First Savings Financial Group, Inc. Quarterly Report (Form 10-Q)

First Savings Financial Group’s Strong Financial Performance

Overview First Savings Financial Group, Inc. has reported impressive financial results for the three-month period ended December 31, 2024. The company recorded net income of $6.2 million, or $0.89 per diluted share, compared to $920,000, or $0.13 per diluted share, in the same period of the prior year. This significant increase in profitability was driven by growth in net interest income and noninterest income, as well as effective cost management.

Financial Condition The company’s balance sheet remains strong, with total assets of $2.44 billion as of December 31, 2024, up from $2.30 billion a year earlier. Cash and cash equivalents increased by $24.1 million to $76.2 million, providing ample liquidity. Net loans receivable decreased by $79.3 million to $1.88 billion, primarily due to a bulk sale of residential real estate home equity line of credit loans.

Deposits decreased by $48.1 million to $1.83 billion, with declines in brokered deposits and noninterest-bearing deposits partially offset by growth in demand deposit accounts, retail time deposits, and money market accounts. Borrowings from the Federal Home Loan Bank (FHLB) decreased by $6.6 million to $295.0 million.

Stockholders’ equity decreased slightly by $1.1 million to $176.0 million, primarily due to a $6.6 million increase in accumulated other comprehensive loss, partially offset by a $5.2 million increase in retained earnings. The company’s regulatory capital ratios remained well above the “well-capitalized” thresholds, demonstrating its strong capital position.

Results of Operations The company’s net interest income increased by $1.3 million, or 9.6%, for the three-month period ended December 31, 2024, compared to the same period in 2023. This was driven by a $152.5 million increase in average interest-earning assets and a $156.7 million increase in average interest-bearing liabilities. The tax-equivalent net interest margin improved from 2.69% to 2.75%.

Total interest income grew by $3.8 million, primarily due to the increase in average interest-earning assets and a higher average yield, which rose from 5.37% to 5.68%. Total interest expense increased by $2.4 million, reflecting the higher average balance of interest-bearing liabilities and a rise in the average cost of these liabilities from 3.10% to 3.34%.

The company recognized a credit for credit losses on loans of $491,000, a provision for unfunded lending commitments of $46,000, and a credit for credit losses on securities of $6,000 during the three-month period. This compares to a provision for credit losses on loans of $470,000 and a credit for unfunded lending commitments of $58,000 in the same period of the prior year.

Noninterest income increased by $3.3 million, primarily due to a $2.5 million net gain on the sale of loans and $403,000 in net gains on the sale of Visa Class B equity securities. Noninterest expense decreased by $1.1 million, driven by reductions in compensation and benefits, occupancy and equipment, and professional fee expenses, largely due to the winding down of national mortgage banking operations.

The company’s effective tax rate for the three-month period ended December 31, 2024, was 12.0%, well below the statutory rate, primarily due to the recognition of investment tax credits related to solar projects.

Liquidity and Capital Resources The company maintains a strong liquidity position, with $76.2 million in cash and cash equivalents and $241.6 million in securities available-for-sale, including $130.3 million that are unpledged. The company has additional borrowing capacity with the FHLB, federal funds purchased lines of credit, and the Federal Reserve Discount Window, providing ample sources of funding if needed.

The Bank, the company’s primary operating subsidiary, was considered “well-capitalized” under applicable regulatory guidelines as of December 31, 2024, with Tier 1 capital, common equity Tier 1 capital, Tier 1 capital, and total capital ratios of 9.33%, 11.93%, 11.93%, and 13.01%, respectively. These ratios were well above the regulatory requirements for a “well-capitalized” institution.

Interest Rate Risk Management The company actively manages its exposure to interest rate risk, using simulation modeling to quantify the potential impact of changing interest rates on its net interest income. The modeling results show that an immediate and sustained increase in interest rates of 1.00% would decrease the company’s net interest income by 3.29% over a one-year horizon, while a 2.00% increase would result in a 6.01% decrease. Conversely, a 1.00% decrease in interest rates would increase net interest income by 3.95%, and a 2.00% decrease would lead to a 7.86% increase.

These interest rate risk measures are within the company’s approved policy guidelines, demonstrating its prudent approach to managing market risk. The company does not engage in hedging activities or purchase high-risk derivative instruments, and it is not subject to foreign currency exchange rate or commodity price risk.

Outlook The company’s strong financial performance, robust liquidity, and well-capitalized position provide a solid foundation for continued success. The company’s focus on managing interest rate risk and maintaining a diversified funding base should help it navigate the evolving interest rate environment. With its disciplined approach to credit risk management and cost control, the company is well-positioned to capitalize on growth opportunities and deliver value to its shareholders.