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First Savings Financial Group, Inc. Reports Financial Results for the Third Fiscal Quarter Ended June 30, 2019

CLARKSVILLE, Ind., Aug. 02, 2019 (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 $5.2 million, or $2.21 per diluted share, for the quarter ended June 30, 2019 compared to net income of $3.1 million, or $1.31 per diluted share, for the quarter ended June 30, 2018, resulting in an increase of 69% on a per share basis. The earnings for the quarter ended June 30, 2019 also compared favorably with the earnings for the second fiscal quarter ended March 31, 2019 of $3.5 million, or $1.50 per diluted share, resulting in an increase of 47% on a per share basis.

Commenting on the Company’s quarterly performance, Larry W. Myers, President and CEO, stated: “We are very pleased with the Company’s performance for the quarter and the nine months then ended, including record earnings for both periods, exceptional asset growth, robust deposit growth, and strong contributions to earnings from the mortgage banking and U.S. Small Business Administration (“SBA”) lending segments. The core banking, mortgage banking and SBA lending segments continue to grow significantly and the lending pipelines for each are very healthy entering into our fourth fiscal quarter.”

Net interest income increased $785,000, or 8.3%, to $10.3 million for the quarter ended June 30, 2019 as compared to the same quarter in 2018. The increase in net interest income is due to a $1.9 million increase in interest income, which was partially offset by a $1.1 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $125.3 million, from $970.2 million for 2018 to $1.1 billion for 2019, and an increase in the weighted average tax-equivalent yield, from 4.75% for 2018 to 4.88% for 2019. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $119.0 million, from $765.5 million for 2018 to $884.5 million for 2019, and an increase in the average cost of interest-bearing liabilities, from 0.89% for 2018 to 1.25% for 2019. These increases for the 2019 quarter related to subordinated debt interest expense of $319,000, including amortization of debt issuance costs, and $19.7 million of subordinated debt included in the average balance of interest-bearing liabilities, net of debt issuance costs. The increase in the average cost of interest-bearing liabilities for the 2019 quarter was due primarily to increasing market rates on deposits and short-term funding alternatives including FHLB advances and brokered deposits and the subordinated debt’s average cost of 6.48%, including amortization of debt issuance costs. Additional details are included in the “Summarized Consolidated Average Balance Sheets” table at the end of this release. 

The Company recognized $337,000 in provision for loan losses for the quarter ended June 30, 2019, compared to $266,000 in provision for loan losses recognized in the same quarter in 2018. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $834,000, from $4.3 million at September 30, 2018 to $5.1 million at June 30, 2019. The Company recognized net charge-offs of $655,000 for the quarter ended June 30, 2019 compared to $104,000 for the same quarter in 2018. The increase in net charge-offs is due primarily to unguaranteed portions of SBA loans. 

Noninterest income increased $9.8 million for the quarter ended June 30, 2019 as compared to the same quarter in 2018. The increase was due primarily to an increase in mortgage banking income of $9.9 million, which was partially offset by the lack of income from tax credit investments in 2019 compared to income of $340,000 in 2018. The increase in mortgage banking income is due to production from the secondary-market residential mortgage lending segment that commenced operations in April 2018. The Bank’s SBA lending activities are performed under Q2 Business Capital, LLC (“Q2”), which specializes in the origination and servicing of SBA loans. The Bank owns 51% of Q2 with the option to purchase the minority interest in September 2020. Gross revenues and expenses related to Q2 are reported in the consolidated statements of income and the net income or net loss attributable to noncontrolling interests is then subtracted (in the case of net income) or added (in the case of net loss) to arrive at net income attributable to the Company. 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 $8.1 million for the quarter ended June 30, 2019 as compared to the same quarter in 2018. The increase was due primarily to increases in compensation and benefits, occupancy and equipment, and advertising expense of $6.3 million, $678,000 and $565,000, respectively. The increase in compensation and benefits expense is attributable to the addition of new employees to support the growth of the Company, including its mortgage banking and SBA lending activities, and normal salary and benefits adjustments. The increase in occupancy and equipment expense is primarily attributable to increases in lease and rental, depreciation and equipment, and software licensing expenses that are all primarily related to the new mortgage banking segment.

The Company recognized income tax expense of $1.0 million for the quarter ended June 30, 2019, for an effective tax rate of 14.9%, as compared to income tax expense of $696,000, for an effective tax rate of 15.9%, for the same quarter in 2018. 

Results of Operations for the Nine Months Ended June 30, 2019 and 2018

The Company reported net income of $11.7 million, or $4.94 per diluted share, for the nine months ended June 30, 2019 compared to net income of $8.2 million, or $3.44 per diluted share, for the nine months ended June 30, 2018, resulting in an increase of 44% on a per share basis. Net income for the nine months ended June 30, 2018 was negatively impacted by merger costs associated with the acquisition of First National Bank of Odon, which totaled approximately $945,000, net of tax, or $0.40 per diluted share.

Net interest income increased $3.4 million, or 13.1%, to $29.7 million for the nine months ended June 30, 2019 as compared to the same period in 2018. The increase in net interest income is due to a $6.4 million increase in interest income, which was partially offset by a $3.0 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $126.7 million, from $913.3 million for 2018 to $1.0 billion for 2019, and an increase in the weighted-average tax-equivalent yield, from 4.63% for 2018 to 4.87% for 2019. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $93.9 million, from $735.8 million for 2018 to $829.7 million for 2019, and an increase in the average cost of interest-bearing liabilities, from 0.81% for 2018 to 1.19% for 2019. These increases for the nine months ended June 30, 2019, related to subordinated debt interest expense of $959,000, including amortization of debt issuance costs, and $19.7 million of subordinated debt included in the average balance of interest-bearing liabilities, net of debt issuance costs. The increase in the average cost of interest-bearing liabilities for the nine months ended June 30, 2019 was due primarily to increasing market rates on deposits and short-term funding alternatives including FHLB advances and brokered deposits and the subordinated debt’s average cost of 6.50%, including amortization of debt issuance costs. Additional details are included in the “Summarized Consolidated Average Balance Sheets” table at the end of this release.

The Company recognized $992,000 in provision for loan losses for the nine months ended June 30, 2019, compared to $1.1 million in provision for loan losses recognized in the same period in 2018. The Company recognized net charge-offs of $699,000 for the nine months ended June 30, 2019 compared to $165,000 for the same period in 2018. The increase in net charge-offs is due primarily to unguaranteed portions of SBA loans. 

Noninterest income increased $17.2 million for the nine months ended June 30, 2019 as compared to the same period in 2018. The increase was due primarily to an increase in mortgage banking income of $18.1 million, which was partially offset by a decrease in the net gain on sale of loans guaranteed by the SBA of $1.6 million. The increase in mortgage banking income is 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 $17.7 million for the nine months ended June 30, 2019 as compared to the same period in 2018. The increase was due primarily to increases in compensation and benefits, occupancy and equipment, and other operating expenses of $13.4 million, $1.8 million and $1.6 million, respectively. The increase in compensation and benefits expense is attributable to the addition of new employees to support the growth of the Company, including its mortgage banking and SBA lending activities, and normal salary and benefits adjustments. The increase in occupancy and equipment expense is primarily attributable to increases in lease and rental, depreciation and equipment, and software licensing expenses that are all primarily related to the new mortgage banking segment. The increase in other operating expenses is primarily due to increases in loan expense related to the mortgage banking activities and insurance reserves and claims related to the Company’s captive insurance subsidiary.

The Company recognized income tax expense of $2.0 million for the nine months ended June 30, 2019, for an effective tax rate of 14.2%, as compared to income tax expense of $1.7 million, for an effective tax rate of 15.0%, for the same period in 2018. 

Comparison of Financial Condition at June 30, 2019 and September 30, 2018

Total assets increased $195.0 million, from $1.0 billion at September 30, 2018 to $1.2 billion at June 30, 2019. Net loans increased $92.7 million during the nine months ended June 30, 2019, due primarily to continued growth in the commercial real estate and SBA loan portfolios. Residential mortgage loans held for sale also increased by $70.6 million during the nine months ended June 30, 2019 due to increased production from the mortgage banking segment. Total liabilities increased $179.2 million primarily due to a $99.3 million increase in Federal Home Loan Bank borrowings and a $77.0 million increase in total deposits.

Common stockholders’ equity increased $17.0 million, from $98.8 million at September 30, 2018 to $115.8 million at June 30, 2019, due primarily to retained net income of $10.6 million and net unrealized gains of $5.8 million on the available-for-sale securities portfolio. At June 30, 2019 and September 30, 2018, the Company and Bank were considered “well-capitalized” under applicable regulatory capital guidelines.

First Savings Bank has sixteen offices in the Indiana communities of Clarksville, Jeffersonville, Charlestown, Sellersburg, New Albany, Georgetown, Corydon, Lanesville, Elizabeth, English, Leavenworth, 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 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:   2019       2018       2019       2018      
(In thousands, except share and per share data)                  
                   
Total interest income $ 13,058     $ 11,206     $ 37,166     $ 30,778      
Total interest expense   2,766       1,699       7,437       4,495      
                   
Net interest income   10,292       9,507       29,729       26,283      
Provision for loan losses   337       266       992       1,099      
                   
Net interest income after provision for loan losses   9,955       9,241       28,737       25,184      
                   
Total noninterest income   13,098       3,254       25,968       8,727      
Total noninterest expense   16,227       8,122       40,523       22,863      
                   
Income before income taxes   6,826       4,373       14,182       11,048      
Income tax expense   1,020       696       2,008       1,656      
                   
Net income   5,806       3,677       12,174       9,392      
                   
Less: Net income (loss) attributable to noncontrolling interests   571       571       475       1,234      
                   
Net income attributable to the Company $ 5,235     $ 3,106     $ 11,699     $ 8,158      
                   
Net income per share, basic $ 2.24     $ 1.37     $ 5.07     $ 3.62      
Weighted average shares outstanding, basic   2,333,502       2,274,951       2,308,359       2,251,387      
                   
Net income per share, diluted $ 2.21     $ 1.31     $ 4.94     $ 3.44      
Weighted average shares outstanding, diluted   2,373,578       2,378,839       2,369,421       2,369,710      
                   
                   
  June 30,   September 30,    Increase        
FINANCIAL CONDITION DATA:   2019       2018     (Decrease)        
(In thousands, except per share data)                  
                   
Total assets $ 1,229,372     $ 1,034,406     $ 194,966          
Cash and cash equivalents   65,105       42,274       22,831          
Investment securities   182,501       186,980       (4,479 )        
Loans held for sale   96,139       32,125       64,014          
Gross loans   806,610       713,594       93,016          
Allowance for loan losses   9,616       9,323       293          
Interest earning assets   1,145,579       963,581       181,998          
Goodwill   9,848       9,848       -          
Core deposit intangibles   1,469       1,727       (258 )        
Noninterest-bearing deposits   172,915       167,705       5,210          
Interest-bearing deposits   715,230       643,407       71,823          
FHLB borrowings   189,255       90,000       99,255          
Total liabilities   1,113,382       934,161       179,221          
Stockholders' equity, net of noncontrolling interests   115,814       98,813       17,001          
                   
Book value per share $ 49.28     $ 43.11     $ 6.17          
Tangible book value per share (1)   44.46       38.06       6.40          
                   
Non-performing assets:                  
Nonaccrual loans $ 5,106     $ 4,182     $ 1,033          
Accruing loans past due 90 days   1       91       65          
Total non-performing loans   5,107       4,273       1,098          
Foreclosed real estate   58       103       (45 )        
Troubled debt restructurings classified as performing loans   8,226       9,145       (644 )        
Other nonperforming assets   -       -       -          
Total non-performing assets $ 13,391     $ 13,521     $ 409          
                   
Asset quality ratios:                  
Allowance for loan losses as a percent of total gross loans   1.19 %     1.31 %     -0.11 %        
Allowance for loan losses as a percent of nonperforming loans   188.29 %     218.18 %     -39.15 %        
Nonperforming loans as a percent of total gross loans   0.63 %     0.60 %     0.07 %        
Nonperforming assets as a percent of total assets   1.09 %     1.31 %     -0.17 %        
                   
(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.        
               
  Three Months Ended   Nine Months Ended    
  June 30,   June 30,    
Net Income    2019       2018       2019       2018      
(In thousands)                  
Net income attributable to the Company (non-GAAP) $ 5,235     $ 3,548     $ 11,699     $ 9,423      
Less: Merger-related expenses, net of tax effect   -       -       -       (945 )    
Less: Secondary-market residential mortgage lending division                  
initial operating expenses, net of tax effect   -       (442 )     -       (442 )    
Less: Effect of adjustment to deferred taxes due to tax law change   -       -       -       122      
Net income attributable to the Company (GAAP) $ 5,235     $ 3,106     $ 11,699     $ 8,158      
                   
  June 30,   June 30,    
Net Income per Share, Diluted   2019       2018       2019       2018      
                   
Net income per share, diluted (non-GAAP)   2.21       1.49       4.94       3.98      
Less: Merger-related expenses, net of tax effect   -       -       -       (0.40 )    
Less: Secondary-market residential mortgage lending division                  
initial operating expenses, net of tax effect   -       (0.18 )     -       (0.19 )    
Less: Effect of adjustment to deferred taxes due to tax law change   -       -       -       0.05      
Net income per share, diluted (GAAP)   2.21       1.31       4.94       3.44      
                   
  June 30,   June 30,    
Efficiency Ratio   2019       2018       2019       2018      
(In thousands)                  
Noninterest expense (GAAP) $ 16,227     $ 8,122     $ 40,523     $ 22,863      
                   
Net interest income (GAAP)   10,292       9,507       29,729       26,283      
                   
Noninterest income (GAAP)   13,098       3,254       25,968       8,727      
                   
Efficiency ratio (GAAP)   69.38 %     63.65 %     72.76 %     65.30 %    
                   
                   
Noninterest expense (GAAP) $ 16,227     $ 8,122     $ 40,523     $ 22,863      
Less: Merger-related expenses   -       -       -       (1,281 )    
Less: Secondary-market residential mortgage lending division                  
net initial operating expenses   -       (616 )     -       (616 )    
Noninterest expense (non-GAAP)   16,227       7,506       40,523       20,966      
                   
Net interest income (GAAP)   10,292       9,507       29,729       26,283      
                   
Noninterest income (GAAP)   13,098       3,254       25,968       8,727      
Less: Income (loss) on tax credit investment   -       (340 )     -       (340 )    
Noninterest income (Non-GAAP) $ 13,098     $ 2,914     $ 25,968     $ 8,387      
                   
Efficiency ratio (excluding nonrecurring items) (non-GAAP)   69.38 %     60.43 %     72.76 %     60.47 %    
                   
                   
  June 30,   September 30,             
Tangible Book Value Per Share   2019       2018              
(In thousands, except share and per share data)                  
                   
Stockholders' equity, net of noncontrolling interests (GAAP) $ 115,814     $ 98,813              
Less: goodwill and core deposit intangibles   (11,317 )     (11,575 )            
Tangible equity (non-GAAP)   104,497       87,238              
                   
Outstanding common shares   2,350,229       2,292,021              
                   
Tangible book value per share (non-GAAP) $ 44.46     $ 38.06              
                   
Book value per share (GAAP) $ 49.28     $ 43.11              
                   
                   
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)   2019       2019       2018       2018       2018  
Total cash and cash equivalents $ 65,105     $ 40,442     $ 36,344     $ 42,274     $ 38,002  
Total investment securities   182,501       193,547       188,830       186,980       210,758  
Total loans, net of allowance for loan losses   796,994       762,661       734,061       704,271       693,858  
Total assets   1,229,372       1,129,722       1,073,989       1,034,406       1,035,346  
                   
Total deposits   888,145       824,770       832,073       811,112       834,754  
Total borrowings from the Federal Home Loan Bank   189,255       160,938       107,019       90,000       90,000  
                   
Stockholders' equity, net of noncontrolling interests   115,814       108,688       102,968       98,813       97,640  
Noncontrolling interests in subsidiary   176       1,241       1,593       1,432       1,229  
Total equity   115,990       109,929       104,561       100,245       98,869  
                   
Outstanding common shares   2,350,229       2,344,836       2,304,310       2,292,021       2,292,021  
                   
                   
   Three Months Ended 
Summarized Consolidated Statements of Income June 30,   March 31,   December 31,   September 30,   June 30,
(In thousands, except per share data)   2019       2019       2018       2018       2018  
Total interest income $ 13,058     $ 12,307     $ 11,801     $ 11,381     $ 11,206  
Total interest expense   2,766       2,446       2,225       1,842       1,699  
Net interest income   10,292       9,861       9,576       9,539       9,507  
Provision for loan losses   337       340       315       254       266  
Net interest income after provision for loan losses   9,955       9,521       9,261       9,285       9,241  
                   
Total noninterest income   13,098       7,089       5,781       4,568       3,254  
Total noninterest expense   16,227       12,880       11,416       10,143       8,122  
Income before income taxes   6,826       3,730       3,626       3,710       4,373  
Income tax expense   1,020       466       522       766       696  
Net income   5,806       3,264       3,104       2,944       3,677  
Less: net income (loss) attributable to noncontrolling interests   571       (269 )     173       200       571  
Net income attributable to the Company $ 5,235     $ 3,533     $ 2,931     $ 2,744     $ 3,106  
                   
                   
Net income per share, basic $ 2.24     $ 1.53     $ 1.28     $ 1.20     $ 1.37  
Weighted average shares outstanding, basic   2,333,502       2,307,155       2,284,665       2,277,709       2,274,951  
                   
Net income per share, diluted $ 2.21     $ 1.50     $ 1.24     $ 1.15     $ 1.31  
Weighted average shares outstanding, diluted   2,373,578       2,360,004       2,371,480       2,379,520       2,378,839