First Savings Financial Group, Inc. Reports Financial Results For The Second Fiscal Quarter Ended March 31, 2019

CLARKSVILLE, Ind., April 29, 2019 (GLOBE NEWSWIRE) -- First Savings Financial Group, Inc. FSFG (the "Company"), the holding company for First Savings Bank (the "Bank"), today reported net income of $3.5 million, or $1.50 per diluted share, for the quarter ended March 31, 2019 compared to net income of $1.6 million, or $0.69 per diluted share, for the quarter ended March 31, 2018.  Net income for the quarter ended March 31, 2018 was negatively impacted by merger costs associated with our acquisition of The First National Bank of Odon, which totaled approximately $921,000, net of tax, or $0.39 per diluted share.     

Commenting on the Company's quarterly performance, Larry W. Myers, President and CEO, stated: "We are very pleased with the Company's performance, which included increasingly strong contribution from core operations, profitability from the mortgage banking segment and a challenging quarter for the SBA lending segment.  Core banking continues to grow robustly, as does the mortgage banking segment, which achieved quarterly profitability for the first time during this quarter.  The SBA lending segment continues to perform well but realized a lower level of loans originated and sold during this quarter, due primarily to seasonality, and a slight deterioration in credit quality, which resulted in increased provision for loan losses during this quarter.  We anticipate the SBA lending segment will return to profitable performance in the quarter ending June 30, 2019."         

Net interest income increased $1.1 million, or 13.0%, to $9.9 million for the quarter ended March 31, 2019 as compared to the same quarter in 2018.  The increase in net interest income is due to a $2.2 million increase in interest income, which was partially offset by a $1.0 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $124.2 million, from $910.8 million for 2018 to $1.0 billion for 2019, and an increase in the weighted average tax-equivalent yield, from 4.59% for 2018 to 4.87% for 2019.  Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $95.3 million, from $732.9 million for 2018 to $828.2 million for 2019, and an increase in the average cost of interest-bearing liabilities, from 0.78% for 2018 to 1.18% for 2019.  Increases for the 2019 quarter related to subordinated debt included interest expense of $318,000, including amortization of debt issuance costs, and $19.7 million in the average balance of interest-bearing liabilities, including 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 6.46%, 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 $340,000 in provision for loan losses for the quarter ended March 31, 2019, compared to $371,000 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 $1.1 million, from $4.3 million at September 30, 2018 to $5.4 million at March 31, 2019.  The Company recognized net charge-offs of $25,000 for the quarter ended March 31, 2019 compared to $18,000 for the same quarter in 2018.

Noninterest income increased $4.5 million for the quarter ended March 31, 2019 as compared to the same quarter in 2018.  The increase was due primarily to an increase in mortgage banking income of $5.0 million, which was partially offset by a decrease in the net gain on sale of loans guaranteed by the U.S. Small Business Administration ("SBA") of $967,000.  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 added (in the case of a net loss) or subtracted (in the case of net income) 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 Income Statement Information" table at the end of this release. 

Noninterest expense increased $4.5 million for the quarter ended March 31, 2019 as compared to the same quarter in 2018.  The increase was due primarily to increases in compensation and benefits, other operating expenses, and occupancy and equipment of $3.8 million, $524,000 and $497,000, 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 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 increase in occupancy and equipment expense is primarily attributable to increases in lease and rental, depreciation and equipment, and software licensing expenses that are primarily related to the new mortgage banking segment.    

The Company recognized income tax expense of $466,000 for the quarter ended March 31, 2019, for an effective tax rate of 12.5%, as compared to income tax expense of $338,000, for an effective tax rate of 13.2%, for the same quarter in 2018. 

Results of Operations for the Six Months Ended March 31, 2019 and 2018

The Company reported net income of $6.5 million, or $2.73 per diluted share, for the six months ended March 31, 2019 compared to net income of $5.1 million, or $2.14 per diluted share, for the six months ended March 31, 2018.  Net income for the six months ended March 31, 2018 was negatively impacted by merger costs associated with our 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 $2.7 million, or 15.9%, to $19.4 million for the six months ended March 31, 2019 as compared to the same period in 2018.  The increase in net interest income is due to a $4.5 million increase in interest income, which was partially offset by a $1.9 million increase in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $127.4 million, from $884.8 million for 2018 to $1.0 billion for 2019, and an increase in the weighted-average tax-equivalent yield, from 4.56% for 2018 to 4.87% for 2019.  Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $81.4 million, from $721.0 million for 2018 to $802.4 million for 2019, and an increase in the average cost of interest-bearing liabilities, from 0.78% for 2018 to 1.16% for 2019.  Increases for the six months ended March 31, 2019, related to subordinated debt included interest expense of $640,000, including amortization of debt issuance costs, and $19.7 million in the average balance of interest-bearing liabilities, including debt issuance costs.  The increase in the average cost of interest-bearing liabilities for the six months ended March 31, 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 6.51%, 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 $655,000 in provision for loan losses for the six months ended March 31, 2019, compared to $833,000 in provision for loan losses recognized in the same period in 2018.  The Company recognized net charge-offs of $43,000 for the six months ended March 31, 2019 compared to $61,000 for the same period in 2018.

Noninterest income increased $7.4 million for the six months ended March 31, 2019 as compared to the same period in 2018.  The increase was due primarily to an increase in mortgage banking income of $8.2 million, which was partially offset by a decrease in the net gain on sale of loans guaranteed by the SBA of $1.5 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 Income Statement Information" table at the end of this release. 

Noninterest expense increased $9.6 million for the six months ended March 31, 2019 as compared to the same period in 2018.  The increase was due primarily to increases in compensation and benefits, other operating expenses, and occupancy and equipment of $7.1 million, $1.2 million and $1.1 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 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 increase in occupancy and equipment expense is primarily attributable to increases in lease and rental, depreciation and equipment, and software licensing expenses that are primarily related to the new mortgage banking segment. 

The Company recognized income tax expense of $988,000 for the six months ended March 31, 2019, for an effective tax rate of 13.4%, as compared to income tax expense of $960,000, for an effective tax rate of 14.4%, for the same period in 2018. 

Comparison of Financial Condition at March 31, 2019 and September 30, 2018

Total assets increased $95.3 million, from $1.0 billion at September 30, 2018 to $1.1 billion at March 31, 2019.  Net loans increased $58.4 million during the six months ended March 31, 2019, due primarily to continued growth in the commercial real estate and SBA loan portfolios.  Total liabilities increased $85.6 million primarily due to a $70.9 million increase in Federal Home Loan Bank borrowings and a $13.7 million increase in total deposits.     
                       
Common stockholders' equity increased $9.9 million, from $98.8 million at September 30, 2018 to $108.7 million at March 31, 2019, due primarily to retained net income of $5.7 million and net unrealized gains of $3.7 million on the available-for-sale securities portfolio.  At March 31, 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