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, 2024        

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 other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

6920 220th Street SW, Mountlake Terrace, Washington  98043

(Address of principal executive offices; Zip Code)

(425) 771‑5299

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	FSBW	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒          No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒          No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).    Yes ☐          No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 8, 2024, there were 7,747,760 outstanding shares of the registrant’s common stock.

FS Bancorp, Inc.

Form 10‑Q

Table of Contents

		Page Number
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at June 30, 2024 (Unaudited) and December 31, 2023	3
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited)	8 - 9
	Notes to Consolidated Financial Statements	10 - 45
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46 - 61
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	61
PART II	OTHER INFORMATION	62
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
SIGNATURES		65

When we refer to “FS Bancorp” in this report, we are referring to FS Bancorp, Inc. When we refer to “Bank” or “1st Security Bank” in this report, we are referring to 1st Security Bank of Washington, the wholly owned subsidiary of FS Bancorp. As used in this report, the terms “we,” “our,” “us,” and “Company” refer to FS Bancorp, Inc. and its consolidated subsidiary, 1st Security Bank of Washington, unless the context indicates otherwise.

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Item 1. Financial Statements

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(In thousands, except shares and per share amounts) (Unaudited)

	June 30,			December 31,
ASSETS	2024			2023
Cash and due from banks	$	20,005		$	17,083
Interest-bearing deposits at other financial institutions		13,006			48,608
Total cash and cash equivalents		33,011			65,691
Certificates of deposit at other financial institutions		12,707			24,167
Securities available-for-sale, at fair value (amortized cost of $250,648 and $328,695, net of allowance for credit losses of $0 and $0, respectively)		221,182			292,933
Securities held-to-maturity, net of allowance for credit losses of $45 (fair value of $7,867 and $7,666, respectively)		8,455			8,455
Loans held for sale, at fair value		53,811			25,668
Loans receivable, net of allowance for credit losses of $31,238 and $31,534 (includes $13,868 and $15,088, at fair value, respectively)		2,457,184			2,401,481
Accrued interest receivable		13,792			14,005
Premises and equipment, net		29,999			30,578
Operating lease right-of-use (“ROU”) assets		5,784			6,627
Federal Home Loan Bank (“FHLB”) stock, at cost		10,322			2,114
Deferred tax asset, net		4,590			6,725
Bank owned life insurance (“BOLI”), net		38,201			37,719
Mortgage servicing rights (“MSRs”), held at the lower of cost or fair value		9,352			9,090
MSRs held for sale, held at the lower of cost or fair value		—			8,086
Goodwill		3,592			3,592
Core deposit intangible, net		15,483			17,343
Other assets		23,912			18,395
TOTAL ASSETS	$	2,941,377		$	2,972,669
LIABILITIES
Deposits:
Noninterest-bearing accounts	$	623,349		$	670,831
Interest-bearing accounts		1,759,454			1,851,492
Total deposits		2,382,803			2,522,323
Borrowings		181,895			93,746
Subordinated notes:
Principal amount		50,000			50,000
Unamortized debt issuance costs		(439	)		(473	)
Total subordinated notes less unamortized debt issuance costs		49,561			49,527
Operating lease liabilities		5,979			6,848
Other liabilities		37,113			35,737
Total liabilities		2,657,351			2,708,181
COMMITMENTS AND CONTINGENCIES (NOTE 9)
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; 7,742,607 and 7,800,545 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		77			78
Additional paid-in capital		55,834			57,362
Retained earnings		243,651			230,354
Accumulated other comprehensive loss, net of tax		(15,536	)		(23,306	)
Total stockholders’ equity		284,026			264,488
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,941,377		$	2,972,669

See accompanying notes to these consolidated financial statements.

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FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except shares and per share amounts) (Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
INTEREST INCOME
Loans receivable, including fees	$	42,406		$	38,216		$	83,403		$	74,208
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions		3,534			2,651			7,417			5,271
Total interest and dividend income		45,940			40,867			90,820			79,479
INTEREST EXPENSE
Deposits		13,252			7,610			26,134			14,234
Borrowings		1,801			1,219			2,968			2,060
Subordinated notes		486			486			971			971
Total interest expense		15,539			9,315			30,073			17,265
NET INTEREST INCOME		30,401			31,552			60,747			62,214
PROVISION FOR CREDIT LOSSES		1,077			716			2,476			2,824
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		29,324			30,836			58,271			59,390
NONINTEREST INCOME
Service charges and fee income		2,479			2,862			5,031			5,470
Gain on sale of loans		2,463			1,947			4,301			3,423
Gain on sale of MSRs		—			—			8,215			—
Gain (loss) on sale of investment securities		151			—			(7,847	)		—
Earnings on cash surrender value of BOLI		242			227			482			448
Other noninterest income		533			(203	)		797			711
Total noninterest income		5,868			4,833			10,979			10,052
NONINTEREST EXPENSE
Salaries and benefits		13,378			13,513			26,935			27,377
Operations		3,519			3,643			6,527			6,335
Occupancy		1,669			1,562			3,374			3,082
Data processing		2,058			1,683			4,016			3,251
Loan costs		653			1,043			1,238			1,513
Professional and board fees		888			657			1,811			1,335
Federal Deposit Insurance Corporation (“FDIC”) insurance		450			591			982			1,171
Marketing and advertising		377			430			604			620
Acquisition cost		—			61			—			1,562
Amortization of core deposit intangible		919			1,023			1,860			1,482
(Recovery) impairment of MSRs		(54	)		(2	)		39			—
Total noninterest expense		23,857			24,204			47,386			47,728
INCOME BEFORE PROVISION FOR INCOME TAXES		11,335			11,465			21,864			21,714
PROVISION FOR INCOME TAXES		2,376			2,349			4,508			4,386
NET INCOME	$	8,959		$	9,116		$	17,356		$	17,328
Basic earnings per share	$	1.15		$	1.17		$	2.23		$	2.23
Diluted earnings per share	$	1.13		$	1.16		$	2.20		$	2.19

See accompanying notes to these consolidated financial statements.

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FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Net income	$	8,959		$	9,116		$	17,356		$	17,328
Other comprehensive income:
Securities available-for-sale:
Unrealized gain (loss) during period		1,001			(3,715	)		(1,551	)		2,421
Income tax (provision) benefit related to unrealized holding gain (loss)		(216	)		799			333			(521	)
Reclassification adjustment for realized (gain) loss, net included in net income		(151	)		—			7,847			—
Income tax provision related to reclassification for realized (gain) loss, net		32			—			(1,687	)		—
Derivative financial instruments:
Unrealized derivative gain during period		1,422			5,335			6,472			3,818
Income tax provision related to unrealized derivative gain		(305	)		(1,142	)		(1,391	)		(820	)
Reclassification adjustment for realized gain, net included in net income		(1,148	)		(1,271	)		(2,870	)		(2,178	)
Income tax provision related to reclassification, net		247			273			617			468
Other comprehensive income, net of tax		882			279			7,770			3,188
COMPREHENSIVE INCOME	$	9,841		$	9,395		$	25,126		$	20,516

See accompanying notes to these consolidated financial statements.

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FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share amounts) (Unaudited)

Three Months Ended June 30, 2024 and 2023

													Accumulated
													Other
							Additional						Comprehensive			Total
	Common Stock						Paid-in			Retained			Loss,			Stockholders'
	Shares			Amount			Capital			Earnings			Net of Tax			Equity
BALANCE, April 1, 2023		7,743,283		$	77		$	56,138		$	208,342		$	(22,723	)	$	241,834
Net income		—		$	—			—			9,116			—		$	9,116
Dividends paid ($0.25 per share)		—		$	—			—			(1,939	)		—		$	(1,939	)
Share-based compensation		—		$	—			364			—			—		$	364
Issuance of common stock-employee stock purchase plan		9,099		$	—			268			—			—		$	268
Stock options exercised, net		1,225		$	—			11			—			—		$	11
Other comprehensive income, net of tax		—		$	—			—			—			279		$	279
BALANCE, June 30, 2023		7,753,607		$	77		$	56,781		$	215,519		$	(22,444	)	$	249,933
BALANCE, April 1, 2024		7,805,795		$	78		$	57,552		$	236,720		$	(16,418	)	$	277,932
Net income		—		$	—			—			8,959			—		$	8,959
Dividends paid ($0.26 per share)		—		$	—			—			(2,028	)		—		$	(2,028	)
Share-based compensation		—		$	—			389			—			—		$	389
Issuance of common stock- employee stock purchase plan		8,690		$	—			278			—			—		$	278
Common stock repurchased - repurchase plan		(72,878	)	$	(1	)		(2,360	)		—			—		$	(2,361	)
Stock options exercised, net		1,000		$	—			(25	)		—			—		$	(25	)
Other comprehensive income, net of tax		—		$	—			—			—			882		$	882
BALANCE, June 30, 2024		7,742,607		$	77		$	55,834		$	243,651		$	(15,536	)	$	284,026

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