Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 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 (Stat ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 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 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 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 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ (Mark one) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-35589 FS BANCORP, ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 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) ( j Washington p 45-4585178 ...

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (Exact name of registrant as specified in its charter) ( j Washington p 45-4585178 organization) (IRS Employer Identification No.) 6920 22 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to (Mark One) Commission File Number: 001-35589 FS BANCORP, INC. (Exact name of registrant as specified in its charter) Washington 45-4585178 organizat ...

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) FS Bancorp, Inc. operates as a holding company for 1st Security Bank of Washington, a community bank with diversified lending and significant COVID-19 response efforts - **Company Consolidated Financials (December 31, 2020):** | Metric | Amount (in billions) | | :----- | :------------------- | | Total Assets | $2.11 | | Total Deposits | $1.67 | | Stockholders' Equity | $0.23 | - The Company's lending strategy has shifted from indirect consumer lending to an increased emphasis on real estate and commercial business loans[26](index=26&type=chunk)[43](index=43&type=chunk) - The Bank participated in the SBA Paycheck Protection Program, funding **$75.8 million** in loans in 2020, with **$62.1 million** outstanding, and offered payment relief to borrowers[28](index=28&type=chunk)[29](index=29&type=chunk) [General](index=5&type=section&id=General) Provides an overview of FS Bancorp, Inc. and its subsidiary, 1st Security Bank of Washington [Market Area](index=7&type=section&id=Market%20Area) Describes the geographic regions where the Bank primarily conducts its operations [Lending Activities](index=9&type=section&id=Lending%20Activities) Details the various types of loans offered and the Bank's lending strategies [General](index=9&type=section&id=General_Lending) Outlines the general principles and objectives of the Bank's lending operations [Loan Portfolio Analysis](index=10&type=section&id=Loan%20Portfolio%20Analysis) Presents a breakdown and analysis of the Bank's loan portfolio composition [Loan Maturity and Repricing](index=12&type=section&id=Loan%20Maturity%20and%20Repricing) Discusses the maturity distribution and interest rate repricing characteristics of the loan portfolio [Lending Authority](index=13&type=section&id=Lending%20Authority) Defines the internal limits and approval processes for loan originations [Commercial Real Estate Lending](index=13&type=section&id=Commercial%20Real%20Estate%20Lending) Focuses on the Bank's activities in commercial real estate loans [Construction and Development Lending](index=14&type=section&id=Construction%20and%20Development%20Lending) Describes the Bank's involvement in financing construction and development projects [Home Equity Lending](index=15&type=section&id=Home%20Equity%20Lending) Details the Bank's home equity loan and line of credit programs [Residential](index=16&type=section&id=Residential) Covers the Bank's residential mortgage lending activities [Consumer Lending](index=16&type=section&id=Consumer%20Lending) Explains the Bank's offerings in various consumer loan products [Commercial Business Lending](index=17&type=section&id=Commercial%20Business%20Lending) Describes the Bank's lending to commercial businesses [Loan Originations, Servicing, Purchases and Sales](index=19&type=section&id=Loan%20Originations%2C%20Servicing%2C%20Purchases%20and%20Sales) Discusses the processes for originating, servicing, and trading loans [Asset Quality](index=22&type=section&id=Asset%20Quality) Reviews the quality of the Bank's assets and related risk management [General](index=22&type=section&id=General_AssetQuality) Provides an overview of the Bank's asset quality management framework [Nonperforming Assets](index=24&type=section&id=Nonperforming%20Assets) Details the Bank's nonperforming loans and other nonperforming assets [Other Real Estate Owned](index=24&type=section&id=Other%20Real%20Estate%20Owned) Describes properties acquired through foreclosure or deed in lieu of foreclosure [Restructured Loans](index=24&type=section&id=Restructured%20Loans) Covers loans whose terms have been modified due to borrower financial difficulties [Other Assets Especially Mentioned](index=24&type=section&id=Other%20Assets%20Especially%20Mentioned) Identifies assets requiring special attention due to potential credit weaknesses [Classified Assets](index=25&type=section&id=Classified%20Assets) Discusses assets categorized by regulators as having credit deficiencies [Allowance for Loan Losses](index=25&type=section&id=Allowance%20for%20Loan%20Losses) Explains the methodology and adequacy of the allowance for loan losses [Investment Activities](index=29&type=section&id=Investment%20Activities) Describes the Bank's strategies and holdings in investment securities [General](index=29&type=section&id=General_InvestmentActivities) Outlines the general approach to managing the Bank's investment portfolio [Securities Portfolio](index=29&type=section&id=Securities%20Portfolio) Provides details on the composition and characteristics of the Bank's securities holdings [Deposit Activities and Other Sources of Funds](index=31&type=section&id=Deposit%20Activities%20and%20Other%20Sources%20of%20Funds) Details the Bank's deposit gathering and other funding strategies [General](index=31&type=section&id=General_DepositActivities) Provides an overview of the Bank's funding sources and deposit strategies [Deposits](index=31&type=section&id=Deposits) Details the types and characteristics of the Bank's deposit accounts [Debt](index=33&type=section&id=Debt) Describes the Bank's various debt obligations and borrowing activities [Subsidiary and Other Activities](index=35&type=section&id=Subsidiary%20and%20Other%20Activities) Covers operations of the Bank's subsidiaries and other non-lending activities [Competition](index=35&type=section&id=Competition) Analyzes the competitive landscape in which the Bank operates [Employees](index=36&type=section&id=Employees) Provides information on the Company's workforce, compensation, and human capital initiatives [Executive Officers](index=36&type=section&id=Executive%20Of%20icers) Lists and describes the Company's key executive management personnel [Human Capital](index=38&type=section&id=Human%20Capital) Discusses the Company's approach to managing and developing its human resources [Employee Compensation and Benefits](index=38&type=section&id=Employee%20Compensation%20and%20Benefits) Details the compensation and benefits programs offered to employees [Diversity and Inclusion](index=38&type=section&id=Diversity%20and%20Inclusion) Outlines the Company's initiatives and commitment to diversity and inclusion [Talent Acquisition](index=39&type=section&id=Talent%20Acquisition) Describes the Company's strategies for recruiting and hiring new employees [Operation Safe and Secure 2020](index=39&type=section&id=Operation%20Safe%20and%20Secure%202020) Highlights specific initiatives related to employee safety and security in 2020 [Volunteerism](index=39&type=section&id=Volunteerism) Discusses employee involvement in community service and volunteer activities [Human Capital Metrics](index=39&type=section&id=Human%20Capital%20Metrics) Presents key data and statistics related to the Company's workforce [How We Are Regulated](index=40&type=section&id=How%20We%20Are%20Regulated) Explains the regulatory framework governing the Company and its Bank subsidiary [Regulation of 1st Security Bank of Washington](index=40&type=section&id=Regulation%20of%201st%20Security%20Bank%20of%20Washington) Details the specific regulations applicable to 1st Security Bank of Washington [Regulation and Supervision of FS Bancorp](index=45&type=section&id=Regulation%20and%20Supervision%20of%20FS%20Bancorp) Describes the regulatory oversight of FS Bancorp as a holding company [Recent Regulatory Reform](index=47&type=section&id=Recent%20Regulatory%20Reform) Discusses recent changes in banking regulations affecting the Company [Taxation](index=48&type=section&id=Taxation) Provides an overview of the tax considerations for the Company [Federal Taxation](index=48&type=section&id=Federal%20Taxation) Details the federal income tax implications for the Company [Washington Taxation](index=49&type=section&id=Washington%20Taxation) Describes the state-level tax obligations in Washington [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) The Company faces significant risks from macroeconomic conditions, lending activities, interest rate changes, accounting matters, regulatory scrutiny, and operational vulnerabilities - The COVID-19 pandemic has caused major economic disruption, impacting loan demand, net interest income, and increasing potential for loan defaults and goodwill impairment[267](index=267&type=chunk)[271](index=271&type=chunk)[274](index=274&type=chunk) - The loan portfolio carries increased risk due to a large percentage of consumer loans (**23.8% of gross loans**) and higher risks associated with commercial real estate and construction lending[282](index=282&type=chunk)[283](index=283&type=chunk)[289](index=289&type=chunk)[295](index=295&type=chunk) - Earnings are highly sensitive to interest rate changes, which can reduce net interest income, impact mortgage banking revenues, and affect the fair value of MSRs and securities[308](index=308&type=chunk)[313](index=313&type=chunk)[315](index=315&type=chunk)[318](index=318&type=chunk) - Regulatory scrutiny over commercial real estate loan concentrations (construction, land development, and land loans at **89.6% of regulatory capital**; all CRE loans at **253.6% of regulatory capital**) could require additional risk management and capital levels[226](index=226&type=chunk)[328](index=328&type=chunk) - Reliance on external vendors, cybersecurity threats, and LIBOR transition uncertainty (affecting **$90.0 million** in notional interest rate swaps) pose significant operational and financial risks[332](index=332&type=chunk)[334](index=334&type=chunk)[342](index=342&type=chunk)[702](index=702&type=chunk) [Risks Related to Macroeconomic Conditions](index=49&type=section&id=Risks%20Related%20to%20Macroeconomic%20Conditions) Discusses potential impacts of broader economic trends on the Company's financial performance [Risks Related to our Lending Activities](index=51&type=section&id=Risks%20Related%20to%20our%20Lending%20Activities) Highlights specific risks inherent in the Company's various loan portfolios [Risk Related to Changes in Market Interest Rates](index=56&type=section&id=Risk%20Related%20to%20Changes%20in%20Market%20Interest%20Rates) Examines the Company's exposure to fluctuations in market interest rates [Risks Related to Accounting Matters](index=59&type=section&id=Risks%20Related%20to%20Accounting%20Matters) Addresses potential risks associated with critical accounting policies and estimates [Risk Related to Regulatory and Compliance Matters](index=60&type=section&id=Risk%20Related%20to%20Regulatory%20and%20Compliance%20Matters) Covers risks arising from regulatory oversight and compliance requirements [Risks Related to Cybersecurity, Third Parties and Technology](index=60&type=section&id=Risks%20Related%20to%20Cybersecurity%2C%20Third%20Parties%20and%20Technology) Details operational risks stemming from technology, cybersecurity, and vendor reliance [Risks Related to Our Business and Industry Generally](index=62&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry%20Generally) Outlines broader business and industry-specific risks affecting the Company [Item 1B. Unresolved Staff Comments](index=64&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report for the Company - No unresolved staff comments[351](index=351&type=chunk) [Item 2. Properties](index=64&type=section&id=Item%202.%20Properties) As of December 31, 2020, the Company owned headquarters and administrative offices, operated 21 branches (13 owned, 8 leased) and five leased loan production offices, with an aggregate net book value of **$27.3 million** - At December 31, 2020, the Company owned one headquarters office and one administrative office, operating 21 full-service bank branches (13 owned, 8 leased) and five stand-alone loan production offices (leased)[352](index=352&type=chunk) - The aggregate net book value of properties was **$27.3 million** at December 31, 2020[352](index=352&type=chunk) - The book value of data processing and computer equipment was **$1.2 million** at December 31, 2020, with a business continuity plan in place[353](index=353&type=chunk) [Item 3. Legal Proceedings](index=64&type=section&id=Item%203.%20Legal%20Proceedings) The Company is involved in various ordinary course legal actions, with management believing any liabilities will not materially affect its financial position - The Company is subject to various pending and threatened legal actions in the ordinary course of business, including those related to subordination liens[354](index=354&type=chunk) - Management believes that liabilities arising from these claims will not have a material effect on the Company's financial position[354](index=354&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[355](index=355&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) FS Bancorp's common stock trades on NASDAQ under 'FSBW', with **4,237,956 shares** outstanding and a **$5.0 million** share repurchase program authorized in September 2020, demonstrating strong shareholder return performance - Common stock trades on The NASDAQ Stock Market LLC under the symbol 'FSBW'[358](index=358&type=chunk) - As of December 31, 2020, there were **4,237,956 shares** of common stock outstanding and approximately 227 shareholders of record[358](index=358&type=chunk) - The Board authorized a **$5.0 million** share repurchase program on September 17, 2020, repurchasing **25,135 shares** in Q4 2020 at an average price of **$44.78**, with **$3,427,254** remaining[361](index=361&type=chunk)[362](index=362&type=chunk) Cumulative Total Shareholder Return (Dec 31, 2015 = 100) | Index | 12/31/15 | 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | | :-------------------- | :------- | :------- | :------- | :------- | :------- | :------- | | FS Bancorp, Inc. | 100.00 | 140.21 | 214.88 | 170.49 | 256.84 | 224.91 | | S&P 500 Index | 100.00 | 111.96 | 136.40 | 130.42 | 171.49 | 203.04 | | SNL Bank $1B-$5B | 100.00 | 143.87 | 153.37 | 134.37 | 163.35 | 138.81 | | SNL Thrift $1B-$5B | 100.00 | 136.30 | 138.06 | 96.07 | 116.56 | 93.62 | [Issuer Purchases of Equity Securities](index=65&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Details the Company's share repurchase programs and activities [Equity Compensation Plan Information](index=66&type=section&id=Equity%20Compensation%20Plan%20Information) Provides data on outstanding options and securities available under equity compensation plans [Performance Graph](index=66&type=section&id=Performance%20Graph) Illustrates the Company's cumulative total shareholder return compared to market indices [Item 6. Selected Financial Data](index=66&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of the Company's consolidated financial position and results of operations, highlighting **$2.11 billion** in total assets and **$39.26 million** net income in 2020 Selected Financial Condition Data (in thousands) | Metric | 2020 | 2019 | | :-------------------------- | :-------- | :-------- | | Total assets | $2,113,241 | $1,713,056 | | Loans receivable, net | $1,544,981 | $1,336,346 | | Loans held for sale, at fair value | $166,448 | $69,699 | | Securities available-for-sale, at fair value | $178,018 | $126,057 | | Deposits | $1,674,071 | $1,392,408 | | Borrowings | $165,809 | $84,864 | | Total stockholders' equity | $230,007 | $200,242 | Selected Operations Data (in thousands) | Metric | 2020 | 2019 | | :-------------------------- | :-------- | :-------- | | Total interest and dividend income | $88,837 | $89,625 | | Total interest expense | $14,717 | $19,317 | | Net interest income | $74,120 | $70,308 | | Provision for loan losses | $13,036 | $2,880 | | Total noninterest income | $55,359 | $23,035 | | Total noninterest expense | $66,593 | $62,333 | | Net income | $39,264 | $22,717 | Selected Financial Ratios | Metric | 2020 | 2019 | | :------------------------------------- | :-------- | :-------- | | Return on assets | 2.02 % | 1.38 % | | Return on equity | 18.74 % | 11.92 % | | Net interest margin | 4.02 % | 4.53 % | | Nonperforming assets to total assets at end of period | 0.37 % | 0.19 % | | Allowance for loan losses to gross loans receivable | 1.66 % | 0.98 % | | Basic earnings per share | $9.14 | $5.13 | | Diluted earnings per share | $8.97 | $5.01 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=69&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews the Company's financial condition and results for 2020 and 2019, highlighting a significant increase in net income to **$39.3 million**, asset growth to **$2.11 billion**, and a decrease in net interest margin to **4.02%** - Net income for 2020 increased by **$16.5 million** (**72.8%**) to **$39.3 million**, driven by a **$32.3 million** increase in noninterest income and a **$3.8 million** increase in net interest income, partially offset by higher provision for loan losses and noninterest expenses[439](index=439&type=chunk) - Net interest margin (NIM) decreased by **51 basis points** to **4.02%** for 2020, from **4.53%** in 2019, primarily due to lower interest rates and the impact of low-yielding PPP loans[385](index=385&type=chunk)[441](index=441&type=chunk) - Total assets increased by **$400.2 million** to **$2.11 billion** at December 31, 2020, funded by a **$281.7 million** increase in deposits and an **$80.9 million** increase in borrowings[413](index=413&type=chunk)[423](index=423&type=chunk) - The provision for loan losses increased to **$13.0 million** in 2020 (from **$2.9 million** in 2019), reflecting COVID-19 credit deterioration and loan portfolio growth, with PPP loans (**$62.1 million**) excluded due to SBA guarantees[387](index=387&type=chunk)[449](index=449&type=chunk) - The Bank maintained a 'well capitalized' status at December 31, 2020, with a Tier 1 leverage-based capital ratio of **10.9%**, exceeding the temporary **8%** Community Bank Leverage Ratio (CBLR) requirement[481](index=481&type=chunk) [Overview](index=69&type=section&id=Overview) Provides a high-level summary of the Company's financial performance and condition [Highlights in Response to the COVID-19 Pandemic](index=71&type=section&id=Highlights%20in%20Response%20to%20the%20COVID-19%20Pandemic) Summarizes the Company's key actions and impacts related to the COVID-19 pandemic [Critical Accounting Policies and Estimates](index=72&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Discusses the accounting policies requiring significant judgment and estimation [Our Business and Operating Strategy and Goals](index=74&type=section&id=Our%20Business%20and%20Operating%20Strategy%20and%20Goals) Outlines the Company's strategic objectives and operational plans [Comparison of Financial Condition at December 31, 2020 and December 31, 2019](index=75&type=section&id=Comparison%20of%20Financial%20Condition%20at%20December%2031%2C%202020%20and%20December%2031%2C%202019) Analyzes changes in the Company's balance sheet between the two fiscal years [Average Balances, Interest and Average Yields/Cost](index=79&type=section&id=Average%20Balances%2C%20Interest%20and%20Average%20Yields%2FCost) Presents average balance sheet data, interest income/expense, and corresponding yields/costs [Rate/Volume Analysis](index=80&type=section&id=Rate%2FVolume%20Analysis) Explains the impact of interest rate and volume changes on net interest income [Comparison of Results of Operations for the Years Ended December 31, 2020 and 2019](index=80&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Years%20Ended%20December%2031%2C%202020%20and%202019) Compares the Company's income statement performance for the two fiscal years [Asset and Liability Management and Market Risk](index=84&type=section&id=Asset%20and%20Liability%20Management%20and%20Market%20Risk) Describes how the Company manages its balance sheet and exposure to market risks [Liquidity](index=86&type=section&id=Liquidity) Discusses the Company's ability to meet its financial obligations and funding needs [Commitments and Off-Balance Sheet Arrangements](index=87&type=section&id=Commitments%20and%20Off-Balance%20Sheet%20Arrangements) Details the Company's contractual obligations and off-balance sheet exposures [Capital Resources](index=87&type=section&id=Capital%20Resources) Reviews the Company's capital structure and regulatory capital adequacy [Recent Accounting Pronouncements](index=88&type=section&id=Recent%20Accounting%20Pronouncements) Summarizes the impact of recently issued accounting standards [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=88&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company's primary market risk is interest rate risk, actively monitored and managed due to its potential material effect on financial condition and operations - The Company's primary market risk is interest rate risk, stemming from lending, investing, deposit, and borrowing activities[485](index=485&type=chunk) - Management actively monitors and manages interest rate risk, recognizing its potential material effect on financial condition and results of operations[485](index=485&type=chunk) - Detailed information on market risk is incorporated by reference from 'Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset and Liability Management'[485](index=485&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=88&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item presents the Company's audited consolidated financial statements for 2020 and 2019, including balance sheets, income statements, and comprehensive notes on accounting policies and financial details - Includes audited consolidated financial statements for the years ended December 31, 2020 and 2019[491](index=491&type=chunk) - The financial statements comprise Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Changes in Stockholders' Equity, and Cash Flows[487](index=487&type=chunk) - Notes to Consolidated Financial Statements provide detailed information on accounting policies, investments, loans, servicing rights, debt, employee benefits, income taxes, commitments, regulatory capital, and fair value measurements[487](index=487&type=chunk)[517](index=517&type=chunk) [Index to Consolidated Financial Statements](index=88&type=section&id=Index%20to%20Consolidated%20Financial%20Statements) Provides a listing of all financial statements included in the report [Report of Independent Registered Public Accounting Firm](index=89&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Presents the auditor's opinion on the financial statements and internal controls [Consolidated Balance Sheets](index=92&type=section&id=Consolidated%20Balance%20Sheets) Presents the Company's financial position at specific points in time [Consolidated Statements of Income](index=93&type=section&id=Consolidated%20Statements%20of%20Income) Reports the Company's revenues, expenses, and net income over periods [Consolidated Statements of Comprehensive Income](index=94&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Details changes in equity from non-owner sources, including net income and other comprehensive income [Consolidated Statements of Changes in Stockholders' Equity](index=95&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Shows the changes in the Company's equity accounts over periods [Consolidated Statements of Cash Flows](index=96&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Reports the cash inflows and outflows from operating, investing, and financing activities [Notes to Consolidated Financial Statements](index=97&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the financial statements [NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=97&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Explains the accounting principles and policies used in preparing the financial statements [NOTE 2 - INVESTMENTS](index=105&type=section&id=NOTE%202%20-%20INVESTMENTS) Provides details on the Company's investment securities portfolio [NOTE 3 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES](index=109&type=section&id=NOTE%203%20-%20LOANS%20RECEIVABLE%20AND%20ALLOWANCE%20FOR%20LOAN%20LOSSES) Details the loan portfolio and the methodology for the allowance for loan losses [NOTE 4 - SERVICING RIGHTS](index=117&type=section&id=NOTE%204%20-%20SERVICING%20RIGHTS) Describes the accounting for mortgage servicing rights [NOTE 5 - PREMISES AND EQUIPMENT](index=119&type=section&id=NOTE%205%20-%20PREMISES%20AND%20EQUIPMENT) Provides information on the Company's property, plant, and equipment [NOTE 6 - LEASES](index=119&type=section&id=NOTE%206%20-%20LEASES) Details the Company's lease agreements and related accounting [NOTE 7 - OTHER REAL ESTATE OWNED](index=120&type=section&id=NOTE%207%20-%20OTHER%20REAL%20ESTATE%20OWNED) Provides information on real estate acquired through foreclosure [NOTE 8 - DEPOSITS](index=120&type=section&id=NOTE%208%20-%20DEPOSITS) Details the composition and types of the Company's deposits [NOTE 9 - DEBT](index=121&type=section&id=NOTE%209%20-%20DEBT) Provides information on the Company's outstanding debt obligations [NOTE 10 - EMPLOYEE BENEFITS](index=123&type=section&id=NOTE%2010%20-%20EMPLOYEE%20BENEFITS) Describes the Company's employee benefit plans [NOTE 11 - INCOME TAXES](index=124&type=section&id=NOTE%2011%20-%20INCOME%20TAXES) Details the Company's income tax provisions and related balances [NOTE 12 - COMMITMENTS AND CONTINGENCIES](index=125&type=section&id=NOTE%2012%20-%20COMMITMENTS%20AND%20CONTINGENCIES) Discloses significant commitments and potential liabilities [NOTE 13 - SIGNIFICANT CONCENTRATION OF CREDIT RISK](index=127&type=section&id=NOTE%2013%20-%20SIGNIFICANT%20CONCENTRATION%20OF%20CREDIT%20RISK) Identifies areas of significant credit risk concentration within the loan portfolio [NOTE 14 - REGULATORY CAPITAL](index=127&type=section&id=NOTE%2014%20-%20REGULATORY%20CAPITAL) Provides details on the Company's compliance with regulatory capital requirements [NOTE 15 - FAIR VALUE MEASUREMENTS](index=128&type=section&id=NOTE%2015%20-%20FAIR%20VALUE%20MEASUREMENTS) Explains the fair value hierarchy and valuation techniques for financial instruments [NOTE 16 - EARNINGS PER SHARE](index=133&type=section&id=NOTE%2016%20-%20EARNINGS%20PER%20SHARE) Details the calculation of basic and diluted earnings per share [NOTE 17 - DERIVATIVES](index=134&type=section&id=NOTE%2017%20-%20DERIVATIVES) Describes the Company's use of derivative financial instruments [NOTE 18 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=135&type=section&id=NOTE%2018%20-%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20%28LOSS%29) Provides a breakdown of components of accumulated other comprehensive income or loss [NOTE 19 - STOCK-BASED COMPENSATION](index=136&type=section&id=NOTE%2019%20-%20STOCK-BASED%20COMPENSATION) Details the Company's stock-based compensation plans and expenses [NOTE 20 - BUSINESS SEGMENTS](index=138&type=section&id=NOTE%2020%20-%20BUSINESS%20SEGMENTS) Provides financial information segmented by the Company's business lines [NOTE 21 - REVENUE FROM CONTRACTS WITH CUSTOMERS](index=140&type=section&id=NOTE%2021%20-%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Details revenue recognition policies from customer contracts [NOTE 22 - GOODWILL AND OTHER INTANGIBLE ASSETS](index=141&type=section&id=NOTE%2022%20-%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Provides information on goodwill and other intangible assets [NOTE 23 - PARENT COMPANY ONLY FINANCIAL INFORMATION](index=142&type=section&id=NOTE%2023%20-%20PARENT%20COMPANY%20ONLY%20FINANCIAL%20INFORMATION) Presents separate financial information for the parent company [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=142&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants on accounting and financial disclosure for the Company - No changes in or disagreements with accountants on accounting and financial disclosure[738](index=738&type=chunk) [Item 9A. Controls and Procedures](index=142&type=section&id=Item%209A.%20Controls%20and%20Procedures) The CEO and CFO concluded disclosure controls were effective as of December 31, 2020, and management assessed internal control over financial reporting as effective, with no significant changes during the quarter - The Company's CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2020[740](index=740&type=chunk) - Management assessed and concluded that the Company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[744](index=744&type=chunk) - Moss Adams LLP, the independent registered public accounting firm, audited and attested to the effectiveness of the Company's internal control over financial reporting[744](index=744&type=chunk)[745](index=745&type=chunk) - There were no significant changes in internal control over financial reporting during the most recent fiscal quarter[746](index=746&type=chunk) [Item 9B. Other Information](index=144&type=section&id=Item%209B.%20Other%20Information) No other information is reported in this item - No other information is reported[747](index=747&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=143&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement, including the Code of Ethics and designated audit committee financial experts - Information regarding Directors, Executive Officers, and Corporate Governance is incorporated by reference from the Company's Proxy Statement[749](index=749&type=chunk) - The Board of Directors has adopted a Code of Ethics for officers (including senior financial officers), directors, and employees, which is posted on the Company's website[752](index=752&type=chunk) - Mr. Ted A. Leech (Chairperson) and Mr. Michael J. Mansfield are designated as 'audit committee financial experts' as defined by the SEC[753](index=753&type=chunk) [Code of Ethics for Senior Financial Officers](index=145&type=section&id=Code%20of%20Ethics%20for%20Senior%20Financial%20Officers) Describes the ethical guidelines for the Company's senior financial management [Audit Committee Financial Expert](index=145&type=section&id=Audit%20Committee%20Financial%20Expert) Identifies the designated financial experts on the Company's audit committee [Item 11. Executive Compensation](index=145&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the Company's definitive Proxy Statement for the 2021 Annual Meeting of Shareholders - Information on executive compensation is incorporated by reference from the Proxy Statement[754](index=754&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=145&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and changes in control is incorporated by reference from the Proxy Statement, with **335,877** securities outstanding from equity compensation plans at a weighted-average exercise price of **$68.49** - Information on security ownership of certain beneficial owners and management, and changes in control, is incorporated by reference from the Proxy Statement[755](index=755&type=chunk)[756](index=756&type=chunk)[757](index=757&type=chunk) Equity Compensation Plan Information (December 31, 2020) | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | :------------------------------------------------ | :------------------------------------------------- | :------------------------------ | :------------------------------------------------- | | 2013 Equity Incentive Plan | 122,937 | $16.89 | 6,013 | | 2018 Equity Incentive Plan | 212,940 | $51.60 | 366,965 | | **Total** | **335,877** | **$68.49** | **372,978** | [Security Ownership of Certain Beneficial Owners](index=145&type=section&id=Security%20Ownership%20of%20Certain%20Beneficial%20Owners) Details the ownership stakes of major shareholders [Security Ownership of Management](index=145&type=section&id=Security%20Ownership%20of%20Management) Details the ownership stakes of the Company's directors and executive officers [Changes in Control](index=145&type=section&id=Changes%20in%20Control) Discusses any arrangements that could result in a change of control of the Company [Equity Compensation Plan Information](index=146&type=section&id=Equity%20Compensation%20Plan%20Information) Provides details on the Company's equity compensation plans [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=146&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the Company's Proxy Statement - Information on certain relationships and related transactions, and director independence, is incorporated by reference from the Proxy Statement[761](index=761&type=chunk) [Item 14. Principal Accounting Fees and Services](index=146&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the Company's Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the Proxy Statement[762](index=762&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=147&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This item lists the financial statements and provides a detailed index of exhibits, including corporate documents, various agreements, the Code of Ethics, and regulatory certifications - Financial statements filed as part of this report are listed in 'Part II - Item 8. Financial Statements and Supplementary Data'[766](index=766&type=chunk) - Exhibits include Articles of Incorporation, Bylaws, Common Stock Certificate, Subordinated Note Indenture, Severance Agreement, Equity Incentive Plans, Purchase and Assumption Agreement, Subordinated Loan Agreement, Change of Control Agreements, Code of Ethics, Subsidiaries, Consent of Independent Registered Public Accounting Firm, and Certifications[766](index=766&type=chunk)[770](index=770&type=chunk) [Item 16. Form 10-K Summary](index=148&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that there is no Form 10-K Summary provided in the report - No Form 10-K Summary is provided[769](index=769&type=chunk) SIGNATURES Contains the required legal attestations for the annual report

Loan Portfolio and Provision for Losses - As of September 30, 2020, the Company had 471 Paycheck Protection Program (PPP) loans totaling $74.1 million for small- to mid-size businesses [181]. - The Company recorded a provision for loan losses of $3.1 million for the quarter ended September 30, 2020, compared to $573,000 for the same quarter in 2019, reflecting the adverse impact of the COVID-19 pandemic [182]. - The total amount of portfolio loans under payment/relief agreements as of September 30, 2020, included $23.8 million in commercial real estate loans and $7.6 million in commercial business loans [182]. - The allowance for loan and lease losses (ALLL) was $24.8 million, or 1.63% of gross loans receivable, at September 30, 2020, compared to $13.2 million, or 0.98%, at December 31, 2019 [211]. - Non-performing loans increased to $7.6 million at September 30, 2020, from $3.0 million at December 31, 2019, with a ratio of non-performing loans to total gross loans of 0.50% [213]. - Substandard loans increased to $18.5 million at September 30, 2020, compared to $6.7 million at December 31, 2019 [211]. - The provision for loan losses increased significantly to $11.4 million for the nine months ended September 30, 2020, compared to $2.2 million in the same period of 2019, reflecting credit deterioration due to the COVID-19 pandemic [243]. Loan Originations and Sales - For the nine months ended September 30, 2020, the Company originated $1.35 billion of one-to-four-family loans, with $1.12 billion sold to investors [191]. - The Company originated $1.35 billion in one-to-four-family loans during the nine months ended September 30, 2020, a 112.0% increase compared to $638.7 million for the same period in 2019 [210]. - The Company sold $1.12 billion of one-to-four-family loans during the nine months ended September 30, 2020, compared to $551.6 million for the same period one year ago [210]. Financial Performance - Net income for the three months ended September 30, 2020, was $12.7 million, a 78.87% increase from $7.1 million for the same period in 2019, primarily due to a $10.8 million increase in noninterest income [223]. - Net income for the nine months ended September 30, 2020, was $27.9 million, a 66.5% increase from $16.8 million in the same period of 2019 [236]. - Noninterest income surged by $10.8 million, or 160.2%, to $17.5 million for the three months ended September 30, 2020, driven by a $11.6 million increase in gain on sale of loans [232]. - Noninterest income rose by $23.2 million, or 133.4%, to $40.6 million for the nine months ended September 30, 2020, driven by a $24.9 million increase in gain on sale of loans [244]. Asset and Liability Management - Total assets increased by $341.6 million, or 19.9%, to $2.05 billion at September 30, 2020, compared to $1.71 billion at December 31, 2019 [207]. - Loans receivable, net increased by $155.2 million to $1.49 billion at September 30, 2020, from $1.34 billion at December 31, 2019 [208]. - Loans held for sale increased by $145.4 million, or 208.6%, to $215.1 million at September 30, 2020, from $69.7 million at December 31, 2019 [209]. - Total liabilities increased by $321.3 million to $1.83 billion at September 30, 2020, from $1.51 billion at December 31, 2019, primarily due to increases in deposits and borrowings [215]. - Total deposits rose by $220.8 million to $1.61 billion at September 30, 2020, driven by organic growth, PPP loan proceeds, and government stimulus checks [216]. Interest Income and Expense - Net interest income increased by $1.2 million to $18.9 million for the three months ended September 30, 2020, compared to $17.7 million for the same period in 2019 [225]. - Interest income decreased by $483,000 to $22.2 million for the three months ended September 30, 2020, primarily due to a 121 basis point decrease in the average yield on interest-earning assets [228]. - The net interest margin decreased by 62 basis points to 3.92% for the three months ended September 30, 2020, from 4.54% for the same period in the prior year [227]. - Interest income for the nine months ended September 30, 2020, decreased by $1.5 million to $65.9 million, primarily due to a 98 basis point decrease in the average yield on interest-earning assets [240]. - Interest expense decreased by $2.8 million to $11.6 million for the nine months ended September 30, 2020, primarily due to a $2.3 million decrease in interest expense on deposits and a $474,000 decrease on borrowings [241]. Capital and Liquidity - The Bank maintained a Tier 1 leverage-based capital ratio of 10.7% at September 30, 2020, down from 11.6% at December 31, 2019, while still exceeding the minimum capital requirements [256]. - FS Bancorp, Inc. had $12.6 million in unrestricted cash to meet liquidity needs as of September 30, 2020 [253]. - As of September 30, 2020, the Bank's total borrowing capacity with the FHLB was $573.8 million, with unused capacity of $495.5 million [249]. Operational Efficiency - The efficiency ratio improved to 47.11% for Q3 2020, compared to 60.14% for Q3 2019, indicating better cost management relative to income [234]. - The efficiency ratio improved to 50.61% for the nine months ended September 30, 2020, compared to 66.24% in the prior year, indicating better cost management relative to income [246]. - Noninterest expense rose by $2.5 million, or 16.7%, to $17.2 million for the three months ended September 30, 2020, primarily due to increased salaries and benefits [233]. - Noninterest expense increased by $1.4 million, or 3.0%, to $48.0 million for the nine months ended September 30, 2020, primarily due to a $2.4 million increase in salaries and benefits [245].

Loan Performance and Provisions - The Company recorded a provision for loan losses of $4.6 million for the quarter ended June 30, 2020, compared to $910,000 for the same quarter in 2019, reflecting the adverse impact of the COVID-19 pandemic [205]. - The allowance for loan and lease losses (ALLL) was $21.5 million, or 1.47% of gross loans receivable, at June 30, 2020, compared to $13.2 million, or 0.98%, at December 31, 2019 [243]. - Non-performing loans increased to $7.9 million at June 30, 2020, from $3.0 million at December 31, 2019, with a ratio of non-performing loans to total gross loans of 0.54% [243]. - The provision for loan losses increased significantly to $4.6 million for the three months ended June 30, 2020, from $910,000 in the same period of 2019, due to credit deterioration from the COVID-19 pandemic [267]. - For the six months ended June 30, 2020, the provision for loan losses increased to $8.3 million from $1.7 million in the same period of 2019, primarily due to credit deterioration related to the COVID-19 pandemic [282]. Loan Originations and Modifications - The Company funded 463 Paycheck Protection Program (PPP) loans totaling $75.3 million as of June 30, 2020, aimed at supporting small to midsize businesses [203]. - As of June 30, 2020, the Bank approved loan modifications for 355 individual loans with aggregate principal balances totaling $103.6 million due to COVID-19 [208]. - The Company originated $764.0 million of one-to-four-family loans during the six months ended June 30, 2020, with $639.4 million sold to investors [218]. - One-to-four-family loan originations increased by $412.3 million, or 117.2%, to $764.0 million during the six months ended June 30, 2020, compared to $351.7 million during the same period in 2019 [239]. - Commercial business loans increased by $54.0 million, primarily due to $75.3 million in PPP loans originated in the second quarter of 2020 [237]. Financial Performance - Net income for the three months ended June 30, 2020, was $10.0 million, a 122.2% increase from $4.5 million for the same period in 2019 [258]. - For the six months ended June 30, 2020, net income was $15.2 million, up from $9.7 million in the same period of 2019, influenced by a $12.4 million increase in noninterest income [273]. - Noninterest income surged by $8.0 million, or 132.3%, to $14.1 million for the three months ended June 30, 2020, driven by a $9.8 million increase in gains on loan sales [268]. - Noninterest income rose by $12.4 million, or 116.4%, to $23.0 million for the six months ended June 30, 2020, driven by a $13.3 million increase in gain on sale of loans [283]. Asset and Liability Changes - Total assets increased by $295.7 million, or 17.3%, to $2.01 billion at June 30, 2020, compared to $1.71 billion at December 31, 2019 [236]. - Loans receivable, net increased by $108.1 million to $1.44 billion at June 30, 2020, from $1.34 billion at December 31, 2019 [237]. - Total liabilities increased by $287.3 million to $1.80 billion at June 30, 2020, from $1.51 billion at December 31, 2019, primarily due to increases in deposits and borrowings [246]. - Total deposits rose by $214.5 million to $1.61 billion at June 30, 2020, driven by PPP loan proceeds and government stimulus checks [247]. Interest Income and Expenses - Net interest income increased by $326,000 to $17.9 million for the three months ended June 30, 2020, compared to $17.5 million for the same period in 2019 [261]. - Interest income decreased by $652,000 to $21.7 million for the three months ended June 30, 2020, primarily due to a 111 basis point decrease in the average yield on interest-earning assets [264]. - Net interest income for the six months ended June 30, 2020, increased slightly by $110,000 to $35.3 million, despite a decrease in interest income of $1.0 million [274]. - Interest income for the six months ended June 30, 2020, decreased by $1.0 million to $43.7 million, with an average yield on interest-earning assets dropping to 5.06% [278]. - Noninterest expense decreased by $2.4 million, or 14.3%, to $14.6 million for the three months ended June 30, 2020, primarily due to a reduction in salaries and benefits [269]. Capital and Efficiency Ratios - Total stockholders' equity increased by $8.4 million to $208.6 million at June 30, 2020, primarily due to net income and other comprehensive income [254]. - The efficiency ratio improved to 45.71% for the three months ended June 30, 2020, compared to 72.28% for the same period in 2019, reflecting increased noninterest income and decreased noninterest expenses [270]. - The efficiency ratio improved to 52.79% for the six months ended June 30, 2020, compared to 69.49% for the same period in 2019, reflecting increased noninterest income and decreased noninterest expense [285]. - The Tier 1 leverage-based capital ratio for the Bank at June 30, 2020 was 10.8%, down from 11.6% at December 31, 2019, while still exceeding the minimum capital requirements [295]. Community Engagement and Operational Adjustments - The Company has taken measures to ensure branch safety, with most employees working remotely and branches operating under specific guidelines [209]. - The Company is actively involved in community activities, strengthening relationships within its market areas [214]. - The Company has emphasized lower cost core deposits to reduce funding costs for loan growth [215]. - The Company is focused on diversifying revenues and expanding lending channels, particularly in residential mortgage and commercial construction [217].