FSFG - First Savings Financial Group Inc. Reports Financial Results For the Third Fiscal Quarter Ended June 30 2021

JEFFERSONVILLE, Ind., July 26, 2021 (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 $4.3 million, or $1.80 per diluted share, for the quarter ended June 30, 2021 compared to net income of $15.4 million, or $6.51 per diluted share, for the quarter ended June 30, 2020.

Commenting on the Company’s performance, Larry W. Myers, President and CEO stated: “We continued to be very pleased with the fundamentals of our organization, which continue to deliver meaningful value to our shareholders. The core banking segment continues to experience strong earnings, loan and deposit growth; resiliency of asset quality; and stability of the net interest margin. The SBA lending segment also continues to experience strong earnings, robust origination volume and resiliency of asset quality. The mortgage banking segment experienced unfavorable market conditions during the quarter, which resulted in decreased volumes, margin compression and adverse market value adjustments. However, we’re optimistic regarding the continued opportunity in mortgage banking and invested in high-caliber management during the quarter in preparation for continued growth and profitability. I have confidence in the each of the Company’s business lines to continue thriving and thus delivering exceptional value to our shareholders.”

COVID-19 Pandemic Loan Information

The table below summarizes payment extensions or loan forbearance agreements that were in effect at July 20, 2021.

As a result of the COVID-19 pandemic, the leisure and hospitality industries carry a higher degree of credit risk. Based on our evaluation of the allowance for loan losses at June 30, 2021, management believes adequate reserves are in place to cover estimated losses at that date. However, as the pandemic continues, additional losses could be recognized and additional provisions for loan losses may be required.

At June 30, 2021, the outstanding principal balance of loans secured by restaurant related collateral was $146.0 million, of which $48.9 million is fully guaranteed by the SBA (including $48.5 million of PPP loans) and $86.7 million is secured by commercial real estate where the collateral property is leased to national-brand, investment-grade tenants.

At June 30, 2021, the outstanding principal balances of loans secured by hotel real estate was $17.5 million, of which $3.9 million is fully guaranteed by the SBA (including $865,000 of PPP loans). The two commercial real estate loans included in the preceding table totaling $8.6 million are secured by hotel real estate and are not guaranteed by the SBA.

Under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was signed into law on March 27, 2020, the SBA made six months of principal and interest payments for loans of existing SBA clients that were in “regular servicing status” (not delinquent) at March 27, 2020 and for loans of new SBA clients originated between March 27, 2020 and September 27, 2020. The CARES Act provided financial support for many of the SBA clients, which resulted in relatively few SBA clients requiring payment extensions or loan forbearance agreements. The Coronavirus Response and Relief Supplemental Appropriations Act (“CRRSAA”), which was signed into law on December 27, 2020, provides additional SBA-provided loan payments to eligible SBA clients beginning in February 2021.

The Company participated in the first round of the SBA’s Paycheck Protection Program (“PPP”), which was originally authorized by the CARES Act, and the second round of the PPP, which was authorized by the CRRSAA. At June 30, 2021, the outstanding principal balance of PPP loans was $100.6 million and net deferred loan fees related to PPP loans were approximately $1.4 million, which will be recognized over the life of the loans and as borrowers are granted forgiveness. As of June 30, 2021, the Company had processed and received forgiveness for 538 PPP loans totaling $118.0 million.

Results of Operations for the Three Months Ended June 30, 2021 and 2020

Net interest income increased $2.1 million, or 16.8%, to $14.2 million for the quarter ended June 30, 2021 as compared to the same quarter in 2020. The increase in net interest income was due to a $1.4 million increase in interest income and a $622,000 decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $131.6 million, from $1.42 billion for 2020 to $1.55 billion for 2021, and an increase in the weighted-average tax-equivalent yield, from 4.24% for 2020 to 4.25% for 2021. The increase in the weighted-average tax-equivalent yield for 2021 was due primarily to an increase in the yield on PPP loans from 2.34% for 2020 to 3.71% for 2021. The increase in the yield on PPP loans was due to accelerated recognition of deferred PPP loan fees related to forgiveness payoffs during the quarter ended June 30, 2021. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 0.88% for 2020 to 0.63% for 2021, partially offset by an increase in the average balance of interest-bearing liabilities of $55.9 million, from $1.16 billion for 2020 to $1.21 billion for 2021. The decrease in the average cost of interest-bearing liabilities for 2021 was due primarily to decreasing market interest rates on deposits and Federal Home Loan Bank (“FHLB”) borrowings, as well as increased borrowings under the Federal Reserve Bank’s PPP Liquidity Facility (“PPPLF”). PPPLF borrowings carry a fixed interest rate of 0.35% and are secured by the Company’s PPP loans.

The Company recognized a negative provision for loan losses of $2.7 million for the quarter ended June 30, 2021 compared to a provision of $3.0 million for 2020. The negative provision for loan losses for the quarter ended June 30, 2021 was primarily the result of decreases in certain segments of the loan portfolio and in nonperforming assets, as well as reductions of certain qualitative risk factors within the allowance for loan losses calculation related to the COVID-19 pandemic. The Company recognized net charge-offs of $47,000 for the quarter ended June 30, 2021 compared to net charge-offs of $31,000 for 2020.

Noninterest income decreased $28.2 million for the quarter ended June 30, 2021 as compared to 2020, due primarily to a decrease in mortgage banking income of $29.5 million, which was partially offset by a $1.0 million increase in net gain on sales of SBA loans. The decrease in mortgage banking income was due to decreased loan originations and sales by the mortgage banking segment, as well as margin compression in the residential mortgage loan secondary market. The increase in net gain on sales of SBA loans was due primarily to increases in production and sales volume from the SBA lending segment, as well as higher premiums in the secondary market. 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 decreased $4.4 million for the quarter ended June 30, 2021 as compared to 2020. The decrease was due primarily to a decrease in compensation and benefits of $5.6 million, which was partially offset by increases in other noninterest expense and professional fees of $753,000 and $567,000, respectively. The decrease in compensation and benefits expense is due primarily to a reduction in incentive compensation for the Company’s mortgage banking segment as a result of decreased mortgage banking income.

The Company recognized income tax expense of $817,000 for the quarter ended June 30, 2021 compared to income tax expense of $5.5 million for 2020. The decrease is primarily the result of lower pretax income in 2021. The effective tax rate for 2021 was 15.9% compared to 26.2% for 2020. The reduction in the effective tax rate is due to lower nondeductible executive compensation in 2021.

Results of Operations for the Nine Months Ended June 30, 2021 and 2020

The Company reported net income of $24.7 million, or $10.35 per diluted share, for the nine months ended June 30, 2021 compared to net income of $18.2 million, or $7.66 per diluted share, for the nine months ended June 30, 2020, resulting in an increase of 35.1% on a per share basis.

Net interest income increased $9.0 million, or 26.8%, to $42.7 million for the nine months ended June 30, 2021 as compared to the same period in 2020. The increase in net interest income was due to a $7.1 million increase in interest income and a $1.9 million decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $342.7 million, from $1.26 billion for 2020 to $1.61 billion for 2021, partially offset by a decrease in the weighted-average tax-equivalent yield, from 4.52% for 2020 to 4.15% for 2021. The decrease in the weighted-average tax-equivalent yield for 2021 is due primarily to lower market interest rates on loans and investment securities in 2021. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 1.07% for 2020 to 0.65% for 2021, partially offset by an increase in the average balance of interest-bearing liabilities of $253.7 million, from $1.03 billion for 2020 to $1.28 billion for 2021. The decrease in the average cost of interest-bearing liabilities for 2021 was due primarily to decreasing market interest rates on deposits and FHLB borrowings, as well as increased PPPLF borrowings.

The Company recognized a negative provision for loan losses of $1.8 million for the nine months ended June 30, 2021 compared to a provision of $5.2 million for the same period in 2020. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, decreased $1.2 million, from $13.6 million at September 30, 2020 to $12.4 million at June 30, 2021. The negative provision for loan losses for 2021 was primarily the result of decreases in certain segments of the loan portfolio and nonperforming assets, as well as reductions of certain qualitative risk factors within the allowance for loan losses calculation related to the COVID-19 pandemic. The Company recognized net charge-offs of $609,000 for the nine months ended June 30, 2021, of which $565,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $590,000 for the same period in 2020, of which $353,000 was related to unguaranteed portions of SBA loans.

Noninterest income increased $27.6 million for the nine months ended June 30, 2021 as compared to the same period in 2020. The increase was due primarily to increases in mortgage banking income of $23.2 million and net gain on sales of SBA loans of $3.5 million. The increase in mortgage banking income was due to increased production from the secondary-market residential mortgage lending segment. The increase in net gain on sales of SBA loans was due primarily to increases in production and sales volume from the SBA lending segment, as well as higher premiums in the secondary market. 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 $32.9 million for the nine months ended June 30, 2021 as compared to the same period in 2020. The increase was due primarily to increases in compensation and benefits of $25.1 million, other operating expense of $3.0 million, professional fees of $2.3 million and occupancy and equipment of $1.6 million. The increase in compensation and benefits expense is attributable to the addition of new employees primarily to support the growth of the Company’s mortgage banking and SBA lending activities, routine salary and benefits adjustments, and increased incentive compensation primarily as a result of the performance of the Company’s mortgage banking segment. The increases in other operating expense, professional fees and occupancy and equipment were primarily to support the growth of the mortgage banking segment.

The Company recognized income tax expense of $9.0 million for the nine months ended June 30, 2021 compared to $5.4 million for the same period in 2020. The increase for 2021 was due primarily to higher pretax income. The effective tax rate for 2021 was 26.5% as compared to 23.0% for 2020.

Comparison of Financial Condition at June 30, 2021 and September 30, 2020

Total assets decreased $6.0 million from September 30, 2020 to June 30, 2021. Net loans decreased $24.2 million during the nine months ended June 30, 2021, due primarily to an $80.0 million decrease in PPP loans, partially offset by continued growth in the single tenant net lease commercial real estate loan portfolio. Residential mortgage and SBA loans held for sale decreased by $21.0 million and $4.6 million, respectively, due to loan sales outpacing originations during the period. Single tenant net lease loans held for sale increased by $17.5 million due to a transfer from held-for-investment to held-for-sale during the period. Total liabilities decreased $26.2 million due primarily to decreases of $67.0 million and $27.6 million in PPPLF and FHLB borrowings, respectively, partially offset by a $79.1 million increase in total deposits.

Common stockholders’ equity increased $20.5 million, from $157.3 million at September 30, 2020 to $177.7 million at June 30, 2021, due primarily to increases in retained net income of $23.0 million, partially offset by decreases in net unrealized gains on available for sale securities included in accumulated other comprehensive income of $851,000 and additional paid in capital of $1.8 million, which was due to the acquisition of the minority interests in Q2 Business Capital, LLC on December 31, 2020. At June 30, 2021 and September 30, 2020, the Bank was considered “well-capitalized” under applicable regulatory capital guidelines.

First Savings Bank is an entrepreneurial community bank headquartered in Jeffersonville, Indiana, which is directly across the river from Louisville, Kentucky, and operates fifteen depository branches within Southern Indiana. The Bank also has three national lending programs, including single-tenant net lease commercial real estate, SBA lending and residential mortgage banking, with offices located throughout the United States. The Bank is a recognized leader, both in its local communities and nationally for its lending programs. The employees of First Savings Bank strive daily to achieve the organization’s vision, We Expect To Be The BEST community BANK, which fuels our success. The Company’s common shares trade on The NASDAQ Stock Market under the symbol “FSFG.”

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 the duration, extent and severity of the COVID-19 pandemic, including its effect on our customers, service providers and on the economy and financial markets in general; changes in market interest rates; 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

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.