FS Bancorp (FSBW) Stock Sees Credit Quality Improve As Non Performing Loans Decline, Challenging Bears

FS Bancorp (FSBW) has just posted Q2 2026 results, with total revenue of US$36.2 million and basic EPS of US$1.08 on net income of US$7.9 million, while trailing 12 month figures sit at US$144.9 million of revenue and EPS of US$4.45. The company has seen revenue move from US$35.3 million in Q2 2025 to US$36.2 million in Q2 2026, with EPS shifting from US$1.00 to US$1.08 over the same period. This sets the stage for investors to weigh forecast earnings growth and dividend income against how margins are holding up.

See our full analysis for FS Bancorp.

Next up is how these results line up with the widely followed narratives around FS Bancorp, highlighting where the latest numbers reinforce the story and where they start to question it.

Curious how numbers become stories that shape markets? Explore Community Narratives

Loan book edges up to US$2.66b with improving credit quality

• Total loans sit at about US$2.66b in Q2 2026, up from US$2.53b in Q1 2025, while non performing loans are US$15.6 million compared with US$19.0 million in Q2 2025.
• What stands out for the more bullish view is that concerns around a smaller regional bank’s credit risk are partly countered by these figures. The non performing loan balance is lower than several prior quarters even as the loan book is larger, although bears would point out that credit costs and detailed reserve movements are not shown here, so they would still look for more depth before relaxing their caution.
  • Critics highlight that concentration in specific regions and real estate can be a concern for a bank like FS Bancorp. Yet loan growth from US$2,532.8 million to US$2,660.2 million over the periods listed has come alongside a lower non performing loan level than the US$19.0 million shown for Q2 2025.
  • Supporters of the bullish angle may see that combination as evidence that recent asset quality metrics do not currently reflect the more severe stress some bears might anticipate, even if they still need to watch future filings closely.

Costs stay around 67% of income as margins hold above 4%

• FS Bancorp reported a Q2 2026 net interest margin of 4.3% and a cost to income ratio of 67.28%, fairly close to Q1 2026 levels of 4.31% and 67.25% and within the 64.63% to 69.39% range seen since early 2025.
• Bears often worry that smaller banks will see profitability squeezed, yet the recent data sets up a more balanced picture, because the trailing net margin of 22.6% is only slightly below last year’s 23.5% while quarterly cost to income and margin figures sit in a tight band instead of showing sharp swings.
  • Consensus style concerns about pressure on profitability reference the five year EPS trend, which declined about 1.9% per year, but current quarter net income of US$7.9 million is in the same general range as the US$7.6 million to US$9.0 million seen over the last six quarters.
  • What challenges a more bearish read is that, despite that longer term EPS drift, the latest quarters do not show an abrupt deterioration in either cost efficiency or interest margin in the figures provided.

Valuation and DCF fair value contrast with mixed earnings trend

• The stock trades at a P/E of 9.6x versus peer and US Banks averages of 11.5x and 12.2x, with a DCF fair value of US$85.78 compared with a current share price of US$43.00 and an analyst price target of US$46.00, while the trailing dividend yield sits at 2.7%.
• Supporters of a more bullish valuation angle point to this gap, yet the earnings record keeps the debate alive because trailing EPS of US$4.45 and a five year EPS decline of about 1.9% per year contrast with forecast earnings growth of roughly 13.7% per year and revenue growth of about 11.7% per year that are both below the broader US market forecasts of around 17.7% and 12.6%.
  • Bulls argue that the combination of a P/E below peers, a DCF fair value that is materially higher than the current price and an ongoing 2.7% dividend yield supports a value case, even with that slower forecast growth profile.
  • On the other hand, the modest net margin move from 23.5% to 22.6% and the negative five year EPS trend give bears concrete figures to point to when they question how quickly any valuation gap might close.

Bulls and skeptics are clearly reading the same set of numbers in very different ways, so it can help to see how other investors connect these earnings to the bigger story for FS Bancorp Curious how numbers become stories that shape markets? Explore Community Narratives.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on FS Bancorp's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

Taking all of this into account, do the latest FS Bancorp numbers leave you cautious or encouraged, and how does that fit your own expectations for the stock? If you want to see what sits behind the optimism in the data, take a closer look at the 4 key rewards

See What Else Is Out There

FS Bancorp shows a flat to slightly weaker earnings trend, with EPS drifting lower over five years and profitability margins sitting just below previous levels.

If that softer earnings profile leaves you wanting more growth and quality, use the screener containing 20 high quality undiscovered gems to quickly spot companies where the numbers look more exciting.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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