FS Bancorp, Inc.

What they do

FS Bancorp holds the stock of 1st Security Bank, a Washington state-chartered stock savings bank that has operated in the Puget Sound area since 1907 and became the Company's subsidiary in July 2012. The Bank runs 27 full-service branches (22 in Washington, five in Oregon) and 13 loan production offices, funding itself primarily with retail deposits and lending across commercial real estate, multi-family, construction, one-to-four-family, home equity, consumer and commercial business categories. Reported segments are Commercial and Consumer Banking and Home Lending.

Revenue drivers

• Commercial and Consumer Banking segment — Provides deposit products, residential, consumer, business and commercial real estate lending and cash management; reported net income of $6.8 million in Q2 2026, the large majority of the Company's earnings.
• Home Lending segment — Residential mortgage origination and related activity; reported net income of $1.1 million in Q2 2026, up from $352,000 in Q2 2025.
• Commercial real estate lending — Year-over-year loan growth was driven primarily by an $88.9 million increase in the commercial real estate portfolio, as of June 30, 2026.
• Consumer lending (indirect home improvement / fixture secured and marine) — Consumer loans were $573.2 million at June 30, 2026, down $33.1 million year over year on payoff activity; 87.3% of Q2 2026 indirect home improvement originations had FICO scores above 720.

Recent performance

For Q2 2026, FS Bancorp reported net income of $7.9 million, or $1.04 per diluted share, versus $7.8 million ($1.02) in the prior quarter and $7.7 million ($0.99) a year earlier. Six-month 2026 net income was $15.8 million, or $2.07 per diluted share, compared with $15.7 million, or $1.99, in the first half of 2025. Total deposits fell $188.7 million, or 7.2%, to $2.45 billion from $2.63 billion at March 31, 2026, driven by a $201.1 million decrease in brokered deposits partly offset by a $12.1 million increase in retail deposits. Loans receivable, net rose $4.9 million to $2.63 billion during the quarter and were up $46.7 million from June 30, 2025. Book value per share was $43.57 at June 30, 2026, and the Bank's total risk-based capital ratio was 14.0%.

Strategy

Management is integrating the proposed merger with Pacific West Bank, announced in the first quarter of 2026, while continuing to run the existing franchise. The Company has pursued whole-bank and branch acquisitions to expand its customer base and distribution, including the February 2023 purchase of seven retail branches from Columbia State Bank that added approximately $425.5 million in deposits and $66.1 million in loans in southeastern Washington and Oregon. Funding strategy is shifting from higher-cost brokered deposits toward borrowings while maintaining sufficient liquidity. The Board has declared a 54th consecutive quarterly cash dividend of $0.29 per share, and the Company repurchased 87,000 shares for $3.6 million in Q2 2026 at an average price of $41.81.

Risks

• Brokered deposit reliance and funding mix — Total deposits fell 7.2% in Q2 2026 mainly on a $201.1 million decrease in brokered deposits, and the Company is shifting that funding to borrowings; the 10-Q notes $87.2 million of brokered deposits remained at June 30, 2026.
• Consumer loan payoff and credit exposure — Consumer loans declined $33.1 million, or 5.5%, year over year on heightened payoff activity, and 87.3% of Q2 2026 indirect home improvement originations carried FICO scores above 720, leaving the remainder in lower credit tiers.
• Merger integration risk — The Company announced a proposed merger with Pacific West Bank in Q1 2026 and management describes teams working toward integration, which concentrates execution and retention risk in a single transaction.
• Geographic concentration in the Pacific Northwest — All 27 branches are in Washington and Oregon, leaving results tied to the Puget Sound and Pacific Northwest economies.

Outlook

Management's Q2 2026 commentary focuses on working toward a successful integration of the proposed merger with Pacific West Bank while concurrently contributing to financial results. The Company also highlighted continued capital return, declaring its 54th consecutive quarterly cash dividend of $0.29 per common share payable August 21, 2026, and buying back shares in the quarter. No specific earnings, loan growth or margin guidance was provided in the excerpts.