FS Bancorp, Inc. Reports Net Income for the Fourth Quarter of $1.1 Million or $0.36 per Share and $5.3 Million or $1.76 per

FS Bancorp, Inc. Reports Net Income for the Fourth Quarter of $1.1 Million or
$0.36 per Share and $5.3 Million or $1.76 per Share for the Year Ended
December 31, 2012

MOUNTLAKE TERRACE, Wash., Jan. 30, 2013 (GLOBE NEWSWIRE) -- FS Bancorp, Inc.
(Nasdaq:FSBW) ("FS Bancorp" or "the Company"), the holding company for 1st
Security Bank of Washington ("the Bank") today reported 2012 fourth quarter
net income of $1.1 million, or $0.36 per diluted share, compared to $312,000
for the fourth quarter ended December 31, 2011. The 2012 fourth quarter net
income of $1.1 million compares to $3.3 million for the third quarter of 2012
which included a $2.3 million reversal of the valuation allowance for the
deferred tax asset. Net income for the year ended December 31, 2012 was $5.3
million including the $2.3 million reversal of the valuation allowance for the
deferred tax asset compared to net income of $1.5 million for the year ended
December 31, 2011. The Company completed its initial public offering on July
9, 2012 with the issuance of 3,240,125 shares of its common stock, which
generated gross proceeds of $32.4 million; therefore, operating results before
that date are for the Bank only.

"The focus on the successful implementation of the business plan has allowed
the Bank to invest in an expanded infrastructure and also, at the same time,
continue to increase earnings," stated Joe Adams, CEO of the Company and the
Bank. "The Board is pleased with the diversified revenue streams that include
expanded business lending, construction lending, and home lending to
complement our strength in consumer lending."

As previously disclosed in the third quarter Form 10-Q, the Company completed
the sale of 366 consumer marine loans on December 14, 2012 that had an
aggregate principal balance of $12.6 million. In connection with the sale, a
$67,000 reserve for potential loan recourse was established and will remain in
effect until June 12, 2013. The sale of marine loans resulted in a pre-tax
gain of $115,000, net of the reserve. The primary purpose in selling these
consumer loans was to enable the Company to continue to diversify its balance
sheet and manage interest rate risk.

2012 Fourth Quarter and Year End Highlights

  *Net income decreased to $1.1 million compared to $3.3 million (including a
    $2.3 million reversal of the valuation allowance for the deferred tax
    asset) in the preceding quarter of 2012, and increased from $312,000 for
    the comparable quarter one year ago;
  *Net income increased to $5.3 million for the year ended December 31, 2012
    compared to $1.5 million for the year ended December 31, 2011;
  *Earnings per diluted share were $0.36 for the fourth quarter 2012 compared
    to $1.03 for the prior quarter;
  *Net interest margin increased to 5.52% compared to 5.39% for the preceding
    quarter and increased from 5.20% for the comparable quarter one year ago;
  *Originations were $23.9 million and $64.2 million of construction and
    one-to-four family residential loans, respectively, during the quarter
    compared to $14.0 million and $44.2 million in the prior quarter;
  *Total non-performing assets decreased $376,000, or 8.5% to $4.1 million at
    December 31, 2012 compared to $4.4 million at September 30, 2012 and $6.9
    million at December 31, 2011;
  *The ratio of non-performing assets to total assets improved to 1.1% at
    December 31, 2012 compared to 1.3% at September 30, 2012 and 2.4% at
    December 31, 2011; and
  *Capital levels at the Bank reflect Total Risk-Based Capital of 16.0% and a
    Tier 1 Leverage Capital Ratio of 13.3% as of December 31, 2012 compared to
    12.3% and 9.3% as of December 31, 2011, respectively.

Balance Sheet and Credit Quality

Total assets increased to $359.0 million at December 31, 2012 compared to
$341.2 million at September 30, 2012 and $283.8 million at December 31, 2011.
The increase in total assets from September 30, 2012 was primarily due to
increases in net loans receivable of $15.8 million, and securities
available-for-sale of $4.5 million offset by a $2.8 million decrease in total
cash and cash equivalents. The increase in assets from December 31, 2011 was
primarily due to increases in net loans receivable of $57.8 million,
securities of $16.4 million and loans held for sale of $8.9 million offset by
a $9.8 million decrease in total cash and cash equivalents.

Net loans receivable increased $15.8 million to $275.0 million at December 31,
2012 from $259.2 million as of September 30, 2012 and increased $57.8 million
from $217.1 million at December 31, 2011. Total real estate loans increased
$14.1 million quarter over quarter due to increased growth in commercial real
estate loans including residential construction lending. Quarter over quarter
increases in other loan categories include a $12.0 million increase in
commercial business loans including warehouse lending offset by a $9.5 million
reduction in consumer loans associated with the marine loan sale.

                                                                 
LOAN PORTFOLIO                                                    
($ in thousands)                                                  
                       December 31, 2012 September 30, 2012 December 31, 2011
                       Amount    Percent Amount     Percent Amount    Percent
                                                                 
REAL ESTATE LOANS                                                 
Commercial              $33,250  11.9%   $32,779   12.5%   $28,931  13.1%
Home equity             15,474    5.5     14,693     5.6     14,507    6.6
Construction and        31,893    11.4    24,480     9.3     10,144    4.6
development
One-to-four family
(held for sale          13,976    5.0     10,340     3.9     8,752     4.0
excluded)
Multi-family            3,202     1.2     1,397      0.5     1,175     0.5
Total real estate loans 97,795    35.0    83,689     31.8    63,509    28.8
                                                                 
CONSUMER LOANS:                                                   
Indirect home           86,249    30.8    82,185     31.2    81,143    36.7
improvement 
Recreational            17,968    6.4     30,773     11.7    24,471    11.1
Automobile              2,416     0.9     3,057      1.2     5,832     2.6
Home improvement        651       0.2     721        0.3     934       0.4
Other                   1,386     0.5     1,430      0.5     1,826     0.8
Total consumer loans    108,670   38.8    118,166    44.9    114,206   51.6
                                                                 
COMMERCIAL BUSINESS     73,465    26.2    61,488     23.3    43,337    19.6
LOANS
Total loans             279,930   100.0%  263,343    100.0%  221,052   100.0%
                                                                 
Allowance for loan      (4,698)          (4,359)           (4,345)   
losses
Deferred cost, fees,    (283)            173               424       
and discounts, net
Total loans receivable, $ 274,949        $ 259,157         $ 217,131 
net
                                                                 

Originations of loans held for sale increased 43.9% to $61.5 million during
the quarter ended December 31, 2012 compared to $42.8 million for the
preceding quarter.Loans held for sale increased $359,000 to $8.9 million at
December 31, 2012 from $8.5 million at September 30, 2012 and none at December
31, 2011.The Bank continues to expand home lending operations and to sell
fixed-rate one-to-four family mortgage loans into the secondary market for
asset/liability management purposes and to generate noninterest income.During
the quarter ended December 31, 2012, the Bank sold $61.4 million of
fixed-rate, one-to-four family mortgage loans compared to $38.3 million for
the preceding quarter and none for the same quarter one year ago.

The allowance for loan losses at December 31, 2012 was $4.7 million, or 1.7%
of gross loans receivable, compared to $4.4 million or 1.7% of gross loans
receivable as of September 30, 2012 and $4.3 million, or 2.0% of gross loans
receivable at December 31, 2011.Non-performing loans, consisting of
non-accrual loans, decreased to $1.9 million at December 31, 2012 from $2.1
million at September 30, 2012 and $2.2 million at December 31, 2011. Other
real estate owned totaled $2.1 million at December 31, 2012, compared to $2.3
million at September 30, 2012 and $4.6 million at December 31, 2011.The $2.5
million or 53.7% reduction in other real estate owned year over year reflects
the sale of $2.6 million in other real estate owned and write-downs to fair
value of $812,000 during the year ended December 31, 2012.At December 31,
2012, the Bank also had $3.3 million in restructured loans of which $2.4
million were performing in accordance with their modified terms and $892,000
were on non-accrual.

Total deposits increased $14.1 million or 5.1% to $288.9 million at December
31, 2012, from $274.8 million at September 30, 2012. Transaction accounts
(noninterest and interest-bearing checking accounts) increased to $58.5
million as of December 31, 2012 from $56.3 million at September 30, 2012 and
$39.9 million at December 31, 2011.Management continues to focus deposit
growth efforts on relationship deposits with new and existing customers.

                                                                 
DEPOSIT BREAKDOWN                                                 
($ in thousands)                                                  
                        December 31, 2012 September 30,     December 31, 2011
                                           2012
                        Amount    Percent Amount    Percent Amount    Percent
Interest-bearing         $ 24,349  8.4%    $ 24,914  9.1%    $ 20,669  8.4%
checking
Noninterest-bearing      34,165    11.8    31,434    11.4    19,254    7.8
checking
Savings                  11,812    4.1    12,146    4.4    11,567    4.7
Money market             114,245   39.5    108,643   39.5    99,022    40.2
Certificates of deposits 40,119    13.9    39,835    14.5    36,220    14.7
less than $100,000
Certificates of deposits
$100,000 to less than    43,810    15.2    33,283    12.1    36,912    15.0
$250,000
Certificates of deposits 20,449    7.1     24,569    9.0     22,774    9.2
$250,000 and over
Total                    $ 288,949 100.0%  $ 274,824 100.0%  $ 246,418 100.0%
                                                                 

Total equity increased $525,000 to $59.9 million at December 31, 2012 from
$59.4 million at September 30, 2012.The increase in equity from the third
quarter was predominantly a result of net income of $1.1 million and the
scheduled payment of the Employee Stock Ownership Plan loan partially offset
by a decline in the unrealized gain on securities available-for-sale included
in accumulated other comprehensive income. Book value per common share was
$19.92 as of December 31, 2012.

The Bank is well capitalized with a Total Risk-Based Capital ratio of 16.0%
and a Tier 1 Leverage Capital ratio of 13.3% at December 31, 2012.The Company
reflects Total Risk-Based Capital and Tier 1 Leverage Capital ratios of 19.8%
and 16.7%, respectively, as of December 31, 2012.

Operating Results

Net interest income before the provision for loan losses increased $1.1
million, or 32.2%, to $4.6 million for the three months ended December 31,
2012, from $3.5 million for the three months ended December 31, 2011. For
the year ended December 31, 2012, net interest income, before the provision
for loan losses, increased $3.0 million, or 21.9%, to $16.4 million compared
to $13.5 million for the same period in the prior year.

The net interest margin increased 24 basis points to 5.43% for the year ended
December 31, 2012, from 5.19% for the same period of the prior year. The
increase was primarily due to a shift in assets during the period from lower
yielding cash and cash equivalents into higher yielding loans and investment
securities and a lower level of non-performing loans, coupled with a 37 basis
point decline in the cost of funds to 0.94% for the year ended December 31,
2012 from 1.31% for the same period in the prior year.

The provision for loan losses was $1.2 million for the three months ended
December 31, 2012, compared to $717,000 for the three months ended December
31, 2011. The $501,000 increase in the provision primarily relates to the
increase in net new loans during the three months ended December 31, 2012.
The provision for loan losses increased $544,000 to $2.9 million for the year
ended December 31, 2012, from $2.4 million for the year ended December 31,
2011.Non-performing loans were $1.9 million, or 0.7% of total loans at
December 31, 2012, compared to $2.2 million, or 1.0% of total loans, at
December 31, 2011. During the year ended December 31, 2012, net charge-offs
totaled $2.6 million compared to $3.9 million during the year ended December
31, 2011.

Noninterest income increased $2.1 million, or 268.8%, to $2.8 million for the
three months ended December 31, 2012, from $770,000 for the three months ended
December 31, 2011. The increase during the period was primarily due to $2.1
million in gains associated with the sale of mortgage loans to the secondary
market as part of the home lending initiative.Noninterest income increased
$3.7 million, or 149.1%, to $6.2 million for the year ended December 31, 2012,
from $2.5 million for the year ended December 31, 2011.

Noninterest expense increased $1.7 million, or 52.7%, to $4.9 million for the
three months ended December 31, 2012, from $3.2 million for the three months
ended December 31, 2011.Changes in noninterest expense included a $1.3
million, or 88.3%, increase in salaries and benefit costs associated with the
addition of more lending staff, a $268,000 or 53.5% increase in operation
costs partially due to a $108,000 increase in off-balance sheet reserves
including a reserve for the marine loan sale, a $215,000, or 210.8% increase
in loan costs associated with increased lending activities, partially offset
by a $151,000 decrease in write-downs to fair value of other real estate
owned.

About FS Bancorp

FS Bancorp, Inc., a Washington corporation, is the holding company for 1st
Security Bank of Washington.The Bank provides loan and deposit services to
customers who are predominately small and middle-market businesses and
individuals in western Washington through its six branches in suburban
communities in the greater Puget Sound area. 

Disclaimer

Certain matters discussed in this press release may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are not statements of historical fact and
often include the words "believes," "expects," "anticipates," "estimates,"
"forecasts," "intends," "plans," "targets," "potentially," "probably,"
"projects," "outlook" or similar expressions or future or conditional verbs
such as "may," "will," "should," "would" and "could."Forward-looking
statements include statements with respect to our beliefs, plans, objectives,
goals, expectations, assumptions and statements about future
performance.These forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that could cause our actual results to
differ materially from the results anticipated, including, but not limited to:
general economic conditions, either nationally or in our market area, that are
worse than expected; the credit risks of lending activities, including changes
in the level and trend of loan delinquencies and write offs and changes in our
allowance for loan losses and provision for loan losses that may be impacted
by deterioration in the housing and commercial real estate markets;
fluctuations in the demand for loans, the number of unsold homes, land and
other properties and fluctuations in real estate values in our market area;
increases in premiums for deposit insurance; the use of estimates in
determining fair value of certain of our assets, which estimates may prove to
be incorrect and result in significant declines in valuation; changes in the
interest rate environment that reduce our interest margins or reduce the fair
value of financial instruments; increased competitive pressures among
financial services companies; our ability to execute our plans to grow our
residential construction lending, our mortgage banking operations and our
warehouse lending and the geographic expansion of our indirect home
improvement lending; our ability to attract and retain deposits; our ability
to control operating costs and expenses; changes in consumer spending,
borrowing and savings habits; our ability to successfully manage our growth;
legislative or regulatory changes that adversely affect our business or
increase capital requirements, including changes related to Basel III; the
effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act and
implementing regulations, changes in regulation policies and principles, or
the interpretation of regulatory capital or other rules; adverse changes in
the securities markets; changes in accounting policies and practices, as may
be adopted by the bank regulatory agencies, the Public Company Accounting
Oversight Board or the Financial Accounting Standards Board; costs and effects
of litigation, including settlements and judgments and inability of key
third-party vendors to perform their obligations to us.

Any of the forward-looking statements that we make in this press release and
in the other public statements we make are based upon management's beliefs and
assumptions at the time they are made.We undertake no obligation to publicly
update or revise any forward-looking statements included in this report or to
update the reasons why actual results could differ from those contained in
such statements, whether as a result of new information, future events or
otherwise.We caution readers not to place undue reliance on any
forward-looking statements.We do not undertake and specifically disclaim any
obligation to revise any forward-looking statements to reflect the occurrence
of anticipated or unanticipated events or circumstances after the date of such
statements.These risks could cause our actual results for fiscal 2013 and
beyond to differ materially from those expressed in any forward-looking
statements by, or on behalf of us, and could negatively affect the Company's
operations and stock price performance.



FS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
                                                               
                                      December 31, September 30, December 31,
                                      2012         2012          2011
                                      Unaudited    Unaudited     Unaudited
ASSETS                                                          
Cash and due from banks                $ 4,003      $ 2,441       $ 2,356
Interest-bearing deposits at other     5,410        9,736         16,897
financial institutions
Total cash and cash equivalents        9,413        12,177        19,253
Securities available-for-sale, at fair 43,313       38,794        26,899
value
Federal Home Loan Bank stock, at cost  1,765        1,781         1,797
Loans held for sale                    8,870        8,511         --
Loans receivable, net                  274,949      259,157       217,131
Accrued interest receivable            1,223        1,283         1,020
Premises and equipment, net            12,663       12,448        9,852
Other real estate owned                2,127        2,321         4,589
Deferred tax asset                     1,927        2,688         --
Other assets                           2,780        2,053         3,252
TOTAL ASSETS                           $ 359,030    $ 341,213     $ 283,793
                                                               
LIABILITIES                                                     
Deposits                                                        
Interest-bearing accounts              $ 254,784    $ 243,390     $ 227,164
Noninterest-bearing accounts           34,165       31,434        19,254
Total deposits                         288,949      274,824       246,418
Borrowings                             6,840        4,100         8,900
Other liabilities                      3,344        2,917         1,708
Total liabilities                      299,133      281,841       257,026
COMMITMENTS AND CONTINGENCIES                                   
EQUITY                                                          
Preferred stock, $.01 par value;
5,000,000 shares authorized; None      --           --            --
issued
Common stock, $.01 par value;
45,000,000 shares authorized;
3,240,125 shares issued and 3,006,836  
outstanding at December 31, 2012, and  32           32            --
3,240,125 shares issued and
outstanding at September 30, 2012, and
none at December 31, 2011
Additional paid-in capital             29,894       29,863        --
Retained earnings                      31,746       30,674        26,451
Accumulated other comprehensive income 597          1,439         316
Unearned shares - Employee Stock       (2,372)      (2,636)       --
Ownership Plan
Total equity                           59,897       59,372        26,767
TOTAL LIABILITIES AND EQUITY           $ 359,030    $ 341,213     $ 283,793




FS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
                                                                 
                                      Three Months Ended  Year Ended
                                       December 31,        December 31,
                                      2012      2011      2012      2011
                                      Unaudited Unaudited Unaudited Unaudited
INTEREST INCOME                                                   
Loans receivable                       $ 4,936   $ 4,060   $ 18,057  $ 16,191
Interest and dividends on investment
securities, and cash and cash          209       111       730       287
equivalents
Total interest income                  5,145     4,171     18,787    16,478
INTEREST EXPENSE                                                  
Deposits                               493       632       2,208     2,826
Borrowings                             37        47        155       180
Total interest expense                 530       679       2,363     3,006
NET INTEREST INCOME                    4,615     3,492     16,424    13,472
PROVISION FOR LOAN LOSSES              1,218     717       2,913     2,369
NET INTEREST INCOME AFTER PROVISION    3,397     2,775     13,511    11,103
FOR LOAN LOSSES
NONINTEREST INCOME                                                
Service charges and fee income         500       521       1,993     1,971
Gain on sale of loans                  2,218     113       3,684     113
Gain on sale of equipment              --        41        --        41
Gain on sale of investment securities  59        --        165       18
Other noninterest income               63        95        322       332
Total noninterest income               2,840     770       6,164     2,475
NONINTEREST EXPENSE                                               
Salaries and benefits                  2,772     1,472     8,495     5,616
Operations                             769       501       2,530     1,949
Occupancy                              343       286       1,232     1,103
Data processing                        293       239       1,055     890
OREO fair value write-downs, net of    119       270       847       601
(gain) loss on sales
OREO expenses, net                     29        (15       184       138
Loan costs                             317       102       867       459
Professional and board fees            136       243       618       631
FDIC insurance                         72        61        257       391
Marketing and advertising              81        55        280       236
Impairment of mortgage servicing       7         19        112       19
rights
Total noninterest expense              4,938     3,233     16,477    12,033
INCOME BEFORE (BENEFIT) PROVISION FOR  1,299     312       3,198     1,545
INCOME TAX
(BENEFIT) PROVISION FOR INCOME TAX     226       --        (2,097)   --
NET INCOME                             $ 1,073   $ 312     $ 5,295   $ 1,545
                                                                 
Net income per common share:                                      
Basic                                  $ 0.36    nm (1)    $ 1.76    nm (1)
Diluted                                $ 0.36    nm (1)    $ 1.76    nm (1)
                                                                 
                                                                 
Weighted average common shares                                    
outstanding:
Basic                                  3,006,836 nm (1)    3,006,836 nm (1)
Diluted                                3,006,836 nm (1)    3,006,836 nm (1)
                                                                 
(1) Earnings per share and share calculations are not meaningful as the
Company completed the stock offering on July 9, 2012.

                                
                                
                                
KEY FINANCIAL RATIOS AND DATA   Three Months Ended
($ in thousands, except per      December 31,   September 30,   December 31,
share amounts) (Unaudited)
                                2012           2012            2011
                                                             
PERFORMANCE RATIOS:                                           
Return on assets (ratio of net
income to average total assets)  1.22%          3.93%           0.44%
(2)
Return on equity (ratio of net   7.13        26.17          4.66
income to average equity) (2)
Yield on average                 6.15          6.11           6.22
interest-earning assets
Rate paid on average             0.82          0.89          1.15
interest-bearing liabilities
Interest rate spread                                          
information:
Average during period            5.33          5.22          5.07
Net interest margin (2)          5.52          5.39          5.20
Operating expense to average     5.61         4.87          4.56
total assets
Average interest-earning assets
to average interest-bearing      129.30        123.60        113.50
liabilities
Efficiency ratio (3)             66.24         71.61         75.86
                                                             
                                Year Ended
                                December 31,                  December 31,
                                2012                          2011
PERFORMANCE RATIOS:                                           
Return on assets (ratio of net
income to average total assets)  1.64%                         0.56%
(2)
Return on equity (ratio of net   12.71                      5.92
income to average equity) (2)
Yield on average                 6.21                         6.35
interest-earning assets
Rate paid on average             0.94                     1.31
interest-bearing liabilities
Interest rate spread                                          
information:
Average during period            5.27                     5.04
Net interest margin (2)          5.43                     5.19
Operating expense to average     5.12                      4.35
total assets
Average interest-earning assets
to average interest-bearing      120.34                     112.90
liabilities
Efficiency ratio (3)             72.95                       75.46
                                                             
                                December 31,   September 30,   December 31,
                                2012           2012            2011
ASSET QUALITY RATIOS AND DATA:                                
Non-performing assets to total   1.13%          1.30%           2.43%
assets at end of period (4)
Non-performing loans to total    0.68       0.80           1.01
gross loans (5)
Allowance for loan losses to     246.48        208.17         195.11
non-performing loans (5)
Allowance for loan losses to     1.68         1.66           1.97
gross loans receivable
                                                             
                                                             
CAPITAL RATIOS, BANK ONLY:                                    
Tier 1 Leverage Capital          13.26%         13.22%         9.30%
Tier 1 Risk-Based Capital        14.75          15.82          11.04
Total Risk-Based Capital         16.00          17.07          12.29
                                                             
CAPITAL RATIOS, COMPANY, ONLY:                                
Tier 1 Leverage Capital          16.66%         16.82%          nm
TotalRisk-Based Capital         19.82          21.21           nm
                                                             
                                                             
BOOK VALUES:                                                  
Book value per common share      $19.92 (7)    $18.32 (6)      nm (1)
                                                             
(1) Earnings per share calculation are not meaningful as the Company became a
public company on July 9, 2012.
(2) Annualized.
(3) Total noninterest expense as a percentage of net interest income and
total other noninterest income.
(4) Non-performing assets consists of non-performing loans (which include
non-accruing loans and accruing loans more than 90 days past due), foreclosed
real estate and other repossessed assets.
(5) Non-performing loans consists of non-accruing loans and accruing loans
more than 90 days past due.
(6) Book value per common share was calculated using all shares outstanding
of 3,240,125 at September 30, 2012.
(7) Book value per common share was calculated using shares outstanding of
3,006,836 at December 31, 2012.

CONTACT: Joseph C. Adams,
         Chief Executive Officer
         Matthew D. Mullet,
         Chief Financial Officer
         (425) 771-5299
         www.FSBWA.com
 
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