March 31, 2025, and 7,742,607 at June 30, 2024767777(1)(1)
Additional paid-in capital48,41852,80655,834(8)(13)
Retained earnings268,509262,945243,651210
Accumulated other comprehensive loss, net of tax(19,800)(16,988)(15,536)1727
Total stockholders’ equity297,203298,840284,026(1)5
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,176,013$3,066,078$2,941,37748
FS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts) (Unaudited)
Three Months EndedLinkedPrior Year
June 30,March 31,June 30,QuarterQuarter
INTEREST INCOME202520252024% Change% Change
Loans receivable, including fees$45,038$43,303$42,40646
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions3,6653,4853,53454
Total interest and dividend income48,70346,78845,94046
INTEREST EXPENSE
Deposits14,52013,05813,2521110
Borrowings1,5852,2631,801(30)(12)
Subordinated notes486485486
Total interest expense16,59115,80615,53957
NET INTEREST INCOME32,11230,98230,40146
PROVISION FOR CREDIT LOSSES2,0211,5921,0772788
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES30,09129,39029,32423
NONINTEREST INCOME
Service charges and fee income2,3232,2442,4794(6)
Gain on sale of loans1,9721,7002,46316(20)
Gain on sale of investment securities, net151NMNM
Earnings on cash surrender value of BOLI25425024225
Other noninterest income621932533(33)17
Total noninterest income5,1705,1265,8681(12)
NONINTEREST EXPENSE
Salaries and benefits14,08814,53313,378(3)5
Operations3,8243,4453,519119
Occupancy1,7801,7171,66947
Data processing2,1372,0452,05844
Loan costs7195486533110
Professional and board fees1,1551,186888(3)30
FDIC insurance554538450323
Marketing and advertising398221377806
Amortization of core deposit intangible809831919(3)(12)
Impairment (recovery) of servicing rights38(9)(54)(522)(170)
Total noninterest expense25,50225,05523,85727
INCOME BEFORE PROVISION FOR INCOME TAXES9,7599,46111,3353(14)
PROVISION FOR INCOME TAXES2,0311,4402,37641(15)
NET INCOME$7,728$8,021$8,959(4)(14)
Basic earnings per share$1.00$1.02$1.15(2)(13)
Diluted earnings per share$0.99$1.01$1.13(2)(12)
FS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts) (Unaudited)
Six Months EndedYear
June 30,June 30,Over Year
INTEREST INCOME20252024% Change
Loans receivable, including fees$88,340$83,4036
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions7,1507,417(4)
Total interest and dividend income95,49090,8205
INTEREST EXPENSE
Deposits27,57826,1346
Borrowings3,8482,96830
Subordinated note971971
Total interest expense32,39730,0738
NET INTEREST INCOME63,09360,7474
PROVISION FOR CREDIT LOSSES3,6132,47646
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES59,48058,2712
NONINTEREST INCOME
Service charges and fee income4,5675,031(9)
Gain on sale of loans3,6724,301(15)
Gain on sale of MSRs8,215NM
Loss on sale of investment securities, net(7,847)NM
Earnings on cash surrender value of BOLI5054825
Other noninterest income1,55279795
Total noninterest income10,29610,979(6)
NONINTEREST EXPENSE
Salaries and benefits28,62126,9356
Operations7,2696,52711
Occupancy3,4963,3744
Data processing4,1824,0164
Loan costs1,2671,2382
Professional and board fees2,3421,81129
FDIC insurance1,09298211
Marketing and advertising6196042
Amortization of core deposit intangible1,6391,860(12)
Impairment of servicing rights2939(26)
Total noninterest expense50,55647,3867
INCOME BEFORE PROVISION FOR INCOME TAXES19,22021,864(12)
PROVISION FOR INCOME TAXES3,4714,508(23)
NET INCOME$15,749$17,356(9)
Basic earnings per share$2.02$2.23(9)
Diluted earnings per share$1.99$2.20(10)

KEY FINANCIAL RATIOS AND DATA (Unaudited)

At or For the Three Months Ended
June 30,March 31,June 30,
PERFORMANCE RATIOS:202520252024
Return on assets (ratio of net income to average total assets)(1)0.99%1.07%1.22%
Return on equity (ratio of net income to average total stockholders' equity)(1)10.2910.8012.72
Yield on average interest-earning assets(1)6.526.536.48
Average total cost of funds(1)2.392.382.38
Interest rate spread information – average during period4.134.154.10
Net interest margin(1)4.304.324.29
Operating expense to average total assets(1)3.283.353.26
Average interest-earning assets to average interest-bearing liabilities(1)140.98142.94143.64
Efficiency ratio(2)68.4069.3965.78
Common equity ratio (ratio of stockholders' equity to total assets)9.369.759.66
Tangible common equity ratio(3)8.919.269.07
For the Six Months Ended
June 30,June 30,
PERFORMANCE RATIOS:20252024
Return on assets (ratio of net income to average total assets)1.03%1.18%
Return on equity (ratio of net income to average total stockholders' equity)10.5512.51
Yield on average interest-earning assets6.526.39
Average total cost of funds2.382.30
Interest rate spread information – average during period4.144.09
Net interest margin4.314.27
Operating expense to average total assets3.323.23
Average interest-earning assets to average interest-bearing liabilities141.93144.07
Efficiency ratio(2)68.8966.07
June 30,March 31,June 30,
ASSET QUALITY RATIOS AND DATA:202520252024
Nonperforming assets to total assets at end of period(4)0.60%0.47%0.39%
Nonperforming loans to total gross loans (excluding loans HFS)(5)0.730.570.46
Allowance for credit losses – loans to nonperforming loans(5)168.89219.08273.95
Allowance for credit losses – loans to total gross loans (excluding loans HFS)1.231.251.26
At or For the Three Months Ended
June 30,March 31,June 30,
PER COMMON SHARE DATA:202520252024
Basic earnings per share$1.00$1.02$1.15
Diluted earnings per share$0.99$1.01$1.13
Weighted average basic shares outstanding7,580,5767,695,3207,688,246
Weighted average diluted shares outstanding7,698,1737,805,7287,796,253
Common shares outstanding at end of period7,515,480(6)7,639,844(7)7,644,463(8)
Book value per share using common shares outstanding$39.55$39.12$37.15
Tangible book value per share using common shares outstanding(9)$37.46$36.96$34.66

__________________________

(1)Annualized.
(2)Total noninterest expense as a percentage of net interest income and total noninterest income.
(3)Represents a non-GAAP financial measure. For a reconciliation to the most comparable GAAP financial measure, see “Non-GAAP Financial Measures” below.
(4)Nonperforming assets consist of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), foreclosed real estate and other repossessed assets.
(5)Nonperforming loans consist of nonaccruing loans and accruing loans 90 days or more past due.
(6)Common shares were calculated using shares outstanding of 7,618,543 at June 30, 2025, less 103,063 unvested restricted stock shares.
(7)Common shares were calculated using shares outstanding of 7,742,907 at March 31, 2025, less 103,063 unvested restricted stock shares.
(8)Common shares were calculated using shares outstanding of 7,742,607 at June 30, 2024, less 98,144 unvested restricted stock shares.
(9)Tangible book value per share using outstanding common shares excludes intangible assets. This ratio represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” below.
(Dollars in thousands)For the Three Months Ended June 30,For the Six Months Ended June 30,QTR Over QTRYTD Over YTD
Average Balances2025202420252024$ Change$ Change
Assets
Loans receivable, net(1)$2,612,959$2,511,326$2,586,598$2,487,964$101,633$98,634
Securities available-for-sale, at amortized cost332,705283,422321,622307,41749,28314,205
Securities held-to-maturity21,4018,50015,0638,50012,9016,563
Interest-bearing deposits and certificates of deposit at other financial institutions8,77541,61310,35350,563(32,838)(40,210)
FHLB stock, at cost19,5027,04017,8404,60712,46213,233
Total interest-earning assets2,995,3422,851,9012,951,4762,859,051143,44192,425
Noninterest-earning assets121,01895,930123,19194,13825,08829,053
Total assets$3,116,360$2,947,831$3,074,667$2,953,189$168,529$121,478
Liabilities
Interest-bearing deposit accounts$1,924,586$1,794,966$1,845,534$1,813,865$129,620$31,669
Borrowings150,492140,964184,377121,0579,52863,320
Subordinated notes49,61749,55049,60849,5426766
Total interest-bearing liabilities2,124,6951,985,4802,079,5191,984,464139,21595,055
Noninterest-bearing deposit accounts657,820637,345660,805647,21420,47513,591
Other noninterest-bearing liabilities32,70041,78533,21842,516(9,085)(9,298)
Total liabilities$2,815,215$2,664,610$2,773,542$2,674,194$150,605$99,348

__________________________

(1)Includes loans HFS.

Non-GAAP Financial Measures:

In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States (“GAAP”), this earnings release presents non-GAAP financial measures that include tangible book value per share, and tangible common equity ratio. Management believes that providing the Company’s tangible book value per share and tangible common equity ratio is consistent with the capital treatment utilized by the investment community, which excludes intangible assets from the calculation of risk-based capital ratios and facilitates comparison of the quality and composition of the Company's capital over time and to its competitors. Where applicable, the Company has also presented comparable GAAP information.

These non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Reconciliation of the GAAP book value per share and common equity ratio and the non-GAAP tangible book value per share and tangible common equity ratio is presented below.

(Dollars in thousands, except share and per share amounts)June 30,March 31,June 30,
Tangible Book Value Per Share:202520252024
Stockholders' equity (GAAP)$297,203$298,840$284,026
Less: goodwill and core deposit intangible, net(15,663)(16,471)(19,075)
Tangible common stockholders' equity (non-GAAP)$281,540$282,369$264,951
Common shares outstanding at end of period7,515,480(1)7,639,844(2)7,644,463(3)
Book value per share (GAAP)$39.55$39.12$37.15
Tangible book value per share (non-GAAP)$37.46$36.96$34.66
Tangible Common Equity Ratio:
Total assets (GAAP)$3,176,013$3,066,078$2,941,377
Less: goodwill and core deposit intangible assets(15,663)(16,471)(19,075)
Tangible assets (non-GAAP)$3,160,350$3,049,607$2,922,302
Common equity ratio (GAAP)9.36%9.75%9.66%
Tangible common equity ratio (non-GAAP)8.919.269.07

_________________________

(1)Common shares were calculated using shares outstanding of 7,618,543 at June 30, 2025, less 103,063 unvested restricted stock shares.
(2)Common shares were calculated using shares outstanding of 7,742,907 at March 31, 2025, less 103,063 unvested restricted stock shares.
(3)Common shares were calculated using shares outstanding of 7,742,607 at June 30, 2024, less 98,144 unvested restricted stock shares.

Contacts:
Joseph C. Adams,
Chief Executive Officer
Matthew D. Mullet,
President
Phillip D. Whittington,
Chief Financial Officer

(425) 771-5299
www.FSBWA.com

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