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.

Financial Condition

The company’s balance sheet remained strong at the end of the quarter. 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. Securities available for sale declined by $7.0 million to $241.6 million, reflecting decreases in fair value as a result of rising long-term interest rates.

On the liabilities side, total 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 by $1.1 million to $176.0 million, primarily due to an increase in accumulated other comprehensive loss, partially offset by an increase in retained earnings.

Results of Operations

The company’s strong financial performance was driven by growth in both net interest income and noninterest income. Net interest income increased by $1.3 million, or 9.6%, compared to the same period in the prior year. This was due to 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 increased by $3.8 million, primarily due to the growth in average interest-earning assets and a higher average yield on those assets. The average yield on interest-earning assets increased from 5.37% to 5.68%. Total interest expense increased by $2.4 million, driven by the growth in average interest-bearing liabilities and a higher average cost of those liabilities, which increased 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. 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 prior-year period.

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 decreases in compensation and benefits, occupancy and equipment, and professional fee expenses, primarily due to the winding down of national mortgage banking operations.

The company recognized income tax expense of $848,000 for the quarter, compared to an income tax benefit of $476,000 in the prior-year period. The effective tax rate for 2024 was 12.0%, well below the statutory tax 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 also has additional borrowing capacity with the FHLB, federal funds purchased lines of credit, and the Federal Reserve Discount Window.

The Bank, a subsidiary of First Savings Financial Group, is well-capitalized, 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, as of December 31, 2024. These ratios exceed the regulatory requirements for a “well-capitalized” institution.

Market Risk Management

The company’s primary market risk exposure is to changes in interest rates, which can affect the estimated fair value of its assets, liabilities, and derivative financial instruments, as well as its net interest income. The company uses simulation modeling to measure and monitor its interest rate risk, quantifying the impact of hypothetical changes in interest rates on net interest income over a one-year horizon.

The simulation results show that an immediate and sustained increase in interest rates of 1.00% would decrease the company’s net interest income by $2.4 million, or 3.29%, over a one-year period. More significant rate increases of 2.00% and 3.00% would result in net interest income decreases of 6.01% and 8.68%, respectively. Conversely, an immediate and sustained decrease in rates of 1.00% would increase net interest income by $2.9 million, or 3.95%, while a 2.00% rate decrease would increase net interest income by 7.86%.

Outlook

First Savings Financial Group’s strong financial performance in the first quarter of fiscal year 2025 demonstrates the company’s ability to navigate the current economic environment and capitalize on growth opportunities. The company’s focus on prudent risk management, diversified revenue streams, and efficient operations has positioned it well for continued success.

Looking ahead, the company will continue to monitor market conditions and interest rate movements, adjusting its strategies as necessary to maintain a strong balance sheet and optimize profitability. With a solid capital position, ample liquidity, and a proven track record of financial discipline, First Savings Financial Group is well-equipped to navigate the challenges and seize the opportunities that may arise in the future.