2026 third quarter
Filed Oct 21, 2026FS Bancorp, Inc. Reports Third Quarter Net Income of $4.9 Million or $0.63 Per Diluted Share and Declares 55th Consecutive Quarterly Cash Dividend
Net income fell to $4.9 million from $7.9 million in the prior quarter and $9.2 million in the prior-year quarter as acquisition-related costs, higher operating expense and a Home Lending loss outweighed higher net interest income and the Pacific West Acquisition bargain purchase gain.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net interest income, three months ended September 30, 2026GAAP | $35.69M | 9% | 6% |
| Provision for credit losses, three months ended September 30, 2026GAAP | $3.46M | 31% | 50% |
| Total noninterest income, three months ended September 30, 2026GAAP | $6.18M | — | 10% |
| Total noninterest expense, three months ended September 30, 2026GAAP | $32.31M | 24% | 27% |
| Income before provision for income taxes, three months ended September 30, 2026GAAP | $6.09M | (39%) | (47%) |
| Provision for income taxes, three months ended September 30, 2026GAAP | $1.16M | (45%) | (52%) |
| Net income, three months ended September 30, 2026GAAP | $4.93M | (38%) | (46%) |
| Basic earnings per share, three months ended September 30, 2026GAAP | $0.65 | (39%) | (46%) |
| Diluted earnings per share, three months ended September 30, 2026GAAP | $0.63 | (39%) | (47%) |
| Net interest margin (annualized), three months ended September 30, 2026GAAP | 4.36% | six basis point increase | – |
| Average total cost of funds (annualized), three months ended September 30, 2026GAAP | 2.32% | – | – |
| Return on assets (annualized), three months ended September 30, 2026GAAP | 0.57% | – | – |
| Return on equity (annualized), three months ended September 30, 2026GAAP | 5.85 | – | – |
| Efficiency ratio, three months ended September 30, 2026GAAP | 77.19 | – | – |
| Gain on sale of loans, three months ended September 30, 2026GAAP | $1.47M | (43%) | (40%) |
| Bargain purchase gain, three months ended September 30, 2026GAAP | $1.66M | NM | NM |
| Gross margins on home loan sales, quarter ended September 30, 2026other | 3.55% | – | – |
| Net income, nine months ended September 30, 2026GAAP | $20.69M | – | (17%) |
| Diluted earnings per share, nine months ended September 30, 2026GAAP | $2.62 | – | (18%) |
| Net interest income, nine months ended September 30, 2026GAAP | $100.9M | – | 4% |
| Total assets, September 30, 2026GAAP | $3.68B | 16% | 15% |
| Loans receivable, net, September 30, 2026GAAP | $3.01B | 14% | 16% |
| Total deposits, September 30, 2026GAAP | $2.87B | 17% | 7% |
| Borrowings, September 30, 2026GAAP | $373.5M | 15% | 189% |
| Stockholders' equity, September 30, 2026GAAP | $333.2M | 4% | 11% |
| Book value per common share, September 30, 2026GAAP | $43.05 | (1.2%) | 6.5% |
| Tangible book value per share, September 30, 2026non-GAAP | $40.84 | – | – |
| Total nonperforming loans, September 30, 2026GAAP | $25.14M | – | – |
| Allowance for credit losses on loans, September 30, 2026GAAP | $36.46M | – | – |
| Nonperforming loans to total gross loans (excluding loans HFS), September 30, 2026GAAP | 0.83 | – | – |
| ACL – loans to total gross loans (excluding loans HFS), September 30, 2026GAAP | 1.20 | – | – |
| Bank total risk-based capital, September 30, 2026GAAP | 12.61% | – | – |
| Bank Tier 1 leverage capital, September 30, 2026GAAP | 11.24% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Commercial and Consumer BankingSegment net income was $5.7 million, compared to $6.8 million for the prior quarter and $8.4 million for the third quarter of 2025. | $31,888 net interest income | – | – |
| Home LendingThe segment reported a net loss of $806,000 due to rising interest rates, compared to net income of $1.1 million for the prior quarter and $775,000 for the third quarter of 2025. | $3,798 net interest income | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Capital returns
- Repurchased 44,664 shares of the Company's common stock in the open market for $1.9 million in the third quarter of 2026, at an average price of $43.41 per share.
- The Board of Directors approved its 55th consecutive quarterly cash dividend of $0.29 per common share.
- The cash dividend will be paid on November 20, 2026, to shareholders of record as of November 6, 2026.
- The increase in stockholders’ equity was partially offset by $1.9 million in open market share repurchases and $2.2 million in cash dividends paid.
What drove it
- Loans receivable, net increased $379.1 million to $3.01 billion from June 30, 2026, reflecting $252.7 million in acquired loans that remained outstanding and $131.5 million of loan growth excluding acquired loans.
- Excluding the acquisition, loan growth was primarily concentrated in non-owner occupied commercial real estate and one-to-four family residential loans, which increased $29.8 million and $76.6 million, respectively, from June 30, 2026.
- Net interest income increased $2.0 million to $35.7 million from the prior-year quarter, primarily due to a $2.7 million increase in interest income on loans receivable, partially offset by a $452,000 increase in total interest expense.
- NIM increased six basis points from the prior quarter, primarily due to lower funding costs, lower rates on repricing certificates of deposit, the slightly lower-cost Pacific West funding base, and improved investment securities yields.
- The Pacific West Acquisition generated a preliminary bargain purchase gain of $1.7 million in noninterest income, which is not taxable.
- Home loan sales totaled $122.9 million, compared to $156.1 million during the previous quarter and $156.4 million during the same quarter one year ago.
Concerns
- Total noninterest expense increased $6.2 million from the prior quarter to $32.3 million, driven by acquisition-related costs, higher salaries and benefits, operations expense and data processing expense.
- The Company incurred $2.5 million in merger-related expenses during the quarter and anticipates that the majority of remaining acquisition-related expenses will be recognized during the fourth quarter of 2026.
- The Home Lending segment recorded a net loss of $806,000 due to rising interest rates.
- Gain on sale of loans declined to $1,468 from $2,581 in the prior quarter and $2,439 in the prior-year quarter, reflecting lower loan sale volume as higher mortgage rates reduced saleable production.
- Total nonperforming loans increased to $25,141 from $15,647 at June 30, 2026, primarily driven by $8.6 million of nonaccrual loans acquired in the Pacific West Acquisition.
- Total classified loans increased to $38,412 from $24,979 at June 30, 2026, primarily driven by $12.5 million of classified loans acquired in the Pacific West Acquisition.
- Bank total risk-based capital declined to 12.6% from 14.0% at June 30, 2026, while the Bank remained well capitalized.
What to watch
- Recognition of the majority of remaining acquisition-related expenses, primarily system integration and core conversion costs, during the fourth quarter of 2026.
- Execution of the planned fourth quarter 2026 core processing conversion and retention of key personnel and customers.
- The performance and credit loss experience of loans acquired in the Pacific West Acquisition.
- The trajectory of Home Lending production, loan sale volume and gains on sale of loans amid mortgage-rate changes.
- Deposit mix, fintech partner deposits, borrowings and the resulting funding-cost impact.
- Nonperforming and classified loan trends, including the indirect home improvement portfolio and the single nonperforming construction and development loan.
Balance sheet and cash flow
- Total cash and cash equivalents were $43,947 at September 30, 2026, compared to $29,710 at June 30, 2026 and $61,280 at September 30, 2025.
- At the close of business on August 19, 2026, the Company completed its acquisition of Pacific West Bancorp for total consideration of approximately $35.3 million.
- The Company acquired assets with a fair value of $476.5 million, including loans of $256.5 million and a core deposit intangible of $5.3 million, and assumed liabilities of $439.5 million, including deposits of $435.6 million.
- Pacific West shareholders received 430,149 shares of FS Bancorp common stock and $16.9 million in cash.
- Transactional deposits increased $377.6 million during the quarter, of which $351.6 million was attributable to the Pacific West Acquisition.
- Fintech partner deposits were $177,463 at September 30, 2026.
- Brokered deposits declined from the prior quarter, partially offset by increased borrowings, which offered a slightly lower cost of funds.
Analysis
FS Bancorp reported third-quarter GAAP net income of $4.9 million, or $0.63 per diluted share, down from $7.9 million, or $1.04 per diluted share, in the prior quarter and $9.2 million, or $1.18 per diluted share, a year earlier. Net interest income increased to $35.7 million, with NIM at 4.36%, above 4.30% in the prior quarter, but profitability was reduced by a $3.5 million provision for credit losses and $32.3 million of noninterest expense. The efficiency ratio rose to 77.19 from 67.28 in the prior quarter and 64.63 a year earlier.
The Pacific West Acquisition completed on August 19, 2026 materially expanded the balance sheet. Total assets reached $3.68 billion, loans receivable, net were $3.01 billion, and deposits were $2.87 billion at September 30, 2026. The acquired business contributed $252.7 million of loans remaining outstanding, $442.8 million in deposits and $177.5 million of fintech partner deposits at quarter end. The transaction also produced a $1.7 million preliminary bargain purchase gain, while adding $2.5 million of merger-related expenses during the quarter.
Core loan growth also contributed. Excluding acquired loans, loans increased $131.5 million during the quarter, with non-owner occupied commercial real estate and one-to-four family residential loans increasing $29.8 million and $76.6 million, respectively. Funding costs improved, as average total cost of funds fell to 2.32% from 2.41% in both the prior quarter and prior-year quarter. However, borrowings increased to $373.5 million from $324.5 million at June 30, 2026, while total risk-based capital at the Bank declined to 12.61% from 14.0%.
Mortgage banking remained under pressure from rising interest rates. The Home Lending segment recorded a net loss of $806,000, home loan sales fell to $122.9 million from $156.1 million in the prior quarter, and gain on sale of loans fell to $1.5 million from $2.6 million. Gross margins on home loan sales improved to 3.55% from 2.98% in the prior quarter, but a $742,000 fair value decrease on first lien residential mortgage loans and lower saleable production weighed on noninterest income.
Credit measures warrant attention following the acquisition. Nonperforming loans increased to $25.1 million from $15.6 million in the prior quarter, primarily because $8.6 million of acquired loans were nonaccrual at the acquisition date. Classified loans rose to $38.4 million from $25.0 million, with $12.5 million acquired through Pacific West. The Company expects the majority of remaining acquisition-related expenses, mainly system integration and core conversion costs, in the fourth quarter. Capital returns continued through $1.9 million of share repurchases and a declared $0.29 per common share quarterly dividend.
Management, verbatim
We are excited to work with the Pacific West Bank team members to further expand the deposit and loan opportunities in the greater Portland, Oregon and Vancouver, Washington markets, and we appreciate all of the hard work that went into the successful systems integration, effective October 5, 2026, through the collaboration of our newly combined teams.
Matthew Mullet, President and CEO of FS Bancorp, Inc.
We are also pleased to announce that our Board of Directors has approved our 55th consecutive quarterly cash dividend of $0.29 per common share, demonstrating our commitment to returning capital to long-term shareholders. The cash dividend will be paid on November 20, 2026, to shareholders of record as of November 6, 2026,
Matthew Mullet, President and CEO of FS Bancorp, Inc.
Not in the filing
stated, not guessed- Total revenue is not reported because the filing presents banking income statement line items rather than revenue.
- Operating cash flow is not reported.
- Free cash flow is not reported.
- Forward financial guidance is not reported.
- Prior outlook is not provided.
- A consolidated gross margin is not reported.
- A GAAP or non-GAAP adjusted earnings measure is not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.