JEFFERSONVILLE, Ind., Oct. 31, 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 $8.2 million, or $1.19 per diluted share, for the year ended September 30, 2023 compared to net income of $15.4 million, or $2.15 per diluted share, for the year ended September 30, 2022. Excluding nonrecurring items, the Company reported net income of $12.7 million (non-GAAP measure)⁽¹⁾ and net income per diluted share of $1.85 (non-GAAP measure)⁽¹⁾ for the year ended September 30, 2023; compared to net income of $17.1 million (non-GAAP measure)⁽¹⁾ and net income per diluted share of $2.40 (non-GAAP measure)⁽¹⁾ for the year ended September 30, 2022.

Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated “As we navigated the challenging environment for the banking industry during fiscal 2023, we focused on reducing balance sheet and operating inefficiencies, risks that could result in earnings volatility, and complexity of the organization, particularly in the fourth fiscal quarter. Many of these measures are highlighted below and quantified in the included table reconciling GAAP and non-GAAP financial measures. In addition to these repositioning measures, we focused on core banking; asset quality; selective high-quality lending; deposit growth; building the SBA lending pipeline; and improvement of liquidity, capital and interest rate sensitivity positions. We believe the measures taken will deliver shareholder value and we’ll continue to evaluate options that will further position the Company for future success.”

Recent Actions to Reduce Inefficiencies and Potential Earnings Volatility

• In the June 2023 quarter ended, utilized gain on repurchase of subordinated debt as an opportunity to sell $78.5 million of available for sale securities that were yielding less than the marginal cost of funding.
• In August 2023, converted the Bank’s data processing system to FIS Horizon.
• In September 2023, entered into a letter of intent to sell the Bank’s residential mortgage servicing rights portfolio with a close anticipated for November 30, 2023.
• In September 2023, dissolved First Savings Insurance Risk Management, Inc., the Company’s captive insurance subsidiary.
• In October 2023, announced that the Bank will cease national originate-to-sell mortgage banking operations during the quarter ending December 31, 2023.

(1) Non-GAAP net income and net income per diluted share exclude certain nonrecurring items. A reconciliation to GAAP and discussion of the use of non-GAAP measures is included in the table at the end of this release.

Results of Operations for the Fiscal Years Ended September 30, 2023 and 2022

Net interest income increased $922,000, or 1.5%, to $61.6 million for the year ended September 30, 2023 as compared to the prior year. The increase in net interest income was due to a $32.0 million increase in interest income, partially offset by a $31.1 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $385.8 million, from $1.67 billion for 2022 to $2.05 billion for 2023, and an increase in the weighted-average tax-equivalent yield, from 4.35% for 2022 to 5.13% for 2023. The increase in the average balance of interest-earning assets was primarily due to an increase in the average balance of loans of $322.9 million and an increase in the average balance of investment securities of $67.2 million. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $390.6 million, from $1.32 billion for 2022 to $1.71 billion for 2023, and an increase in the average cost of interest-bearing liabilities, from 0.78% for 2022 to 2.44% 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 as a result of increased market interest rates and a $91.4 million migration of deposit balances from noninterest-bearing to interest-bearing.

The Company recognized a provision for loan losses of $2.6 million for the year ended September 30, 2023 due primarily to loan portfolio growth, compared to a provision for loan losses of $1.9 million for the prior year. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $3.1 million from $10.9 million at September 30, 2022 to $13.9 million at September 30, 2023. The Company recognized net charge-offs of $1.1 million for the year ended September 30, 2023, of which $873,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $849,000 in 2022, of which $733,000 was related to unguaranteed portions of SBA loans.

Noninterest income decreased $25.9 million for the year ended September 30, 2023 as compared to the prior year. The decrease was due primarily to a $24.0 million decrease in mortgage banking income in 2023 compared to the same period in 2022. 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 $587.7 million in the year ended September 30, 2023 as compared to $1.61 billion for the prior year.

Noninterest expense decreased $16.5 million for the year ended September 30, 2023 as compared to the prior year. The decrease was due primarily to a decrease in compensation and benefits and professional fees of $17.3 million and $3.7 million, respectively, partially offset by a $2.2 million increase in data processing expense. 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 volume. The decrease in professional fees was due primarily to a $2.0 million consulting fee incurred in 2022 in connection with negotiating a new core processing contract. The increase in data processing expense is primarily due to one-time charges totaling $1.4 million in connection with the conversion of the Bank’s data processing system.

The Company recognized income tax expense of $10,000 for the year ended September 30, 2023 compared to income tax expense of $1.9 million for the prior year. The effective tax rate for the 2023 period was 0.1% as compared to 11.1% for 2022. The decrease in the effective tax rate in 2023 was primarily due to the recognition of investment tax credits related to solar projects in 2023 and lower pre-tax income in 2023 as compared to 2022. The lower pre-tax income for 2023 is due primarily to losses incurred for mortgage banking operations, professional fees related to mortgage banking loss contingencies, and expenses related to the conversion of the Bank’s data processing system.

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

The Company reported a net loss of $747,000, or $0.11 per diluted share, for the three months ended September 30, 2023 compared to net income of $1.4 million, or $0.20 per diluted share, for the three months ended September 30, 2022. Excluding nonrecurring items, the Company reported net income of $2.8 million (non-GAAP measure)⁽¹⁾ and net income per diluted share of $0.41 (non-GAAP measure)⁽¹⁾ for the three months ended September 30, 2023; compared to net income of $3.1 million (non-GAAP measure)⁽¹⁾ and net income per diluted share of $0.44 (non-GAAP measure)⁽¹⁾ for the three months ended September 30, 2022.

Net interest income decreased $1.3 million, or 7.7%, to $15.5 million for the three months ended September 30, 2023 as compared to the same period 2022. The decrease in net interest income was due to an $8.3 million increase in interest expense, partially offset by a $7.0 million increase in interest income. Interest income increased due to an increase in the average balance of interest-earning assets of $257.0 million, from $1.85 billion for 2022 to $2.11 billion for 2023, and an increase in the weighted-average tax-equivalent yield, from 4.64% for 2022 to 5.42% for 2023. The increase in the average balance of interest-earning assets was primarily due to increases in the average balance of loans $317.6 million, partially offset by a decrease in the average balance of investment securities of $58.9 million. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $311.5 million, from $1.48 billion for 2022 to $1.79 billion for 2023, and an increase in the average cost of interest-bearing liabilities, from 1.12% for 2022 to 2.82% 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 increased market interest rates.

The Company recognized a provision for loan losses of $815,000 for the three months ended September 30, 2023, compared to $880,000 for the same period in 2022. The Company recognized net charge-offs of $753,000 for the three months ended September 30, 2023, of which $609,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $500,000 in 2022, of which $404,000 was related to unguaranteed portions of SBA loans.

Noninterest income increased $911,000 for the three months ended September 30, 2023 as compared to the same period in 2022. The increase was due primarily to an increases in mortgage banking income of $772,000. The increase in mortgage banking income was primarily due to higher origination, sales volume, and gain on sale margins in the 2023 period compared to 2022. Mortgage loans originated for sale were $195.5 million in the three months ended September 30, 2023 as compared to $186.0 million in the same period in 2022.

Noninterest expense increased $2.1 million for the three months ended September 30, 2023 as compared to the same period in 2022. The increase was due primarily to increases in other operating expense and data processing of $2.7 million and $1.4 million, respectively, partially offset by a decrease of $2.6 million in professional fees. The increase in other operating expense was primarily due to SBA-guaranteed loan contingencies and mortgage banking loss contingencies, including related professional fees, of $1.0 million and $1.6 million, respectively, during the three months ended September 30, 2023. The increase in data processing expense is primarily due to one-time charges totaling $1.3 million in connection with the conversion of the Bank’s data processing system. The decrease in professional fees was primarily due to a $2.0 million consulting fee incurred in the 2022 period in connection with negotiating the new data processing contract.

The Company recognized income tax benefit of $737,000 for the three months ended September 30, 2023 compared to tax benefit of $446,000 for the same period in 2022. The increase in the income tax benefit was primarily due to the recognition of investment tax credits related to solar projects in 2023 and a pre-tax loss in 2023 compared to pre-tax income in 2022.

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

Total assets increased $195.1 million, from $2.09 billion at September 30, 2022 to $2.29 billion at September 30, 2023. Net loans held for investment increased $295.7 million during the year ended September 30, 2023 due primarily to growth in residential mortgage and single-tenant net lease commercial real estate loans. Available-for-sale securities decreased $88.8 million during the year ended September 30, 2023 due primarily to the sale of $78.5 million of securities in June 2023 and scheduled amortization and maturities. The proceeds from which were used to repay brokered deposits and FHLB borrowings.

Total liabilities increased $195.7 million due primarily to increases in total deposits and FHLB borrowings of $172.5 million and $55.9 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 due primarily increases in brokered deposits, money market deposit accounts, retail time deposits, and interest-bearing checking of $145.8 million, $85.5 million, $41.1 million and $21.6 million, respective, partially offset by decreases in noninterest-bearing deposits and savings accounts of $91.4 million and $30.1 million, respectively. The increases in deposits and FHLB borrowings were primarily used to fund loan growth. As of September 30, 2023, deposits exceeding the FDIC insurance limit of $250,000 per insured account were 27.5% of total deposits and excluding public funds insured by the Indiana Public Deposit Insurance Fund, uninsured deposits totaled 12.8% of total deposits.

Common stockholders’ equity decreased $584,000, from $151.6 million at September 30, 2022 to $151.0 million at September 30, 2023, due primarily to a $2.6 million increase in treasury stock and an increase in accumulated other comprehensive loss of $2.5 million, partially offset by an increase in retained net income of $4.4 million. The increase in treasury stock was due to the repurchase of 124,710 of Company common shares during the year ended September 30, 2023. The increase in accumulated other comprehensive loss was primarily due to increasing long term market interest rates during the year ended September 30, 2023, which resulted in a decrease in the fair value of the available-for-sale securities portfolio. At September 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 two national lending programs, including single-tenant net lease commercial real estate and SBA lending, with offices located predominately in the Midwest. 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