FS Bancorp(FSBW) - 2025 Q3 - Quarterly Results

Executive Summary & Highlights This section provides an overview of FS Bancorp, Inc.'s financial performance for the third quarter and nine months ended September 30, 2025, highlighting key operational metrics and dividend declarations Third Quarter & Nine Months Ended Financial Performance FS Bancorp, Inc. reported a decrease in net income for both the third quarter and the nine months ended September 30, 2025, compared to the prior year. Diluted EPS also saw a corresponding decline Net Income and Diluted EPS Summary | Metric | Q3 2025 ($) | Q3 2024 ($) | YoY Change (%) | 9M 2025 ($) | 9M 2024 ($) | YoY Change (%) | | :----- | :---------- | :---------- | :------------- | :---------- | :---------- | :------------- | | Net Income | 9.2 million | 10.3 million | (10.7) | 24.9 million | 27.6 million | (9.8) | | Diluted EPS | 1.18 | 1.29 | (8.4) | 3.18 | 3.45 | (7.8) | Key Financial & Operational Highlights The third quarter of 2025 saw net income of $9.2 million, significant growth in total deposits, a substantial decrease in borrowings, and a modest increase in net loans. Consumer loans experienced a slight decline, while book value and tangible book value per share improved. The company also engaged in share repurchases - Net interest margins (NIM) remain strong with expanding yields on earning assets and a stable, well-positioned mix of funding liabilities[2] Key Financial and Operational Metrics | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | QoQ Change (%) | YoY Change | YoY Change (%) | | :-------------------------- | :----------- | :----------- | :----------- | :--------- | :------------- | :--------- | :------------- | | Net Income (Q3) ($ million) | 9.2 | 7.7 | 10.3 | 1.5 | 19.5% | (1.1) | (10.7%) | | Total Deposits ($ billion) | 2.69 | 2.55 | 2.43 | 0.1331 | 5.2% | 0.2592 | 10.7% | | Noninterest-bearing deposits ($ million) | 665.9 | 654.1 | 657.8 | 11.8 | 1.8% | 8.1 | 1.2% | | Borrowings ($ million) | 129.3 | 234.3 | 163.8 | (105.0) | (44.8%) | (34.5) | (21.1%) | | Loans receivable, net ($ billion) | 2.60 | 2.58 | 2.46 | 0.0173 | 0.7% | 0.1359 | 5.5% | | Consumer loans ($ million) | 600.8 | 606.3 | 632.4 | (5.5) | (0.91%) | (31.6) | (5.0%) | | Book value per share ($) | 40.43 | 39.55 | 37.45 | 0.88 | 2.2% | 2.98 | 8.0% | | Tangible book value per share ($) | 38.43 | 37.46 | 35.10 | 0.97 | 2.6% | 3.33 | 9.5% | - Repurchased 134,413 shares of the Company's common stock in the third quarter of 2025 at an average price of $41.15 per share[4] Dividend Declaration The Board of Directors approved the 51st consecutive quarterly cash dividend of $0.28 per common share, demonstrating a commitment to long-term shareholders. The dividend is payable on November 20, 2025, to shareholders of record as of November 6, 2025 - Approved the 51st consecutive quarterly cash dividend of $0.28 per common share[3] Segment Reporting This section details the financial performance and operational overview of the Company's Commercial and Consumer Banking and Home Lending segments Segment Overview The Company operates through two primary reportable segments: Commercial and Consumer Banking, which offers diversified financial products and services, and Home Lending, which primarily originates residential mortgage loans for sale in secondary markets - Commercial and Consumer Banking segment provides diversified financial products and services, including deposit products, various lending, and cash management[5] - Home Lending segment originates one-to-four-family residential mortgage loans primarily for sale in the secondary markets[5] Three Months Ended September 30, 2025 & 2024 For the third quarter of 2025, the Commercial and Consumer Banking segment reported net income of $8.4 million, while the Home Lending segment reported $775,000. Both segments experienced a decrease in net income compared to the same period in 2024 Segment Performance for Three Months Ended September 30 | Metric (Q3) | Commercial and Consumer Banking (2025) ($ thousand) | Home Lending (2025) ($ thousand) | Total (2025) ($ thousand) | Commercial and Consumer Banking (2024) ($ thousand) | Home Lending (2024) ($ thousand) | Total (2024) ($ thousand) | | :-------------------------------- | :------------------------------------- | :------------------ | :----------- | :------------------------------------- | :------------------ | :----------- | | Net interest income | 30,810 | 2,880 | 33,690 | 28,612 | 2,632 | 31,244 | | Provision for credit losses | (2,150) | (159) | (2,309) | (1,331) | (182) | (1,513) | | Noninterest income | 2,079 | 3,515 | 5,594 | 2,257 | 3,710 | 5,967 | | Noninterest expense | (20,134) | (5,254) | (25,388) | (20,199) | (5,633) | (25,832) | | Net income | 8,402 | 775 | 9,177 | 9,268 | 1,018 | 10,286 | | Total average assets | 2,523,410 | 662,047 | 3,185,457 | 2,347,854 | 612,935 | 2,960,789 | | FTEs | 460 | 115 | 575 | 442 | 117 | 559 | - Regulatory capital ratios for the Bank at September 30, 2025, were 13.8% for total risk-based capital and 11.0% for Tier 1 leverage capital, slightly lower than June 30, 2025[7] Nine Months Ended September 30, 2025 & 2024 For the nine months ended September 30, 2025, total net income was $24.9 million, a decrease from $27.6 million in the comparable period of 2024. The Commercial and Consumer Banking segment contributed $23.6 million, while the Home Lending segment contributed $1.4 million Segment Performance for Nine Months Ended September 30 | Metric (9M) | Commercial and Consumer Banking (2025) ($ thousand) | Home Lending (2025) ($ thousand) | Total (2025) ($ thousand) | Commercial and Consumer Banking (2024) ($ thousand) | Home Lending (2024) ($ thousand) | Total (2024) ($ thousand) | | :-------------------------------- | :------------------------------------- | :------------------ | :----------- | :------------------------------------- | :------------------ | :----------- | | Net interest income | 88,397 | 8,387 | 96,784 | 84,749 | 7,242 | 91,991 | | Provision for credit losses | (5,320) | (602) | (5,922) | (3,796) | (193) | (3,989) | | Noninterest income | 6,621 | 9,269 | 15,890 | 6,919 | 10,027 | 16,946 | | Noninterest expense | (60,624) | (15,321) | (75,945) | (58,250) | (14,968) | (73,218) | | Net income | 23,557 | 1,369 | 24,926 | 25,369 | 2,273 | 27,642 | | Total average assets | 2,468,543 | 643,460 | 3,112,003 | 2,369,740 | 586,001 | 2,955,741 | | FTEs | 460 | 115 | 575 | 442 | 117 | 559 | Balance Sheet Analysis This section provides a detailed analysis of the Company's assets, liabilities, and equity, including loan portfolio composition and regulatory capital ratios Asset Summary Total assets increased by 1% quarter-over-quarter and 8% year-over-year to $3.21 billion at September 30, 2025, driven by growth in the loan portfolio and selective investment activities. The loan portfolio saw increases in commercial and speculative construction and development loans, and C&I loans, while consumer loans decreased Total Assets Overview Total assets grew to $3.21 billion at September 30, 2025, reflecting the Company's strategy of balance sheet expansion through loan origination and investment, supported by on-balance sheet liquidity and borrowings Total Assets Summary | Asset Category | Sep 30, 2025 ($ thousand) | Jun 30, 2025 ($ thousand) | Sep 30, 2024 ($ thousand) | QoQ Change ($ thousand) | QoQ Change (%) | YoY Change ($ thousand) | YoY Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------------ | :---------------- | :------------- | :---------------- | :------------- | | Total cash and cash equivalents | 61,280 | 33,195 | 40,340 | 28,085 | 85 | 20,940 | 52 | | Securities available-for-sale, at fair value | 311,695 | 302,692 | 228,199 | 9,003 | 3 | 83,496 | 37 | | Loans receivable, net | 2,599,601 | 2,582,272 | 2,463,697 | 17,329 | 1 | 135,904 | 6 | | TOTAL ASSETS | 3,208,825 | 3,176,013 | 2,970,208 | 32,812 | 1 | 238,617 | 8 | - 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[11] Loan Portfolio Composition Total gross loans increased to $2.63 billion in Q3 2025, primarily driven by growth in commercial and speculative construction and development loans and C&I loans. Conversely, consumer loans experienced a decline Loan Portfolio Composition by Category | Loan Category | Sep 30, 2025 ($ thousand) | Sep 30, 2025 (%) | Jun 30, 2025 ($ thousand) | Jun 30, 2025 (%) | Sep 30, 2024 ($ thousand) | Sep 30, 2024 (%) | QoQ Change ($ thousand) | YoY Change ($ thousand) | | :------------------------------------ | :------------------ | :--------------- | :------------------ | :--------------- | :------------------ | :--------------- | :-------------- | :-------------- | | Total CRE loans | 932,689 | 35.5% | 916,137 | 35.0% | 832,013 | 33.4% | 16,552 | 100,676 | | Total residential real estate loans | 769,903 | 29.2% | 779,518 | 29.8% | 718,477 | 28.8% | (9,615) | 51,426 | | Total consumer loans | 600,779 | 22.9% | 606,291 | 23.2% | 632,417 | 25.3% | (5,512) | (31,638) | | Total commercial business loans | 326,286 | 12.4% | 312,515 | 12.0% | 312,022 | 12.5% | 13,771 | 14,264 | | Total loans receivable, gross | 2,629,657 | 100.0% | 2,614,461 | 100.0% | 2,494,929 | 100.0% | 15,196 | 134,728 | | Allowance for credit losses (ACL) on loans | (30,056) | | (32,189) | | (31,232) | | 2,133 | 1,176 | | Total loans receivable, net | 2,599,601 | | 2,582,272 | | 2,463,697 | | 17,329 | 135,904 | - Commercial and speculative construction and development loans increased $26.0 million, led by speculative residential vertical projects[12] - C&I loans increased $16.6 million[12] Construction Loan Composition Total construction loans reached $379.98 million at September 30, 2025, with speculative residential construction – vertical projects being the largest component and primary driver of growth Construction Loan Portfolio Breakdown | Construction Type | Sep 30, 2025 ($ thousand) | Sep 30, 2025 (%) | Jun 30, 2025 ($ thousand) | Jun 30, 2025 (%) | Sep 30, 2024 ($ thousand) | Sep 30, 2024 (%) | | :---------------------------------------------------- | :------------------ | :--------------- | :------------------ | :--------------- | :------------------ | :--------------- | | Speculative residential construction – vertical | 217,821 | 57.3% | 200,375 | 56.5% | 145,549 | 49.8% | | Multi-family | 29,751 | 7.8% | 23,119 | 6.5% | 30,931 | 10.6% | | Custom construction – single family residential | 44,299 | 11.7% | 45,570 | 12.8% | 43,528 | 14.9% | | Total | 379,980 | 100.0% | 354,747 | 100.0% | 292,366 | 100.0% | One-to-Four-Family Loan Originations & Sales Originations of one-to-four-family loans decreased both quarter-over-quarter and year-over-year in Q3 2025, primarily due to a decline in purchase loans. However, loan sales volume increased QoQ, attributed to seasonal homebuying, and gross margins on home loan sales improved One-to-Four-Family Loan Originations and Sales | Origination Type (Q3) | Sep 30, 2025 ($ thousand) | Sep 30, 2025 (%) | Jun 30, 2025 ($ thousand) | Jun 30, 2025 (%) | Sep 30, 2024 ($ thousand) | Sep 30, 2024 (%) | QoQ Change ($ thousand) | QoQ Change (%) | YoY Change ($ thousand) | YoY Change (%) | | :-------------------- | :------------------ | :--------------- | :------------------ | :--------------- | :------------------ | :--------------- | :-------------- | :------------- | :-------------- | :------------- | | Purchase | 155,910 | 88.8% | 170,854 | 85.7% | 168,088 | 85.7% | (14,944) | (8.7%) | (12,178) | (7.2%) | | Refinance | 19,714 | 11.2% | 28,470 | 14.3% | 28,001 | 14.3% | (8,756) | (30.8%) | (8,287) | (29.6%) | | Total | 175,624 | 100.0% | 199,324 | 100.0% | 196,089 | 100.0% | (23,700) | (11.9%) | (20,465) | (10.4%) | - The Company sold $156.4 million of one-to-four-family loans in Q3 2025, an increase from $127.1 million in the previous quarter, primarily due to seasonal homebuying factors[14] - Gross margins on home loan sales increased to 3.14% for the quarter ended September 30, 2025, up from 3.06% in the previous quarter and 2.96% in the same quarter one year ago[14] Liabilities and Equity Summary Total deposits increased significantly, primarily driven by brokered CDs, while borrowings decreased substantially. Shareholders' equity saw a modest increase, influenced by net income and unrealized gains on securities, partially offset by share repurchases and dividends. The Bank remains well-capitalized, exceeding all regulatory requirements Deposits Total deposits increased by 5.2% quarter-over-quarter and 10.7% year-over-year to $2.69 billion at September 30, 2025, mainly due to a rise in brokered certificates of deposit and other deposits. Noninterest-bearing deposits also saw a slight increase Deposit Composition by Category | Deposit Category | Sep 30, 2025 ($ thousand) | Sep 30, 2025 (%) | Jun 30, 2025 ($ thousand) | Jun 30, 2025 (%) | Sep 30, 2024 ($ thousand) | Sep 30, 2024 (%) | QoQ Change ($ thousand) | YoY Change ($ thousand) | | :----------------------- | :------------------ | :--------------- | :------------------ | :--------------- | :------------------ | :--------------- | :-------------- | :-------------- | | Noninterest-bearing checking | 648,661 | 24.1% | 643,573 | 25.2% | 641,270 | 26.4% | 5,088 | 7,391 | | Total interest-bearing checking | 199,527 | 7.4% | 211,260 | 8.3% | 165,944 | 6.8% | (11,733) | 33,583 | | Total money market | 354,333 | 13.2% | 350,799 | 13.7% | 340,049 | 14.0% | 3,534 | 14,284 | | Retail CDs | 924,925 | 34.4% | 891,355 | 34.9% | 849,302 | 35.0% | 33,570 | 75,623 | | Brokered CDs | 369,403 | 13.8% | 280,754 | 11.0% | 250,240 | 10.3% | 88,649 | 119,163 | | Total deposits | 2,686,492 | 100.0% | 2,553,375 | 100.0% | 2,427,331 | 100.0% | 133,117 | 259,161 | - Uninsured deposits were approximately $694.4 million at September 30, 2025, an increase from $677.2 million at June 30, 2025, and $644.9 million at September 30, 2024[17] Borrowings & Shareholders' Equity Borrowings decreased significantly by 44.8% QoQ and 21.1% YoY. Shareholders' equity increased QoQ due to net income and unrealized gains on available-for-sale securities, partially offset by share repurchases and cash dividends Borrowings and Shareholders' Equity Summary | Metric | Sep 30, 2025 ($ thousand) | Jun 30, 2025 ($ thousand) | Sep 30, 2024 ($ thousand) | QoQ Change ($ thousand) | YoY Change ($ thousand) | | :------------------ | :------------------ | :------------------ | :------------------ | :-------------- | :-------------- | | Borrowings | 129,305 | 234,305 | 163,806 | (105,000) | (34,501) | | Shareholders' equity | 300,511 | 297,203 | 288,902 | 3,308 | 11,609 | | Book value per share | 40.43 | 39.55 | 37.45 | 0.88 | 2.98 | - The increase in stockholders' equity was primarily due to net income of $9.2 million and an unrealized gain in fair value on securities available for sale of $2.9 million (net of tax), partially offset by share repurchases of $5.5 million and cash dividends paid of $3.8 million[18] Regulatory Capital Ratios As of September 30, 2025, the Bank maintained strong regulatory capital ratios, exceeding all requirements and being classified as 'well capitalized' by the FDIC Bank and Company Regulatory Capital Ratios | Capital Ratio (Sep 30, 2025) | Bank | Company | | :----------------------------- | :----- | :------ | | Total risk-based capital | 13.81% | 13.93% | | Tier 1 leverage capital | 10.96% | 9.49% | | CET 1 capital | 12.64% | 10.95% | Credit Quality This section analyzes the Company's credit quality, focusing on the Allowance for Credit Losses, nonperforming loans, and classified loans Allowance for Credit Losses (ACL) The ending ACL balance decreased quarter-over-quarter and year-over-year to $30.06 million at September 30, 2025. This was primarily influenced by increased charge-offs, notably a $2.3 million partial charge-off for a commercial construction loan, which had been fully reserved in prior periods Allowance for Credit Losses Activity | ACL Metric ($ thousand) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :-------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Beginning ACL balance | 32,189 | 31,653 | 31,238 | 536 | 951 | | Provision | 1,851 | 1,715 | 1,591 | 136 | 260 | | Total Charge-offs | (4,344) | (1,640) | (1,964) | (2,704) | (2,380) | | Total Recoveries | 360 | 461 | 367 | (101) | (7) | | Ending ACL balance | 30,056 | 32,189 | 31,232 | (2,133) | (1,176) | - A $2.3 million charge-off for a commercial construction - office project was recognized in Q3 2025, which was fully reserved in previous periods, resulting in no income statement impact from increased provisions[21] Nonperforming Loans Total nonperforming loans decreased quarter-over-quarter but increased significantly year-over-year to $18.38 million at September 30, 2025. This rise was primarily driven by two commercial construction loans and increased delinquencies in consumer and mortgage loans, partially offset by a decrease in C&I nonaccrual loans Nonperforming Loans by Category | Nonperforming Loan Category ($ thousand) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Total CRE loans | 11,197 | 11,129 | 5,867 | 68 | 5,330 | | Total residential real estate loans | 2,116 | 2,060 | 322 | 56 | 1,794 | | Total consumer loans | 4,462 | 3,945 | 2,008 | 517 | 2,454 | | C&I | 600 | 1,862 | 2,575 | (1,262) | (1,975) | | Total nonperforming loans | 18,375 | 18,996 | 10,772 | (621) | 7,603 | - The year-over-year increase in nonaccrual loans was partly driven by two commercial construction loans, which remain in active development, contributing a $4.4 million net increase[22] - Increases in consumer loan and mortgage loan delinquencies also contributed to the overall rise in nonaccrual loans[22] Classified Loans Total classified loans increased both quarter-over-quarter and year-over-year to $27.05 million at September 30, 2025. This increase was primarily due to higher classified CRE, residential real estate, and consumer loans, partially offset by a decrease in C&I classified loans Classified Loans by Category | Classified Loan Category ($ thousand) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :---------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Total CRE loans | 14,665 | 11,129 | 8,340 | 3,536 | 6,325 | | Total residential real estate loans | 3,963 | 4,634 | 2,952 | (671) | 1,011 | | Total consumer loans | 4,462 | 3,945 | 2,007 | 517 | 2,455 | | C&I | 3,963 | 5,220 | 9,880 | (1,257) | (5,917) | | Total classified loans | 27,053 | 24,928 | 23,179 | 2,125 | 3,874 | Operating Results This section reviews the Company's operating performance, including net interest income, provision for credit losses, noninterest income, and noninterest expense Net Interest Income & Net Interest Margin (NIM) Net interest income increased for both the three and nine months ended September 30, 2025, driven by higher interest income on loans and investment securities, partially offset by increased interest expense. Net Interest Margin (NIM) also saw slight improvements Net Interest Income and Margin Trends | Metric | Q3 2025 ($ thousand) | Q3 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | 9M 2025 ($ thousand) | 9M 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | | :-------------------- | :----------- | :----------- | :-------------- | :------------- | :----------- | :----------- | :-------------- | :------------- | | Net interest income | 33,690 | 31,244 | 2,446 | 7.8% | 96,784 | 91,991 | 4,793 | 5.2% | | Total interest income | 50,973 | 47,043 | 3,930 | 8.4% | 146,463 | 137,863 | 8,600 | 6.2% | | Total interest expense | 17,283 | 15,799 | 1,484 | 9.4% | 49,679 | 45,872 | 3,807 | 8.3% | | NIM (annualized) | 4.37% | 4.35% | +2 bps | | 4.33% | 4.30% | +3 bps | | | Average total cost of funds | 2.41% | 2.39% | +2 bps | | 2.39% | 2.33% | +6 bps | | - The $3.9 million increase in total interest income for Q3 was primarily due to a $2.9 million increase in interest income on loans receivable, driven by net loan growth and higher loan yields[24] - The $1.5 million increase in total interest expense for Q3 was primarily the result of higher average deposit balances used to fund asset growth[24] Provision for Credit Losses & Net Charge-offs The provision for credit losses on loans increased significantly for both the three and nine months ended September 30, 2025, reflecting net loan growth and a rise in net charge-off activity, largely due to a commercial construction loan Provision for Credit Losses and Net Charge-offs | Metric | Q3 2025 ($ thousand) | Q3 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | 9M 2025 ($ thousand) | 9M 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | | :-------------------------- | :----------- | :----------- | :-------------- | :------------- | :----------- | :----------- | :-------------- | :------------- | | Provision for credit losses | 2,309 | 1,513 | 796 | 52.6% | 5,922 | 3,989 | 1,933 | 48.5% | | Net charge-offs (Q3) | 4,000 | 1,600 | 2,400 | 150.0% | | | | | | Net charge-offs (9M) | | | | | 6,900 | 4,300 | 2,600 | 60.5% | - The increase in Q3 net charge-offs was primarily due to a $2.3 million partial charge-off of a commercial construction loan[29] - For the nine months, net charge-offs increased due to the commercial construction loan charge-off and a $1.3 million increase in net charge-offs on indirect home improvement loans, partially offset by decreases in commercial business and marine loan charge-offs[29] Noninterest Income Total noninterest income decreased for both the three and nine months ended September 30, 2025. This decline was mainly attributed to lower service charges and fees, no gain on sale of MSRs in the current quarter, and a decrease in gain on sale of loans Noninterest Income Breakdown | Metric | Q3 2025 ($ thousand) | Q3 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | 9M 2025 ($ thousand) | 9M 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | | :-------------------------- | :----------- | :----------- | :-------------- | :------------- | :----------- | :----------- | :-------------- | :------------- | | Total noninterest income | 5,594 | 5,967 | (373) | (6.2%) | 15,890 | 16,946 | (1,056) | (6.2%) | | Service charges and fee income | 2,326 | 2,482 | (156) | (6.3%) | 6,894 | 7,513 | (619) | (8.2%) | | Gain on sale of MSRs | — | 141 | (141) | NM | — | 8,356 | NM | NM | | Gain on sale of loans | 2,439 | 2,523 | (84) | (3.3%) | 6,111 | 6,824 | (713) | (10.4%) | | Other noninterest income | 560 | 558 | 2 | 0.4% | 2,112 | 1,355 | 757 | 55.9% | - The decrease in 9M noninterest income was partially offset by a $757,000 increase in other noninterest income, primarily due to a $358,000 gain on sales of nonmarketable equity securities, $219,000 in bank owned life insurance proceeds, and a $152,000 increase in brokered loans fees[30] Noninterest Expense Total noninterest expense slightly decreased quarter-over-quarter but increased year-over-year for the nine months ended September 30, 2025. The Q3 decrease was mainly due to a recovery in MSRs and lower data processing costs, while the 9M increase was driven by higher salaries and benefits and operations expense Noninterest Expense Breakdown | Metric | Q3 2025 ($ thousand) | Q3 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | 9M 2025 ($ thousand) | 9M 2024 ($ thousand) | YoY Change ($ thousand) | YoY Change (%) | | :-------------------------- | :----------- | :----------- | :-------------- | :------------- | :----------- | :----------- | :-------------- | :------------- | | Total noninterest expense | 25,388 | 25,832 | (444) | (1.7%) | 75,945 | 73,218 | 2,727 | 3.7% | | Salaries and benefits | 14,415 | 13,985 | 430 | 3.1% | 43,037 | 40,920 | 2,117 | 5.2% | | Data processing | 1,784 | 2,156 | (372) | (17.3%) | 5,966 | 6,172 | (206) | (3.3%) | | (Recovery) impairment of servicing rights | (6) | 506 | (512) | (116.0%) | 23 | 545 | (522) | (95.8%) | - The Q3 decrease in noninterest expense was primarily due to a $6,000 recovery in MSRs (compared to the prior year's $506,000 impairment) and a $372,000 decrease in data processing[31] - The 9M increase was mainly due to a $2.1 million increase in salaries and benefits (primarily due to competitive wage adjustments) and an $889,000 increase in operations expense[31] Company Information Contact information for key executives of FS Bancorp, Inc. is provided for inquiries About FS Bancorp, Inc. FS Bancorp, Inc. is the holding company for 1st Security Bank of Washington, providing a range of loan and deposit services to small- and middle-market businesses and individuals in Washington and Oregon through its extensive branch network and loan production offices - FS Bancorp, Inc. is the holding company for 1st Security Bank of Washington[32] - The Bank offers a range of loan and deposit services primarily to small- and middle-market businesses and individuals in Washington and Oregon[32] - Operates through 27 bank branches, one headquarters office, and loan production offices in various suburban communities in the greater Puget Sound area, the Tri-Cities, and Vancouver, Washington[32] Forward-Looking Statements This section identifies forward-looking statements and cautions that actual results may differ materially from current expectations due to various inherent uncertainties and external factors. These factors include adverse economic conditions, changes in interest rates, competitive pressures, and regulatory changes. The Company explicitly disclaims any obligation to revise these statements - Forward-looking statements are identified by specific phrases such as 'believe,' 'will,' 'are expected to,' 'estimate,' and 'project'[33] - Actual results may differ materially due to factors including adverse economic conditions, changes in interest rates, inflation, geopolitical developments, competitive pressures, and regulatory changes[33] - The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements[34] Consolidated Financial Statements This section presents the Company's consolidated balance sheets and statements of income for the reported periods Consolidated Balance Sheets The consolidated balance sheets for FS Bancorp, Inc. and Subsidiary show total assets of $3.21 billion at September 30, 2025, an increase of 1% QoQ and 8% YoY. Total deposits increased by 5% QoQ and 11% YoY, while borrowings decreased significantly Consolidated Balance Sheet Highlights | Metric ($ thousand) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change (%) | YoY Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :------------- | :------------- | | TOTAL ASSETS | 3,208,825 | 3,176,013 | 2,970,208 | 1 | 8 | | Total deposits | 2,686,492 | 2,553,375 | 2,427,331 | 5 | 11 | | Borrowings | 129,305 | 234,305 | 163,806 | (45) | (21) | | Total liabilities | 2,908,314 | 2,878,810 | 2,681,306 | 1 | 8 | | Total stockholders' equity | 300,511 | 297,203 | 288,902 | 1 | 4 | Consolidated Statements of Income (Three Months) For the three months ended September 30, 2025, net income was $9.18 million, an increase of 19% QoQ but a decrease of 11% YoY. Net interest income increased by 5% QoQ and 8% YoY, while provision for credit losses increased significantly Consolidated Statements of Income (Three Months Ended September 30) | Metric ($ thousand) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change (%) | YoY Change (%) | | :------------------------------------------ | :----------- | :----------- | :----------- | :------------- | :------------- | | Total interest and dividend income | 50,973 | 48,703 | 47,043 | 5 | 8 | | Total interest expense | 17,283 | 16,591 | 15,799 | 4 | 9 | | NET INTEREST INCOME | 33,690 | 32,112 | 31,244 | 5 | 8 | | PROVISION FOR CREDIT LOSSES | 2,309 | 2,021 | 1,513 | 14 | 53 | | Total noninterest income | 5,594 | 5,170 | 5,967 | 8 | (6) | | Total noninterest expense | 25,388 | 25,502 | 25,832 | (0) | (2) | | INCOME BEFORE PROVISION (BENEFIT) FOR INCOME TAXES | 11,587 | 9,759 | 9,866 | 19 | 17 | | PROVISION (BENEFIT) FOR INCOME TAXES | 2,410 | 2,031 | (420) | 19 | (674) | | NET INCOME | 9,177 | 7,728 | 10,286 | 19 | (11) | | Diluted earnings per share | 1.18 | 0.99 | 1.29 | 19 | (9) | Consolidated Statements of Income (Nine Months) For the nine months ended September 30, 2025, net income was $24.93 million, a decrease of 10% YoY. Net interest income increased by 5% YoY, but this was offset by a 48% increase in provision for credit losses and a 6% decrease in total noninterest income Consolidated Statements of Income (Nine Months Ended September 30) | Metric ($ thousand) | Sep 30, 2025 | Sep 30, 2024 | YoY Change (%) | | :------------------------------------------ | :----------- | :----------- | :------------- | | Total interest and dividend income | 146,463 | 137,863 | 6 | | Total interest expense | 49,679 | 45,872 | 8 | | NET INTEREST INCOME | 96,784 | 91,991 | 5 | | PROVISION FOR CREDIT LOSSES | 5,922 | 3,989 | 48 | | Total noninterest income | 15,890 | 16,946 | (6) | | Total noninterest expense | 75,945 | 73,218 | 4 | | INCOME BEFORE PROVISION FOR INCOME TAXES | 30,807 | 31,730 | (3) | | PROVISION FOR INCOME TAXES | 5,881 | 4,088 | 44 | | NET INCOME | 24,926 | 27,642 | (10) | | Diluted earnings per share | 3.18 | 3.45 | (8) | Key Financial Ratios and Data This section provides key financial performance, asset quality, average balance, and per common share data for the Company Performance Ratios Performance ratios for Q3 and 9M 2025 show an increase in Return on Assets and Return on Equity QoQ, but a decrease YoY. Yield on average interest-earning assets and net interest margin increased, while the efficiency ratio improved QoQ but slightly worsened YoY for 9M Key Performance Ratios | Performance Ratio | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :-------------------------------------------------- | :------ | :------ | :------ | :------ | | Return on assets | 1.14% | 1.38% | 1.07% | 1.25% | | Return on equity | 11.97% | 14.08% | 11.03% | 13.05% | | Yield on average interest-earning assets | 6.61% | 6.56% | 6.55% | 6.44% | | Average total cost of funds | 2.41% | 2.39% | 2.39% | 2.33% | | Net interest margin | 4.37% | 4.35% | 4.33% | 4.30% | | Efficiency ratio | 64.63% | 69.42% | 67.40% | 67.21% | | Common equity ratio | 9.37% | 9.73% | | | | Tangible common equity ratio | 8.94% | 9.17% | | | Asset Quality Ratios and Data Asset quality ratios at September 30, 2025, indicate an increase in nonperforming assets and loans relative to total assets and gross loans year-over-year. The ratio of ACL to nonperforming loans significantly decreased YoY, suggesting a lower coverage of nonperforming loans by the allowance Asset Quality Ratios | Asset Quality Ratio | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :------------------------------------------------ | :----------- | :----------- | :----------- | | Nonperforming assets to total assets at end of period | 0.57% | 0.60% | 0.36% | | Nonperforming loans to total gross loans | 0.70% | 0.73% | 0.43% | | ACL – loans to nonperforming loans | 163.77% | 168.89% | 290.07% | | ACL – loans to total gross loans | 1.14% | 1.23% | 1.25% | Average Balances Average total assets increased by $224.7 million QoQ and $156.3 million YoY for the three and nine months ended September 30, 2025, respectively. Average loans receivable, net, and interest-bearing deposit accounts also showed increases Average Balance Sheet Metrics | Average Balance Metric ($ thousand) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | Q3 YoY Change ($ thousand) | 9M YoY Change ($ thousand) | | :---------------------------------------------------- | :-------- | :-------- | :-------- | :-------- | :----------------- | :----------------- | | Loans receivable, net | 2,651,111 | 2,536,106 | 2,608,338 | 2,504,129 | 115,005 | 104,209 | | Total interest-earning assets | 3,060,502 | 2,854,848 | 2,988,218 | 2,857,642 | 205,654 | 130,576 | | Total assets | 3,185,457 | 2,960,789 | 3,112,003 | 2,955,741 | 224,668 | 156,262 | | Interest-bearing deposit accounts | 1,947,830 | 1,737,793 | 1,880,007 | 1,788,324 | 210,037 | 91,683 | | Total liabilities | 2,881,351 | 2,670,097 | 2,809,874 | 2,672,819 | 211,254 | 137,055 | Per Common Share Data Diluted earnings per share decreased year-over-year for both the third quarter and nine months ended September 30, 2025. However, book value per share and tangible book value per share both increased quarter-over-quarter and year-over-year Per Common Share Data | Per Share Data | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Basic earnings per share | 1.20 | 1.00 | 1.32 | | Diluted earnings per share | 1.18 | 0.99 | 1.29 | | Book value per share using common shares outstanding | 40.43 | 39.55 | 37.45 | | Tangible book value per share using common shares outstanding | 38.43 | 37.46 | 35.10 | Non-GAAP Financial Measures This section explains and reconciles non-GAAP financial measures used by the Company to provide additional insights into its financial performance and capital structure Explanation of Non-GAAP Measures The report includes non-GAAP financial measures such as tangible book value per share and tangible common equity ratio. Management believes these measures are valuable for comparing capital quality and composition over time and against competitors, as they exclude intangible assets from capital ratio calculations. However, these measures have inherent limitations and should not replace GAAP results - Non-GAAP financial measures presented include tangible book value per share and tangible common equity ratio[47] - Management believes these measures are consistent with the capital treatment utilized by the investment community and facilitate comparison of capital quality and composition[47] - These non-GAAP measures have inherent limitations, are not uniformly applied, and should not be considered in isolation or as a substitute for GAAP results[48] Reconciliation of Tangible Book Value Per Share and Tangible Common Equity Ratio A reconciliation is provided to bridge GAAP book value per share and common equity ratio to their non-GAAP tangible counterparts. This reconciliation highlights the impact of excluding goodwill and core deposit intangibles from the calculations, offering a clearer view of tangible equity Reconciliation of Non-GAAP Tangible Measures | Metric ($ thousand, except per share) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Stockholders' equity (GAAP) | 300,511 | 297,203 | 288,902 | | Less: goodwill and core deposit intangible, net | (14,876) | (15,663) | (18,178) | | Tangible common stockholders' equity (non-GAAP) | 285,635 | 281,540 | 270,724 | | Book value per share (GAAP) | 40.43 | 39.55 | 37.45 | | Tangible book value per share (non-GAAP) | 38.43 | 37.46 | 35.10 | | Total assets (GAAP) | 3,208,825 | 3,176,013 | 2,970,208 | | Less: goodwill and core deposit intangible assets | (14,876) | (15,663) | (18,178) | | Tangible assets (non-GAAP) | 3,193,949 | 3,160,350 | 2,952,030 | | Common equity ratio (GAAP) | 9.37% | 9.36% | 9.73% | | Tangible common equity ratio (non-GAAP) | 8.94% | 8.91% | 9.17% | Contacts Contact information for key executives of FS Bancorp, Inc. is provided for inquiries - Contact information for Matthew D. Mullet, President and Chief Executive Officer, and Phillip D. Whittington, Chief Financial Officer, is provided[52] - Contact number: (425) 771-5299; Website: **www.FSBWA.com**[52](index=52&type=chunk)