🗓️ What This Document Is

This document is an 8-K filing and an earnings announcement from FS Bancorp, Inc. It signals the company’s official financial results for the first quarter of 2026. Think of this as the bank’s quarterly report card, telling investors how the business performed over the last three months.

The filing covers everything from net income figures to major strategic announcements, including a merger with Pacific West Bancorp. 👉 The main takeaway is that while quarterly net income dipped slightly, the company is emphasizing sustained growth, managing capital well, and executing a major strategic merger.

🏢 What The Company Does

In simple terms, FS Bancorp, Inc. is the holding company for 1st Security Bank of Washington. They are a regional bank that provides essential financial services to small- and medium-market businesses and individual customers.

The bank's service area is primarily Washington and Oregon, operating through 27 bank branches and specialized loan production offices across the greater Puget Sound area, the Tri-Cities, and Vancouver. They also service home mortgage customers across the Northwest. 👉 They make money by earning interest on loans and by charging fees for various services (like cash management or servicing mortgages).

💰 Financial Highlights

The bank reported key financial metrics for Q1 2026. Overall, net income saw a slight decrease compared to the previous quarter, but pre-tax income showed solid growth, suggesting increasing profitability from core lending activities.

• Net Income: Totaled $7.8 million in Q1 2026. This is a decrease compared to $8.4 million reported in the previous quarter.
  • Why it matters: The filing attributes this decrease primarily to a one-time $1.0 million bank-owned life insurance mortality benefit received in the previous quarter, which was not present this quarter.
• Pre-tax Income: Increased to $9.9 million in Q1 2026, up $440,000 (or 4.6%) from the comparable quarter one year ago.
  • Why it matters: This growth is strong and was driven by improvements in net interest income and results from the Home Lending segment, indicating healthy core lending operations.
• Dividend: The Board of Directors approved a 53rd consecutive quarterly cash dividend of $0.29 per common share. This payment is scheduled for May 21, 2026, for shareholders of record on May 7, 2026.
  • Why it matters: A consistent, increasing dividend demonstrates the bank's commitment to its long-term shareholders and its financial stability.
• Book Value per Share: Increased to $42.42 as of March 31, 2026.
  • Why it matters: This metric reflects the total value of the bank's assets for every single share of stock, showing that the bank's overall value has grown year-over-year.

🤝 Merger Announcement & Future Growth

A major focus of the announcement was the merger with Pacific West Bancorp. The bank views this union as a key step in its long-term growth strategy, particularly in expanding its footprint into the Portland, Oregon market area later in 2026.

The momentum around growth was highlighted by executives:

• Matthew Mullet, CEO and President of 1st Security Bank, stated: “We are excited about the announced merger with Pacific West Bancorp that occurred in February and our projected growth into the Portland, Oregon market area later in 2026.”
  • Interpretation: This quote emphasizes that the merger is not just paperwork; it's viewed as the catalyst for significant future geographic growth and market presence.
• Joe Adams, CEO of FS Bancorp, Inc., reiterated the positive outlook by noting that the "Book value per share reached a split adjusted record of $42.42 in the first quarter of 2026, reflecting sustained earnings growth and disciplined capital management.”
  • Interpretation: This confirms that the bank's recent financial health and strict management of capital are supporting the merger-driven growth plan.

📈 Segment Breakdown

The bank reports its operations through two main divisions: Commercial and Consumer Banking, and Home Lending. This breakdown shows where the money is coming from and how the segments performed against each other.

🏦 Commercial and Consumer Banking Segment: This is the core segment providing diverse financial services, including checking accounts, consumer/business lending, and managing the bank’s investment portfolio.

• Net Income: Reported $6.7 million for the quarter.
• Total Average Assets: Managed $2,543,059 thousand.
• Why it matters: This segment represents the bank's daily, diversified relationship with its customer base, providing stability.

🏡 Home Lending Segment: This segment specializes in originating one-to-four-family residential mortgage loans, which are often sold on the secondary market.

• Net Income: Reported $1.1 million for the quarter.
• Total Average Assets: Managed $658,300 thousand.
• Why it matters: While smaller than the primary banking segment, this specialized division is crucial for generating revenue through high-volume mortgage activities.

💵 Financial Position & Loan Portfolio Health

A bank’s balance sheet shows its overall financial health. The bank reports its assets (what it owns) and its liabilities (who it owes money to), giving a clear picture of its current stability and risk exposure.

💳 Deposits and Funding: Total deposits were $2,637,576 thousand. The bank's deposits are diversified, including substantial amounts in Certificates of Deposit (CDs) and various types of transactional accounts.

• The bank's overall deposits remained stable compared to the previous year (up $22,425 thousand).
  • Why it matters: Stable deposits are critical because they represent the bank's most reliable, low-cost source of funding.

🏘️ Loans and Lending Activity: The total net loans receivable stood at $2,624,091 thousand, showing steady growth year-over-year. The loan portfolio is highly diversified:

• Commercial Real Estate (CRE) Loans: Total CRE loans reached $986,838 thousand. The largest portion is in CRE non-owner occupied lending, specifically office and retail space.
  • Why it matters: CRE loans are often sensitive to local economic cycles, meaning their performance directly reflects the health of the regional real estate market.
• Consumer Loans: Total consumer loans were $583,484 thousand. The biggest source of consumer lending remains the indirect home improvement category.
  • Why it matters: The slight decrease in consumer loans (from $608,9 million a year ago) and the rise in net charge-offs signals that consumer credit stress remains a concern in the current economic environment.

🛡️ Capital and Risk Management

This section shows how secure the bank is. Regulators monitor "capital ratios" to ensure the bank has enough reserves to cover potential losses.

• Total Risk-Based Capital: As of March 31, 2026, the bank reported 13.81% (for the Bank alone).
  • Why it matters: The regulatory requirement is a measure of safety. The bank's ratio being high confirms that it is "well capitalized" and exceeds all regulatory requirements, giving depositors confidence.
• Nonperforming Loans (NPLs): Total NPLs were $18,268 thousand. While this is slightly higher than the prior year, the filing suggests this increase is partly due to supporting active development projects, rather than outright distress.
• Allowance for Credit Losses (ACL): This reserve fund, which set aside money for loans that might fail, increased by $506 thousand (year-over-year).
  • Why it matters: A robust ACL shows the bank is proactively budgeting for potential bad loans, protecting its financial stability.

🏦 Operational Trends and Performance Details

The details reveal how the bank's operational efficiency changed during the quarter, highlighting both successful initiatives and areas facing increasing cost pressures.

• Net Interest Margin (NIM): The annualized NIM decreased slightly to 4.31% (compared to 4.32% the previous year).
  • Why it matters: NIM is the core profitability metric for a bank. The decline was partially attributed to the cost of funding (specifically, the repricing of the subordinated notes) and lower loan yields due to prime rate decreases.
• Noninterest Income: Increased $275,000 to $5.4 million. This growth came primarily from a $684,000 increase in gains on the sale of loans.
  • Why it matters: Sales of loans (especially those needed to fund growth or satisfy capital needs) are a major source of non-interest revenue, but management must ensure these sales are strategic.
• Noninterest Expense: Increased $465,000 to $25.5 million. Key contributors were higher loan costs and significant costs related to the Pacific West Bancorp merger (acquisition-related costs).
  • Why it matters: While the merger requires large, necessary spending, the increased operational costs show the bank is aggressively investing in growth and technology.

🔑 Contacts & Next Steps

FS Bancorp provides several key details for investors and stakeholders to follow up on the strategic developments and financial reporting.

• Upcoming Merger Documentation: The bank noted that a registration statement on Form S-4 will be filed with the SEC regarding the Pacific West Bancorp merger. Investors are advised to read these documents carefully when they become available.
• Contact Information: For investor relations questions, users can call (425) 771-5299, or write to FS Bancorp, Inc. at 6920 220th Street SW, Mountlake Terrace, Washington 98043, Attn: Investor Relations.
• Management Contacts: Matthew D. Mullet, President and CEO, and Phillip D. Whittington, Chief Financial Officer, are listed as key contacts.

---

🧠 The Analogy

Think of FS Bancorp like a large, established department store undergoing a massive expansion project. 🛍️ They aren't just running the daily sales (core banking); they are actively buying out and absorbing a neighboring department store (the merger). This expansion requires enormous upfront spending (increased noninterest expense) and temporarily changes how their bottom line looks. However, the CEO is assuring everyone that the combined store will be much bigger, more visible (in Portland), and more profitable in the long run.

🧩 Final Takeaway

The bank is navigating a period of strategic transformation, evidenced by the merger and investment in growth. While the quarterly earnings show minor dips and cost increases, the focus remains on expanding market share and maintaining superior regulatory capital reserves to secure future growth.