The Washington-based holding company is preparing for expansion into Oregon through its pending merger with Pacific West Bancorp.

April 22, 2026

FS Bancorp, Inc., the parent company of 1st Security Bank of Washington, reported first quarter 2026 net income of $7.8 million, or $1.02 per diluted share, as the Mountlake Terrace-based institution continues preparing for a previously announced merger that will extend its footprint into the Portland, Oregon market later this year.

The earnings figure represents a modest decline from the $8.4 million, or $1.10 per diluted share, posted in the fourth quarter of 2025, and from $8.0 million, or $1.01 per diluted share, in the comparable quarter one year earlier. However, pre-tax income actually grew 4.6 percent year-over-year to $9.9 million, with the net income decline attributable primarily to a higher effective tax rate.

Dividend and Capital Return

The company’s board approved its 53rd consecutive quarterly cash dividend, setting the payment at $0.29 per common share. The dividend will be paid on May 21, 2026, to shareholders of record as of May 7, 2026. Joe Adams, CEO of FS Bancorp, highlighted the sustained capital return program as a reflection of the company’s commitment to long-term shareholders.

Book value per share reached a split-adjusted record of $42.42 at the end of the first quarter, up $0.87 from $41.55 at year-end 2025 and $3.30 higher than the $39.12 reported a year ago. Tangible book value per share, a non-GAAP measure, climbed to $40.61 from $39.65 at the prior quarter-end.

During the quarter, the company repurchased 15,025 shares of common stock for $620,000 at an average price of $41.24 per share, with $3.6 million remaining available under the existing share repurchase authorization.

Merger With Pacific West Bancorp

Matthew Mullet, President and CEO of 1st Security Bank, pointed to the February-announced merger with Pacific West Bancorp as a key strategic development. The transaction is expected to support the company’s expansion into the Portland, Oregon market area later in 2026. The company recorded $295,000 in acquisition-related costs during the quarter in connection with the pending deal.

A registration statement on Form S-4 will be filed with the Securities and Exchange Commission, which will include a proxy statement for Pacific West Bancorp shareholders to vote on the proposed merger and the issuance of FS Bancorp common stock as part of the transaction consideration.

Loan Portfolio and Segment Performance

Total loans receivable, net, stood at $2.62 billion at quarter-end, essentially flat compared to year-end 2025 but up $123.0 million, or 4.9 percent, from $2.50 billion a year earlier. Growth of $17.4 million in commercial real estate loans was offset by continued payoff activity in the consumer loan portfolio.

The loan mix at quarter-end included:

• Commercial real estate loans: $986.8 million, or 37.2 percent of gross loans
• Residential real estate loans: $763.6 million, or 28.8 percent
• Consumer loans: $583.5 million, or 21.9 percent
• Commercial business loans: $322.6 million, or 12.1 percent

Home Lending production showed notable strength, totaling $207.5 million for the quarter compared to $145.4 million in the same period a year earlier, a 42.7 percent increase driven by more favorable interest rate activity. Refinance activity surged 175 percent year-over-year to $67.9 million, while purchase originations rose 15.7 percent to $139.6 million. The company sold $154.7 million of one-to-four-family loans during the quarter, up from $91.9 million in the prior-year quarter, though gross margins on home loan sales compressed slightly to 3.03 percent from 3.26 percent.

Segment results showed the Commercial and Consumer Banking unit generating net income of $6.7 million, down from $7.8 million in the prior-year quarter, while the Home Lending segment contributed $1.1 million, up substantially from $241,000 a year earlier.

Deposit Trends and Funding

Total deposits, excluding brokered deposits, were unchanged at $2.31 billion compared to year-end 2025 but increased $65.2 million, or 2.9 percent, from a year earlier. The cost of deposits declined modestly to 2.24 percent for the first quarter from 2.26 percent in the fourth quarter of 2025, reflecting repricing activities on maturing certificates of deposit.

Total deposits including brokered funds fell to $2.64 billion from $2.67 billion at year-end as brokered maturity deposits decreased by approximately $35 million. Borrowings increased to $167.3 million from $129.3 million at year-end, comprised of Federal Home Loan Bank advances and Federal Reserve Bank borrowings. Uninsured deposits at the Bank were estimated at approximately $704.2 million, down from $718.1 million at year-end.

Credit Quality Metrics

The allowance for credit losses on loans rose to $32.4 million at quarter-end from $31.9 million at year-end 2025. The provision for credit losses on loans was $2.6 million for the quarter, compared to $1.5 million a year earlier, reflecting increased net charge-off activity along with elevated past due and nonaccrual consumer loans.

Net charge-offs totaled $2.1 million for the quarter, an increase of $422,000 from the prior-year period. Indirect home improvement loans accounted for $624,000 of the increase, reflecting continued credit stress in that portfolio amid challenging economic conditions. Nonperforming loans stood at $18.3 million, down slightly from $18.7 million at year-end but up from $14.5 million a year earlier. The increase from the prior year was partly driven by one commercial construction relationship that remains in active development.

Net Interest Margin and Income

Net interest income grew $1.6 million to $32.5 million for the first quarter compared to $31.0 million a year earlier, driven by a $2.7 million increase in interest income on loans from net loan growth, partially offset by a $982,000 rise in interest expense from higher average deposit balances.

Net interest margin narrowed by one basis point to 4.31 percent from 4.32 percent in the prior-year period. The company noted that the repricing of its subordinated notes to a floating rate on February 15, 2026, reduced NIM by approximately two basis points.

Total noninterest income increased to $5.4 million from $5.1 million a year earlier, supported by a $684,000 increase in gain on sale of loans. Total noninterest expense rose modestly to $25.5 million from $25.1 million, reflecting higher loan costs, competitive wage adjustments, acquisition-related costs, and increased occupancy expenses from branch renovations, partially offset by a $451,000 reduction in data processing costs following renegotiated vendor contracts.

Capital Position

The Bank remains well capitalized, with total risk-based capital at 13.8 percent and Tier 1 leverage capital at 11.2 percent at quarter-end. Common equity Tier 1 capital stood at 12.59 percent for the Bank and 11.15 percent for the Company. The company operates 27 bank branches along with one headquarters office and loan production offices across Washington State, primarily serving the Puget Sound region, the Tri-Cities area, and Vancouver, Washington.