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, 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 November 4, 2024, there were 7,817,172 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 September 30, 2024 (Unaudited) and December 31, 2023	3
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)	8 - 9
	Notes to Consolidated Financial Statements	10 - 10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48 - 64
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	65
PART II	OTHER INFORMATION	65
Item 1.	Legal Proceedings	65
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
SIGNATURES		68

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.

2

Item 1. Financial Statements

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

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

	September 30,			December 31,
ASSETS	2024			2023
Cash and due from banks	$	17,950		$	17,083
Interest-bearing deposits at other financial institutions		22,390			48,608
Total cash and cash equivalents		40,340			65,691
Certificates of deposit at other financial institutions		12,001			24,167
Securities available-for-sale, at fair value (amortized cost of $252,272 and $328,695, net of allowance for credit losses of $0 and $0, respectively)		228,199			292,933
Securities held-to-maturity, net of allowance for credit losses of $45 (fair value of $7,983 and $7,666, respectively)		8,455			8,455
Loans held for sale, at fair value		49,373			25,668
Loans receivable, net of allowance for credit losses of $31,232 and $31,534 (includes loans of $13,861 and $15,088, at fair value, respectively)		2,463,697			2,401,481
Accrued interest receivable		14,014			14,005
Premises and equipment, net		30,026			30,578
Operating lease right-of-use (“ROU”) assets		5,365			6,627
Federal Home Loan Bank (“FHLB”) stock, at cost		9,504			2,114
Deferred tax asset, net		4,222			6,725
Bank owned life insurance (“BOLI”), net		38,453			37,719
Mortgage servicing rights (“MSRs”), held at the lower of cost or fair value		8,739			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		14,586			17,343
Other assets		39,642			18,395
TOTAL ASSETS	$	2,970,208		$	2,972,669
LIABILITIES
Deposits:
Noninterest-bearing accounts	$	657,753		$	670,831
Interest-bearing accounts		1,769,578			1,851,492
Total deposits		2,427,331			2,522,323
Borrowings		163,806			93,746
Subordinated notes:
Principal amount		50,000			50,000
Unamortized debt issuance costs		(423	)		(473	)
Total subordinated notes less unamortized debt issuance costs		49,577			49,527
Operating lease liabilities		5,548			6,848
Other liabilities		35,044			35,737
Total liabilities		2,681,306			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; 7,817,172 and 7,800,545 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		78			78
Additional paid-in capital		55,264			57,362
Retained earnings		251,843			230,354
Accumulated other comprehensive loss, net of tax		(18,283	)		(23,306	)
Total stockholders’ equity		288,902			264,488
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,970,208		$	2,972,669

See accompanying notes to these consolidated financial statements.

3

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
INTEREST INCOME
Loans receivable, including fees	$	43,800		$	39,874		$	127,203		$	114,082
Interest and dividends on investment securities, cash and cash equivalents, and certificates of deposit at other financial institutions		3,243			3,396			10,660			8,667
Total interest and dividend income		47,043			43,270			137,863			122,749
INTEREST EXPENSE
Deposits		13,486			10,462			39,620			24,696
Borrowings		1,828			1,689			4,796			3,749
Subordinated notes		485			485			1,456			1,456
Total interest expense		15,799			12,636			45,872			29,901
NET INTEREST INCOME		31,244			30,634			91,991			92,848
PROVISION FOR CREDIT LOSSES		1,513			548			3,989			3,372
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		29,731			30,086			88,002			89,476
NONINTEREST INCOME
Service charges and fee income		2,482			2,882			7,513			8,352
Gain on sale of loans		2,523			1,875			6,824			5,298
Gain on sale of MSRs		141			—			8,356			—
Gain (loss) on sale of investment securities, net		11			—			(7,836	)		—
Earnings on cash surrender value of BOLI		252			233			734			681
Other noninterest income		558			(8	)		1,355			703
Total noninterest income		5,967			4,982			16,946			15,034
NONINTEREST EXPENSE
Salaries and benefits		13,985			13,503			40,920			40,880
Operations		3,827			3,409			10,354			9,744
Occupancy		1,662			1,588			5,036			4,670
Data processing		2,156			1,841			6,172			5,092
Loan costs		666			564			1,904			2,077
Professional and board fees		1,223			666			3,034			2,001
Federal Deposit Insurance Corporation (“FDIC”) insurance		533			561			1,515			1,732
Marketing and advertising		377			452			981			1,072
Acquisition cost		—			—			—			1,562
Amortization of core deposit intangible		897			1,002			2,757			2,484
Impairment of MSRs		506			—			545			—
Total noninterest expense		25,832			23,586			73,218			71,314
INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES		9,866			11,482			31,730			33,196
(BENEFIT) PROVISION FOR INCOME TAXES		(420	)		2,529			4,088			6,915
NET INCOME	$	10,286		$	8,953		$	27,642		$	26,281
Basic earnings per share	$	1.32		$	1.15		$	3.54		$	3.38
Diluted earnings per share	$	1.29		$	1.13		$	3.45		$	3.33

See accompanying notes to these consolidated financial statements.

4

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Net income	$	10,286		$	8,953		$	27,642		$	26,281
Other comprehensive income (loss):
Securities available-for-sale:
Unrealized gain (loss) during period		5,404			(11,762	)		3,853			(9,341	)
Income tax (provision) benefit related to unrealized holding gain (loss)		(1,161	)		2,528			(828	)		2,007
Reclassification adjustment for realized (gain) loss, net included in net income		(11	)		—			7,836			—
Income tax provision (benefit) related to reclassification for realized (gain) loss, net		2			—			(1,685	)		—
Derivative financial instruments:
Unrealized derivative (loss) gain during period		(7,742	)		4,337			(1,270	)		8,155
Income tax benefit (provision) related to unrealized derivative (loss) gain		1,664			(933	)		273			(1,753	)
Reclassification adjustment for realized gain, net included in net income		(1,151	)		(1,446	)		(4,021	)		(3,624	)
Income tax provision related to reclassification, net		248			311			865			779
Other comprehensive (loss) income, net of tax		(2,747	)		(6,965	)		5,023			(3,777	)
COMPREHENSIVE INCOME	$	7,539		$	1,988		$	32,665		$	22,504

See accompanying notes to these consolidated financial statements.

5

FS BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

Three Months Ended September 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, July 1, 2023		7,753,607		$	77	$	56,781		$	215,519		$	(22,444	)	$	249,933
Net income		—		$	—		—			8,953			—		$	8,953
Dividends paid ($0.25 per share)		—		$	—		—			(1,940	)		—		$	(1,940	)
Share-based compensation		—		$	—		590			—			—		$	590
Issuance of common stock - employee stock purchase plan		7,710		$	1		241			—			—		$	242
Restricted stock awards		37,600		$	—		—			—			—		$	—
Restricted stock awards forfeited		(4,712	)	$	—		—			—			—		$	—
Common stock repurchased for employee/director taxes paid on restricted stock awards		(11,006	)	$	—		(339	)		—			—		$	(339	)
Stock options exercised, net		12,896		$	—		191			—			—		$	191
Other comprehensive loss, net of tax		—		$	—		—			—			(6,965	)	$	(6,965	)
BALANCE, September 30, 2023		7,796,095		$	78	$	57,464		$	222,532		$	(29,409	)	$	250,665
BALANCE, July 1, 2024		7,742,607		$	77	$	55,834		$	243,651		$	(15,536	)	$	284,026
Net income		—		$	—		—			10,286			—		$	10,286
Dividends paid ($0.27 per share)		—		$	—		—			(2,094	)		—		$	(2,094	)
Share-based compensation		—		$	—		464			—			—		$	464
Issuance of common stock - employee stock purchase plan		6,173		$	1