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First Savings Financial Group, Inc. Reports Financial Results for the Third Fiscal Quarter Ended June 30, 2020

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JEFFERSONVILLE, Ind., July 27, 2020 (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 $15.4 million, or $6.51 per diluted share, for the quarter ended June 30, 2020 compared to net income of $4.4 million, or $1.85 per diluted share, for the quarter ended June 30, 2019.

Commenting on the Company’s performance, Larry W. Myers, President and CEO stated: “We are very pleased with the outstanding quarter, including the stellar level of reported earnings, $2.9 million increase in allowance for loan losses, resiliency of asset quality, stability of the net interest margin, significant increase in stockholders’ equity, and substantial increase in shareholder value. The core bank, which is the bedrock of our entrepreneurial enterprise, continues to perform very well each quarter and the ancillary business lines, which provide diversification of our revenue streams, continue to generate additional meaningful return for our shareholders. Given such, I continue in the confidence that the Company is well-positioned to thrive during what is otherwise a very challenging banking environment and I continue to be very proud of our Company and staff.”

COVID-19 Response

The COVID-19 pandemic has placed, and continues to place, significant health, economic and other major hardships throughout the communities we serve, the United States and the entire world. The Company has implemented a number of procedures in response to the pandemic to support the safety and well-being of our customers, employees, and communities:

  • Following the guidelines of the Center for Disease Control and local governments, we have updated our branch operating procedures. While our branches have remained open, the lobbies were temporarily closed and transactions were being conducted through drive-up windows or by appointment. Our branches have returned to pre-pandemic service levels, but have implemented safety precautions, including use of personal protective equipment (“PPE”) (where and when prudent), enhanced daily cleaning and instructions to maintain appropriate social distancing. We also actively encourage customers to utilize PPE and alternative banking channels, such as our online and mobile banking platforms. Our customer service and retail departments remain fully staffed and available to assist customers remotely.

  • Our corporate and operations offices have predominately returned to pre-pandemic schedules and processes, but we have enhanced daily cleaning and instructed employees to maintain appropriate social distancing. Our employees maintain the ability to work remotely, both safely and efficiently using technology, in the event that such is required or necessary. Most of our normally scheduled meetings, including Board of Director meetings and various committee meetings, are now held virtually instead of in-person.

  • We continue to assist customers experiencing COVID-19 related hardships by approving payment extensions or loan forbearance agreements, and waiving or refunding certain fees. During the initial onset of the hardships, we proactively contacted all commercial borrowers and offered uniform payment extensions or loan forbearance agreements, while requests from consumer borrowers were reviewed and approved on case-by-case basis. Beginning with March 18, 2020 and through July 24, 2020, we had approved 206 payment extensions or loan forbearance agreements on approximately $90.6 million of balances in the loan portfolio, of which $81.9 million related to commercial real estate, $7.2 million related to residential real estate and consumer loans, and $1.5 million related to Small Business Administration (“SBA”) lending relationships. These payment extensions or loan forbearance agreements were generally for periods of three months and included deferment of both principle and interest. As of July 24, 2020, we had 48 loans with payment extensions or loan forbearance agreements on approximately $22.1 million of balances that were still in effect and set to expire between July 27, 2020 and October 13, 2020. Following the expiration of the initial payment extensions or loan forbearance agreements, we will entertain requests for extended periods on a case-by-case basis, which will generally include deferment of only the principle portion of payments (but both principle and interest for hotel loans) for a period of up to three months. Included in those 48 agreements in effect as of July 24, 2020, three were for second three-month periods of deferred principle and interest payments, two of which were hotel loans and the other in the entertainment service industry.

  • As a result of the passage of the CARES Act, the SBA will make six months of principal and interest payments for loans of existing SBA clients that were in “regular servicing status” (not delinquent) at March 27, 2020 and for SBA loans of new clients originated between March 27, 2020 and September 27, 2020. The aforementioned $1.5 million of SBA lending relationships that were provided payment extensions and forbearance by the Company will also receive the six months of SBA-made payments once the forbearance periods have expired. In addition, the majority of the Company’s SBA clients applied for participation in the SBA’s Paycheck Protection Program (“PPP”).

  • We are actively participating in the PPP and had $180.5 million of outstanding PPP loan balances as of June 30, 2020. At June 30, 2020, we had approximately $3.5 million of deferred loan fees related to PPP loans that will be recognized over the life of the loans and as borrowers are granted forgiveness.

  • The leisure and hospitality industries carry a higher degree of credit risk due to the COVID-19 pandemic. Based on our evaluation of the allowance for loan losses at June 30, 2020, management believes sufficient reserves are in place to cover estimated losses at that date. However, as the pandemic continues, losses could be recognized.

  • The Company had outstanding loan balances to restaurants totaling $167.5 million as of June 30, 2020, of which $76.1 million is fully guaranteed by the SBA, including $74.5 million of PPP loans, and $77.4 million represents commercial real estate loans where the collateral property is leased to national-brand, investment-grade tenants.

  • The Company had outstanding loan balances to hotels totaling $17.5 million as of June 30, 2020, of which $3.7 million is fully guaranteed by the SBA, including $606,000 of PPP loans.

Management continues to closely monitor the pandemic and may take additional action to respond to the pandemic’s effects on the Company’s business as the situation continues to evolve. We cannot determine or estimate the impact on our business at this time because the length and severity of the economic downturn is not known. We believe we are well-positioned to withstand any challenges that may be presented, and we are committed to continuing to serve our customers, employees and communities.

Results of Operations for the Three Months Ended June 30, 2020 and 2019

Net interest income increased $2.9 million, or 29.4%, to $12.8 million for the quarter ended June 30, 2020 as compared to the same quarter in 2019. The increase in net interest income was due to a $2.3 million increase in interest income and a $623,000 decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $327.1 million, from $1.09 billion for 2019 to $1.42 billion for 2020, partially offset by a decrease in the weighted average tax-equivalent yield, from 4.88% for 2019 to 4.41% for 2020. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 1.43% for 2019 to 0.88% for 2020, partially offset by an increase in the average balance of interest-bearing liabilities of $274.0 million, from $884.5 million for 2019 to $1.16 billion for 2020. The decrease in the average cost of interest-bearing liabilities for 2020 was due primarily to decreasing market interest rates on deposits and Federal Home Loan Bank (“FHLB”) borrowings. The Company also began participation in the Federal Reserve Bank’s PPP Liquidity Facility (“PPPLF”) during the quarter ended June 30, 2020. Borrowings under the PPPLF are secured by the outstanding PPP loans and have an interest rate of 0.35%. Additional details are included in the “Summarized Consolidated Average Balance Sheets” table at the end of this release.

The Company recognized $3.0 million in provision for loan losses for the quarter ended June 30, 2020, compared to $337,000 in 2019. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $8.6 million, from $5.2 million at September 30, 2019 to $13.8 million at June 30, 2020, of which $3.7 million was guaranteed by the SBA. The Company recognized net charge-offs of $31,000 for the quarter ended June 30, 2020 compared to net charge-offs of $655,000 for the same quarter in 2019. The increase in the provision for loan losses for 2020 was primarily due to increased nonperforming assets as well as changes to qualitative factors within the allowance for loan losses calculation related to economic uncertainties surrounding COVID-19.

Noninterest income increased $33.7 million for the quarter ended June 30, 2020 as compared to the same quarter in 2019. The increase was due primarily to an increase in mortgage banking income of $33.5 million. The increase in mortgage banking income was due to production from the secondary-market residential mortgage lending segment that commenced operations in April 2018. 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 $18.5 million for the quarter ended June 30, 2020 as compared to the same quarter in 2019. The increase was due primarily to increases in compensation and benefits and advertising of $15.2 million and $1.1 million, respectively. 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 and SBA lending activities, routine salary and benefits adjustments, and increased incentive compensation as a result of the Company’s performance. The increase in advertising is primarily due to the mortgage banking segment.

The Company recognized income tax expense of $5.5 million for the quarter ended June 30, 2020, as compared to income tax expense of $748,000 for 2019. The effective tax rate increased from 13.1% for the quarter ended June 20, 2019 to 26.2% for the quarter ended June 30, 2020 primarily due to increases in pre-tax income and nondeductible compensation.

Results of Operations for the Nine Months Ended June 30, 2020 and 2019

The Company reported net income of $18.2 million, or $7.66 per diluted share, for the nine months ended June 30, 2020 compared to net income of $10.9 million, or $4.58 per diluted share, for the nine months ended June 30, 2019.

Net interest income increased $5.3 million, or 18.0%, to $34.6 million for the nine months ended June 30, 2020 as compared to the same period in 2019. The increase in net interest income is due to a $5.6 million increase in interest income, which was partially offset by a $364,000 increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $223.5 million, from $1.04 billion for 2019 to $1.26 billion for 2020, partially offset by a decrease in the weighted-average tax-equivalent yield, from 4.88% for 2019 to 4.62% for 2020. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $195.9 million, from $829.7 million for 2019 to $1.03 billion for 2020, partially offset by a decrease in the average cost of interest-bearing liabilities, from 1.26% for 2019 to 1.07% for 2020. The decrease in the average cost of interest-bearing liabilities for the nine months ended June 30, 2020 was due primarily to decreasing market interest rates on deposits and FHLB borrowings, as well as the Company’s participation in the PPPLF discussed previously. Additional details are included in the “Summarized Consolidated Average Balance Sheets” table at the end of this release.

The Company recognized $5.2 million in provision for loan losses for the nine months ended June 30, 2020, compared to $992,000 for the same period in 2019. The Company recognized net charge-offs of $590,000 for the nine months ended June 30, 2020, of which $353,000 was related to unguaranteed portions of SBA loans. The Company recognized net charge-offs of $699,000 for the same period in 2019, of which $645,000 was related to unguaranteed portions of SBA loans. The increase in the provision for loan losses for 2020 was primarily due to increased nonperforming assets for the period, as well as changes to qualitative factors within the allowance for loan losses calculation related to economic uncertainties surrounding COVID-19.

Noninterest income increased $49.9 million for the nine months ended June 30, 2020 as compared to the same period in 2019. The increase was due primarily to an increase in mortgage banking income of $49.2 million. Additional details regarding the financial performance of the mortgage banking and SBA lending segments are included in the “Segmented Income Statement Information” table at the end of this release.

Noninterest expense increased $40.6 million for the nine months ended June 30, 2020 as compared to the same period in 2019. The increase was due primarily to increases in compensation and benefits and advertising of $32.4 million and $3.4 million, respectively. 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 and SBA lending activities, routine salary and benefits adjustments, and increased incentive compensation as a result of the Company’s performance. The increase in advertising is primarily due to the mortgage banking segment.

The Company recognized income tax expense of $5.4 million for the nine months ended June 30, 2020, compared to $1.7 million for the same period in 2019. The effective tax rate increased from 13.3% for the nine months ended June 30, 2019 to 23.0% for the same period in 2020 primarily due to increases in pre-tax income and nondeductible executive compensation.

Comparison of Financial Condition at June 30, 2020 and September 30, 2019

Total assets increased $438.7 million, from $1.22 billion at September 30, 2019 to $1.66 billion at June 30, 2020. Net loans increased $270.7 million during the nine months ended June 30, 2020, due primarily to continued growth in the commercial business, commercial real estate and SBA loan portfolios, as well as $180.5 million in PPP loans outstanding at June 30, 2020. Residential mortgage loans held for sale and SBA loans held for sale also increased by $109.8 million and $4.2 million, respectively, during the nine months ended June 30, 2020 due to increased production from the mortgage banking and SBA lending segments. Total liabilities increased $417.8 million primarily due to a $174.8 million increase in Federal Reserve PPP Liquidity Facility advances, a $76.1 million increase in FHLB borrowings and a $148.5 million increase in total deposits.

Common stockholders’ equity increased $21.3 million, from $121.1 million at September 30, 2019 to $142.4 million at June 30, 2020, due primarily to increases in retained net income and net unrealized gains on available for sale securities included in accumulated other comprehensive income of $17.2 million and $3.8 million, respectively. At June 30, 2020 and September 30, 2019, the Bank was considered “well-capitalized” under applicable regulatory capital guidelines.

Prior Period Restatement

On November 19, 2019, the Company filed with the Securities and Exchange Commission (“SEC”) a Current Report on Form 8-K to report the Company’s conclusion that its interim consolidated financial statements, and related notes, contained in its Form 10-Q for the period ended June 30, 2019 should no longer be relied upon. The accounting matters underlying this conclusion relate primarily to significant accounting assumptions used in the fair value calculations for interest rate lock commitments and mortgage loans held-for-sale relating to the Company’s mortgage banking operations segment and unrecognized accruals for incentive compensation related to such segment. On December 4, 2019, the Company filed with the SEC an amended Form 10-Q for the period ended June 30, 2019, containing restated interim consolidated financial statements, and related notes, for the period then ended. All financial information at June 30, 2019 and for periods then ended contained in this earnings release have been restated accordingly.

First Savings Bank has fifteen offices in the Indiana communities of Clarksville, Jeffersonville, Charlestown, Sellersburg, New Albany, Georgetown, Corydon, Lanesville, Elizabeth, English, Marengo, Salem, Odon and Montgomery. Access to First Savings Bank accounts, including online banking and electronic bill payments, is available anywhere with Internet access through the Bank's website at www.fsbbank.net.

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 and 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


FIRST SAVINGS FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

Three Months Ended

Nine Months Ended

June 30,

June 30,

OPERATING DATA:

2020

2019

2020

2019

(In thousands, except share and per share data)

Total interest income

$

15,344

$

13,058

$

42,804

$

37,166

Total interest expense

2,543

3,166

8,201

7,837

Net interest income

12,801

9,892

34,603

29,329

Provision for loan losses

2,980

337

5,190

992

Net interest income after provision for loan losses

9,821

9,555

29,413

28,337

Total noninterest income

46,337

12,644

75,457

25,514

Total noninterest expense

35,009

16,488

81,356

40,784

Income before income taxes

21,149

5,711

23,514

13,067

Income tax expense

5,540

748

5,404

1,736

Net income

15,609

4,963

18,110

11,331

Less: Net (income) loss attributable to noncontrolling interests

204

571

(107

)

475

Net income attributable to the Company

$

15,405

$

4,392

$

18,217

$

10,856

Net income per share, basic

$

6.51

$

1.88

$

7.74

$

4.70

Weighted average shares outstanding, basic

2,365,217

2,333,502

2,353,816

2,308,359

Net income per share, diluted

$

6.51

$

1.85

$

7.66

$

4.58

Weighted average shares outstanding, diluted

2,366,787

2,373,578

2,377,399

2,369,421

Performance ratios (annualized)

Return on average assets

4.02

%

1.50

%

1.78

%

1.30

%

Return on average common stockholders' equity

47.91

%

15.90

%

19.36

%

13.83

%

Interest rate spread (tax equivalent basis)

3.53

%

3.45

%

3.55

%

3.62

%

Net interest margin (tax equivalent basis)

3.70

%

3.72

%

3.75

%

3.87

%

Efficiency ratio

59.20

%

73.16

%

73.92

%

74.37

%

June 30,

September 30,

Increase

FINANCIAL CONDITION DATA:

2020

2019

(Decrease)

(In thousands, except per share data)

Total assets

$

1,661,281

$

1,222,579

$

438,702

Cash and cash equivalents

27,544

41,432

(13,888

)

Investment securities

205,960

179,638

26,322

Loans held for sale

210,077

96,070

114,007

Gross loans

1,096,021

820,698

275,323

Allowance for loan losses

14,640

10,040

4,600

Interest earning assets

1,531,174

1,130,095

401,079

Goodwill

9,848

9,848

-

Core deposit intangibles

1,256

1,416

(160

)

Noninterest-bearing deposits

227,797

173,072

54,725

Interest-bearing deposits

755,073

661,312

93,761

FHLB borrowings

298,622

222,544

76,078

Federal Reserve PPPLF borrowings

174,835

-

174,835

Total liabilities

1,519,133

1,101,322

417,811

Stockholders' equity, net of noncontrolling interests

142,362

121,053

21,309

Book value per share

$

59.93

$

51.51

$

8.43

Tangible book value per share (1)

55.26

46.71

8.54

Non-performing assets:

Nonaccrual loans - SBA guaranteed

$

3,709

$

450

$

3,259

Nonaccrual loans - unguaranteed

10,101

4,718

5,383

Total nonaccrual loans

$

13,810

$

5,168

$

8,642

Accruing loans past due 90 days

-

12

(12

)

Total non-performing loans

13,810

5,180

8,630

Foreclosed real estate

-

55

(55

)

Troubled debt restructurings classified as performing loans

5,694

7,265

(1,571

)

Total non-performing assets

$

19,504

$

12,500

$

7,004

Asset quality ratios:

Allowance for loan losses as a percent of total gross loans

1.34

%

1.22

%

0.11

%

Allowance for loan losses as a percent of nonperforming loans

106.01

%

193.82

%

-87.81

%

Nonperforming loans as a percent of total gross loans

1.26

%

0.63

%

0.63

%

Nonperforming assets as a percent of total assets

1.17

%

1.02

%

0.15

%

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

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.

June 30,

September 30,

Tangible Book Value Per Share

2020

2019

(In thousands, except share and per share data)

Stockholders' equity, net of noncontrolling interests (GAAP)

$

142,362

$

121,053

Less: goodwill and core deposit intangibles

(11,104

)

(11,264

)

Tangible equity (non-GAAP)

$

131,258

$

109,789

Outstanding common shares

2,375,324

2,350,229

Tangible book value per share (non-GAAP)

$

55.26

$

46.71

Book value per share (GAAP)

$

59.93

$

51.51

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED):

As of

Summarized Consolidated Balance Sheets

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands, except per share data)

2020

2020

2019

2019

2019

Total cash and cash equivalents

$

27,544

$

22,603

$

41,327

$

41,432

$

65,105

Total investment securities

205,960

186,873

179,991

179,638

182,421

Total loans, net of allowance for loan losses

1,081,381

877,276

851,700

810,658

796,994

Total assets

1,661,281

1,368,252

1,292,573

1,222,579

1,228,953

Total deposits

982,870

937,306

885,598

834,384

888,145

Total borrowings from the Federal Home Loan Bank

298,622

270,000

239,566

222,544

189,255

Stockholders' equity, net of noncontrolling interests

142,362

116,659

123,810

121,053

114,971

Noncontrolling interests in subsidiary

(214

)

(414

)

368

204

176

Total equity

142,148

116,245

124,178

121,257

115,147

Outstanding common shares

2,375,324

2,375,324

2,357,369

2,350,229

2,350,229

Three Months Ended

Summarized Consolidated Statements of Income

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands, except per share data)

2020

2020

2019

2019

2019

Total interest income

$

15,344

$

13,693

$

13,767

$

13,829

$

13,058

Total interest expense

2,543

2,783

2,875

3,069

3,166

Net interest income

12,801

10,910

10,892

10,760

9,892

Provision for loan losses

2,980

1,705

505

471

337

Net interest income after provision for loan losses

9,821

9,205

10,387

10,289

9,555

Total noninterest income

46,337

10,994

18,126

18,340

12,644

Total noninterest expense

35,009

22,075

24,272

21,606

16,488

Income (loss) before income taxes

21,149

(1,876

)

4,241

7,023

5,711

Income tax expense (benefit)

5,540

(774

)

638

1,359

748

Net income (loss)

15,609

(1,102

)

3,603

5,664

4,963

Less: net income (loss) attributable to noncontrolling interests

204

(475

)

164

343

571

Net income (loss) attributable to the Company

$

15,405

$

(627

)

$

3,439

$

5,321

$

4,392

Net income (loss) per share, basic

$

6.51

$

(0.27

)

$

1.47

$

2.28

$

1.88

Weighted average shares outstanding, basic

2,365,217

2,355,750

2,340,619

2,337,472

2,333,502

Net income (loss) per share, diluted

$

6.51

$

(0.26

)

$

1.44

$

2.24

$

1.85

Weighted average shares outstanding, diluted

2,366,787

2,379,901

2,382,754

2,378,221

2,373,578

As previously discussed, financial information at June 30, 2019 and for periods then ended contained in this earnings release have been restated.

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Consolidated Performance Ratios (Annualized)

2020

2020

2019

2019

2019

Return on average assets

4.02

%

-0.19

%

1.09

%

1.75

%

1.50

%

Return on average equity

48.75

%

-3.51

%

11.76

%

19.28

%

17.95

%

Return on average common stockholders' equity

47.91

%

-2.00

%

11.24

%

18.12

%

15.90

%

Net interest margin (tax equlivalent basis)

3.70

%

3.73

%

3.83

%

3.92

%

3.72

%

Efficiency ratio

59.20

%

100.78

%

83.64

%

74.25

%

73.16

%

As of or for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Consolidated Asset Quality Ratios

2020

2020

2019

2019

2019

Nonperforming loans as a percentage of total loans

1.26

%

1.55

%

0.64

%

0.63

%

0.63

%

Nonperforming assets as a percentage of total assets

1.17

%

1.45

%

1.00

%

1.02

%

1.09

%

Allowance for loan losses as a percentage of total loans

1.34

%

1.32

%

1.22

%

1.22

%

1.19

%

Allowance for loan losses as a percentage of nonperforming loans

106.01

%

84.67

%

191.18

%

193.82

%

188.29

%

Net charge-offs (recoveries) to average outstanding loans

0.00

%

0.06

%

0.00

%

0.01

%

0.08

%

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

Three Months Ended

Segmented Statements of Income Information

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands, except per share data)

2020

2020

2019

2019

2019

Net interest income - Core Banking

$

9,652

$

9,236

$

9,188

$

9,178

$

8,739

Net interest income - SBA Lending (Q2)

1,584

1,151

1,217

1,237

1,066

Net interest income - Mortgage Banking

1,565

523

487

345

87

Total net interest income

$

12,801

$

10,910

$

10,892

$

10,760

$

9,892

Provision for loan losses - Core Banking

$

1,668

$

216

$

520

$

104

$

162

Provision for loan losses - SBA Lending (Q2)

1,312

1,489

(15

)

367

175

Provision for loan losses - Mortgage Banking

-

-

-

-

-

Total provision for loan losses

$

2,980

$

1,705

$

505

$

471

$

337

Net interest income after provision for loan losses - Core Banking

$

7,984

$

9,020

$

8,668

$

9,074

$

8,577

Net interest income (loss) after provision for loan losses - SBA Lending (Q2)

272

(338

)

1,232

870

891

Net interest income after provision for loan losses - Mortgage Banking

1,565

523

487

345

87

Total net interest income after provision for loan losses

$

9,821

$

9,205

$

10,387

$

10,289

$

9,555

Noninterest income - Core Banking

$

1,324

$

1,411

$

1,391

$

1,582

$

1,351

Noninterest income - SBA Lending (Q2)

1,785

1,209

929

1,715

1,658

Noninterest income - Mortgage Banking

43,228

8,374

15,806

15,043

9,635

Total noninterest income

$

46,337

$

10,994

$

18,126

$

18,340

$

12,644

Noninterest expense - Core Banking (2)

$

12,046

$

5,973

$

7,545

$

7,521

$

7,576

Noninterest expense - SBA Lending (Q2)

1,642

1,841

1,825

1,883

1,385

Noninterest expense - Mortgage Banking

21,321

14,261

14,902

12,202

7,527

Total noninterest expense

$

35,009

$

22,075

$

24,272

$

21,606

$

16,488

Income (loss) before income taxes - Core Banking

$

(2,738

)

$

4,458

$

2,514

$

3,135

$

2,352

Income (loss) before income taxes - SBA Lending (Q2)

415

(970

)

336

702

1,164

Income (loss) before income taxes - Mortgage Banking

23,472

(5,364

)

1,391

3,186

2,195

Total income (loss) before income taxes

$

21,149

$

(1,876

)

$

4,241

$

7,023

$

5,711

Income tax expense (benefit) - Core Banking

$

(381

)

$

691

$

247

$

472

$

51

Income tax expense (benefit) - SBA Lending (Q2)

53

(124

)

43

90

148

Income tax expense (benefit) - Mortgage Banking

5,868

(1,341

)

348

797

549

Total income tax expense (benefit)

$

5,540

$

(774

)

$

638

$

1,359

$

748

Net income (loss) - Core Banking (3)

$

(2,357

)

$

3,767

$

2,267

$

2,663

$

2,301

Net income (loss) - SBA Lending (Q2)

362

(846

)

293

612

1,016

Net income (loss) - Mortgage Banking

17,604

(4,023

)

1,043

2,389

1,646

Total net income (loss)

$

15,609

$

(1,102

)

$

3,603

$

5,664

$

4,963

Net income (loss) attributable to the Company - Core Banking (3)

$

(2,357

)

$

3,767

$

2,267

$

2,663

$

2,301

Net income (loss) attributable to the Company - SBA Lending (Q2)

158

(371

)

129

269

445

Net income (loss) attributable to the Company - Mortgage Banking

17,604

(4,023

)

1,043

2,389

1,646

Total net income (loss) attributable to the Company

$

15,405

$

(627

)

$

3,439

$

5,321

$

4,392

Net income (loss) per share, basic - Core Banking (3)

$

(1.00

)

$

1.60

$

0.96

$

1.14

$

0.98

Net income (loss) per share, basic - SBA Lending (Q2)

0.07

(0.16

)

0.06

0.12

0.19

Net income (loss) per share, basic - Mortgage Banking

7.44

(1.71

)

0.45

1.02

0.71

Total net income (loss) per share, basic

$

6.51

$

(0.27

)

$

1.47

$

2.28

$

1.88

Net income (loss) per share, diluted - Core Banking (3)

$

(1.00

)

$

1.59

$

0.95

$

1.13

$

0.97

Net income (loss) per share, diluted - SBA Lending (Q2)

0.07

(0.16

)

0.05

0.11

0.19

Net income (loss) per share, diluted - Mortgage Banking

7.44

(1.69

)

0.44

1.00

0.69

Total net income (loss) per share, diluted

$

6.51

$

(0.26

)

$

1.44

$

2.24

$

1.85

(2) Volatility in Noninterest expense - Core Banking for the three-month periods ended March 31 and June 30, 2020 is due primarily to the impact of the Mortgage Banking segment's performance on incentive compensation expense for employees of the Core Banking segment.

(3) Volatility in Net Income - Core Banking, including per share data, for the three-month periods ended March 31 and June 30, 2020 is partially due to the impact of the Mortgage Banking segment's performance on incentive compensation expense for employees of the Core Banking segment.

As previously discussed, financial information at June 30, 2019 and for periods then ended contained in this earnings release have been restated.

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2020

2020

2019

2019

2019

Noninterest Expense Detail by Segment

(In thousands)

Compensation - Core Banking (4)

$

8,631

$

2,789

$

4,451

$

4,427

$

4,694

Occupancy - Core Banking

1,239

1,133

1,200

1,140

1,105

Advertising - Core Banking

194

152

147

183

151

Other - Core Banking

1,982

1,899

1,747

1,771

1,626

Total Noninterest Expense - Core Banking

$

12,046

$

5,973

$

7,545

$

7,521

$

7,576

Compensation - SBA Lending (Q2)

$

1,314

$

1,569

$

1,469

$

1,403

$

1,045

Occupancy - SBA Lending (Q2)

118

99

89

88

80

Advertising - SBA Lending (Q2)

-

9

5

8

10

Other - SBA Lending (Q2)

210

164

262

384

250

Total Noninterest Expense - SBA Lending (Q2)

$

1,642

$

1,841

$

1,825

$

1,883

$

1,385

Compensation - Mortgage Banking

$

16,951

$

10,549

$

11,900

$

9,866

$

5,966

Occupancy - Mortgage Banking

855

757

633

549

387

Advertising - Mortgage Banking

1,667

1,616

1,314

871

566

Other - Mortgage Banking

1,848

1,339

1,055

916

608

Total Noninterest Expense - Mortgage Banking

$

21,321

$

14,261

$

14,902

$

12,202

$

7,527

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Mortgage Banking Noninterest Expense Fixed vs. Variable

2020

2020

2019

2019

2019

(In thousands)

Noninterest Expense - Fixed Expenses

$

8,188

$

6,533

$

5,466

$

4,603

$

3,589

Noninterest Expense - Variable Expenses (5)

13,133

7,728

9,436

7,599

3,938

Total Noninterest Expense

$

21,321

$

14,261

$

14,902

$

12,202

$

7,527

Three Months Ended

SBA Lending (Q2) Data

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands, except percentage data)

2020

2020

2019

2019

2019

Final funded loans guaranteed portion sold, SBA

$

16,605

$

16,180

$

10,830

$

19,471

$

22,310

Gross gain on sales of loans, SBA

$

1,771

$

1,597

$

1,066

$

2,138

$

2,085

Weighted average gross gain on sales of loans, SBA

10.67

%

9.87

%

9.84

%

10.98

%

9.35

%

Net gain on sales of loans, SBA (6)

$

1,317

$

1,229

$

761

$

1,569

$

1,515

Weighted average net gain on sales of loans, SBA

7.93

%

7.60

%

7.03

%

8.06

%

6.79

%

Three Months Ended

Mortgage Banking Data

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands, except percentage data)

2020

2020

2019

2019

2019

Mortgage originations for sale in the secondary market

$

1,003,518

$

532,996

$

542,568

$

447,616

$

258,743

Mortgage sales

$

954,568

$

488,457

$

529,344

$

447,819

$

204,565

Gross gain on sales of loans, mortgage banking

$

31,067

$

14,912

$

13,411

$

14,244

$

7,335

Weighted average gross gain on sales of loans, mortgage banking

3.25

%

3.05

%

2.53

%

3.18

%

3.59

%

Gross mortgage banking income (7)

$

43,088

$

8,272

$

15,817

$

15,033

$

9,611

(4) Volatility in Compensation - Core Banking for the three-month periods ended March 31 and June 30, 2020 is due primarily to the impact of the Mortgage Banking segment's performance on incentive compensation expense for employees of the Core Banking segment.

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

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

(7) Net of lender credits and other investor expenses, and inclusive of loan fees, fair value adjustments and gains (losses) on derivative instruments.

As previously discussed, financial information at June 30, 2019 and for periods then ended contained in this earnings release have been restated.

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

Three Months Ended

Summarized Consolidated Average Balance Sheets

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands)

2020

2020

2019

2019

2019

Interest-earning assets

Average balances:

Interest-bearing deposits with banks

$

25,985

$

48,306

$

46,296

$

52,736

$

38,332

Loans

1,191,097

970,083

935,211

891,477

859,525

Investment securities

178,611

158,116

157,093

156,070

163,185

Agency mortgage-backed securities

8,660

10,870

13,057

15,178

21,993

FRB and FHLB stock

16,804

14,878

14,149

13,020

12,505

Total interest-earning assets

$

1,421,157

$

1,202,253

$

1,165,806

$

1,128,481

$

1,095,540

Interest income (tax equlivalent basis):

Interest-bearing deposits with banks

$

37

$

153

$

205

$

277

$

205

Loans

13,460

11,875

11,830

11,788

10,924

Investment securities

1,947

1,728

1,780

1,762

1,877

Agency mortgage-backed securities

69

76

83

105

152

FRB and FHLB stock

168

151

154

184

196

Total interest income (tax equivalent basis)

$

15,681

$

13,983

$

14,052

$

14,116

$

13,354

Weighted average yield (tax equlivalent basis, annualized):

Interest-bearing deposits with banks

0.57

%

1.27

%

1.77

%

2.10

%

2.14

%

Loans

4.52

%

4.90

%

5.06

%

5.29

%

5.08

%

Investment securities

4.36

%

4.37

%

4.53

%

4.52

%

4.60

%

Agency mortgage-backed securities

3.19

%

2.80

%

2.54

%

2.77

%

2.76

%

FRB and FHLB stock

4.00

%

4.06

%

4.35

%

5.65

%

6.27

%

Total interest-earning assets

4.41

%

4.65

%

4.82

%

5.00

%

4.88

%

Interest-bearing liabilities

Average balances:

Interest-bearing deposits

$

770,402

$

716,051

$

707,518

$

712,692

$

684,736

Repurchase agreements

-

-

-

250

1,354

Fed funds purchased

1,978

143

-

130

-

Borrowings from Federal Home Loan Bank

292,168

248,205

207,851

175,912

178,707

Federal Reserve PPPLF

74,218

-

-

-

-

Subordinated debt

19,769

19,752

19,735

19,718

19,701

Total interest-bearing liabilities

$

1,158,535

$

984,151

$

935,104

$

908,702

$

884,498

Interest expense:

Interest-bearing deposits

$

1,311

$

1,625

$

1,749

$

1,965

$

1,948

Repurchase agreements

-

-

-

-

1

Fed funds purchased

2

-

-

1

-

Borrowings from Federal Home Loan Bank

846

838

808

785

898

Federal Reserve PPPLF

66

-

-

-

-

Subordinated debt

318

320

318

318

319

Total interest expense

$

2,543

$

2,783

$

2,875

$

3,069

$

3,166

Weighted average cost (annualized):

Interest-bearing deposits

0.68

%

0.91

%

0.99

%

1.10

%

1.14

%

Repurchase agreements

0.00

%

0.00

%

0.00

%

0.00

%

0.30

%

Fed funds purchased

0.40

%

0.00

%

0.00

%

3.08

%

0.00

%

Borrowings from Federal Home Loan Bank

1.16

%

1.35

%

1.55

%

1.78

%

2.01

%

Federal Reserve PPPLF

0.36

%

0.00

%

0.00

%

0.00

%

0.00

%

Subordinated debt

6.43

%

6.48

%

6.45

%

6.45

%

6.48

%

Total interest-bearing liabilities

0.88

%

1.13

%

1.23

%

1.35

%

1.43

%

Interest rate spread (tax equlivalent basis, annualized)

3.53

%

3.52

%

3.59

%

3.65

%

3.45

%

Net interest margin (tax equlivalent basis, annualized)

3.70

%

3.73

%

3.83

%

3.92

%

3.72

%

As previously discussed, financial information at June 30, 2019 and for periods then ended contained in this earnings release have been restated.