FS Bancorp : Third Quarter ending September 30, 2022

JOSEPH URBANSKI

President

Chief Executive Officer

CONTACT	FOR IMMEDIATE RELEASE	October 31, 2022
Stacy Merrifield
Investor Relations
260.463.7111
[e-mail]

FS Bancorp Reports September 30, 2022 Financial Results

LAGRANGE, IN. - FS Bancorp (the "Company") (OTCPK: FXLG) parent company of Farmers State Bank (the "Bank") announced earnings for the quarter ended September 30, 2022.

FS Bancorp is pleased to report record quarterly earnings for the quarter ending September 30, 2022. Net income for the quarter ended September 30, 2022 was $4.3 million compared to $4.0 million for the same quarter of 2021. The continued growth of our balance sheet combined with good expense management has allowed us to maintain strong core earnings. Highlights of the third quarter of 2022 included the following items:

• Total loans totaled $731 million at September 30, 2022 compared to $632 million at September 30, 2021.
• Total assets, total loans and total deposits all reached record quarter end levels at September 30, 2022.
• Asset quality remains very good through the third quarter of 2022. Net recoveries during the third quarter of 2022 totaled $18,000, and total delinquencies were 0.06% as of loans at September 30, 2022.

We are pleased to have achieved 16% loan growth over the past twelve months while maintaining strong asset quality indicators. During the third quarter of 2022, changes in market conditions including interest rates negatively impacted the value of our investment portfolio and the net unrealized losses on securities which is a component of shareholders' equity. The resulting decline in shareholders' equity does not impact regulatory capital levels as this amount is not a component of regulatory capital.

In October of 2022, the Indiana Department of Revenue (IDOR) proposed adjustments to our tax returns for 2018 and 2019 related to a single tax position of the Company and requested we pay approximately $1.5 million in taxes, penalties and interest. We are protesting IDOR's findings and believe the tax position taken by the Company is consistent with Indiana law, previous rulings by

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

www.GoFSB.com

IDOR and common practice in the Indiana banking industry. If IDOR is successful, the Company could incur approximately $3 million in expense (net of federal tax benefits) for all tax years that are currently open under Indiana law. After discussing this matter with our legal counsel and independent audit firm, we have determined that no expense or liability should be recorded as of September 30, 2022 for this matter based on existing accounting guidance.

We are very pleased that we had a great first nine months in 2022. 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

September 30, 2022 and 2021 (Unaudited)

		September 30,	September 30,
(Dollars in thousands)		2022		2021
Assets
Cash and due from banks	$	86,817	$	162,948
Investment securities		291,483		247,314
Federal Home Loan Bank stock		2,143		2,343
Total loans		730,635		631,804
Less allowance for loan losses		(6,721)		(6,611)
Loans, net		723,914		625,193
Premises and equipment, net		10,448		10,475
CSV- Insurance		18,897		14,569
Goodwill and other intangible assets		2,604		2,604
Other assets		17,241		6,770
Total Assets	$	1,153,547	$	1,072,216
Liabilities
Deposits
Noninterest-bearing demand	$	292,133	$	272,360
Interest-bearing demand		465,642		393,732
Savings		192,925		189,879
Time under $250,000		73,466		73,640
Time $250,000 and over		32,165		19,526
Total deposits		1,056,331		949,137
Repurchase agreements		7,432		7,498
Federal Home Loan Bank advances		-		10,000
Other liabilities		7,464		5,383
Total Liabilities		1,071,227		972,018
Shareholders' Equity
Common stock: No par value, 10,000,000 shares
authorized; 4,763,904 shares issued and
4,297,676 and 4,326,464 shares outstanding 2022
and 2021		149		149
Paid-in capital		3,045		3,697
Retained earnings		114,013		101,878
Net unrealized gains (losses) on securities		(25,973)		2,306
Less treasury stock, at cost; 466,228 and 437,440
shares 2022 and 2021		(8,914)		(7,832)
Total Shareholders' Equity		82,320		100,198
Total Liabilities and Shareholders' Equity		$	1,153,547	$	1,072,216

FS BANCORP

CONSOLIDATED STATEMENTS OF INCOME

For the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)

		Three Months Ended	Nine Months Ended
(Dollars in thousands except earnings per share)		September 30,	September 30,
		2022		2021	2022	2021
Interest Income
Interest and fees on loans	$	8,225	$	7,581	$ 23,091	$ 22,467
Interest on investment securities		1,476		1,104	4,247	2,998
Other interest and dividend income		346		101	580	233
Total Interest Income		10,047		8,786	27,918	25,698

Interest Expense

Interest on deposits

Interest on FHLB advances and other borrowings

Total Interest Expense

Net Interest Income

Provision for loan losses

Net Interest Income after Provision for Loan Losses

Noninterest Income

Service charges on deposit accounts

Credit and debit card income

Mortgage banking

Gains and losses on securities

Other income

Total Noninterest Income

Noninterest Expenses

Salaries and employee benefits

Occupancy expense on premises, furniture and equipment, net

Data processing expense Advertising and marketing expense Other expenses

Total Noninterest Expenses

Income Before Income Taxes

Income tax expense (benefit)

Net Income

Basic Earnings Per Share

Diluted Earnings Per Common Share

	941		283		1,606		853
	1		77		2		287
	942		360		1,608		1,140
	9,105		8,426		26,310		24,558
	60		(56)		160		-
	9,045		8,482		26,150		24,558
	573		465		1,518		1,226
	868		891		2,581		2,472
	108		177		345		709
	(42)		132		(42)		533
	303		281		861		914
	1,810		1,946		5,263		5,854
	3,174		3,163		9,452		9,425
	482		490		1,490		1,459
	564		473		1,589		1,425
	131		150		405		811
	1,354		1,341		3,681		3,356
	5,705		5,617		16,617		16,476
	5,150		4,811		14,796		13,936
	877		780		2,442		2,329
$	4,273	$	4,031	$	12,354	$	11,607
$	1.00	$	0.93	$	2.86	$	2.68
$	0.99	$	0.92	$	2.84	$	2.66