JEFFERSONVILLE, Ind., Feb. 06, 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 $2.9 million, or $0.41 per diluted share, for the quarter ended December 31, 2022 compared to net income of $4.3 million, or $0.60 per diluted share, for the quarter ended December 31, 2021.

Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated, “This first quarter of fiscal 2023 was challenging and included a number of generally nonrecurring items that adversely affected net income. The core banking segment recognized higher than normal provisions for loan losses due primarily to a $109 million increase in gross loans for the quarter. The SBA lending segment recognized a $351,000 impairment for the loan servicing asset due to the high-rate environment. And, due to restructuring during the quarter, the mortgage banking segment recognized approximately $1.8 million of expense that will not be recognized in future periods. This restructuring in mortgage banking included changes in leadership, elimination of surplus staffing positions, closure of nonperforming loan production offices (“LPOs”), and reduction in third-party and vendor related expenses. As part of the restructuring, the Bank has strategically focused on a predominately Midwest footprint for LPOs and a greater alignment of these with the core banking operations. While some expenses associated with the restructuring will be recognized in the quarter ending March 31, 2023, we are confident that this restructuring and realignment will result in the cessation of the significant losses recognized by the mortgage banking segment in recent quarters. The core banking segment continues to perform well and asset quality remains strong, but it’s increasing facing margin compression as funding costs increase in this rate environment, particularly those associated with wholesale funding sources such as home loan bank advances and brokered deposits. We are encouraged by the strong 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 73,392 of its common shares during the quarter, in addition to the 199,195 purchased in the third and fourth quarters of fiscal 2022, which together totaled more than 3.8% of outstanding shares.”

Results of Operations for the Three Months Ended December 31, 2022 and 2021

Net interest income increased $2.4 million, or 17.0%, to $16.3 million for the three months ended December 31, 2022 as compared to the same period 2021. The increase in net interest income was due to a $7.7 million increase in interest income, partially offset by a $5.4 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $449.5 million, from $1.53 billion for 2021 to $1.98 billion for 2022, and an increase in the weighted-average tax-equivalent yield, from 4.22% for 2021 to 4.87% for 2022. 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 $152.3 million and $310.2 million, respectively. When excluding the impact from PPP loan payoffs, the increase in the average balance of loans was $360.7 million when comparing the two periods. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $415.1 million, from $1.20 billion for 2021 to $1.61 billion for 2022, and an increase in the average cost of interest-bearing liabilities, from 0.62% for 2021 to 1.79% for 2022. The increase in the average cost of interest-bearing liabilities for 2022 was due primarily to higher rates paid for brokered deposits and money market deposit accounts during the period.

The Company recognized a provision for loan losses of $984,000 for the three months ended December 31, 2022 due primarily to loan portfolio growth, compared to a provision of $526,000 for the same period in 2021. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $667,000 from $10.9 million at September 30, 2022 to $11.5 million at December 31, 2022. The Company recognized net charge-offs of $264,000 for the three months ended December 31, 2022, of which $247,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $47,000 in 2021.

Noninterest income decreased $11.4 million for the three months ended December 31, 2022 as compared to the same period in 2021. The decrease was due primarily to decreases in mortgage banking income and net gain on sale of SBA loans of $10.2 million and $861,000, respectively. The decrease in mortgage banking income was primarily due to a $3.9 million decrease in production revenue from lower originations for sale, a $4.4 million decrease in capitalized residential mortgage loan servicing rights, a $1.2 million decrease in realized and unrealized hedging gains in 2022 and a $1.2 million decrease in the fair value of the residential mortgage loan servicing rights portfolio in 2022 as compared to a $675,000 increase in fair value recognized in 2021, partially offset by a $1.3 million increase in the fair value of loans held for sale and interest rate lock commitments as compared to a $222,000 decrease in fair value recognized in 2021. Mortgage loans originated for sale were $77.6 million in the three months ended December 31, 2022 as compared to $541.1 million in 2021. 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.

Noninterest expense decreased $7.3 million for the three months ended December 31, 2022 as compared to the same period in 2021. The decrease was due primarily to a decrease in compensation and benefits of $6.6 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 $83,000 for the three months ended December 31, 2022 compared to tax expense of $811,000 for the same period in 2021. The effective tax rate for 2022 was 2.8%, which was a decrease from the effective tax rate of 15.9% in 2021. The decrease was due to recognition of solar tax credits in 2022 and reduction of pre-tax net income in 2022 as compared to 2021.

Comparison of Financial Condition at December 31, 2022 and September 30, 2022

Total assets increased $103.2 million, from $2.09 billion at September 30, 2022 to $2.20 billion at December 31, 2022. Net loans held for investment increased $108.4 million during the quarter ended December 31, 2022, due primarily to growth in single-tenant net lease commercial real estate loans and residential mortgage loans.

Total liabilities increased $94.6 million due primarily to increases in total deposits, FHLB borrowings and other borrowings of $22.0 million, $70.3 million and $7.3 million, respectively. The increase in FHLB borrowings was primarily used to fund loan growth. The increase in other borrowings represents commercial loan transfers that were accounted for as secured borrowings.

Common stockholders’ equity increased $8.6 million, from $151.6 million at September 30, 2022 to $160.1 million at December 31, 2022, due primarily to increases in accumulated other comprehensive income and retained net income of $8.1 million and $2.0 million, respectively. The increase in accumulated other comprehensive income was primarily due to decreasing market interest rates during the three months ended December 31, 2022, which resulted in an increase in the fair value of the available-for-sale securities portfolio. At December 31, 2022 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