First Savings Financial Group, Inc. Reports Financial Results For The Fiscal Year Ended September 30, 2021

JEFFERSONVILLE, Ind., Oct. 28, 2021 (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 $29.6 million, or $4.12 per diluted share, for the year ended September 30, 2021 compared to net income of $33.4 million, or $4.68 per diluted share, for the year ended September 30, 2020.

Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated: “We are very pleased in delivering another fiscal year of outstanding performance to our shareholders. In addition to achieving the second highest year of recorded net income and substantially growing the balance sheet, excluding forgiveness of PPP loans, we believe that we have positioned the Company for continued growth and profitability. We are encouraged by the strong performance of the core banking and SBA lending segments, plus perceive opportunity for enhanced growth and profitability of the mortgage banking segment in fiscal 2022. I’m optimistic that each of these business lines will continue to thrive and deliver exceptional value to our shareholders.”

Results of Operations for the Fiscal Years Ended September 30, 2021 and 2020

Net interest income increased $10.0 million, or 21.2%, to $57.2 million for the year ended September 30, 2021 as compared to 2020. The increase in net interest income was due to a $7.6 million increase in interest income and a $2.5 million decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $230.2 million, from $1.36 billion for 2020 to $1.59 billion for 2021, partially offset by a decrease in the weighted-average tax-equivalent yield, from 4.33% for 2020 to 4.18% for 2021. The decrease in the weighted-average tax-equivalent yield for 2021 was due primarily to declining market interest rates for loans and investment securities. This decline was partially offset by an increase in the yield on PPP loans from 2.29% for 2020 to 3.97% for 2021, which was due to accelerated recognition of deferred PPP loan fees related to forgiveness payoffs during the year ended September 30, 2021 as compared to 2020. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 0.96% for 2020 to 0.64% for 2021, partially offset by an increase in the average balance of interest-bearing liabilities of $162.9 million, from $1.10 billion for 2020 to $1.27 billion for 2021. The decrease in the average cost of interest-bearing liabilities for 2021 was due primarily to decreasing market interest rates on deposits and Federal Home Loan Bank (“FHLB”) borrowings.

The Company recognized a credit for loan losses of $1.8 million for the year ended September 30, 2021 compared to a provision of $8.0 million for 2020. The credit for loan losses for the year ended September 30, 2021 was primarily the result of decreases in certain segments of the loan portfolio as well as reductions of certain qualitative risk factors within the allowance for loan losses calculation related to the COVID-19 pandemic. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $1.9 million, from $13.6 million at September 30, 2020 to $15.5 million at September 30, 2021. The Company recognized net charge-offs of $958,000 for the year ended September 30, 2021, of which $894,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $975,000, of which $679,000 was related to unguaranteed portions of SBA loans, for the year ended September 30, 2020.

Noninterest income decreased $12.9 million for the year ended September 30, 2021 as compared to 2020, due primarily to a decrease in mortgage banking income of $16.2 million, which was partially offset by a $3.1 million increase in net gain on sales of SBA loans. The decrease in mortgage banking income was due to decreased loan originations and sales by the mortgage banking segment, as well as margin compression in the residential mortgage loan secondary market. The increase in net gain on sales of SBA loans was due primarily to increases in production and sales volume from the SBA lending segment, as well as higher premiums in the secondary market. Additional details regarding the financial performance of the mortgage banking and SBA lending segments are included in the “Segmented Statements of Income Information” table at the end of this release.

Noninterest expense increased $13.6 million for the year ended September 30, 2021 as compared to 2020. The increase was due primarily to an increase in compensation and benefits of $10.0 million and an increase in professional fees of $2.0 million. The increase in compensation and benefits expense is attributable to the addition of new employees primarily to support the growth of the Company’s mortgage banking, core banking and SBA lending activities, routine salary and benefits adjustments, and increased incentive compensation as a result of the Company’s performance.

The Company recognized income tax expense of $10.0 million for the year ended September 30, 2021 compared to income tax expense of $12.7 million for 2020. The decrease is primarily the result of lower pretax income in 2021. The effective tax rate for 2021 was 25.0% compared to 27.1% for 2020. The lower effective tax rate for 2021 was due to lower nondeductible executive compensation expense in 2021 as compared to 2020.

Results of Operations for the Three Months Ended September 30, 2021 and 2020

The Company reported net income of $4.8 million, or $0.67 per diluted share, for the three months ended September 30, 2021 compared to net income of $15.1 million, or $2.13 per diluted share, for the three months ended September 30, 2020.

Net interest income increased $996,000, or 7.4%, to $14.4 million for the three months ended September 30, 2021 as compared to the same period in 2020. The increase in net interest income was due to a $478,000 increase in interest income and a $518,000 decrease in interest expense. Interest income increased due to an increase in the weighted-average tax-equivalent yield, from 3.98% for 2020 to 4.26% for 2021, partially offset by a decrease in the average balance of interest-earning assets of $62.5 million, from $1.62 billion for 2020 to $1.56 billion for 2021. The increase in the weighted-average tax-equivalent yield for 2021 is due primarily to an increase in the yield on PPP loans from 2.26% for 2020 to 5.78% for 2021. The increase in the yield on PPP loans was due to accelerated recognition of deferred PPP loan fees related to forgiveness payoffs during the quarter ended September 30, 2021. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 0.70% for 2020 to 0.60% for 2021, and a decrease in the average balance of interest-bearing liabilities of $107.1 million, from $1.33 billion for 2020 to $1.22 billion for 2021. The decrease in the average cost of interest-bearing liabilities for 2021 was due primarily to decreasing market interest rates on deposits and FHLB borrowings.

The Company recognized a provision for loan losses of $8,000 for the three months ended September 30, 2021 compared to a provision of $2.8 million for the same period in 2020. The Company recognized net charge-offs of $349,000 for the three months ended September 30, 2021, of which $328,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $385,000 for the same period in 2020, of which $326,000 was related to unguaranteed portions of SBA loans.

Noninterest income decreased $40.5 million for the three months ended September 30, 2021 as compared to the same period in 2020. The decrease was due primarily to a decrease in mortgage banking income of $39.9 million. The decrease in mortgage banking income was due to decreased loan originations and sales by the mortgage banking segment, as well as margin compression in the residential mortgage loan secondary market.

Noninterest expense decreased $19.3 million for the three months ended September 30, 2021 as compared to the same period in 2020. The decrease was due primarily to decreases in compensation and benefits, other operating expense and advertising expense of $15.0 million, $2.0 million and $1.4 million, respectively. The decrease in compensation and benefits expense is due primarily to a reduction in incentive compensation for the Company’s mortgage banking segment as a result of decreased mortgage banking income. The decreases in other operating expense and advertising expense were primarily due to the reduced volume from the mortgage banking segment.

The Company recognized income tax expense of $958,000 for the three months ended September 30, 2021 compared to $7.3 million for the same period in 2020. The decrease was primarily the result of lower pretax income in 2021. The effective tax rate for 2021 was 16.5% as compared to 31.2% for 2020. The lower effective tax rate for 2021 was due to lower nondeductible executive compensation expense in 2021 as compared to 2020.

Comparison of Financial Condition at September 30, 2021 and September 30, 2020

Total assets decreased $44.1 million, from $1.76 billion at September 30, 2020 to $1.72 billion at September 30, 2021. Residential mortgage loans held for sale decreased by $95.6 million due to loan sales outpacing originations during the year and single tenant net lease loans held for sale increased by $23.0 million due to a transfer from held-for-investment to held-for-sale during the year. Net loans decreased $14.1 million during the year ended September 30, 2021, due primarily to a $123.9 million decrease in PPP loans, partially offset by growth in the single tenant net lease commercial real estate and residential mortgage loans. Excluding the decrease in PPP loans and transfers of single tenant net lease loans to held-for-sale, net loans increased $132.8 million, or 12.2%. Residential mortgage loan servicing rights increased $27.9 million, or 128.6%, to $49.6 million at September 30, 2021 as the Company continues to increase its loan servicing portfolio.

Total liabilities decreased $66.9 million due primarily to decreases of $174.8 million and $60.9 million in PPPLF and FHLB borrowings, respectively, partially offset by a $179.5 million increase in total deposits.

Common stockholders’ equity increased $23.1 million, from $157.3 million at September 30, 2020 to $180.4 million at September 30, 2021, due primarily to retained net income of $27.0 million, partially offset by decreases in net unrealized gains on available for sale securities included in accumulated other comprehensive income of $2.3 million and additional paid in capital of $1.8 million, which was due to the acquisition of the minority interests in Q2 Business Capital, LLC on December 31, 2020. At September 30, 2021 and September 30, 2020, 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 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

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(1) Includes $56.7 million and $180.6 million of PPP loans at September 30, 2021 and September 30, 2020, respectively.

(2) Includes $100.1 million and $132.1 million of brokered certificates of deposit at September 30, 2021 and September 30, 2020, respectively.

(3) See reconciliation of GAAP and Non-GAAP financial measures for additional information relating to calculation of this item.

(4) Denominator excludes PPP loans, which are fully guaranteed by the SBA. This ratio is non-GAAP, but is believed by management to be meaningful because it provides a comparable ratio after eliminating PPP loans.

RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES (UNAUDITED):
The following non-GAAP financial measures used by the Company provide information useful to investors in understanding the Company’s performance. The Company believes the financial measures presented below are important because of their widespread use by investors as a means to evaluate capital adequacy and earnings. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company’s consolidated financial statements and reconciles those non-GAAP financial measures with the comparable GAAP financial measures.

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(9) Variable expenses include incentive compensation and advertising expenses.

(10) Net of commissions, referral fees, SBA repair fees and discounts on unguaranteed portions held-for-investment, and inclusive of gains on servicing assets.

(11) Net of lender credits and other investor expenses, and inclusive of servicing income, loan fees, gains on mortgage servicing rights, fair value adjustments and gains (losses) on derivative instruments.