FSFG - First Savings Financial Group Inc. Reports Financial Results for the Second Fiscal Quarter Ended March 31 2021

JEFFERSONVILLE, Ind., April 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 $10.5 million, or $4.39 per diluted share, for the quarter ended March 31, 2021 compared to a net loss of $627,000, or a net loss of $0.26 per diluted share, for the quarter ended March 31, 2020.

Commenting on the Company’s performance, Larry W. Myers, President and CEO stated: “We continued to be very pleased with the performance of our staff and the fundamentals of our organization, both of which continue to deliver meaningful value to our shareholders. We continue to experience strong earnings, loan and deposit growth; resiliency of asset quality; stability of the net interest margin; and substantial increases to stockholders’ equity. The core bank and ancillary business lines continue to perform exceptionally well despite recent market headwinds that are adversely affecting loan origination volumes. I continue to have confidence in the Company’s ability to thrive during challenging environments and I appreciate the dedication of our staff to ensure such.”

COVID-19 Pandemic Loan Information

We assisted customers that experienced COVID-19 pandemic related hardships by approving payment extensions or loan forbearance agreements, and by waiving or refunding certain fees. During the onset of the COVID-19 pandemic in early 2020, we proactively contacted all commercial borrowers and offered uniform payment extensions or loan forbearance agreements, while requests from consumer borrowers were reviewed and approved on a case-by-case basis. Payment extensions or loan forbearance agreements were generally for periods of three months and included deferment of both principal and interest. Following the expiration of the initial payment extensions or loan forbearance agreements, we entertained requests for extended periods on a case-by-case basis, which generally included deferment of only the principal portion of payments for a period of up to three months. The table below summarizes payment extensions or loan forbearance agreements that were in effect at April 19, 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 March 31, 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 March 31, 2021, the outstanding principal balance of loans secured by restaurant related collateral was $168.6 million, of which $75.3 million is fully guaranteed by the SBA (including $74.9 million of PPP loans) and $82.2 million is secured by commercial real estate where the collateral property is leased to national-brand, investment-grade tenants. The commercial business loan included in the preceding table is secured by restaurant related collateral. None of the SBA commercial loans included in the preceding table are secured by restaurant related collateral.

At March 31, 2021, the outstanding principal balances of loans secured by hotel real estate was $17.6 million, of which $3.9 million is fully guaranteed by the SBA (including $878,000 of PPP loans). The three commercial real estate and the SBA commercial real estate loans included in the preceding table totaling $9.9 million and $1.1 million, respectively, are secured by hotel real estate.

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. Following the expiration of the SBA-provided loan payments under the CARES Act for most of the SBA clients, the five SBA clients included in the preceding table, which operate in COVID-sensitive industries, were granted 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, including the aforementioned five SBA clients following the expiration of their payment extensions or loan forbearance agreements.

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 March 31, 2021, the outstanding principal balance of PPP loans was $159.3 million and net deferred loan fees related to PPP loans was approximately $2.1 million, which will be recognized over the life of the loans and as borrowers are granted forgiveness. As of March 31, 2021, the Company had processed and received forgiveness for 378 PPP loans totaling $49.2 million.

Results of Operations for the Three Months Ended March 31, 2021 and 2020

Net interest income increased $4.0 million, or 37.2%, to $14.8 million for the quarter ended March 31, 2021 as compared to the same quarter in 2020. The increase in net interest income was due to a $3.3 million increase in interest income and a $723,000 decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $435.6 million, from $1.20 billion for 2020 to $1.64 billion for 2021, partially offset by a decrease in the weighted-average tax-equivalent yield, from 4.61% for 2020 to 4.19% for 2021. The decrease in the weighted-average tax-equivalent yield for 2021 is primarily due to lower market interest rates on loans and investment securities in 2021, as well as the Company’s participation in the PPP. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 1.13% for 2020 to 0.63% for 2021, partially offset by an increase in the average balance of interest-bearing liabilities of $328.4 million, from $984.2 million for 2020 to $1.31 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 the Company’s participation in 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 $287,000 in provision for loan losses for the quarter ended March 31, 2021 compared to $1.7 million for 2020. The Company recognized net recoveries of $8,000 for the quarter ended March 31, 2021 compared to net charge-offs of $544,000 for 2020. The lower provision for loan losses in 2021 is primarily due to changes in qualitative factors within the allowance for losses calculation related to economic uncertainties surrounding COVID-19 made in 2020 and lesser net charge-offs in 2021.

Noninterest income increased $27.8 million for the quarter ended March 31, 2021 as compared to 2020. The increase was primarily due to increases in mortgage banking income of $24.0 million and net gains on sales of SBA loans of $2.0 million. The increase in mortgage banking income was due to production from the secondary-market residential mortgage lending segment. The increase in net gain on sales of SBA loans was primarily due 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 $17.2 million for the quarter ended March 31, 2021 as compared to 2020. The increase was primarily due to an increase in compensation and benefits of $14.6 million and an increase in professional fees of $1.1 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 increase in professional fees was primarily due to the mortgage banking segment and represented various outsourced services.

The Company recognized income tax expense of $3.7 million for the quarter ended March 31, 2021 compared to an income tax benefit of $774,000 for 2020. The tax benefit for 2020 was primarily the result of a pretax operating loss for the quarter. The effective tax rate for 2021 was 26.1%.

Results of Operations for the Six Months Ended March 31, 2021 and 2020

The Company reported net income of $20.4 million, or $8.55 per diluted share, for the six months ended March 31, 2021 compared to net income of $2.8 million, or $1.18 per diluted share, for the six months ended ended March 31, 2020, resulting in an increase of 625% on a per share basis.

Net interest income increased $7.0 million, or 32.3%, to $28.5 million for the six months ended March 31, 2021 as compared to the same period in 2020. The increase in net interest income was due to a $5.7 million increase in interest income and a $1.3 million decrease in interest expense. Interest income increased due to an increase in the average balance of interest-earning assets of $447.8 million, from $1.18 billion for 2020 to $1.63 billion for 2021, partially offset by a decrease in the weighted-average tax-equivalent yield, from 4.74% for 2020 to 4.11% for 2021. The decrease in the weighted-average tax-equivalent yield for 2021 is primarily due to lower market interest rates on loans and investment securities in 2021, as well as the Company’s participation in the PPP. Interest expense decreased due to a decrease in the average cost of interest-bearing liabilities, from 1.18% for 2020 to 0.66% for 2021, partially offset by an increase in the average balance of interest-bearing liabilities of $352.2 million, from $959.5 million for 2020 to $1.31 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 the Company’s participation in the PPPLF.

The Company recognized $955,000 in provision for loan losses for the six months ended March 31, 2021 compared to $2.2 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 $2.2 million, from $13.6 million at September 30, 2020 to $11.4 million at March 31, 2021. The Company recognized net charge-offs of $562,000 for the six months ended March 31, 2021, of which $496,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $559,000 for the same period in 2020. The lower provision for loan losses in 2021 is primarily due to changes in qualitative factors within the allowance for losses calculation related to economic uncertainties surrounding COVID-19 made in 2020.

Noninterest income increased $55.8 million for the six months ended March 31, 2021 as compared to the same period in 2020. The increase was primarily due to increases in mortgage banking income of $50.4 million, net gains on sales of SBA loans of $2.5 million and other income of $2.5 million. The increase in mortgage banking income was due to production from the secondary-market residential mortgage lending segment. The increase in net gain on sales of SBA loans was primarily due to increases in production and sales volume from the SBA lending segment, as well as higher premiums in the secondary market. The increase in other income was primarily due to service fee income from the mortgage banking segment. 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 $37.3 million for the six months ended March 31, 2021 as compared to the same period in 2020. The increase was primarily due to an increase in compensation and benefits of $30.6 million and an increase in other operating expense of $2.3 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 increase in other operating expense was primarily due to the mortgage banking segment.

The Company recognized income tax expense of $8.2 million for the six months ended March 31, 2021 compared to an income tax benefit of $136,000 for the same period in 2020. The tax benefit for 2020 was the result of the Company’s tax-exempt income and investments in tax credit bonds. The effective tax rate for 2021 was 28.3%.

Comparison of Financial Condition at March 31, 2021 and September 30, 2020

Total assets decreased $14.0 million, from $1.76 billion at September 30, 2020 to $1.75 billion at March 31, 2021. Net loans increased $38.3 million during the six months ended March 31, 2021, primarily due to continued growth in the single tenant net lease commercial real estate loan portfolio. Residential mortgage and SBA loans held for sale decreased by $73.0 million and $5.4 million, respectively, due to loan sales outpacing originations during the period. Total liabilities decreased $29.5 million primarily due to decreases of $46.3 million and $21.6 million in PPPLF and FHLB borrowings, respectively, partially offset by a $47.4 million increase in total deposits.

Common stockholders’ equity increased $15.7 million, from $157.3 million at September 30, 2020 to $173.0 million at March 31, 2021, due primarily to increases in retained net income of $19.6 million, partially offset by decreases in net unrealized gains on available for sale securities included in accumulated other comprehensive income of $2.0 million 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 March 31, 2021 and September 30, 2020, the Bank was considered “well-capitalized” under applicable regulatory capital guidelines.

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 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 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