JEFFERSONVILLE, Ind., July 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 $2.3 million, or $0.34 per diluted share, for the quarter ended June 30, 2023 compared to net income of $2.6 million, or $0.37 per diluted share, for the quarter ended June 30, 2022.

During the June 2023 quarter, the Company repurchased $2.0 million of subordinated debt that was issued by the Company in March 2022 at a discount during the 2023 period, which resulted in a $660,000 gain. The Company used this gain as an opportunity to sell $78.5 million of available-for-sale securities during the quarter for a net loss of $540,000. The sale of these securities was a strategic initiative to improve the Company’s liquidity posture and remove an inefficient portion of the Company’s balance sheet in which the cost of funding was higher than the yield earned on the securities. The proceeds from the sale of the securities were used to reduce FHLB borrowings in the June 2023 quarter.

Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated “This challenging environment for the banking industry will pass, but as it persists we’re active to realign the balance sheet, stabilize the margin, manage expenses and make select investments in opportunities that will be fruitful in future quarters and years. We continue to focus on core banking; asset quality; selective high-quality lending; lesser reliance on wholesale funding; improvement of liquidity, capital and interest rate sensitivity positions; and evaluation of options and opportunities to achieve such. We have acted to protect from persistently higher interest rates, which has adversely affected the current margin, while still remaining well-positioned to benefit from a potential rates-down environment. The underperformance of the mortgage banking and SBA lending segments are recognized but the macroeconomic environment for these businesses to perform well continues to improve. We are focused on managing through the remainder of this economic dislocation and positioning the company for enhanced shareholder value.”

Results of Operations for the Three Months Ended June 30, 2023 and 2022

Net interest income decreased $1.0 million, or 6.6%, to $14.9 million for the three months ended June 30, 2023 as compared to the same period 2022. The decrease in net interest income was due to a $9.4 million increase in interest expense, partially offset by an $8.3 million increase in interest income. Interest income increased due to an increase in the average balance of interest-earning assets of $372.9 million, from $1.74 billion for 2022 to $2.11 billion for 2023, and an increase in the weighted-average tax-equivalent yield, from 4.36% for 2022 to 5.20% for 2023. The increase in the average balance of interest-earning assets was primarily due to an increase in the average balance of total loans of $334.1 million. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $387.8 million, from $1.37 billion for 2022 to $1.76 billion for 2023, and an increase in the average cost of interest-bearing liabilities, from 0.75% for 2022 to 2.71% 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 $441,000 for the three months ended June 30, 2023 due primarily to loan portfolio growth, compared to a provision for loan losses of $532,000 for the same period in 2022. The Company recognized net charge-offs of $61,000 for the three months ended June 30, 2023, compared to net charge-offs of $27,000 in 2022.

Noninterest income decreased $2.8 million for the three months ended June 30, 2023 as compared to the same period in 2022. The decrease was due primarily to a $2.4 million decrease in mortgage banking income in 2023 compared to the same period in 2022 and the aforementioned $540,000 net loss on sale of available-for-sale securities compared to a $476,000 gain recognized in 2022, partially offset by the aforementioned $660,000 gain on the repurchase of subordinated debt. The decrease in mortgage banking income was primarily due to lower origination and sales volume in 2023 compared to 2022. Mortgage loans originated for sale were $199.9 million in the three months ended June 30, 2023 as compared to $421.4 million for the same period in 2022.

Noninterest expense decreased $3.9 million for the three months ended June 30, 2023 as compared to the same period in 2022. The decrease was due primarily to a decrease in compensation and benefits of $4.1 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 income tax expense of $331,000 for the three months ended June 30, 2023 compared to income tax benefit of $61,000 for the same period in 2022. The effective tax rate for the 2023 period was 12.5%. The increase in the effective tax rate was primarily due to Company’s utilization of capital loss carryovers during the 2022 period with no corresponding utilization in the 2023 period.

Results of Operations for the Nine Months Ended June 30, 2023 and 2022

The Company reported net income of $8.9 million, or $1.29 per diluted share, for the nine months ended June 30, 2023 compared to net income of $14.0 million, or $1.95 per diluted share, for the nine months ended June 30, 2022.

Net interest income increased $2.2 million, or 5.0%, to $46.0 million for the nine months ended June 30, 2023 as compared to the same period 2022. The increase in net interest income was due to a $25.1 million increase in interest income, partially offset by a $22.8 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $429.9 million, from $1.61 billion for 2022 to $2.04 billion for 2023, and an increase in the weighted-average tax-equivalent yield, from 4.25% for 2022 to 5.03% for 2023. The increase in the average balance of interest-earning assets was primarily due to increases in the average balance of total loans and investment securities of $324.7 million and $109.7 million, respectively. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $417.2 million, from $1.27 billion for 2022 to $1.68 billion for 2023, and an increase in the average cost of interest-bearing liabilities, from 0.65% for 2022 to 2.30% for 2023. The increase in the average cost of interest-bearing liabilities for 2023 was due primarily to higher rates for FHLB borrowings, brokered deposits and money market deposit accounts as a result of increases in market interest rates.

The Company recognized a provision for loan losses of $1.8 million for the nine months ended June 30, 2023 due primarily to loan portfolio growth, compared to $1.0 million 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 $851,000 from $10.9 million at September 30, 2022 to $11.7 million at June 30, 2023. The Company recognized net charge-offs of $319,000 for the nine months ended June 30, 2023, of which $264,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $349,000 in 2022, of which $218,000 was related to unguaranteed portions of SBA loans.

Noninterest income decreased $26.8 million for the nine months ended June 30, 2023 as compared to the same period in 2022. The decrease was due primarily to decreases in mortgage banking income and net gain on sale of SBA loans of $24.8 million and $1.3 million, respectively. The decrease in mortgage banking income was primarily due to lower origination and sales volume in the 2023 period compared to 2022. Mortgage loans originated for sale were $392.2 million in the nine months ended June 30, 2023 as compared to $1.42 billion in 2022. The decrease in net gain on sales of SBA loans was due primarily to decreased sales volume from the SBA lending segment and lower premiums in the secondary market.

Noninterest expense decreased $18.7 million for the nine months ended June 30, 2023 as compared to the same period in 2022. The decrease was due primarily to a decrease in compensation and benefits, advertising expense and professional fees of $17.8 million, $1.1 million and $1.0 million, 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 activity. 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 income tax expense of $747,000 for the nine months ended June 30, 2023 compared to tax expense of $2.4 million for the same period in 2022. The effective tax rate for the 2023 period was 7.7%, which was a decrease from the effective tax rate of 14.5% 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 June 30, 2023 and September 30, 2022

Total assets increased $166.7 million, from $2.09 billion at September 30, 2022 to $2.26 billion at June 30, 2023. Net loans held for investment increased $216.7 million during the nine months ended June 30, 2023 due primarily to growth in residential mortgage loans and single-tenant net lease commercial real estate loans. Available-for-sale securities decreased $68.1 million during the nine months ended June 30, 2023 due primarily to the sale of $78.5 million of securities in June 2023

Total liabilities increased $153.2 million due primarily to increases in total deposits and FHLB borrowings of $143.9 million and $37.7 million, respectively, partially offset by a $39.8 million decrease in other borrowings primarily due to the reversal of secured borrowings recorded at September 30, 2022. The increase in total deposits was primarily due to a $121.9 million increase in brokered deposits, partially offset by a $24.6 million decrease in noninterest-bearing deposits. The increases in deposits and FHLB borrowings were primarily used to fund loan growth. As of June 30, 2023, deposits exceeding the FDIC insurance limit of $250,000 per insured account were estimated to be not greater than 19.6% of total deposits. The amount is believed to be less than 19.6% 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 $13.5 million, from $151.6 million at September 30, 2022 to $165.1 million at June 30, 2023, due primarily to a decrease in accumulated other comprehensive loss and increase in retained net income of $9.5 million and $6.1 million, respectively. The decrease in accumulated other comprehensive loss was primarily due to decreasing long term market interest rates during the nine months ended June 30, 2023, which resulted in an increase in the fair value of the available-for-sale securities portfolio. At June 30, 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; 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