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First Savings Financial Group, Inc. Reports Financial Results for Fiscal Year Ended September 30, 2019

CLARKSVILLE, Ind., Nov. 19, 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 $16.2 million, or $6.82 per diluted share, for the year ended September 30, 2019 compared to net income of $10.9 million, or $4.60 per diluted share, for the year ended September 30, 2018, resulting in an increase of 48% 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 fiscal year, including record earnings for the year, 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 new fiscal year.”

Net interest income increased $4.3 million, or 11.9%, to $40.1 million for the year ended September 30, 2019 as compared to 2018.  The increase in net interest income is due to an $8.8 million increase in interest income, which was partially offset by a $4.6 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $132.4 million, from $929.2 million for 2018 to $1.06 billion for 2019, and an increase in the weighted average tax-equivalent yield, from 4.67% for 2018 to 4.91% for 2019.  Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $106.3 million, from $743.3 million for 2018 to $849.6 million for 2019, and an increase in the average cost of interest-bearing liabilities, from 0.85% for 2018 to 1.28% for 2019.  These increases for the 2019 fiscal year included an increase in subordinated debt interest expense of $1.2 million, including amortization of debt issuance costs, and an increase of $19.1 million in 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 2019 was due primarily to increasing market interest 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 $1.5 million in provision for loan losses for the year ended September 30, 2019, compared to $1.4 million in provision for loan losses recognized in 2018.  Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $907,000, from $4.3 million at September 30, 2018 to $5.2 million at September 30, 2019.  The Company recognized net charge-offs of $746,000 for the year ended September 30, 2019 compared to $122,000 in 2018.  The increase in net charge-offs is due primarily to charge-offs of the unguaranteed portions of SBA loans. 

Noninterest income increased $30.6 million for the year ended September 30, 2019 as compared to 2018.  The increase was due primarily to an increase in mortgage banking income of $30.7 million and a $589,000 increase in real estate lease income.  These increases were partially offset by a decrease in the net gain on sale of loans guaranteed by the SBA of $924,000.  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 $29.4 million for the year ended September 30, 2019 as compared to 2018.  The increase was due primarily to increases in compensation and benefits, occupancy and equipment, and other operating expense of $23.2 million, $2.5 million and $2.0 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 mortgage banking segment.

The Company recognized income tax expense of $3.1 million for the year ended September 30, 2019, for an effective tax rate of 15.4%, as compared to income tax expense of $2.4 million, for an effective tax rate of 16.4%, for 2018.

Results of Operations for the Three Months Ended September 30, 2019 and 2018

The Company reported net income of $5.3 million, or $2.24 per diluted share, for the three months ended September 30, 2019 compared to net income of $2.7 million, or $1.15 per diluted share, for the three months ended September 30, 2018, resulting in an increase of 95% on a per share basis.  Net income for the quarter ended September 30, 2018 was negatively impacted by a loss of $109,000, net of taxes, related to the new secondary-market mortgage lending division and decreased income from SBA lending activities.

Net interest income increased $1.2 million, or 12.9%, to $10.8 million for the three months ended September 30, 2019 as compared to the same period in 2018.  The increase in net interest income is due to a $2.4 million increase in interest income, which was partially offset by a $1.2 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $151.8 million, from $976.6 million for 2018 to $1.13 billion for 2019, and an increase in the weighted-average tax-equivalent yield, from 4.79% for 2018 to 5.00% for 2019.  Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $143.2 million, from $765.5 million for 2018 to $908.7 million for 2019, and an increase in the average cost of interest-bearing liabilities, from 0.96% for 2018 to 1.35% for 2019.  These increases for the three months ended September 30, 2019, included an increase in subordinated debt interest expense of $285,000, including amortization of debt issuance costs, and an increase of $17.4 million in 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 three months ended September 30, 2019 was due primarily to increasing market interest rates on deposits and short-term funding alternatives including FHLB advances and brokered deposits and the subordinated debt’s average cost of 6.45%, 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 $471,000 in provision for loan losses for the three months ended September 30, 2019, compared to $254,000 in provision for loan losses recognized in the same period in 2018.  The Company recognized net charge-offs of $47,000 for the three months ended September 30, 2019 compared to net recoveries of $43,000 for the same period in 2018.   

Noninterest income increased $13.8 million for the three months ended September 30, 2019 as compared to the same period in 2018.  The increase was due primarily to an increase in mortgage banking income of $13.0 million and an increase in gain the sale of SBA loans of $661,000 when compared to the same period 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.  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 $11.5 million for the three months ended September 30, 2019 as compared to the same period in 2018.  The increase was due primarily to increases in compensation and benefits, advertising, and occupancy and equipment expenses of $9.5 million, $711,000 and $707,000, 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 advertising is primarily due to the new mortgage banking segment.  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 $1.4 million for the three months ended September 30, 2019, for an effective tax rate of 19.4%, as compared to income tax expense of $766,000, for an effective tax rate of 20.6%, for the same period in 2018. 

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

Total assets increased $188.2 million, from $1.03 billion at September 30, 2018 to $1.22 billion at September 30, 2019.  Net loans increased $106.4 million during the year ended September 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 $70.0 million during the year ended September 30, 2019 due to increased production from the mortgage banking segment.  Total liabilities increased $167.2 million primarily due to a $132.5 million increase in Federal Home Loan Bank borrowings and a $23.3 million increase in total deposits.

Common stockholders’ equity increased $22.3 million, from $98.8 million at September 30, 2018 to $121.1 million at September 30, 2019, due primarily to retained net income of $14.7 million and net unrealized gains of $6.9 million on the available-for-sale securities portfolio.  At September 30, 2019 and September 30, 2018, 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 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.  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 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
YEARS ENDED SEPTEMBER 30, 2019 AND 2018
               
  Three Months Ended   Years Ended
  September 30,   September 30,
OPERATING DATA:   2019       2018       2019       2018  
(In thousands, except share and per share data)              
               
Total interest income $ 13,829     $ 11,381     $ 50,995     $ 42,159  
Total interest expense   3,069       1,842       10,906       6,337  
               
Net interest income   10,760       9,539       40,089       35,822  
Provision for loan losses   471       254       1,463       1,353  
               
Net interest income after provision for loan losses   10,289       9,285       38,626       34,469  
               
Total noninterest income   18,340       4,568       43,854       13,295  
Total noninterest expense   21,606       10,143       62,390       33,006  
               
Income before income taxes   7,023       3,710       20,090       14,758  
Income tax expense   1,359       766       3,095       2,422  
               
Net income   5,664       2,944       16,995       12,336  
               
Less:  Net income attributable to noncontrolling interests   343       200       818       1,434  
               
Net income attributable to the Company $ 5,321     $ 2,744     $ 16,177     $ 10,902  
               
Net income per share, basic $ 2.28     $ 1.20     $ 6.99     $ 4.83  
Weighted average shares outstanding, basic   2,337,472       2,277,709       2,315,697       2,258,020  
               
Net income per share, diluted $ 2.24     $ 1.15     $ 6.82     $ 4.60  
Weighted average shares outstanding, diluted   2,378,221       2,379,520       2,372,084       2,372,554  
               
               
Performance rates (three-month data annualized)              
Return on average assets   1.75 %     1.06 %     1.42 %     1.11 %
Return on average common stockholders' equity   18.12 %     11.16 %     15.00 %     11.37 %
Interest rate spread   3.65 %     3.83 %     3.63 %     3.82 %
Net interest margin   3.92 %     4.04 %     3.88 %     3.99 %
Efficiency ratio (1)   74.79 %     73.01 %     74.51 %     63.96 %
                               


  September 30,   September 30,   Increase
FINANCIAL CONDITION DATA:   2019       2018     (Decrease)
(In thousands, except per share data)          
           
Total assets $ 1,222,579     $ 1,034,406     $ 188,173  
Cash and cash equivalents   41,432       42,274       (842 )
Investment securities   179,638       186,980       (7,342 )
Loans held for sale   96,070       32,125       63,945  
Gross loans   820,698       713,594       107,104  
Allowance for loan losses   10,040       9,323       717  
Interest earning assets   1,130,095       963,581       166,514  
Goodwill   9,848       9,848       -  
Core deposit intangibles   1,416       1,727       (311 )
Noninterest-bearing deposits   173,072       167,705       5,367  
Interest-bearing deposits   661,312       643,407       17,905  
FHLB borrowings   222,544       90,000       132,544  
Total liabilities   1,101,322       934,161       167,161  
Stockholders' equity, net of noncontrolling interests   121,053       98,813       22,240  
           
Book value per share $ 51.51     $ 43.11     $ 8.40  
Tangible book value per share (1)   46.71       38.06       8.65  
           
Non-performing assets:          
Nonaccrual loans $ 5,168     $ 4,182     $ 986  
Accruing loans past due 90 days   12       91       (79 )
Total non-performing loans   5,180       4,273       907  
Foreclosed real estate   55       103       (48 )
Troubled debt restructurings classified as performing loans   7,265       9,145       (1,880 )
Total non-performing assets $ 12,500     $ 13,521     $ (1,021 )
           
Asset quality ratios:          
Allowance for loan losses as a percent of total gross loans   1.22 %     1.31 %     -0.08 %
Allowance for loan losses as a percent of nonperforming loans   193.82 %     218.18 %     -24.36 %
Nonperforming loans as a percent of total gross loans   0.63 %     0.60 %     0.03 %
Nonperforming assets as a percent of total assets   1.02 %     1.31 %     -0.28 %
                       

_______________
(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   Years Ended
  September 30,   September 30,
Net Income    2019       2018       2019       2018  
(In thousands)              
Net income attributable to the Company (non-GAAP) $ 5,321     $ 2,767     $ 16,177     $ 12,240  
Less:  Merger-related expenses, net of tax effect   -       (23 )     -       (979 )
Less:  Secondary-market residential mortgage lending division initial operating expenses, net of tax effect   -       -       -       (481 )
Less:  Effect of adjustment to deferred taxes due to tax law change   -       -       -       122  
Net income attributable to the Company (GAAP) $ 5,321     $ 2,744     $ 16,177     $ 10,902  
               
               
  Three Months Ended   Years Ended
  September 30,   September 30,
Net Income per Share, Diluted   2019       2018       2019       2018  
               
Net income per share, diluted (non-GAAP) $ 2.24     $ 1.16     $ 6.82     $ 5.16  
Less:  Merger-related expenses, net of tax effect   -       (0.01 )     -       (0.41 )
Less:  Secondary-market residential mortgage lending division initial operating expenses, net of tax effect   -       -       -       (0.20 )
Less:  Effect of adjustment to deferred taxes due to tax law change   -       -       -       0.05  
Net income per share, diluted (GAAP) $ 2.24     $ 1.15     $ 6.82     $ 4.60  
               
               
  Three Months Ended   Years Ended
  September 30,   September 30,
Efficiency Ratio   2019       2018       2019       2018  
(In thousands)              
Noninterest expense (GAAP) $ 21,606     $ 10,143     $ 62,390     $ 33,006  
               
Net interest income (GAAP)   10,760       9,539       40,089       35,822  
               
Noninterest income (GAAP)   18,340       4,568       43,854       13,295  
               
Efficiency ratio (GAAP)   74.25 %     71.90 %     74.32 %     67.20 %
               
               
Noninterest expense (GAAP) $ 21,606     $ 10,143     $ 62,390     $ 33,006  
Less:  Merger-related expenses   -       (23 )     -       (1,303 )
               
Less:  Secondary-market residential mortgage lending division net initial operating expenses   -       -       -       (661 )
Noninterest expense (non-GAAP)   21,606       10,120       62,390       31,042  
               
Net interest income (GAAP)   10,760       9,539       40,089       35,822  
               
Noninterest income (GAAP)   18,340       4,568       43,854       13,295  
Less:  Income on tax credit investment   (210 )     (245 )     (210 )     (585 )
Noninterest income (Non-GAAP) $ 18,130     $ 4,323     $ 43,644     $ 12,710  
               
Efficiency ratio (excluding nonrecurring items) (non-GAAP)   74.79 %     73.01 %     74.51 %     63.96 %
               
               
  September 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) $ 121,053     $ 98,813          
Less:  goodwill and core deposit intangibles   (11,264 )     (11,575 )        
Tangible equity (non-GAAP) $ 109,789     $ 87,238          
               
Outstanding common shares   2,350,229       2,292,021          
               
Tangible book value per share (non-GAAP) $ 46.71     $ 38.06          
               
Book value per share (GAAP) $ 51.51     $ 43.11          
                       

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED):

   As of
Summarized Consolidated Balance Sheets September 30,   June 30,   March 31,   December 31,   September 30,
(In thousands, except per share data)   2019       2019       2019       2018       2018  
Total cash and cash equivalents $ 41,432     $ 65,105     $ 40,442     $ 36,344     $ 42,274  
Total investment securities   179,638       182,421       193,547       188,830       186,980  
Total loans, net of allowance for loan losses   810,658       796,994       762,661       734,061       704,271  
Total assets   1,222,579       1,228,953       1,129,722       1,073,989       1,034,406  
                   
Total deposits   834,384       888,145       824,770       832,073       811,112  
Total borrowings from the Federal Home Loan Bank   222,544       189,255       160,938       107,019       90,000  
                   
Stockholders' equity, net of noncontrolling interests   121,053       114,971       108,688       102,968       98,813  
Noncontrolling interests in subsidiary   204       176       1,241       1,593       1,432  
Total equity   121,257       115,147       109,929       104,561       100,245  
                   
Outstanding common shares   2,350,229       2,350,229       2,344,836       2,304,310       2,292,021  
                   
                   
   Three Months Ended
Summarized Consolidated Statements of Income September 30,   June 30,   March 31,   December 31,   September 30,
(In thousands, except per share data)   2019       2019       2019       2018       2018  
Total interest income $ 13,829     $ 13,058     $ 12,307     $ 11,801     $ 11,381  
Total interest expense   3,069       3,166       2,446       2,225       1,842  
Net interest income   10,760       9,892       9,861       9,576       9,539  
Provision for loan losses   471       337       340       315       254  
Net interest income after provision for loan losses   10,289       9,555       9,521       9,261       9,285  
                   
Total noninterest income   18,340       12,644       7,089       5,781       4,568  
Total noninterest expense   21,606       16,488       12,880       11,416       10,143  
Income before income taxes   7,023       5,711       3,730       3,626       3,710  
Income tax expense   1,359       748       466       522       766  
Net income   5,664       4,963       3,264       3,104       2,944  
Less: net income (loss) attributable to noncontrolling interests   343       571       (269 )     173       200  
Net income attributable to the Company $ 5,321     $ 4,392     $ 3,533     $ 2,931     $ 2,744  
                   
                   
Net income per share, basic $ 2.28     $ 1.88     $ 1.53     $ 1.28     $ 1.20  
Weighted average shares outstanding, basic   2,337,472       2,333,502       2,307,155       2,284,665       2,277,709  
                   
Net income per share, diluted $ 2.24     $ 1.85     $ 1.50     $ 1.24     $ 1.15  
Weighted average shares outstanding, diluted   2,378,221       2,373,578       2,360,004       2,371,480       2,379,520  
                   
                   
   Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
Consolidated Performance Ratios (Annualized)   2019       2019       2019       2018       2018  
Return on average assets   1.75 %     1.50 %     1.28 %     1.11 %     1.06 %
Return on average equity   19.28 %     17.95 %     12.34 %     12.35 %     11.83 %
Return on average common stockholders' equity   18.12 %     15.90 %     13.55 %     11.82 %     11.16 %
Net interest margin (tax equivalent basis)   3.92 %     3.72 %     3.92 %     3.98 %     4.04 %
Efficiency ratio (excluding nonrecurring items) (non-GAAP)   74.79 %     73.16 %     75.99 %     74.34 %     73.01 %
                   
                   
   As of or for the Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
Consolidated Asset Quality Ratios   2019       2019       2019       2018       2018  
Nonperforming loans as a percen...