“We continue to manage our strong net interest margins (NIM) with expanding yields on earning assets while maintaining a stable, well positioned mix of funding liabilities,” stated Matthew Mullet, CEO and President of 1st Security Bank.
“Shareholder returns were balanced in the third quarter with share repurchases, a paid special dividend, and the payment of our 50 quarterly dividend,” stated Joe Adams, CEO of FS Bancorp, Inc. “We are also pleased to announce that our Board of Directors has approved our 51st consecutive quarterly cash dividend of $0.28 per common share, demonstrating our commitment to long-term shareholders. The cash dividend will be paid on November 20, 2025, to shareholders of record as of November 6, 2025,” concluded Adams.
2025 Third Quarter Highlights
* Net income was $9.2 million for the third quarter of 2025, compared to $7.7 million for the previous quarter, and $10.3 million for the comparable quarter one year ago;
* Total deposits increased $133.1 million, or 5.2%, to $2.69 billion at September 30, 2025, compared to $2.55 billion at June 30, 2025, and increased $259.2 million, or 10.7%, from $2.43 billion at September 30, 2024, primarily due to an increase in brokered certificates of deposit (“CDs”) and, to a lesser extent, other deposits. Noninterest-bearing deposits were $665.9 million at September 30, 2025, $654.1 million at June 30, 2025, and $657.8 million at September 30, 2024;
* Borrowings decreased $105.0 million, or 44.8%, to $129.3 million at September 30, 2025, compared to $234.3 million at June 30, 2025, and decreased $34.5 million, or 21.1%, from $163.8 million at September 30, 2024;
* Loans receivable, net increased $17.3 million, or 0.7%, to $2.60 billion at September 30, 2025, compared to $2.58 billion at June 30, 2025, and increased $135.9 million, or 5.5%, from $2.46 billion at September 30, 2024;
* Consumer loans were $600.8 million at September 30, 2025, a decrease of $5.5 million, or 0.91%, from $606.3 million in the previous quarter, and a decrease of $31.6 million, or 5.0%, from $632.4 million in the comparable quarter one year ago. During the three months ended September 30, 2025, consumer loan originations included 83.3% of home improvement loans originated with a Fair Isaac Corporation (“FICO”) score above 720;
* 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, with $826,000 remaining for future purchases under the existing share repurchase plan as of September 30, 2025;
* Book value per share increased $0.88 to $40.43 at September 30, 2025, compared to $39.55 at June 30, 2025, and increased $2.98 from $37.45 at September 30, 2024. Tangible book value per share (non-GAAP financial measure) increased $0.97 to $38.43 at September 30, 2025, compared to $37.46 at June 30, 2025, and increased $3.33 from $35.10 at September 30, 2024. See, “Non-GAAP Financial Measures;”
* Segment reporting in the third quarter of 2025 reflected net income of $8.4 million for the Commercial and Consumer Banking segment and $775,000 for the Home Lending segment, compared to net income of $7.4 million and $351,000 in the prior quarter, and net income of $9.3 million and $1.0 million in the third quarter of 2024, respectively; and
* Regulatory capital ratios at the Bank were 13.8% for total risk-based capital and 11.0% for Tier 1 leverage capital at September 30, 2025, compared to 14.1% for total risk-based capital and 11.2% for Tier 1 leverage capital at June 30, 2025.
Segment Reporting
The Company operates through two reportable segments: Commercial and Consumer Banking and Home Lending. The Commercial and Consumer Banking segment provides diversified financial products and services to our commercial and consumer customers. These products and services include deposit products; residential, consumer, business and commercial real estate lending and cash management services. This segment also manages the Bank’s investment portfolio and other assets. The Home Lending segment originates one-to-four-family residential mortgage loans primarily for sale in the secondary markets as well as loans held for investment.
The tables below provide a summary of segment reporting at or for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):
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Asset Summary
The following table presents the components and changes in total assets as of the dates indicated.
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.
Total loans increased to $2.63 billion during the third quarter of 2025, primarily as a result of growth in commercial and speculative construction and development loans and C&I loans. Commercial and speculative construction and development loans increased $26.0 million, let by speculative residential vertical projects, while C&I loans increased $16.6 million.
The composition of CRE loans at the dates indicated were as follows:
The following table includes CRE loans repricing or maturing within the next two years, excluding loans that reprice simultaneously with changes to the prime rate:
The composition of construction loans at the dates indicated were as follows:
Originations of one-to-four-family loans to purchase and refinance a home for the periods indicated were as follows:
During the quarter ended September 30, 2025, the Company sold $156.4 million of one-to-four-family loans compared to $127.1 million during the previous quarter and $167.6 million during the same quarter one year ago. The increase in the volume of loans sold during the current quarter compared to the prior quarter was primarily due to seasonal homebuying factors. This increased demand for homes generally results in a higher volume of loan originations and, consequently, more loans available for sale. Gross margins on home loan sales increased to 3.14% for the quarter ended September 30, 2025, compared to 3.06% in the previous quarter and increased from 2.96% in the same quarter one year ago. Gross margins are defined as the margin on loans sold (cash sales) without the impact of deferred costs.
Liabilities and Equity Summary
The following table summarizes the components and changes in deposits, borrowings, equity, and book value per common share at the dates indicated.
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(1) Primarily noninterest-bearing accounts based on applicable state law.
(2) Comprised of FHLB advances and Federal Reserve Bank borrowings.
At September 30, 2025, the Bank had uninsured deposits of approximately $694.4 million, compared to approximately $677.2 million at June 30, 2025, and $644.9 million at September 30, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
In the table above, the linked quarter increase in stockholders’ equity at September 30, 2025, compared to June 30, 2025, was primarily due to net income of $9.2 million and unrealized gain in fair value on securities available for sale of $2.9 million, net of tax, partially offset by unrealized loss in fair value and cash flow hedges of $454,000, net of tax. These changes reduced accumulated other comprehensive loss reported in the prior quarter to income this quarter, contributing to the increase in stockholders’ equity. Gains and losses in fair value reflect changes in market interest rates during the periods. The increase in shareholders’ equity was partially offset by share repurchases of $5.5 million and cash dividends paid of $3.8 million.
The Bank is considered “well capitalized” under the capital requirement established by the Federal Deposit Insurance Corporation (“FDIC”) and the Company exceeded all regulatory capital requirements. At September 30, 2025, capital ratios presented for the Bank and the Company were as follows:
Credit Quality
The following table summarizes the changes in the ACL on loans, nonperforming loans, and classified loans at the dates indicated.
The commercial construction – office charge-off shown above reflects the expected loss for the project recognized during the three months ended September 30, 2025.
The increase in nonaccrual loans year-over-year was partly driven by two commercial construction loans, which remain in active development. Disbursements on these loans, net of partial charge-offs of $2.3 million, contributed to a $4.4 million net increase in the nonaccrual balance of these loans compared to the same period last year. Increases in consumer loan and mortgage loan delinquencies also contributed to the overall rise in nonaccrual loans between the periods, partially offset by a $2.0 million decrease in C&I loans, primarily due to a partial charge-off and receipt of funds on a government guarantee for a single nonaccrual C&I loan.
Operating Results
Net interest income increased $2.4 million to $33.7 million for the three months ended September 30, 2025, from $31.2 million for the three months ended September 30, 2024, primarily due to an increase in total interest income of $3.9 million, partially offset by an increase in total interest expense of $1.5 million. The $3.9 million increase in total interest income was primarily due to an increase of $2.9 million in interest income on loans receivable, including fees, resulting from net loan growth and higher loan yields as a result of repricing and increased market rates. The $1.5 million increase in total interest expense was primarily the result of higher average deposit balances used to fund asset growth, partially offset by effective management of deposit and funding costs.
For the nine months ended September 30, 2025, net interest income increased $4.8 million to $96.8 million, from $92.0 million for the nine months ended September 30, 2024, with an $8.6 million increase in total interest income, partially offset by a $3.8 million increase in interest expense for the same reasons mentioned above.
NIM (annualized) increased two basis points to 4.37% for the three months ended September 30, 2025, from 4.35% for the same period in the prior year and increased three basis points from 4.30% to 4.33% for the nine months ended September 30, 2025. The change in NIM for the three and nine months ended September 30, 2025, compared to the same period in 2024, reflects the combined effects of higher yields on interest-earning assets, favorable shifts in asset mix, and continued control of funding costs.
The average total cost of funds, including noninterest-bearing checking, increased two basis points to 2.41% for the three months ended September 30, 2025, from 2.39% for the three months ended September 30, 2024. This increase was predominantly due to higher average balances in borrowings. The average cost of funds increased six basis points to 2.39% for the nine months ended September 30, 2025, from 2.33% for the nine months ended September 30, 2024, primarily for the same reason noted above as well as growth in the deposit mix from the prior year.
For the three and nine months ended September 30, 2025, the provision for credit losses on loans was $2.3 million and $5.9 million, compared to $1.5 million and $4.0 million for the three and nine months ended September 30, 2024, respectively. The provision for credit losses on loans reflects net loan growth and an increase in net charge-off activity.
During the three months ended September 30, 2025, net charge-offs increased $2.4 million to $4.0 million, compared to $1.6 million for the same prior last year. The increase was primarily due to a commercial construction loan’s partial charge-off of $2.3 million. The partial charge-off was fully reserved for in previous periods, accordingly, there was no income statement impact resulting from increased provisions. During the nine months ended September 30, 2025, net charge-offs increased $2.6 million, to $6.9 million, compared to $4.3 million during the nine months ended September 30, 2024. The increase was primarily due to the $2.3 million partial charge-off discussed above, a $1.3 million increase in net charge-offs on indirect home improvement loans, partially offset by a $695,000 decrease in net charge-offs on commercial business loans and a $312,000 decrease in net charge-offs on marine loans. Management attributes the increase in net charge-offs for the current nine-month period to continued volatile economic conditions.
Total noninterest income decreased $373,000 to $5.6 million for the three months ended September 30, 2025, from $6.0 million for the three months ended September 30, 2024. The decrease primarily reflects a $156,000 decrease in service charges and fee income and a $141,000 decrease in gain on sale of MSRs as there were no MSR sales in the current quarter compared to the same period last year. Total noninterest income decreased $1.1 million to $15.9 million, for the nine months ended September 30, 2025, from $16.9 million for the nine months ended September 30, 2024. This decrease was primarily the result of a $713,000 decrease in gain on sale of loans, a $619,000 decrease in service charges and fee income, and a net decrease of $520,000 from no activity in gain on sales of MSRs and loss on sale of investment securities compared to an $8.4 million net gain on sale of MSRs, offset by the $7.8 million loss on sale of investment securities that occurred during the same period in 2024. These decreases were 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.
Total noninterest expense was $25.4 million for the three months ended September 30, 2025, compared to $25.8 million for the three months ended September 30, 2024. The $444,000 decrease was primarily due to a $6,000 recovery in MSRs, compared to the prior year’s $506,000 impairment, driven primarily by market rates, a $372,000 decrease in data processing, a $130,000 decrease in professional and board fees, a $118,000 decrease in marketing and advertising, and a $110,000 decrease in amortization of core deposit intangibles, partially offset by a $430,000 increase in salaries and benefits, primarily due to competitive wage adjustments, and a $147,000 increase in operations expense. Total noninterest expense increased $2.7 million to $75.9 million for the nine months ended September 30, 2025, compared to $73.2 million for the nine months ended September 30, 2024. Increases during the nine months ended September 30, 2025, compared to the same period last year included a $2.1 million in salaries and benefits, $889,000 in operations expense, and $401,000 in professional and board fees, partially offset by a $522,000 decrease in the impairment of MSRs, primarily for the same reasons discussed above.
About FS Bancorp
FS Bancorp, Inc., a Washington corporation, is the holding company for 1st Security Bank of Washington. The Bank offers a range of loan and deposit services primarily to small- and middle-market businesses and individuals in Washington and Oregon. It operates through 27 bank branches, one headquarters office that provides loans and deposit services, and loan production offices in various suburban communities in the greater Puget Sound area, the Kennewick-Pasco-Richland metropolitan area of Washington, also known as the Tri-Cities, and in Vancouver, Washington. Additionally, the Bank services home mortgage customers across the Northwest, focusing on markets in Washington State including the Puget Sound, Tri-Cities, and Vancouver.
Forward-Looking Statements
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause the Company’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels; labor shortages, the effects of inflation, recessionary pressures or slowing economic growth; changes in interest rates and the duration of such changes, including actions by the Federal Reserve, which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity; the impact of inflation and monetary and fiscal policy responses thereto and their impact on consumer and business behavior; geopolitical developments and international conflicts including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors; the effects of a federal government shutdown, debt ceiling standoff, or other fiscal policy uncertainty; increased competitive pressures, including repricing and competitors’ pricing initiatives, and their impact on our market position, loan, and deposit products; adverse changes in the securities markets, the Company’s ability to execute its plans to grow its residential construction lending, mortgage banking, and warehouse lending operations, and the geographic expansion of its indirect home improvement lending; challenges arising from expanding into new geographic markets, products, or services; secondary market conditions for loans and the Company’s ability to originate loans for sale and sell loans in the secondary market; volatility in the mortgage industry; fluctuations in deposits; liquidity issues, including our ability to borrow funds or raise additional capital, if necessary; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; the ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity; legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulation, tax laws, or consumer protection laws; vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; environmental, social and governance goals; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, domestic political unrest and other external events on our business; and other factors described in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other reports filed with or furnished to the SEC which are available on its website at http://www.fsbwa.com and on the SEC’s website at http://www.sec.gov.
Any of the forward-looking statements that the Company makes in this press release and in the other public statements are based upon management’s beliefs and assumptions at the time they are made and may turn out to be incorrect because of the inaccurate assumptions the Company might make, because of the factors illustrated above or because of other factors that cannot be foreseen by the Company. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
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(1) Includes loans HFS.
Non-GAAP Financial Measures:
In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States (“GAAP”), this earnings release presents non-GAAP financial measures that include tangible book value per share, and tangible common equity ratio. Management believes that providing the Company’s tangible book value per share and tangible common equity ratio is consistent with the capital treatment utilized by the investment community, which excludes intangible assets from the calculation of risk-based capital ratios and facilitates comparison of the quality and composition of the Company’s capital over time and to its competitors. Where applicable, the Company has also presented comparable GAAP information.
These non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. They should not be considered in isolation or as a substitute for total stockholders’ equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
Reconciliation of the GAAP book value per share and common equity ratio and the non-GAAP tangible book value per share and tangible common equity ratio is presented below.
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Contacts:
Matthew D. Mullet,
President and Chief Executive Officer
Phillip D. Whittington,
Chief Financial Officer
(425) 771-5299
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