Breaking Down FS Bancorp, Inc. (FSBW) Financial Health: Key Insights for Investors

You're looking at FS Bancorp, Inc. (FSBW) and trying to figure out if its financial health supports a near-term investment, and honestly, the Q3 2025 numbers give us a clear picture of a regional bank managing its core business defintely well in a tough rate environment. The headline is that the company reported net income of $9.2 million, translating to $1.18 per diluted share, which comfortably beat analyst consensus estimates of $1.08 per share. This performance is grounded in a strong balance sheet, with total assets crossing the $3.03 billion milestone as of September 30, 2025, supported by a solid net interest margin (NIM) of 4.37%. Still, we need to dig into the deposit mix-total deposits grew to $2.69 billion, but that 5.2% quarterly growth was driven primarily by brokered certificates of deposit, which are typically more rate-sensitive and expensive, so the quality of that funding growth is a crucial next question for investors looking at profitability and risk.

Revenue Analysis

You need to know where the money is coming from to judge the quality of FS Bancorp, Inc. (FSBW)'s earnings. The direct takeaway is that FSBW's revenue base is highly concentrated in its core lending business-Net Interest Income (NII)-which is typical for a regional bank, but the growth rate has slowed considerably in the current high-rate environment.

For the trailing twelve months (TTM) ending September 30, 2025, FS Bancorp, Inc.'s total revenue was approximately $140.95 million. This figure represents a modest year-over-year (YoY) growth of only 1.07%. That's a sharp deceleration from the kind of growth you'd want to see, especially when compared to the 19.67% growth they saw back in 2023. Honestly, a 1.07% climb shows the pressure on their margins.

The revenue structure is simple: it's split between Net Interest Income (NII) and Non-Interest Income. NII is the profit a bank makes from lending money out at a higher rate than it pays on deposits and borrowings. Non-Interest Income covers everything else, mostly fees and gains on investments. Here's the quick math for the estimated 2025 fiscal year revenue of $142.0 million:

• Net Interest Income (NII): $123.1 million, contributing about 86.7% of total revenue.
• Non-Interest Income: $18.9 million, making up the remaining 13.3%.

That 86.7% reliance on NII means the bank's earnings are defintely sensitive to interest rate movements and the health of the loan portfolio. You've got to watch that NII like a hawk.

The Core Engine: Net Interest Income Breakdown

FS Bancorp, Inc. generates its NII primarily through its diverse lending portfolio. The interest income comes from loans and leases, plus a smaller portion from investment securities. The bank's lending programs are a mix of commercial and consumer products, which helps diversify risk somewhat.

The key lending segments driving this income are:

• Commercial and industrial (C&I) loans.
• Commercial real estate (CRE) and speculative construction/development loans.
• Consumer loans, with a significant portion being home improvement loans.
• Specialized lending for home buyers, local contractors, builders, mortgage companies, and boat dealerships.

In the third quarter of 2025, the growth in commercial and speculative construction and development loans (up $26.0 million) and commercial and industrial loans (up $16.6 million) was a clear driver for the quarter's loan receivable increase. This tells you where management is putting its capital to work right now.

Non-Interest Income and Revenue Shifts

Non-Interest Income, while a smaller piece of the pie, is important for stability. It's what you call fee income, and it includes things like service charges and net realized and unrealized capital gains on investments. When the lending market gets tough, fee income can be a crucial cushion. The bank is a diversified lender, but its non-interest revenue is still relatively small.

What this estimate hides is the rising cost of funds. Total Interest Expense has been climbing, which is what compresses that NII margin even if Total Interest Income is also rising. For a deeper dive into the strategic direction, you can check out the Mission Statement, Vision, & Core Values of FS Bancorp, Inc. (FSBW).

To summarize the revenue components for clarity, here are the major elements:

Your next step should be to model the impact of a 50 basis point increase in deposit costs on that NII figure. That's the real near-term risk.

Profitability Metrics

You're looking at FS Bancorp, Inc. (FSBW) to understand if its core business is generating enough profit to justify the risk. The direct takeaway is that while the company maintains strong profitability with a high Net Profit Margin for a regional bank, the trend is one of contraction, which is a clear headwind you need to watch.

For the most recent Trailing Twelve Months (TTM) leading up to late 2025, FS Bancorp's margins show a solid, though declining, performance. The company's Gross Margin (a bank's equivalent of revenue minus the cost of funds, or Net Interest Income) stands at approximately 67.88%. This is a strong percentage, but it represents a 2.33% decrease from the prior year, showing the pressure of a higher interest rate environment on funding costs.

Here's the quick math on the key profitability measures:

• Gross Margin: Approximately 67.88% (TTM)
• Operating Margin: The Net Operating Margin is about 18.94% (TTM), reflecting a more significant 5.94% decrease year-over-year.
• Net Profit Margin: The Net Profit Margin recently fell to 23.5%, down from 25.6% in the prior year.

This margin contraction is the primary trend. The Net Income for the third quarter of 2025 was $9.2 million, which is lower than the $10.3 million reported in the same quarter last year. Year-to-date (YTD) net income through Q3 2025 was $24.9 million. This decline in net income, quarter over quarter, shows the challenge of maintaining profitability as funding costs rise faster than asset yields, a common issue for regional banks defintely in this cycle.

Benchmarking Against Peers and Operational Efficiency

When you compare FS Bancorp, Inc. to the broader market and the Finance sector, the stock looks like a value play, but its growth profile is slower. The company's Price-to-Earnings (P/E) ratio is around 9.52x, which is significantly lower than the overall Finance sector average of about 21.29x and the US bank industry average of 11.2x. This discount suggests the market is pricing in the slower growth.

The forecast for annual earnings growth is about 5.91%, which is modest when stacked against the US market's expected 15.5% growth rate. Still, the ability to sustain a Net Profit Margin of 23.5% underlines resilient profitability, even with the recent dip. You can dig deeper into who is buying and why by Exploring FS Bancorp, Inc. (FSBW) Investor Profile: Who's Buying and Why?

Operational efficiency is a mixed bag. The company's Efficiency Ratio (which measures non-interest expense as a percentage of revenue-lower is better) was 68.2% for Q4 2024. Banks generally aim for a ratio below 60%, so 68.2% suggests there's room for improvement in cost management. However, management has been effective at managing its Net Interest Margin (NIM) with expanding yields on earning assets, and they significantly reduced borrowings by 44.8%, or $105.0 million, to $129.3 million as of September 30, 2025. That reduction in expensive short-term debt is a clear, positive action to manage interest expense and boost future operating leverage.

Debt vs. Equity Structure

You need to know exactly how FS Bancorp, Inc. (FSBW) funds its operations, and the short answer is they maintain a balanced, slightly debt-leaning structure compared to peers, but with strong credit quality. As of the most recent data, the company's Debt-to-Equity (D/E) ratio sits at about 0.60. This is a critical figure, as it tells you the company is using 60 cents of debt for every dollar of shareholder equity to finance its assets.

For a regional bank, this leverage is right in line with the industry. Here's the quick math: the average D/E ratio for US Regional Banks is around 0.5753. FS Bancorp, Inc. is marginally more leveraged, but not alarmingly so. They are not shy about using debt to fuel their loan portfolio growth, which is a common and often efficient strategy in banking, especially when interest rates are favorable for loan-to-deposit spreads.

The total debt picture for FS Bancorp, Inc. is dynamic. On the long-term side, the company reported approximately $49.611 million in total subordinated notes as of the first quarter of 2025. These are essentially junior bonds that count toward regulatory capital. However, the short-term borrowings have seen volatility. After a sharp decrease in Q1 2025, borrowings rose significantly by 240.5% to $234.3 million in Q2 2025. This jump suggests a tactical use of short-term funding to manage liquidity or take advantage of lending opportunities.

The good news is the market views their debt management as solid. In January 2025, KBRA affirmed the company's senior unsecured debt rating at BBB with a Stable Outlook. This investment-grade rating confirms their ability to meet financial commitments. This stability allows them to balance debt financing-like the use of wholesale brokered Certificates of Deposit (CDs) to replace some borrowings-with equity funding.

FS Bancorp, Inc. is defintely focused on optimizing the equity side, too. The Board authorized an additional $5.0 million share repurchase program in October 2025. This action reduces the share count, which increases earnings per share and book value, essentially returning capital to shareholders and boosting the value of the equity component. This dual strategy-judicious debt use backed by a strong rating, plus active equity management-shows a mature capital allocation framework. For a deeper look into the bank's core philosophy, check out their Mission Statement, Vision, & Core Values of FS Bancorp, Inc. (FSBW).

• Debt-to-Equity Ratio: 0.60, slightly above the regional bank average of 0.5753.
• Senior Debt Rating: BBB with a Stable Outlook, affirmed in January 2025.
• Equity Action: Authorized a new $5.0 million share repurchase program in October 2025.

Liquidity and Solvency

You're looking at FS Bancorp, Inc. (FSBW) and wondering if they have enough cash to cover their near-term obligations, which is the core of liquidity analysis. The short answer is yes, but the story in 2025 is one of active, and sometimes volatile, balance sheet management. The bank's liquidity profile is tight but stable, backed by a strong reduction in short-term debt in the third quarter.

We need to look past the simple ratios, which for a bank are defintely less telling than for a manufacturer. For the most recent period, the company's Current Ratio sits at a tight 1.05, with the Quick Ratio just behind at 1.03. Here's the quick math: a ratio near 1.0 means current assets (like cash and short-term investments) just barely cover current liabilities (like deposits and short-term debt). For a financial institution, this isn't a red flag-it just shows they keep their assets working in loans, not sitting idle as cash. They're a bank, not a tech company hoarding cash.

Working Capital Trends and Funding Shifts

The real action in 2025 has been in how FS Bancorp, Inc. funded its balance sheet. Working capital, or the difference between current assets and current liabilities, has been managed through strategic shifts in deposits and borrowings. This is where you see the risk and opportunity mapped out.

• Q1 2025: Total deposits surged 11.8% to $2.62 billion.
• Q2 2025: Deposits dropped 2.4% to $2.55 billion, forcing a reliance on expensive funding.
• Q3 2025: Deposits rebounded to $2.69 billion, up 5.2% quarter-over-quarter.

This volatility is the key near-term risk. In Q2 2025, when deposits fell, the company's borrowings spiked a massive 240.5% to $234.3 million. But, to be fair, management corrected this quickly. By Q3 2025, they had successfully paid down those expensive borrowings by 44.8%, bringing the total down to $129.3 million. That's a clear, decisive action to de-risk the funding structure and improve future net interest margin.

Cash Flow Statement Overview

While we don't have the full 2025 cash flow statement line-by-line, we can piece together the trends from the quarterly reports. The flow of cash is a three-part story: Operating, Investing, and Financing.

The Operating Cash Flow is anchored by solid, though slightly lower, net income. Net income for the first three quarters of 2025 totaled $24.9 million. This provides a consistent, positive cash inflow for the bank. The Investing Cash Flow is a net outflow, as expected, because the bank is growing its loan portfolio. Loans receivable, net, increased from $2.50 billion in Q1 to $2.60 billion in Q3. This is the bank doing its job: lending money. The Financing Cash Flow is the most dynamic. It saw a massive inflow from new borrowings in Q2, followed by a significant outflow in Q3 as those borrowings were paid down. Plus, the bank maintains a commitment to shareholder return, paying a consistent quarterly cash dividend of $0.28 per share.

What this estimate hides is the cost of that Q2 funding spike; that will show up in interest expense. The strength is that they have the access to capital to cover deposit outflows, which is a crucial solvency indicator.

For a deeper dive into the company's long-term strategic direction, you should review their Mission Statement, Vision, & Core Values of FS Bancorp, Inc. (FSBW).

Valuation Analysis

You want to know if FS Bancorp, Inc. (FSBW) is a buy, a hold, or a sell right now. The quick answer is that the market sees it as fairly valued, leaning toward a small upside, but the stock has been under pressure. The consensus from analysts is a Moderate Buy, with an average price target of $41.00.

As a seasoned financial analyst, I look past the headlines and focus on the core valuation multiples. For a bank like FS Bancorp, Inc., the Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios are your most important tools. They tell the story of whether you are paying too much for the company's current profitability and its underlying assets.

Is FS Bancorp, Inc. (FSBW) Overvalued or Undervalued?

Based on the latest trailing twelve months (TTM) data leading up to November 2025, FS Bancorp, Inc. looks like a value play, especially when stacked against its peers. Its P/E ratio sits at 9.52. To be fair, that's significantly lower than the broader Finance sector average, which often trades north of 20x. This suggests investors are not paying a premium for its earnings power, which is a classic signal of being undervalued.

The Price-to-Book (P/B) ratio is even more compelling. The company's P/B is 0.98. Here's the quick math: a P/B below 1.0 means the stock is trading for less than the value of its net tangible assets-what shareholders would theoretically get if the bank liquidated its assets and paid off all its liabilities. With the Q3 2025 book value per share at $40.43, and the stock trading around $38.89 as of mid-November 2025, you are defintely buying a dollar for less than a dollar.

Now, about the Enterprise Value-to-EBITDA (EV/EBITDA) ratio: you won't find a reliable, standard EV/EBITDA ratio for FS Bancorp, Inc. or most banks. That's because EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a poor measure of a bank's true operating performance. Interest income and expense are the core of a bank's business, not an add-back, so we stick to P/E and P/B.

Stock Trends and Investor Payouts

The stock price trend over the last 12 months tells a story of market caution, not operational failure. The stock has decreased by 14.39% over the past year, reflecting broader pressures on regional banks and the impact of the high-interest-rate environment on loan portfolios and deposit costs. The stock is currently trading near the lower end of its 52-week range, which runs from $34.61 to $48.05. Still, the company has shown resilience by actively repurchasing shares, which helps support the price.

For income-focused investors, the dividend profile is strong. FS Bancorp, Inc. has a trailing dividend yield of approximately 2.9%. More importantly, the dividend payout ratio is a very healthy 27% of profit. This low payout ratio means the quarterly cash dividend of $0.28 per share is highly sustainable, with plenty of room for future increases or to weather an economic downturn. They aren't overextending to pay shareholders. That's prudent management.

If you want to dive deeper into who is actually buying and selling this stock right now, you should be Exploring FS Bancorp, Inc. (FSBW) Investor Profile: Who's Buying and Why?

• Stock is down 14.39% over the last 12 months.
• Dividend yield is a solid 2.9%.
• Low payout ratio of 27% signals dividend safety.

Risk Factors

You need to know the risks before you commit capital, and for FS Bancorp, Inc. (FSBW), the near-term picture shows a classic regional bank balancing credit quality against a high-interest-rate funding environment. The direct takeaway is this: while their capital ratios are strong, investors must watch the creep in nonperforming loans and the reliance on higher-cost funding sources.

FSBW's net income is trending lower, hitting $9.2 million in Q3 2025, down from $10.3 million a year prior. This dip is a clear signal that the cost of doing business-specifically, the cost of funds and the provision for credit losses-is rising faster than revenue growth. This isn't a crisis, but it's a headwind you can't ignore.

Internal and External Pressures

The biggest external risk is the sustained high-interest-rate environment. This creates two problems: it pressures the bank's net interest margin (NIM) by increasing deposit costs, and it stresses borrowers, raising the risk of loan defaults. The bank's NIM did improve slightly to 4.37% in Q3 2025, but that margin is constantly under attack from deposit competition. Also, the forward-looking statements in their Q3 2025 10-Q filing explicitly call out the risk of geopolitical developments and international conflicts disrupting financial markets and energy prices, which hits their operating region in Washington and Oregon.

Internally, the liquidity profile has shifted. Total deposits grew to $2.69 billion by September 30, 2025, but a significant portion of that growth came from brokered deposits, which are generally more sensitive to interest rate changes and less stable than core deposits. Uninsured deposits totaled approximately $694.4 million, or 25.8% of total deposits at the end of Q3 2025. That's a key vulnerability in a stressful market.

Operational and Financial Risks to Monitor

The most concrete financial risk is asset quality deterioration. The ratio of nonperforming loans to total gross loans rose to 0.70% at September 30, 2025, up from 0.54% at the end of 2024. Classified loans-those with well-defined weaknesses-also increased to $27.1 million. Here's the quick math: the coverage ratio of the Allowance for Credit Losses (ACL) to nonperforming loans dropped to 163.8%, a notable decrease from 234.3% in December 2024. Less coverage means a smaller cushion for future losses.

Operationally, the company is undergoing a leadership transition. Joseph C. Adams, the long-time CEO, is retiring from the bank in September 2025, with Matthew D. Mullet taking over as President and CEO of 1st Security Bank. While Mullet has extensive experience, any CEO succession creates a period of elevated strategic risk, defintely in a challenging economic cycle. You can review their guiding principles here: Mission Statement, Vision, & Core Values of FS Bancorp, Inc. (FSBW).

• Nonperforming loans are up.
• Deposit funding costs are rising.
• Leadership change is underway.

Mitigation and Actionable Defense

The good news is that management is taking clear actions. They are focused on maintaining strong regulatory capital, which is a massive defense against market shocks. At the end of Q3 2025, the bank's Total Risk-Based Capital ratio stood at a healthy 13.8%, and its Tier 1 Leverage Capital ratio was 11.0%, both well above regulatory minimums. This gives them a strong buffer.

They are also aggressively managing capital structure. The Board authorized an additional share repurchase program of up to $5.0 million in October 2025, which signals confidence in the stock's valuation and is a direct way to return capital to shareholders. This capital management, combined with a focus on expanding yields on earning assets, shows they are actively working to offset the rising cost of funds.

Growth Opportunities

You're looking for a clear path forward with FS Bancorp, Inc. (FSBW), and the data for the 2025 fiscal year points to a story of resilient, measured growth, not explosive tech-sector expansion. The key takeaway is that the company is effectively leveraging its regional strength and capital management to deliver value, even as net interest margins face pressure.

The analyst consensus pegs FS Bancorp's full-year 2025 earnings per share (EPS) at around $4.67, which represents a solid projected increase of 9.62% over the prior year's forecast. Here's the quick math: that growth is slower than the broader U.S. market, but it's a reliable climb for a regional bank. Revenue is forecast to grow at approximately 6.1% per annum, primarily driven by their core banking activities in the Northwest.

Core Growth Drivers: Deposits and Diversified Lending

The company's growth is grounded in its strong deposit base and targeted lending. Total deposits surged to approximately $2.69 billion in the third quarter of 2025, a significant 10.7% year-over-year increase. This deposit inflow, even with the use of brokered deposits, gives them a stable, lower-cost funding source. Loan stability is also a factor, with loans receivable holding steady at about $2.50 billion as of the first quarter of 2025.

Their geographic focus on the greater Puget Sound area, the Tri-Cities, and Vancouver, Washington, plus parts of Oregon, is a defintely smart, targeted market expansion. They aren't chasing growth everywhere; they are deepening their presence in high-potential Northwest markets. Their diversified portfolio-commercial and industrial loans, residential mortgage financing, and specialized products like marine loans-helps smooth out the cyclicality that often hits banks focused on just one area.

• Deposit Strength: Total deposits hit $2.69 billion in Q3 2025.
• Loan Stability: Loans receivable remained stable at $2.50 billion.
• Geographic Focus: Deepening penetration in the Puget Sound and Tri-Cities.

Strategic Initiatives and Competitive Edge

FS Bancorp's strategic moves in 2025 have been focused on capital returns and governance. The Board authorized an additional share repurchase program of up to $5.0 million in October 2025, signaling management's confidence that the stock is undervalued and a commitment to boosting shareholder returns. This is a clear, actionable move to improve EPS. Plus, the CEO succession plan, which saw Matt Mullet named President and CEO of 1st Security Bank in September 2025, provides a smooth transition and leadership continuity.

What really sets FS Bancorp apart is its valuation. The stock is trading at a steep discount to its estimated discounted cash flow (DCF) fair value of $82.76. That's a huge gap. Their Price-to-Earnings (P/E) ratio is also low at about 9x compared to peers, suggesting the market is overlooking their quality earnings and minimal risk profile. They also maintain a sustainable dividend, having declared their 51st consecutive quarterly cash dividend of $0.28 per share in Q3 2025.

Here is a snapshot of the forward-looking financial health based on 2025 data:

For a deeper dive into the risks and other financial metrics, you should read the full analysis: Breaking Down FS Bancorp, Inc. (FSBW) Financial Health: Key Insights for Investors.