JEFFERSONVILLE, Ind., April 27, 2023 (GLOBE NEWSWIRE) -- First Savings Financial Group, Inc. (NASDAQ: FSFG - news) (the "Company"), the holding company for First Savings Bank (the "Bank"), today reported net income of $3.7 million, or $0.54 per diluted share, for the quarter ended March 31, 2023 compared to net income of $7.0 million, or $0.98 per diluted share, for the quarter ended March 31, 2022.

Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated, “There continues to be a challenging environment for the banking industry, but we have taken and will continue to take prudent actions to perform while such exists. The aggressive measures taken to restructure the mortgage banking segment through expense reductions, efforts to rebuild the SBA lending segment’s lending team, and continued focus on balance sheet management for the core banking segment have provided positive results for the quarter and position the Company for enhanced performance. We continue to be selective in our lending, both in terms of asset quality and yield opportunities. We also have lengthened certain wholesale funding maturities for intermediate duration, which was a contributing factor in adversely impacting net interest margin for the quarter but somewhat protects from persistently higher interest rates while still remaining well-positioned to benefit from a potential rates-down environment, particularly on the short end of the curve. We are encouraged by the performance of the core banking segment and are optimistic for enhanced performance of the SBA lending and mortgage banking segments in future periods. Lastly, the Company repurchased 50,000 of its common shares during the quarter, which together with repurchases during the three preceding fiscal quarters totaled approximately 4.6% of outstanding shares.”

Results of Operations for the Three Months Ended March 31, 2023 and 2022

Net interest income increased $899,000, or 6.4%, to $14.9 million for the three months ended March 31, 2023 as compared to the same period 2022. The increase in net interest income was due to a $9.0 million increase in interest income, partially offset by a $8.1 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $465.3 million, from $1.56 billion for 2022 to $2.02 billion for 2023, and an increase in the weighted-average tax-equivalent yield, from 4.14% for 2022 to 5.01% for 2023. The increase in the average balance of interest-earning assets was primarily due to increases in the average balance of investment securities and total loans of $139.3 million and $330.1 million, respectively. When excluding the impact from PPP loan payoffs, the increase in the average balance of loans was $351.6 million when comparing the two periods. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $449.0 million, from $1.23 billion for 2022 to $1.68 billion for 2023, and an increase in the average cost of interest-bearing liabilities, from 0.58% for 2022 to 2.36% for 2023. The increase in the average cost of interest-bearing liabilities for 2023 was due primarily to higher rates paid for FHLB borrowings, brokered deposits and money market deposit accounts primarily due to the increase in market interest rates.

The Company recognized a provision for loan losses of $372,000 for the three months ended March 31, 2023 due primarily to loan portfolio growth, compared to a credit for loan losses of $30,000 for the same period in 2022. The Company recognized net charge-offs of $6,000 for the three months ended March 31, 2023, compared to net charge-offs of $275,000 in 2022.

Noninterest income decreased $12.6 million for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease was due primarily to decreases in mortgage banking income, net gain on sale of single tenant net lease loans and net gain on sale of SBA loans of $12.1 million, $557,000 and $420,000, respectively. The decrease in mortgage banking income was primarily due to a $12.7 million decrease in realized and unrealized hedging gains, a $3.1 million decrease in capitalized residential mortgage loan servicing rights, and a $1.3 million decrease in the fair value of the residential mortgage loan servicing rights portfolio in 2023 as compared to a $5.6 million increase in fair value recognized in 2022, partially offset by a $2.0 million increase in production revenue from originations for sale in 2023 and a $1.3 million increase in the fair value of loans held for sale and interest rate lock commitments in 2023 as compared to a $7.2 million decrease in fair value recognized in 2022. Mortgage loans originated for sale were $115.0 million in the three months ended March 31, 2023 as compared to $459.4 million for the same period in 2022. The decrease in net gain on sales of SBA loans was due primarily to decreases in production and sales volume from the SBA lending segment, and lower premiums in the secondary market. There were no sales of single tenant net lease loans during the 2023 period.

Noninterest expense decreased $7.5 million for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease was due primarily to a decrease in compensation and benefits of $7.1 million. The decrease in compensation and benefits expense was due primarily to a reduction in staff and incentive compensation for the Company’s mortgage banking segment as a result of decreased mortgage banking income.

The Company recognized an income tax expense of $333,000 for the three months ended March 31, 2023 compared to income tax expense of $1.6 million for the same period in 2022. The effective tax rate for 2023 was 8.2%, which was a decrease from the effective tax rate of 18.7% in 2022. The decrease was due to recognition of investment tax credits related to solar projects in 2023 and lower pre-tax income in 2023 as compared to 2022.

Results of Operations for the Six Months Ended March 31, 2023 and 2022

The Company reported net income of $6.6 million, or $0.95 per diluted share, for the six months ended March 31, 2023 compared to net income of $11.3 million, or $1.58 per diluted share, for the six months ended March 31, 2022.

Net interest income increased $3.3 million, or 11.7%, to $31.2 million for the six months ended March 31, 2023 as compared to the same period 2022. The increase in net interest income was due to a $16.7 million increase in interest income, partially offset by a $13.5 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $457.3 million, from $1.54 billion for 2022 to $2.00 billion for 2023, and an increase in the weighted-average tax-equivalent yield, from 4.18% for 2022 to 4.94% for 2023. The increase in the average balance of interest-earning assets was primarily due to increases in the average balance of investment securities and total loans of $145.8 million and $320.0 million, respectively. When excluding the impact from PPP loan payoffs, the increase in the average balance of loans was $356.2 million when comparing the two periods. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $431.9 million, from $1.21 billion for 2022 to $1.64 billion for 2023, and an increase in the average cost of interest-bearing liabilities, from 0.60% for 2022 to 2.08% for 2023. The increase in the average cost of interest-bearing liabilities for 2023 was due primarily to higher rates paid for FHLB borrowings, brokered deposits and money market deposit accounts primarily due to the increase in market interest rates.

The Company recognized a provision for loan losses of $1.4 million for the six months ended March 31, 2023 due primarily to loan portfolio growth, compared to $496,000 for the same period in 2022. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $1.6 million from $10.9 million at September 30, 2022 to $12.5 million at March 31, 2023. The Company recognized net charge-offs of $258,000 for the six months ended March 31, 2023, of which $238,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $322,000 in 2022, of which $292,000 was related to unguaranteed portions of SBA loans.

Noninterest income decreased $24.0 million for the six months ended March 31, 2023 as compared to the same period in 2022. The decrease was due primarily to decreases in mortgage banking income, net gain on sale of SBA loans, and net gain on sale of single tenant net lease loans of $22.4 million, $1.3 million, and $719,000, respectively. The decrease in mortgage banking income was primarily due to a $14.0 million decrease in realized and unrealized hedging gains, a $7.4 million decrease in capitalized residential mortgage loan servicing rights, $1.9 million decrease in production revenue, and a $2.5 million decrease in the fair value of the residential mortgage loan servicing rights portfolio in 2023 as compared to a $6.2 million increase in fair value recognized in 2022, partially offset by a $2.5 million increase in the fair value of loans held for sale and interest rate lock commitments in 2023 as compared to a $7.4 million decrease in fair value recognized in 2022. Mortgage loans originated for sale were $192.6 million in the six months ended March 31, 2023 as compared to $1.0 billion in 2022. The decrease in net gain on sales of SBA loans was due primarily to decreases in production and sales volume from the SBA lending segment, and lower premiums in the secondary market. There were no sales of single tenant net lease loans during the 2023 period.

Noninterest expense decreased $14.8 million for the six months ended March 31, 2023 as compared to the same period in 2022. The decrease was due primarily to a decrease in compensation and benefits, professional fees and advertising expense of $13.7 million, $992,000 and $857,000, respectively. The decrease in compensation and benefits expense was due primarily to a reduction in staff and incentive compensation for the Company’s mortgage banking segment as a result of decreased mortgage banking income. The decreases in professional fees and advertising expense were related to the reduced activity and loan origination volume of the mortgage banking segment.

The Company recognized an income tax expense of $416,000 for the six months ended March 31, 2023 compared to tax expense of $2.4 million for the same period in 2022. The effective tax rate for 2023 was 5.9%, which was a decrease from the effective tax rate of 17.6% in 2022. The decrease was due to recognition of investment tax credits related to solar projects in 2023 and lower pre-tax income in 2023 as compared to 2022.

Comparison of Financial Condition at March 31, 2023 and September 30, 2022

Total assets increased $145.9 million, from $2.09 billion at September 30, 2022 to $2.24 billion at March 31, 2023. Net loans held for investment increased $123.9 million during the six months ended March 31, 2023, due primarily to growth in residential mortgage loans and single-tenant net lease commercial real estate loans. Excluding the impact of reclassification of $38.0 million of single tenant net lease loans as participated loan sales quarter during ending March 31, 2023, which were accounted for as secured borrowings at September 30, 2022, total assets and net loans held for investment would have increased $183.9 million and $161.9 million, respectively, during the six months ended March 31, 2023.

Total liabilities increased $130.5 million due primarily to increases in total deposits and FHLB borrowings of $27.0 million and $130.5 million, respectively, partially offset by the aforementioned $38.0 million reclassification in other borrowings. Excluding the impact of this reclassification, total liabilities would have increased $168.5 million during the six months ended March 31, 2023. The increase in FHLB borrowings was primarily used to fund loan growth. The increase in total deposits was primarily due to a $44.2 million increase in brokered deposits, partially offset by a $21.3 million decrease in noninterest-bearing deposits due primarily to customary seasonal outflows of public fund deposits. Deposits exceeding the FDIC insurance amount of $250,000 as of March 31, 2023 were not greater than 13.8% of total deposits. The amount is believed to be less than 13.8% of total deposits due to certain accounts being structured to achieve a level of insurance above the FDIC limit, but is difficult to quantify.

Common stockholders’ equity increased $15.3 million, from $151.6 million at September 30, 2022 to $166.9 million at March 31, 2023, due primarily to increases in accumulated other comprehensive income and retained net income of $12.9 million and $4.7 million, respectively. The increase in accumulated other comprehensive income (loss) was primarily due to decreasing market interest rates during the six months ended March 31, 2023, which resulted in an increase in the fair value of the available-for-sale securities portfolio. At March 31, 2023 and September 30, 2022, the Bank was considered “well-capitalized” under applicable regulatory capital guidelines.

First Savings Bank is an entrepreneurial community bank headquartered in Jeffersonville, Indiana, which is directly across the Ohio River from Louisville, Kentucky, and operates fifteen depository branches within Southern Indiana. The Bank also has three national lending programs, including single-tenant net lease commercial real estate, SBA lending and residential mortgage banking, with offices located throughout the United States. The Bank is a recognized leader, both in its local communities and nationally for its lending programs. The employees of First Savings Bank strive daily to achieve the organization’s vision, We Expect To Be The BEST community BANK, which fuels our success. The Company’s common shares trade on The NASDAQ Stock Market under the symbol “FSFG.”

This release may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions, including the duration, extent and severity of the COVID-19 pandemic, including its effect on our customers, service providers and on the economy and financial markets in general; changes in market interest rates; changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.

Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on its behalf. Except as may be required by applicable law or regulation, the Company assumes no obligation to update any forward-looking statements.

Contact:
Tony A. Schoen, CPA
Chief Financial Officer
812-283-0724