FSBW

FS Bancorp is a $3.2B-asset Washington/Oregon thrift that screens cheap and financially sound, but its earnings are quietly eroding. FY2025 net income of $33.3M (-4.8% YoY) and diluted EPS of $4.29 (-1.6%) mark a second straight annual decline (FY2023 $36.1M → FY2024 $35.0M → FY2025 $33.3M). The MD&A/audit is clean — Baker Tilly issued an unqualified opinion on both the financials and internal control over financial reporting as of 12/31/2025 — and the balance sheet is solid: equity grew 4.0% to $308M, retained earnings rose 9.0% to $280M, and assets expanded 5.5% to $3.20B. Leverage of 9.39x liabilities/equity and $28.2M of cash are normal for a deposit-funded bank, not signs of stress.

Valuation is the reason to own it, not the growth. At $43.92 the stock trades at 10.2x EPS and roughly 1.07x book value (book ≈ $41.07/share on $308M equity ÷ 7.50M shares), with a 10.8% ROE. Management is returning capital aggressively — $15.4M of buybacks (up 515%) shrank the share count 3.4%, and dividends paid rose 24.2% to $10.3M — accretive while the stock hovers near book. That combination puts a reasonable floor under the shares.