FS Bancorp, Inc.

Previous wording

At March 31, 2025, the Company's loan portfolio included commercial real estate loans, residential real estate loans, consumer loans, and commercial business loans representing 34.5%, 30.0%, 24.0%, and 11.5% of the portfolio, respectively.

Current wording

At June 30, 2025, the Company's loan portfolio included commercial real estate loans, residential real estate loans, consumer loans, and commercial business loans representing 35.0%, 29.8%, 23.2%, and 12.0% of the portfolio, respectively.

Previous wording

Fixture secured loans to finance window, gutter, siding replacement, solar panels, spas, and other improvement renovations are a large segment of the consumer loan portfolio. These fixture-secured consumer loans are dependent on the Company’s contractor/dealer network of 33 currently active fixture dealerships located throughout Washington, Oregon, California, Idaho, Colorado, Nevada, Arizona, Minnesota, Texas, Utah, Massachusetts, Montana, and New Hampshire. Five of these contractor/dealers were responsible for 79.8% of the dollar volume of funded loans for the three months ended March 31, 2025. The Company funded $26.9 million, consisting of 1,232 loans in the fixture-secured consumer loan category during the quarter ended March 31, 2025.

Current wording

Fixture secured loans to finance window, gutter, siding replacement, solar panels, spas, and other improvement renovations are a large segment of the consumer loan portfolio. These fixture-secured consumer loans are dependent on the Company’s contractor/dealer network of 34 currently active fixture dealerships located throughout Washington, Oregon, California, Idaho, Colorado, Nevada, Arizona, Minnesota, Texas, Utah, Massachusetts, Montana, and New Hampshire. During the three months ended June 30, 2025, the Company originated 1,620 fixture-secured consumer loans with an aggregate total of $37.6 million. Five contractor/dealers accounted for 81.9% of the dollar volume funded in this category. In addition, four states represented nearly three-quarters of the loan originations: Washington, Oregon, California, and Idaho with 37.5%, 17.9%, 12.1%, and 7.1% of total loan volume, respectively.

Previous wording

The Company originates one-to-four-family residential mortgage loans through referrals from real estate agents, financial planners, builders, and from existing customers. Retail banking customers are also an important source of the Company’s loan originations. The Company originated $141.4 million of one-to-four-family loans (which included loans held for sale, loans held for investment and fixed seconds) in addition to $4.0 million of loans brokered to other institutions through the home lending segment during the three months ended March 31, 2025, of which $91.9 million were sold to investors. Of the loans sold to investors, $31.8 million were sold to the FNMA, FHLMC, FHLB, and/or GNMA with servicing rights retained for the purpose of further developing these customer relationships. At March 31, 2025, one-to-four-family residential mortgage loans held for investment totaled $637.3 million, or 25.2%, of the total gross loan portfolio, while loans held for sale totaled $31.0 million and residential home equity loans totaled $73.8 million at that date.

Current wording

The Company originates one-to-four-family residential mortgage loans through referrals from real estate agents, financial planners, builders, and from existing customers. Retail banking customers are also an important source of the Company’s loan originations. The Company originated $193.3 million of one-to-four-family loans (which included loans held for sale, loans held for investment and fixed seconds) in addition to $6.0 million of loans brokered to other institutions through the home lending segment during the three months ended June 30, 2025, of which $127.1 million were sold to investors. Of the loans sold to investors, $40.9 million were sold to the FNMA, FHLMC, FHLB, and/or GNMA with servicing rights retained for the purpose of further developing these customer relationships.

Previous wording

The Company is significantly affected by prevailing economic conditions, as well as government policies and regulations concerning, among other things, monetary and fiscal affairs. Deposit flows are influenced by a number of factors, including interest rates paid on time deposits, other investments, account maturities, and the overall level of personal income and savings. Lending activities are influenced by the demand for funds, the number and quality of lenders, and regional economic cycles. Sources of funds for lending activities include primarily deposits, including brokered deposits, borrowings, payments on loans, and income provided from operations.

Current wording

The Company is affected by prevailing economic conditions, as well as government policies and regulations concerning, among other things, monetary and fiscal affairs. Deposit flows are influenced by a number of factors, including interest rates paid on time deposits, other investments, account maturities, and the overall level of personal income and savings. Lending activities are influenced by the demand for funds, the number and quality of lenders, and regional economic cycles. Sources of funds for lending activities include primarily deposits, including brokered deposits, borrowings, payments on loans, and income provided from operations.

Previous wording

***Assets.***Total assets increased $36.9 million to $3.07 billion at March 31, 2025, from $3.03 billion at December 31, 2024, primarily due to increases of $31.1 million in total cash and cash equivalents, $10.0 million in securities available-for-sale, $3.4 million in other assets, $3.2 million in loans held for sale, and $2.0 million in securities held-to-maturity. These increases were partially offset by decreases of $10.4 million in FHLB stock, $834,000 in loans receivable, net, and $831,000 in core deposits intangible, net. The net increase in total assets was primarily funded by brokered deposits during the three months ended March 31, 2025.

Current wording

***Assets.***Total assets increased $146.8 million to $3.18 billion at June 30, 2025, from $3.03 billion at December 31, 2024, primarily due to increases of $80.3 million in loans receivable, net, $25.8 million in loans held for sale, $23.1 million in securities held-to-maturity, and $21.5 million in securities available-for-sale, partially offset by a decrease of $4.0 million in FHLB stock funded by a combination of on-balance sheet liquidity and borrowings.

Previous wording

Loans receivable, net was virtually unchanged at $2.50 billion at both March 31, 2025, and December 31, 2024. The changes in CRE loans at March 31, 2025, compared to December 31, 2024, reflect an increase in construction and development loans of $8.2 million, partially offset by a decrease in CRE owner occupied loans of $5.5 million, and in CRE non-owner occupied loans of $733,000. The changes in residential real estate loans for the same time periods was driven by an increase in one-to-four-family loans (excluding loans held for sale) of $20.0 million. The home equity and residential custom construction loans saw minor declines, though these changes were not significant. Total undisbursed construction and development loan commitments increased $11.3 million to $185.4 million at March 31, 2025, as compared to $174.1 million at December 31, 2024. Commercial business loans decreased $9.0 million at March 31, 2025, compared to December 31, 2024, primarily as a result of a decrease in C&I loans of $12.1 million, slightly offset by an increase in warehouse lending of $3.0 million. Consumer loans decreased $11.3 million at March 31, 2025, compared to December 31, 2024, primarily due to decreases of $9.9 million in indirect home improvement loans and $1.2 million in marine loans.

Current wording

Loans receivable, net increased $80.3 million to $2.58 billion at June 30, 2025, compared to $2.50 billion at December 31, 2024. CRE loans increased $44.8 million at June 30, 2025, compared to December 31, 2024, and reflects increases of $19.9 million in commercial and speculative construction and development loans, $18.0 million in multi-family loans, and $9.9 million in CRE owner occupied loans, partially offset by a decrease of $2.9 million in CRE non-owner occupied loans. Residential real estate loans increased $37.1 million for the same time periods, driven by increases in one-to-four-family loans (excluding loans held for sale) of $22.6 million, home equity of $10.5 million, and residential custom construction of $4.1 million. Total undisbursed construction and development loan commitments increased $30.8 million to $204.9 million at June 30, 2025, as compared to $174.1 million at December 31, 2024. Commercial business loans increased $12.6 million at June 30, 2025, compared to December 31, 2024, due to increases in C&I loans of $7.5 million and $5.0 million in warehouse lending. Consumer loans decreased $13.9 million at June 30, 2025, compared to December 31, 2024, primarily due to decreases of $11.6 million in indirect home improvement loans and $2.2 million in marine loans. Loan growth was concentrated in construction and development, residential real estate, and multi-family loan segments, reflecting sustained demands in those markets, while consumer balances, primarily in indirect home improvement loans declined during the period as the Company continued to manage indirect exposures.

Previous wording

Loans held for sale, consisting of one-to-four-family loans, increased $3.2 million to $31.0 million at March 31, 2025, from $27.8 million at December 31, 2024. The Company continues to invest in its home lending operations and strategically manage production capacity in the markets we serve.

Current wording

Loans held for sale, consisting of one-to-four-family loans, increased $25.8 million to $53.6 million at June 30, 2025, from $27.8 million at December 31, 2024. The Company continues to invest in its home lending operations and strategically manage production capacity in the markets we serve.

Previous wording

One-to-four-family loan originations for the three months ended March 31, 2025, included $84.7 million of loans originated for sale, $56.8 million of portfolio loans including first and second liens, and $4.0 million of loans brokered to other institutions.

Current wording

One-to-four-family loan originations for the six months ended June 30, 2025, included $204.6 million of loans originated for sale, $109.7 million of portfolio loans including first and second liens, and $10.0 million of loans brokered to other institutions.

Previous wording

During the three months ended March 31, 2025, the Company sold $91.9 million of one-to-four-family loans, compared to $93.9 million for the same period one year ago. This slight decrease in loan sales reflects a more competitive market environment, where interest rate fluctuations and broader economic conditions may have contributed to a reduction in origination volume. Despite this modest dip in sales, the Company remains focused on strategically managing its loan production and maintaining a robust pipeline of loans for sale, in line with market demand. Gross margin on home loan sales decreased to 3.26% for the three months ended March 31, 2025, compared to 3.43% for the three months ended March 31, 2024. Gross margin is defined as the margin on loans sold without the impact of deferred loan costs.

Current wording

During the six months ended June 30, 2025, the Company sold $219.0 million of one-to-four-family loans, compared to $258.4 million for the same period one year ago. The decrease in loan sales reflects a more competitive market environment and lower purchase volume, partially offset by higher refinance activity. The Company remains focused on managing loan production capacity and maintaining a pipeline consistent with market demand. Gross margin on home loan sales was 3.14% for both the six months ended June 30, 2025 and 2024. Gross margin is defined as the margin on loans sold without the impact of deferred loan costs.

Previous wording

The ACL on loans was $31.7 million or 1.25% of gross loans receivable (excluding loans held for sale) at March 31, 2025, compared to $31.9 million or 1.26% of gross loans receivable (excluding loans held for sale) at December 31, 2024. The ACL on unfunded loan commitments increased $66,000 to $1.5 million at March 31, 2025, from $1.4 million at December 31, 2024.

Current wording

The ACL on loans totaled $32.2 million, or 1.23% of gross loans receivable (excluding loans held for sale), at June 30, 2025, compared to $31.9 million, or 1.26% at December 31, 2024. The ACL on unfunded loan commitments increased $217,000 to $1.6 million at June 30, 2025, from $1.4 million at December 31, 2024. The most significant qualitative factor change was an increase in qualitative reserves, driven by higher levels of nonaccrual loans and shifts in delinquency trends. Total loans 30 days or more past due were $20.7 million, or 0.79% of total loans, at June 30, 2025, compared to $22.2 million, or 0.88%, at December 31, 2024. Although total past due loans declined slightly, loans 90 days or more past due increased to $14.8 million from $11.1 million, primarily due to the migration of certain construction and development CRE loans into later-stage delinquency. Nonaccrual loans rose to $19.0 million from $13.6 million over the same period. The increase was primarily concentrated in construction and development CRE loans, which increased to $9.1 million from $5.0 million, and in the consumer portfolio, where nonaccrual loans increased to $3.9 million from $2.0 million, led by indirect home improvement loans. Loan growth of 3.2% during the period also contributed to a higher required allowance under CECL. As a result, management increased qualitative reserves to address the higher risk of loss, particularly in the consumer and construction portfolios. The coverage ratio of the ACL on loans to nonperforming loans was 169.4% at June 30, 2025, compared to 234.3%, at December 31, 2024, reflecting the increase in nonaccrual balances discussed above.

Previous wording

Classified loans, all of which were classified as substandard, totaled $23.5 million at March 31, 2025, compared to $22.9 million at December 31, 2024. Nonperforming loans, consisting solely of nonaccrual loans, increased $870,000 to $14.5 million at March 31, 2025, from $13.6 million at December 31, 2024, primarily due to increases in nonperforming commercial and speculative construction and development loans of $1.5 million, nonperforming indirect home improvement loans of $1.1 million, and nonperforming one-to-four-family loans of $970,000, partially offset by decreases in nonperforming CRE owner occupied loans of $1.6 million and nonperforming commercial business loans of $1.5 million. The ratio of nonperforming loans to total gross loans was 0.57% at March 31, 2025, compared to 0.54% at December 31, 2024.

Current wording

Classified loans, all of which were classified as substandard, totaled $24.9 million at June 30, 2025, compared to $22.9 million at December 31, 2024. Nonperforming loans, consisting solely of nonaccrual loans, increased $5.4 million to $19.0 million at June 30, 2025, from $13.6 million at December 31, 2024, primarily due to increases in nonperforming commercial and speculative construction and development loans of $4.1 million, nonperforming indirect home improvement loans of $1.7 million, and nonperforming one-to-four-family loans of $1.6 million, partially offset by decreases in nonperforming commercial business loans of $1.6 million and nonperforming commercial real estate loans of $725,000. The ratio of nonperforming loans to total gross loans was 0.73% at June 30, 2025, compared to 0.54% at December 31, 2024. Management increased qualitative reserves during the period to address migration of certain credits to later-state delinquency categories and higher nonaccrual balances, as discussed above.

Previous wording

Liabilities. Total liabilities increased $33.8 million to $2.77 billion at March 31, 2025, from $2.73 billion at December 31, 2024, primarily due to an increase of $275.7 million in deposits, offset by a decrease of $239.0 million in borrowings.

Current wording

Liabilities. Total liabilities increased $145.4 million to $2.88 billion at June 30, 2025, from $2.73 billion at December 31, 2024, primarily due to an increase of $214.0 million in deposits, offset by a decrease of $73.5 million in borrowings. The loan-to-deposit ratio was approximately 101.1% at June 30, 2025, compared to approximately 106.9% at December 31, 2024, reflecting the mix shift toward deposits, particularly brokered CDs, to fund asset growth and reduce wholesale borrowings.

Previous wording

Total deposits increased $275.7 million to $2.62 billion at March 31, 2025, from $2.34 billion at December 31, 2024, reflecting increases in all deposit categories. Transactional accounts (noninterest-bearing checking, interest-bearing checking and escrow accounts) increased $63.5 million to $878.2 million at March 31, 2025, from $814.7 million at December 31, 2024, due to increases of $24.9 million in interest-bearing checking, $31.7 million in noninterest-bearing checking and $6.8 million in escrow accounts related to mortgages serviced. Money market and savings accounts increased $7.9 million to $503.7 million at March 31, 2025, from $495.8 million at December 31, 2024.

Current wording

Total deposits increased $214.0 million to $2.55 billion at June 30, 2025, from $2.34 billion at December 31, 2024, reflecting increases in all deposit categories. Transactional accounts (noninterest-bearing checking, interest-bearing checking and escrow accounts) increased $50.6 million to $865.3 million at June 30, 2025, from $814.7 million at December 31, 2024, due to increases of $34.7 million in interest-bearing checking, $15.9 million in noninterest-bearing checking and $17,000 in escrow accounts related to mortgages serviced. Money market and savings accounts increased $14.6 million to $510.4 million at June 30, 2025, from $495.8 million at December 31, 2024.

Previous wording

CDs, which include both retail and non-retail CDs, increased $204.4 million to $1.23 billion at March 31, 2025, from $1.03 billion at December 31, 2024. Retail CDs increased $7.5 million to $881.6 million at March 31, 2025, from $874.1 million at December 31, 2024, while non-retail CDs, which include brokered CDs, online CDs and public funds CDs increased $196.9 million to $351.7 million, compared to $154.8 million at December 31, 2024. The increase in non-retail CDs was primarily due to an increase of $196.8 million in brokered CDs. Non-retail CDs represented 28.5% and 15.0% of total CDs at March 31, 2025 and December 31, 2024, respectively. The increase in non-retail CDs was due to the Company's strategy to manage interest rate risk and liquidity by accessing larger funding sources at competitive rates, which were only slightly higher than local market rates, and to pay down higher cost borrowings.

Current wording

CDs, which include both retail and non-retail CDs, increased $148.8 million to $1.18 billion at June 30, 2025, from $1.03 billion at December 31, 2024. Retail CDs increased $17.2 million to $891.4 million at June 30, 2025, from $874.1 million at December 31, 2024, while non-retail CDs, which include brokered CDs, online CDs and public funds CDs increased $131.5 million to $286.3 million, compared to $154.8 million at December 31, 2024. The increase in non-retail CDs was primarily due to an increase of $137.7 million in brokered CDs. Non-retail CDs represented 24.3% and 15.0% of total CDs at June 30, 2025 and December 31, 2024, respectively. The increase in non-retail CDs aligns with the Company's strategy to manage interest rate risk and liquidity by accessing larger, diversified funding sources at competitive rates, which were only slightly higher than local market rates, and to pay down higher cost borrowings.

Previous wording

The Bank had uninsured deposits of approximately $679.4 million or 26.0% of total deposits, at March 31, 2025, compared to approximately $652.7 million or 27.9% of total deposits at December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

Current wording

The Bank had uninsured deposits of approximately $677.2 million or 26.5% of total deposits, at June 30, 2025, compared to approximately $652.7 million or 27.9% of total deposits at December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

Previous wording

Borrowings decreased $239.0 million to $68.8 million at March 31, 2025, from $307.8 million at December 31, 2024. The decreased borrowings reflect the paydown of these higher cost funds utilizing lower cost brokered deposits. At March 31, 2025, borrowings were comprised solely of FHLB advances.

Current wording

Borrowings decreased $73.5 million to $234.3 million at June 30, 2025, from $307.8 million at December 31, 2024. The decreased borrowings reflect the paydown of these higher cost funds utilizing lower cost brokered deposits. At June 30, 2025, borrowings were comprised of $209.3 million of FHLB advances and $25.0 million of FRB borrowings.

Previous wording

Stockholders’*** Equity.*** Total stockholders’ equity increased $3.1 million to $298.8 million at March 31, 2025, from $295.8 million at December 31, 2024. The increase in stockholders' equity reflects net income of $8.0 million and $512,000 in equity award compensation, partially offset by share repurchases of $3.8 million and cash dividends paid totaling $2.2 million. Additionally, the issuance of common stock under the employee stock purchase plan added $336,000, due to the issuance of 8,210 shares of Company common stock. Stockholders' equity was also impacted by decreases in unrealized net losses in securities available-for-sale of $2.7 million, net of tax, and decreases in unrealized net gains on fair value and cash flow hedges of $2.6 million, net of tax, reflecting changes in market interest rates during the quarter, resulting in a $152,000 increase in other comprehensive income, net of tax.

Current wording

Stockholders’*** Equity.*** Total stockholders’ equity increased $1.4 million to $297.2 million at June 30, 2025, from $295.8 million at December 31, 2024. The increase primarily reflects net income of $15.7 million, partially offset by share repurchases of $9.0 million, cash dividends paid totaling $4.3 million, and $1.0 million in equity award compensation. Additionally, the issuance of common stock under the employee stock purchase plan contributed $650,000, reflecting the issuance of 16,128 shares of Company common stock. Stockholders' equity was also impacted by the increase in accumulated other comprehensive loss, net of tax of $2.7 million, primarily due to decreases in unrealized net gains on fair value and cash flow hedges of $4.2 million, net of tax, reflecting changes in market interest rates during the quarter, partially offset by an improvement in unrealized net losses on securities available-for-sale of $1.5 million, net of tax.

Previous wording

Book value per common share was $39.12 at March 31, 2025, compared to $38.26 at December 31, 2024. The calculation of book value per share at March 31, 2025, was based on 7,639,844 common shares, derived by subtracting the 103,063 unvested restricted stock shares from the 7,742,907 reported common shares outstanding as of that date. Similarly, the book value per share at December 31, 2024, was calculated based on 7,729,951 common shares, obtained by subtracting the 103,063 unvested restricted stock shares from the 7,833,014 reported common shares outstanding as of that date.

Current wording

Book value per common share was $39.55 at June 30, 2025, compared to $38.26 at December 31, 2024. The calculation of book value per share at June 30, 2025, was based on 7,515,480 common shares, derived by subtracting the 103,063 unvested restricted stock shares from the 7,618,543 reported common shares outstanding as of that date. Similarly, the book value per share at December 31, 2024, was calculated based on 7,729,951 common shares, after deducting 103,063 unvested restricted stock shares from the 7,833,014 reported common shares outstanding as of that date.

Previous wording

***General.***Net income was $8.0 million for the three months ended March 31, 2025, compared to $8.4 million for the three months ended March 31, 2024. The decrease was primarily due to a $1.5 million, or 6.5%, increase in noninterest expense and a $193,000, or 13.8%, increase in provision for loan losses, partially offset by a $692,000, or 32.5%, reduction in provision for income tax expense and a $636,000, or 2.1%, increase in net interest income.

Current wording

***General.***Net income was $7.7 million for the three months ended June 30, 2025, compared to $9.0 million for the three months ended June 30, 2024. The decrease was primarily due to a $1.6 million, or 6.9%, increase in noninterest expense, a $944,000, or 87.7%, increase in provision for loan losses, and a $698,000 decrease in total noninterest income, partially offset by a $1.7 million, or 5.6% increase in net interest income and a $345,000, or 14.5%, reduction in provision for income tax expense.

Previous wording

***Net Interest Income.***Net interest income increased $636,000 to $31.0 million for the three months ended March 31, 2025, from $30.3 million for the three months ended March 31, 2024, primarily due to an increase in interest income of $1.9 million, partially offset by an increase in interest expense of $1.3 million. The $1.9 million increase in interest income was primarily due to an increase of $2.3 million in interest income on loans receivable, including fees, driven primarily by a 17-basis point increase in the average yield earned on loans receivable as new loans were originated at higher rates and variable-rate loans repriced higher, and a higher average balance of loans outstanding. The $1.3 million increase in total interest expense was primarily the result of higher market interest rates and a shift in deposit mix from transactional accounts to higher cost brokered CDs.

Current wording

***Net Interest Income.***Net interest income increased $1.7 million to $32.1 million for the three months ended June 30, 2025, from $30.4 million for the three months ended June 30, 2024, primarily due to an increase in total interest income of $2.8 million, partially offset by an increase in total interest expense of $1.1 million. The $2.8 million increase in total interest income was primarily due to an increase of $2.6 million in interest income on loans receivable, including fees, driven primarily by a 12-basis point increase in the average yield earned on loans receivable as new loans were originated at higher rates and variable-rate loans repriced higher, and a higher average balance of loans outstanding. The $1.1 million increase in total interest expense was primarily the result of higher market interest rates and a shift in deposit mix from transactional accounts to higher cost brokered CDs.

Previous wording

***Interest Income.***Interest income for the three months ended March 31, 2025, increased $1.9 million to $46.8 million, from $44.9 million for the three months ended March 31, 2024. The $1.9 million increase in total interest income was primarily due to an increase of $2.3 million in interest income on loans receivable, including fees, primarily as a result of net loan growth and variable rate loans repricing higher.

Current wording

***Interest Income.***Total interest income for the three months ended June 30, 2025, increased $2.8 million to $48.7 million, from $45.9 million for the three months ended June 30, 2024. The $2.8 million increase in total interest income was primarily due to an increase of $2.6 million in interest income on loans receivable, including fees, primarily as a result of net loan growth and variable rate loans repricing higher.

Previous wording

***Interest Expense.***Interest expense increased $1.3 million to $15.8 million for the three months ended March 31, 2025, from $14.5 million for the comparable quarter in 2024, primarily due to an increase of interest expense on borrowings of $1.1 million. The higher borrowing costs were a result of an increase in the average balance of borrowings, partially offset by a decrease in the average interest paid.

Current wording

***Interest Expense.***Total interest expense increased $1.1 million to $16.6 million for the three months ended June 30, 2025, from $15.5 million for the comparable quarter in 2024, primarily due to an increase of interest expense on deposits of $1.3 million. The higher deposit costs were a result of an increase in the average balance of deposits, partially offset by a decrease in the average interest paid. The increase in interest expense also reflects a strategic shift in deposit mix, with a higher proportion of CDs and interest-bearing checking accounts that carry higher interest rates in the current market.

Previous wording

The average cost of total interest-bearing deposits increased 17 basis points to 3.00%, for the three months ended March 31, 2025, compared to 2.83%, for the three months ended March 31, 2024. The average balance of total interest-bearing deposits decreased $67.2 million to $1.77 billion for the three months ended March 31, 2025 and 2024, compared to $1.83 billion for the three months ended March 31, 2024.

Current wording

The average cost of total interest-bearing deposits increased six basis points to 3.03%, for the three months ended June 30, 2025, compared to 2.97%, for the three months ended June 30, 2024. The average balance of total interest-bearing deposits increased $129.6 million to $1.92 billion for the three months ended June 30, 2025 and 2024, compared to $1.79 billion for the three months ended June 30, 2024. The increase in cost was primarily attributable due to a shift in deposit mix to higher cost certificates of deposits and increases in deposit cost for interest-bearing checking, savings and money markets accounts.

Previous wording

The average cost of total interest-bearing liabilities increased 20 basis points to 3.15% for the three months ended March 31, 2025, from 2.95% for the three months ended March 31, 2024. The average cost of funds, which includes noninterest-bearing checking, increased 17 basis points to 2.38% for the three months ended March 31, 2025, from 2.21% for the three months ended March 31, 2024.

Current wording

The average cost of total interest-bearing liabilities decreased two basis points to 3.13% for the three months ended June 30, 2025, from 3.15% for the three months ended June 30, 2024. The average cost of funds, which includes noninterest-bearing checking, increased one basis points to 2.39% for the three months ended June 30, 2025, from 2.38% for the three months ended June 30, 2024.

Previous wording

Provision for Credit Losses. For the three months ended March 31, 2025, the provision for credit losses was $1.6 million, consisting of a $1.5 million provision for credit losses on loans, and a $66,0000 provision for credit losses on unfunded loan commitments, compared to $1.4 million provision for credit losses for the three months ended March 31, 2024, consisting of a $1.4 million provision for credit losses on loans and a $22,000 reversal of the ACL on unfunded loan commitments. The provision for credit losses on loans reflects the increase in the loan portfolio, as well as an increase in nonperforming loans and higher net charge-offs.

Current wording

Provision for Credit Losses. For the three months ended June 30, 2025, the provision for credit losses was $2.0 million, consisting of a $1.7 million provision for credit losses on loans, a $154,000 provision for held-to-maturity securities, and a $151,000 provision for credit losses on unfunded loan commitments, compared to $1.1 million provision for credit losses for the three months ended June 30, 2024, consisting of a $1.0 million provision for credit losses on loans and a $77,000 provision of the ACL on unfunded loan commitments. The provision for credit losses on loans reflects the increase in the loan portfolio, as well as an increase in nonperforming loans and higher net charge-offs.

Previous wording

The efficiency ratio, which is calculated by dividing noninterest expense by total net interest income and noninterest income, weakened to 69.39% for the three months ended March 31, 2025, compared to 66.36% for the three months ended March 31, 2024, due to an increase in noninterest expense that outpaced total revenue growth.

Current wording

The efficiency ratio, which is calculated by dividing noninterest expense by total net interest income and noninterest income, weakened to 68.40% for the three months ended June 30, 2025, compared to 65.78% for the three months ended June 30, 2024, due to an increase in noninterest expense that outpaced total revenue growth.

Previous wording

Net interest margin (“NIM”) (annualized) increased six basis point to 4.32% for the three months ended March 31, 2025, from 4.26% for the same period the prior year. The change in NIM reflects the increase in yields earned on interest-earning assets, along with higher average capital relative to the prior period.

Current wording

Net interest margin (“NIM”) (annualized) increased four basis point to 4.31% for the six months ended June 30, 2025, from 4.27% for the same period the prior year. The change in NIM reflects the increase in yields earned on interest-earning assets, along with higher average capital relative to the prior period.

Previous wording

During the three months ended March 31, 2025, net loan charge-offs totaled $1.7 million, compared to $1.5 million during the three months ended March 31, 2024. This increase was the result of increased net charge-offs of $487,000 in indirect home improvement loans and $25,000 in commercial business loans, partially offset by a reduction of net charge-offs of $213,000 in marine loans and $46,000 in other consumer loans. A decline in national and local economic conditions, as a result the effects of inflation, a recession or slowed economic growth, among other economic factors, could result in a material increase in the ACL on loans and may adversely affect the Company’s financial condition and result of operations.

Current wording

During the six months ended June 30, 2025, net loan charge-offs totaled $2.9 million, compared to $2.7 million during the six months ended June 30, 2024. This increase was the result of increased net charge-offs of $1.2 million in indirect home improvement loans, primarily offset by net charge-off decreases of $693,000 in commercial business loans and $271,000 in marine loans. A decline in national and local economic conditions, as a result the effects of tariffs or slowed economic growth, among other economic factors, could result in a material increase in the ACL on loans and may adversely affect the Company’s financial condition and result of operations.

Previous wording

***Noninterest Expense.***Noninterest expense increased $1.5 million to $25.1 million for the three months ended March 31, 2025, from $23.5 million for the three months ended March 31, 2024. The increase was primarily due to increases of $976,000 in salaries and benefits due to competitive wage adjustments, additional staffing to support growth, and higher overall benefit costs, and $437,000 in operations.

Current wording

***Noninterest Expense.***Noninterest expense increased $3.2 million to $50.6 million for the six months ended June 30, 2025, from $47.4 million for the six months ended June 30, 2024. The increase was primarily due to increases of $1.7 million in salaries and benefits due to competitive wage adjustments and higher overall benefit costs, $742,000 in operations, and $531,000 in professional and board fees.

Previous wording

Provision for Income Taxes.* *For the three months ended March 31, 2025, the Company recorded a provision for income taxes of $1.4 million, compared to $2.1 million for the three months ended March 31, 2024. The decrease in the income taxes provision was primarily due to a $1.1 million decrease in pre-tax income during the three months ended March 31, 2025, as compared to the same quarter last year. The effective corporate income tax rates for the three months ended March 31, 2025 and 2024, were 15.2% and 20.2%, respectively. The decline in tax rate between the quarters was primarily attributable to the tax benefits recognized from the $660,000 gain of related tax credits purchased versus the utilization of the credit. Excluding the tax benefit related to the $660,000 gain, the effective corporate income tax rate for the three months ended March 31, 2025 would have been 22.2%.

Current wording

Provision for Income Taxes.* *For the six months ended June 30, 2025, the Company recorded a provision for income taxes of $3.5 million, compared to $4.5 million for the six months ended June 30, 2024. The decrease in the income taxes provision was primarily due to a $2.6 million decrease in pre-tax income during the six months ended June 30, 2025, as compared to the same period last year. The effective corporate income tax rates for the six months ended June 30, 2025 and 2024, were 18.1% and 20.6%, respectively. The decline in tax rate between the quarters was primarily attributable to the tax benefits recognized from the $660,000 gain of related tax credits purchased versus the utilization of the credit. Excluding the tax benefit related to the $660,000 gain, the effective corporate income tax rate for the six months ended June 30, 2025 would have been approximately 340 basis points higher.

Previous wording

The Bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to fund its operations. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs. At March 31, 2025, the Bank’s total borrowing capacity was $639.2 million with the FHLB of Des Moines, with unused borrowing capacity of $570.0 million. The FHLB borrowing limit is based on certain categories of loans, primarily real estate loans that qualify as collateral for FHLB borrowings. At March 31, 2025, the Bank held approximately $1.08 billion in loans that qualify as collateral for FHLB borrowings.

Current wording

The Bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to fund its operations. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs. At June 30, 2025, the Bank’s total borrowing capacity was $650.9 million with the FHLB of Des Moines, with unused borrowing capacity of $438.2 million. The FHLB borrowing limit is based on certain categories of loans, primarily real estate loans that qualify as collateral for FHLB borrowings. At June 30, 2025, the Bank held approximately $1.09 billion in loans that qualify as collateral for FHLB borrowings.

Previous wording

In addition to the availability of liquidity from the FHLB of Des Moines, the Bank maintains a short-term borrowing line with the FRB with a limit of $270.6 million and a combined credit limit of $101.0 million in written federal funds lines of credit through correspondent banking relationships at March 31, 2025. The FRB borrowing limit is based on certain categories of loans, primarily consumer loans that qualify as collateral for FRB line of credit. At March 31, 2025, the Bank held approximately $597.4 million in loans that qualify as collateral for the FRB line of credit. There were no outstanding borrowings with the FRB or correspondent banks as of March 31, 2025 and December 31, 2024. Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.

Current wording

In addition to the availability of liquidity from the FHLB of Des Moines, the Bank maintains a short-term borrowing line with the FRB with a limit of $262.8 million and a combined credit limit of $101.0 million in written federal funds lines of credit through correspondent banking relationships at June 30, 2025. The FRB borrowing limit is based on certain categories of loans, primarily consumer loans that qualify as collateral for FRB line of credit. At June 30, 2025, the Bank held approximately $591.0 million in loans that qualify as collateral for the FRB line of credit. There were $25.0 million of outstanding borrowings with the FRB or correspondent banks as of June 30, 2025, and none at December 31, 2024. Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.

Previous wording

The Bank’s Asset and Liability Management Policy permits management to utilize brokered deposits up to 20% of deposits or $524.3 million at March 31, 2025. Total brokered deposits at March 31, 2025 were $370.2 million. Management utilizes brokered deposits to mitigate interest rate risk and to enhance liquidity when appropriate.

Current wording

The Bank’s Asset and Liability Management Policy permits management to utilize brokered deposits up to 20% of deposits or $511.2 million at June 30, 2025. Total brokered deposits at June 30, 2025 were $311.0 million. Management utilizes brokered deposits to mitigate interest rate risk and to enhance liquidity when appropriate.

Previous wording

Liquidity management is both a daily and long-term function of the Company’s management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer-term basis, a strategy is maintained of investing in various lending products and investment securities, including U.S. Government obligations and U.S. agency securities. The Company uses sources of funds primarily to meet ongoing commitments, pay maturing deposits, fund withdrawals, and to fund loan commitments. At March 31, 2025, outstanding loan commitments, including unused lines of credit totaled $583.4 million. The Company purchased $15.0 million in securities during the three months ended March 31, 2025. The Company purchased $38.0 million in securities during the three months ended March 31, 2024. Proceeds from securities repayments, maturities and sales were $6.3 million and $48.3 million during the three months ended March 31, 2025 and 2024, respectively.

Current wording

Liquidity management is both a daily and long-term function of the Company’s management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer-term basis, a strategy is maintained of investing in various lending products and investment securities, including U.S. Government obligations and U.S. agency securities. The Company uses sources of funds primarily to meet ongoing commitments, pay maturing deposits, fund withdrawals, and to fund loan commitments. At June 30, 2025, outstanding loan commitments, including unused lines of credit totaled $583.3 million. The Company purchased $69.8 million in securities during the six months ended June 30, 2025. The Company purchased $38.0 million in securities during the six months ended June 30, 2024. Proceeds from securities repayments, maturities and sales were $26.2 million and $107.5 million during the six months ended June 30, 2025 and 2024, respectively.

Previous wording

The Bank’s liquidity is also affected by the volume of loans sold and loan principal payments. During the three months ended March 31, 2025 and 2024, the Bank sold $91.9 million and $93.9 million in loans, respectively.

Current wording

The Bank’s liquidity is also affected by the volume of loans sold and loan principal payments. During the six months ended June 30, 2025 and 2024, the Bank sold $219.0 million and $258.4 million in loans, respectively.

Previous wording

Total deposits increased $275.7 million during the three months ended March 31, 2025, primarily driven by a net increase in brokered deposits of $226.9 million. CDs scheduled to mature in three months or less at March 31, 2025, totaled $516.7 million. It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this strategy, management believes that a majority of maturing relationship deposits will remain with the Bank.

Current wording

Total deposits increased $214.0 million during the six months ended June 30, 2025, primarily driven by a net increase in brokered deposits of $167.7 million. CDs scheduled to mature in three months or less at June 30, 2025, totaled $502.7 million. It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this strategy, management believes that a majority of maturing relationship deposits will remain with the Bank.

Previous wording

For the remainder of 2025, we project that fixed commitments will include $1.2 million of operating lease payments. For information regarding our operating leases, see “Note 6 – Leases” of the Notes to Consolidated Financial Statements included in this report. FHLB borrowings of $16.0 million are scheduled to mature within the next twelve months.

Current wording

For the remainder of 2025, we project that fixed commitments will include $1.1 million of operating lease payments. For information regarding our operating leases, see “Note 6 – Leases” of the Notes to Consolidated Financial Statements included in this report. FHLB borrowings of $128.8 million are scheduled to mature within the next twelve months.

Previous wording

Dividends and other capital distributions from the Bank are subject to regulatory notice and certain restrictions. The unrestricted cash of FS Bancorp held at the Bank on an unconsolidated basis totaled $6.3 million at March 31, 2025. The Company currently expects to continue the current practice of paying quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is $0.28 per share, which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank and returning a substantial portion of our cash to our shareholders. Assuming continued payment during 2025 at this rate of $0.28 per share, our total dividends paid each quarter would be approximately $2.2 million based on the number of the current outstanding shares as of March 31, 2025.

Current wording

Dividends and other capital distributions from the Bank are subject to regulatory notice and certain restrictions. The unrestricted cash of FS Bancorp held at the Bank on an unconsolidated basis totaled $2.6 million at June 30, 2025. The Company currently expects to continue the current practice of paying quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is $0.28 per share, which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank and returning a substantial portion of our cash to our shareholders. Assuming continued payment during 2025 at this rate of $0.28 per share, our total dividends paid each quarter would be approximately $2.2 million based on the number of the current outstanding shares as of June 30, 2025.

Previous wording

Under FS Bancorp’s existing stock repurchase program, approximately $873,000 remained available for future repurchases as of March 31, 2025. See “Unregistered Sales of Equity Securities and Use of Proceeds” in Item 2, Part II of this Form 10-Q for additional information relating to stock repurchases.

Current wording

Under FS Bancorp’s existing stock repurchase program, approximately $725,000 remained available for future repurchases as of June 30, 2025. On July 9, 2025, subsequent to quarter-end, the Company publicly announced that its Board of Directors approved an additional stock repurchase program, authorizing the repurchase of up to $5.0 million of Company common stock, in addition to the amount remaining under the existing stock repurchase program. See “Unregistered Sales of Equity Securities and Use of Proceeds” in Item 2, Part II of this Form 10-Q for additional information relating to stock repurchases.

Previous wording

The Bank is subject to minimum capital requirements imposed by the FDIC. Based on its capital levels at March 31, 2025, the Bank exceeded these requirements as of that date. Consistent with our goals to operate a sound and profitable organization, our policy is for the Bank to maintain a well-capitalized status under the capital categories of the FDIC. Based on capital levels at March 31, 2025, the Bank was considered to be “well capitalized”. At March 31, 2025, the Bank exceeded all regulatory capital requirements with Tier 1 leverage-based capital, Tier 1 risk-based capital, total risk-based capital, and common equity Tier 1 capital ratios of 11.3%, 13.2%, 14.4%, and 13.2%, respectively.

Current wording

The Bank is subject to minimum capital requirements imposed by the FDIC. Based on its capital levels at June 30, 2025, the Bank exceeded these requirements as of that date. Consistent with our goals to operate a sound and profitable organization, our policy is for the Bank to maintain a well-capitalized status under the capital categories of the FDIC. Based on capital levels at June 30, 2025, the Bank was considered to be “well capitalized”. At June 30, 2025, the Bank exceeded all regulatory capital requirements with Tier 1 leverage-based capital, Tier 1 risk-based capital, total risk-based capital, and common equity Tier 1 capital ratios of 11.2%, 12.8%, 14.1%, and 12.8%, respectively.