FS Bancorp : Fourth Quarter ending December 31, 2022

JOSEPH URBANSKI

President

Chief Executive Officer

CONTACT	FOR IMMEDIATE RELEASE	January 27, 2023
Stacy Merrifield
Investor Relations
260.463.7111
[e-mail]

FS Bancorp Reports December 31, 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 December 31, 2022.

FS Bancorp is pleased to report quarterly earnings for the quarter ending December 31, 2022. Net income for the quarter ended December 31, 2022 was $4.1 million compared to $3.9 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 fourth quarter of

2022 included the following items:

• Total loans totaled $747 million at December 31, 2022 compared to $673 million at December 31, 2021.
• Total assets, total loans and total deposits all reached record quarter end levels at December 31, 2022.
• Asset quality remains very good through the fourth quarter of 2022. Net recoveries during the fourth quarter of 2022 totaled $5,000, and total delinquencies were 0.14% of loans at December 31, 2022.

Like many banks we originated many loans over the last three years that have not repriced since interest rates have begun their significant rise. However, the cost of deposits and other interest- bearing liabilities have been rising. In our effort to manage interest rate risk we purchased an interest rate cap to help protect future earnings should the Federal Reserve raise interest rates further than currently expected.. At December 31, 2022, the interest rate cap resulted in a loss of $310,000 that is included in Other income. The quarterly revaluation of the interest rate cap could have a positive or negative impact on future earnings.

We are pleased to have achieved 11% loan growth over the past twelve months while maintaining strong asset quality indicators.

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

www.GoFSB.com

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 protested IDOR's findings, and they have indicated they are no longer pursuing the matter.

We are very pleased that we had a great year 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

December 31, 2022 and 2021 (Unaudited)

		December 31,	December 31,
(Dollars in thousands)		2022		2021
Assets
Cash and due from banks	$	89,703	$	72,304
Investment securities		294,491		318,617
Federal Home Loan Bank stock		2,143		2,343
Total loans		747,160		672,850
Less allowance for loan losses		(6,708)		(6,598)
Loans, net		740,452		666,252
Premises and equipment, net		10,404		10,340
CSV- Insurance		19,014		14,638
Goodwill and other intangible assets		2,604		2,604
Other assets		20,498		7,288
Total Assets	$	1,179,309	$	1,094,386
Liabilities
Deposits
Noninterest-bearing demand	$	286,637	$	274,268
Interest-bearing demand		476,466		423,879
Savings		189,686		188,500
Time under $250,000		90,312		72,635
Time $250,000 and over		23,861		19,577
Total deposits		1,066,962		978,859
Repurchase agreements		6,970		7,607
Federal Home Loan Bank advances		10,000		-
Other liabilities		7,377		5,356
Total Liabilities		1,091,309		991,822
Shareholders' Equity
Common stock: No par value, 10,000,000 shares
authorized; 4,763,904 shares issued and
4,300,070 and 4,332,316 shares outstanding 2022
and 2021		149		149
Paid-in capital		3,088		3,152
Retained earnings		117,283		104,909
Net unrealized gains (losses) on securities		(23,633)		1,861
Less treasury stock, at cost; 463,834 and 431,588
shares 2022 and 2021		(8,887)		(7,507)
Total Shareholders' Equity		88,000		102,564
Total Liabilities and Shareholders' Equity		$	1,179,309	$	1,094,386

FS BANCORP

CONSOLIDATED STATEMENTS OF INCOME

For the Three and Twelve Months Ended December 31, 2022 and 2021 (Unaudited)

		Three Months Ended	Twelve Months Ended
(Dollars in thousands except earnings per share)		December 31,		December 31,
		2022		2021		2022		2021
Interest Income
Interest and fees on loans	$	8,895	$	7,118	$	31,986	$	29,585
Interest on investment securities		1,485		1,319		5,732		4,317
Other interest and dividend income		854		83		1,434		316
Total Interest Income		11,234		8,520		39,152		34,218
Interest Expense
Interest on deposits		2,127		269		3,733		1,122
Interest on FHLB advances and other borrowings		34		19		36		306
Total Interest Expense		2,161		288		3,769		1,428
Net Interest Income		9,073		8,232		35,383		32,790
Provision for loan losses		-		-		160		-
Net Interest Income after Provision for Loan
Losses		9,073		8,232		35,223		32,790
Noninterest Income
Service charges on deposit accounts		455		480		1,973		1,706
Credit and debit card income		866		900		3,447		3,372
Mortgage banking		45		100		390		809
Gains and losses on securities		16		-		(26)		533
Other income		(32)		308		829		1,222
Total Noninterest Income		1,350		1,788		6,613		7,642
Noninterest Expenses
Salaries and employee benefits		3,047		3,071		12,499		12,496
Occupancy expense on premises, furniture and
equipment, net		476		499		1,966		1,958
Data processing expense		551		461		2,140		1,886
Advertising and marketing expense		94		140		499		951
Other expenses		1,435		1,379		5,116		4,735
Total Noninterest Expenses		5,603		5,550		22,220		22,026
Income Before Income Taxes		4,820		4,470		19,616		18,406
Income tax expense (benefit)		703		614		3,145		2,943
Net Income	$	4,117	$	3,856	$	16,471	$	15,463
Basic Earnings Per Share	$	0.96	$	0.89	$	3.82	$	3.57
Diluted Earnings Per Common Share	$	0.96	$	0.88	$	3.80	$	3.54