FS Bancorp : Second Quarter ending June 30, 2023

JOSEPH URBANSKI

President

Chief Executive Officer

CONTACT	FOR IMMEDIATE RELEASE	July 28, 2023
Stacy Merrifield
Investor Relations
260.463.7111
[e-mail]

FS Bancorp Reports June 30, 2023 Financial Results

LAGRANGE, IN. - FS Bancorp (the "Company") (OTCPK: FXLG) parent company of Farmers State Bank (the "Bank") announced earnings for the quarter ended June 30, 2023.

FS Bancorp is pleased to report solid earnings for the quarter ending June 30, 2023. Net income for the quarter ended June 30, 2023 was $3.7 million compared to $4.2 million for the same quarter of 2022. Core earnings continued to be solid with net interest income remaining relatively stable in a volatile interest rate environment. Inflation, higher FDIC insurance premiums, higher legal and compliance costs, increased self-funded medical insurance claims, and other factors led to higher overhead costs during 2023 resulting in slightly lower net income. Highlights of the second quarter of 2023 included the following items:

• FS Bancorp was ranked 23rd on the American Banker Association (ABA) list of top 200 banks (assets below $2 billion) based on average return on equity for 2020 to 2022. FS Bancorp was the highest ranked bank in Indiana for our asset size category on the ABA's report this year.
• Total loans were $753 million at June 30, 2023 compared to $712 million at June 30, 2022.
• Total deposits were $1,022,057,000 at June 30, 2023 compared to $1,045,309,000 at June

30, 2022, which represents a 2% decrease. Total deposits include $30,951,000 and $4,713,000 of brokered deposits at June 30, 2023 and 2022, respectively. The changes in the deposit mix at June 30, 2023 represented the demand for clients to earn more interest on their excess funds and consumers spending excess liquidity.

• We maintained a solid balance sheet liquidity profile. At June 30, 2023, cash and due from banks totaled $80.9 million. Additionally, our investment portfolio contains $96.7 million in investments that are either floating rate or mature by June 30, 2025.
• We sold approximately $10 million of investment securities during the quarter that resulted in a net loss on the sale of securities of $249,000.

220 S. Detroit Street • LaGrange, Indiana 46761 • phone [phone] • fax [phone]

www.GoFSB.com

• We have recognized a gain on our interest rate cap of $219,000 during the second quarter of 2023, which is included in Other income.
• We have meaningful borrowing capacity with the Federal Home Loan Bank of Indianapolis (FHLBI), Federal Reserve and other institutions totaling more than $450 million. Our borrowing capacity is greatly enhanced by the significant assets including mortgage loans that we pledge as collateral to FHLBI. Based on existing mortgage loans pledged as collateral to FHLBI, Farmers State Bank has the ability to borrow $228 million beyond the current outstanding borrowings which only totaled $20 million at June 30, 2023. We are in the process of pledging commercial loans to the Federal Reserve Bank to increase our current borrowing capacity of $70 million.
• Asset quality remained very good through the first quarter of 2023. Net charge-offs during the second quarter of 2023 totaled $20,000, and total delinquencies were 0.22% of loans at June 30, 2023.
• We are maintaining some of the strongest capital ratios in the history of the Company. Our Tier 1 leverage ratio was 9.5% at June 30, 2023 compared to 8.7% at June 30, 2022. Our total capital ratio was 17.3% at June 30, 2023 compared to 16.1% at June 30, 2022.
• There may be changes to the Internal Revenue Services' (IRS) treatment of captive insurance subsidiaries. There may be future changes to our organizational structure as a result of actions taken by the IRS that may negatively impact earnings in the period the change is enacted. Subsequent earnings of the Company are not expected to be materially impacted.

We are very pleased that we have had a good start to 2023. Our entire team is focused on growing our Company and implementing changes that will be a benefit to our customers, employees, and the communities we serve. Thank you for your continued investment in FS Bancorp and your support of our Farmers State Bank team.

Forward Looking Statements

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include expressions such as "expects," "intends," "believes," and "should," which are necessarily statements of belief as to the expected outcomes of future events. Actual results could materially differ from those presented. The Company's ability to predict future results involves a number of risks and uncertainties. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

Founded in 1915 in Stroh, Indiana, Farmers State Bank is one of northeast Indiana's leading financial institutions and the home of Blue Button Banking. With corporate headquarters in LaGrange, Indiana, Farmers State Bank has been providing banking and financial services to both consumers and businesses for the past 100 years. To learn more, visit GoFSB.com.

FS BANCORP

CONSOLIDATED BALANCE SHEETS

June 30, 2023 and 2022 (Unaudited)

	June 30,	June 30,
(Dollars in thousands)	2023	2022
Assets

Cash and due from banks

Investment securities

Federal Home Loan Bank stock

Total loans

Less allowance for credit losses

Loans, net

Premises and equipment, net

Cash surrender value of life insurance

Goodwill and other intangible assets

Other assets

Total Assets

Liabilities

Deposits

Noninterest-bearing demand

Interest-bearing demand

Savings

Time under $250,000

Time $250,000 and over

Total deposits

Repurchase agreements

Federal Home Loan Bank advances

Other liabilities

Total Liabilities

Shareholders' Equity

Common stock: No par value, 10,000,000 shares authorized; 4,763,904 shares issued and 4,286,713 and 4,327,532 shares outstanding 2023 and 2022

Paid-in capital Retained earnings

Net unrealized gains (losses) on securities

Less treasury stock, at cost; 477,191 and 436,372 shares 2023 and 2022

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

$	80,928	$	94,640
	263,921		297,531
	6,136		2,143
	753,281		711,703
	(7,030)		(6,679)
	746,251		705,024
	10,123		10,261
	19,239		18,785
	2,604		2,604
	17,704		15,445
$	1,146,906	$	1,146,433

$ 268,085	$ 287,838
452,112	457,739
180,139	193,827
99,151	73,301
22,570	32,604
1,022,057	1,045,309
4,479	7,457
20,000	-
6,897	6,683
1,053,433	1,059,449

149	149
2,970	3,017
122,657	111,341
(22,888)	(19,663)
(9,415)	(7,860)
93,473	86,984
$ 1,146,906	$ 1,146,433

FS BANCORP

CONSOLIDATED STATEMENTS OF INCOME

For the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)

		Three Months Ended		Six Months Ended
(Dollars in thousands except earnings per share)		June 30,			June 30,
Interest Income		2023		2022		2023		2022
Interest and fees on loans	$	9,695	$	7,621	$	18,939	$	14,866
Interest on investment securities		1,475		1,424		3,032		2,771
Other interest and dividend income		999		184		1,788		234
Total Interest Income		12,169		9,229		23,759		17,871
Interest Expense
Interest on deposits		3,268		399		6,119		665
Interest on FHLB advances and other borrowings		153		1		353		1
Total Interest Expense		3,421		400		6,472		666
Net Interest Income		8,748		8,829		17,287		17,205
Credit loss expense - loans		48		60		48		100
Net Interest Income after Provision for Loan
Losses		8,700		8,769		17,239		17,105
Noninterest Income
Service charges on deposit accounts		499		496		1,053		945
Credit and debit card income		872		900		1,707		1,713
Mortgage banking		71		89		94		237
Gains and (losses) on securities		(249)		-		(224)		-
Other income		482		275		661		558
Total Noninterest Income		1,675		1,760		3,291		3,453
Noninterest Expenses
Salaries and employee benefits		3,345		3,117		6,638		6,278
Occupancy expense on premises, furniture and
equipment, net		498		488		997		1,008
Data processing expense		611		505		1,125		1,025
Advertising and marketing expense		114		150		264		274
Other expenses		1,431		1,234		2,848		2,327
Total Noninterest Expenses		5,999		5,494		11,872		10,912
Income Before Income Taxes		4,376		5,035		8,658		9,646
Income tax expense		696		807		1,312		1,565
Net Income	$	3,680	$	4,228	$	7,346	$	8,081
Basic Earnings Per Share
$	0.86	$	0.97	$	1.71	$	1.86
Diluted Earnings Per Common Share	$	0.85	$	0.97	$	1.70	$	1.85