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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): October 24, 2024

 

FIRST SAVINGS FINANCIAL GROUP, INC.

(Exact Name of Registrant as Specified in Charter)

 

Indiana 001-34155 37-1567871
(State or Other Jurisdiction of
Incorporation)
(Commission File No.) (I.R.S. Employer
Identification No.)

 

702 North Shore Drive, Suite 300, Jeffersonville, Indiana 47130
(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: (812) 283-0724

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading
Symbol(s)
  Name of each exchange on which
registered
Common Stock, par value $0.01 per share   FSFG   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 


 

Item 2.02. Results of Operations and Financial Condition.

 

On October 24, 2024, First Savings Financial Group, Inc. announced its financial results for the three and twelve months ended September 30, 2024. The press release announcing the financial results for the three and twelve months ended September 30, 2024 is furnished as Exhibit 99.1 and incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

  (a) Not applicable.

 

  (b) Not applicable.

 

  (c) Not applicable.

 

  (d) Exhibits

 

    99.1           Press release dated October 24, 2024

 

    101            Cover Page Interactive Data File (formatted in Inline XBRL)

 

 


  

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  FIRST SAVINGS FINANCIAL GROUP, INC.
   
   
Date:      October 24, 2024 By: /s/Tony A. Schoen
    Tony A. Schoen
    Chief Financial Officer

 

 

 

EX-99.1 2 tm2427180d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

FIRST SAVINGS FINANCIAL GROUP, INC. REPORTS FINANCIAL RESULTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2024

 

Jeffersonville, Indiana — October 24, 2024. First Savings Financial Group, Inc. (NASDAQ: FSFG - news) (the "Company"), the holding company for First Savings Bank (the "Bank"), today reported net income of $13.6 million, or $1.98 per diluted share, for the year ended September 30, 2024, compared to net income of $8.2 million, or $1.19 per diluted share, for the year ended September 30, 2023. The core banking segment reported net income of $16.9 million, or $2.47 per diluted share for the year ended September 30, 2024, compared to $14.9 million, or $2.18 per diluted share for the year ended September 30, 2023.

 

Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated “Fiscal 2024 was, in many ways, a year of rebuilding, repositioning and refinement. A summary of these enhancement actions is provided below. While we’re not entirely pleased with the financial performance in fiscal 2024, we are confident that the Company is well positioned to better perform in fiscal 2025 and the years thereafter regardless of the economic environment. For fiscal 2025 we’ll remain focused on core banking; strong asset quality; selective high-quality lending; core deposit growth; increased SBA lending volume; continued improvement of liquidity, capital and interest rate sensitivity positions; and strategic opportunities. We believe the efforts of fiscal 2024 along with the focus for fiscal 2025 will deliver enhanced shareholder value. Additionally, we’ll continue to evaluate options and strategies that we believe will further position the Company for future success and deliver shareholder value.”

 

Enhancements Actions During Fiscal Year Ended September 30, 2024

 

· Converted the core operating system immediately prior to the beginning of fiscal 2024 and committed to effectively adapt to the new system and gain efficiencies and expense reductions therewith.
· Ceased national mortgage banking operations in the first fiscal quarter, including sale of the residential mortgage servicing rights portfolio.
· Implemented additional expense reduction and containment strategies, which were effective.
· Experienced the net interest margin floor in the second fiscal quarter and recognized expansion in the subsequent quarters, in addition to a slowed paced of deposit migration to higher cost types.
· Maintained a balance sheet position that is expected to benefit in a potential decreasing rate environment but having limited exposure to potential increasing rates.
· Remained disciplined in our lending philosophy with respect to both rate expectations and credit quality.
· Enhanced our review of asset quality, which remains strong, in order to prepare for any potential financial downturn that may occur.
· Enhanced SBA Lending business development staff with new and replacement hires throughout the fiscal year, plus decreased surplus support staff at the end of the fourth fiscal quarter.

 

Results of Operations for the Fiscal Years Ended September 30, 2024 and 2023

 

Net interest income decreased $3.5 million, or 5.7%, to $58.1 million for the year ended September 30, 2024 as compared to the prior year. The tax equivalent net interest margin for the year ended September 30, 2024 was 2.68% as compared to 3.10% for the prior year. The decrease in net interest income was due to a $22.3 million increase in interest expense, partially offset by an $18.8 million increase in interest income. A table of average balance sheets, including average asset yields and average liability costs, is included at the end of this release.

 

 


 

The Company recognized a provision for credit losses for loans of $3.5 million, a credit for unfunded lending commitments of $421,000, and a provision for credit losses for securities of $21,000 for the year ended September 30, 2024, compared to a provision for loan losses of $2.6 million only for the prior year. The provision for credit losses for loans increased primarily due to loan growth and the effects of adopting the Current Expected Credit Loss (CECL) methodology during the year ended September 30, 2024. The Company recognized net charge-offs totaling $527,000 during the year, of which $104,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $1.1 million during the prior year, of which $872,000 was related to unguaranteed portions of SBA loans. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $3.0 million from $13.9 million at September 30, 2023 to $16.9 million at September 30, 2024.

 

Noninterest income decreased $12.8 million for the year ended September 30, 2024 as compared to the prior year. The decrease was due primarily to a $14.1 million decrease in mortgage banking income due to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.

 

Noninterest expense decreased $23.2 million for the year ended September 30, 2024 as compared to the prior year. The decrease was due primarily to decreases in compensation and benefits, data processing expense and other operating expenses of $12.0 million, $2.2 million and $7.8 million, respectively. The decrease in compensation and benefits expense was due primarily to a reduction in staffing related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023. The decrease in data processing expense was due primarily to expenses recognized in the prior year related to the implementation of the new core operating system in August 2023. The decrease in other operating expense was due primarily to a $1.9 decrease in net loss on captive insurance operations due to the dissolution of the captive insurance company in September 2023; a decrease in loss contingency accrual for SBA-guaranteed loans of $754,000 in 2024 compared to an increase of $1.5 million in 2023; a decrease in the loss contingency accrual for restitution to mortgage borrowers of $283,000 in 2024 compared to an increase of $609,000 in 2023; and a decrease of $853,000 in loan expense for 2024 as compared to 2023 due primarily to lower mortgage loan originations related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.

 

The Company recognized income tax expense of $1.0 million for the year ended September 30, 2024 compared to tax expense of $10,000 for the prior year. The increase is primarily due to higher taxable income in the 2024 period. The effective tax rate for 2024 was 7.0%, which was an increase from the effective tax rate of 0.1% in 2023. The effective tax rate is well below the statutory tax rate primarily due to the recognition of investment tax credits related to solar projects in both the 2024 and 2023 periods.

 

Results of Operations for the Three Months Ended September 30, 2024 and 2023

 

The Company reported net income of $3.7 million, or $0.53 per diluted share, for the three months ended September 30, 2024, compared to a net loss of $747,000, or $0.11 per diluted share, for the three months ended September 30, 2023. The core banking segment reported net income of $4.1 million, or $0.60 per diluted share, for the three months ended September 30, 2024, compared to $2.3 million, or $0.33 per diluted share, for the three months ended September 30, 2023.

 

Net interest income decreased $459,000, or 3.0%, to $15.1 million for the three months ended September 30, 2024 as compared to the same period in 2023. The tax equivalent net interest margin was 2.72% for the three months ended September 30, 2024 as compared to 3.03% for the same period in 2023. The decrease in net interest income was due to a $4.5 million increase in interest expense, partially offset by a $4.1 million increase in interest income. A table of average balance sheets, including average asset yields and average liability costs, is included at the end of this release.

 

 


 

The Company recognized a provision for credit losses for loans of $1.8 million, a credit for unfunded lending commitments of $262,000, and a credit for credit losses for securities of $86,000 for the three months ended September 30, 2024, compared to a provision for loan losses of $815,000 only for the same period in 2023. The provision for credit losses for loans increased primarily due to loan growth and the effects of adopting the Current Expected Credit Loss (CECL) methodology during the year ended September 30, 2024. The Company recognized net charge-offs totaling $304,000 during the 2024 period, of which $120,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $753,000 during the 2023 period, of which $609,000 was related to unguaranteed portions of SBA loans.

 

Noninterest income decreased $2.6 million for the three months ended September 30, 2024 as compared to the same period in 2023. The decrease was due primarily to a $3.0 million decrease in mortgage banking income due to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.

 

Noninterest expense decreased $9.0 million for the three months ended September 30, 2024 as compared to the same period in 2023. The decrease was due primarily to decreases in compensation and benefits expense, data processing expense, and other operating expenses of $4.5 million, $1.5 million and $3.5 million, respectively. The decrease in compensation and benefits expense was due primarily to a reduction in staffing related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023. The decrease in data processing expense was due primarily to expenses recognized in the prior year period related to the implementation of the new core operating system in August 2023. The decrease in other operating expense was due primarily to a $978,000 decrease in the net loss on captive insurance operations due to the dissolution of the captive insurance company in September 2023; a decrease in loss contingency accrual for SBA-guaranteed loans of $14,000 in 2024 compared to an increase of $1.0 million in 2023; and a decrease of $270,000 in loan expense for 2024 as compared to 2023 due primarily to lower mortgage loan originations related to the cessation of the national mortgage banking operations in the quarter ended December 31, 2023.

 

The Company recognized income tax expense of $145,000 for the three months ended September 30, 2024 compared to income tax benefit of $737,000 for the same period in 2023. The increase was primarily due to higher taxable income in the 2024 period.

 

Comparison of Financial Condition at September 30, 2024 and September 30, 2023

 

Total assets increased $161.5 million, from $2.29 billion at September 30, 2023 to $2.45 billion at September 30, 2024. Net loans held for investment increased $193.6 million during the year ended September 30, 2024 due primarily to growth in residential real estate, residential construction, and commercial real estate loans. Loans held for sale decreased by $20.1 million from $45.9 million at September 30, 2023 to $25.7 million, primarily due to the winddown of the national mortgage banking operations. Residential mortgage loan servicing rights decreased $59.8 million during the year ended September 30, 2024, due to the sale of the entire residential mortgage loan servicing rights portfolio during the year.

 

Total liabilities increased $135.4 million due primarily to increases in total deposits of $199.1 million, which included an increase in brokered deposits of $70.8 million, partially offset by a decrease in FHLB borrowings of $61.5 million. As of September 30, 2024, deposits exceeding the FDIC insurance limit of $250,000 per insured account were 30.1% of total deposits and 13.7% of total deposits when excluding public funds insured by the Indiana Public Deposit Insurance Fund.

 

 


 

Common stockholders’ equity increased $26.1 million, from $151.0 million at September 30, 2023 to $177.1 million at September 30, 2024, due primarily to a $18.4 million decrease in accumulated other comprehensive loss and an increase in retained net income of $7.0 million. The decrease in accumulated other comprehensive loss was due primarily to decreasing long term market interest rates during the year ended September 30, 2024, which resulted in an increase in the fair value of securities available for sale. At September 30, 2024 and September 30, 2023, 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 Ohio River from Louisville, Kentucky, and operates fifteen depository branches within Southern Indiana. The Bank also has two national lending programs, including single-tenant net lease commercial real estate and SBA lending, with offices located predominately in the Midwest. 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; 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

 

 


 

FIRST SAVINGS FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

  

    Three Months Ended     Years Ended  
OPERATING DATA:   September 30,     September 30,  
(In thousands, except share and per share data)   2024     2023     2024     2023  
Total interest income   $ 32,223     $ 28,137     $ 121,988     $ 103,229  
Total interest expense     17,146       12,601       63,926       41,655  
                                 
Net interest income     15,077       15,536       58,062       61,574  
                                 
Provision for credit losses - loans     1,808       815       3,492       2,612  
Provision (credit) for unfunded lending commitments     (262 )     -       (421 )     -  
Provision (credit) for credit losses - securities     (86 )     -       21       -  
                                 
Total provision for credit losses     1,460       815       3,092       2,612  
                                 
Net interest income after provision for credit losses     13,617       14,721       54,970       58,962  
                                 
Total noninterest income     2,842       5,442       12,530       25,342  
Total noninterest expense     12,642       21,647       52,890       76,122  
                                 
Income (loss) before income taxes     3,817       (1,484 )     14,610       8,182  
Income tax expense (benefit)     145       (737 )     1,018       10  
                                 
Net income (loss)   $ 3,672     $ (747 )   $ 13,592     $ 8,172  
                                 
Net income (loss) per share, basic   $ 0.54     $ (0.11 )   $ 1.99     $ 1.19  
Weighted average shares outstanding, basic     6,833,376       6,817,365       6,830,466       6,848,311  
                                 
Net income (loss) per share, diluted   $ 0.53     $ (0.11 )   $ 1.98     $ 1.19  
Weighted average shares outstanding, diluted     6,877,518       6,837,919       6,856,520       6,880,072  
                                 
                                 
Performance ratios (annualized)                                
  Return on average assets     0.61 %     (0.13 )%     0.58 %     0.37 %
  Return on average equity     8.52 %     (1.82 )%     8.31 %     5.04 %
  Return on average common stockholders' equity     8.52 %     (1.82 )%     8.31 %     5.04 %
  Net interest margin (tax equivalent basis)     2.72 %     3.03 %     2.68 %     3.10 %
  Efficiency ratio     70.55 %     103.19 %     74.92 %     87.58 %

 

 


 

                QTD           FYTD  
FINANCIAL CONDITION DATA:   September 30,     June 30,     Increase     September 30,     Increase  
(In thousands, except per share data)   2024     2024     (Decrease)     2023     (Decrease)  
Total assets   $ 2,450,368     $ 2,393,491     $ 56,877     $ 2,288,854     $ 161,514  
Cash and cash equivalents     52,142       42,423       9,719       30,845       21,297  
Investment securities     249,719       238,785       10,934       229,039       20,680  
Loans held for sale     25,716       125,859       (100,143 )     45,855       (20,139 )
Gross loans     1,985,146       1,846,769       138,377       1,787,143       198,003  
Allowance for credit losses (1)     21,294       19,789       1,505       16,900       4,394  
Interest earning assets     2,277,512       2,239,109       38,403       2,083,397       194,115  
Goodwill     9,848       9,848       -       9,848       -  
Core deposit intangibles     398       438       (40 )     561       (163 )
Loan servicing rights     2,754       2,860       (106 )     62,819       (60,065 )
Noninterest-bearing deposits     191,528       201,854       (10,326 )     242,237       (50,709 )
Interest-bearing deposits (customer)     1,180,196       1,111,143       69,053       1,001,238       178,958  
Interest-bearing deposits (brokered)     509,157       399,151       110,006       438,319       70,838  
Federal Home Loan Bank borrowings     301,640       425,000       (123,360 )     363,183       (61,543 )
Subordinated debt and other borrowings     48,603       48,563       40       48,444       159  
Total liabilities     2,273,253       2,225,491       47,762       2,137,873       135,380  
Accumulated other comprehensive loss     (11,195 )     (17,415 )     6,220       (29,587 )     18,392  
Stockholders' equity     177,115       168,000       9,115       150,981       26,134  
                                         
Book value per share   $ 25.72     $ 24.41   $ 1.31     $ 21.99     $ 3.73  
Tangible book value per share - Non-GAAP (2)     24.23       22.91       1.32       20.47       3.76  
                                         
Non-performing assets:                                        
   Nonaccrual loans - SBA guaranteed   $ 5,036     $ 5,049     $ (13 )   $ 5,091     $ (55 )
   Nonaccrual loans     11,906       11,705       201       8,857       3,049  
      Total nonaccrual loans   $ 16,942     $ 16,754     $ 188     $ 13,948     $ 2,994  
   Accruing loans past due 90 days     -       -       -       -       -  
      Total non-performing loans     16,942       16,754       188       13,948       2,994  
   Foreclosed real estate     444       444       -       474       (30 )
   Troubled debt restructurings classified as performing loans     -       -       -       1,266       (1,266 )
      Total non-performing assets   $ 17,386     $ 17,198     $ 188     $ 15,688     $ 1,698  
                                         
Asset quality ratios:                                        
   Allowance for credit losses as a percent of total gross loans     1.07 %     1.07 %     0.00 %     0.95 %     0.13 %
   Allowance for credit losses as a percent of nonperforming loans     125.69 %     118.12 %     7.57 %     121.16 %     4.52 %
   Nonperforming loans as a percent of total gross loans     0.85 %     0.91 %     (0.05 )%     0.78 %     0.07 %
   Nonperforming assets as a percent of total assets     0.71 %     0.72 %     (0.01 )%     0.69 %     0.02 %

 

 

(1) The Company adopted ASU 2016-13 Topic 326 on October 1, 2023. Allowance was determined using current expected credit loss methodology (CECL) for the quarters ended September, June, and March 2024 and December 2023. Allowance was determined using the previous incurred loss methodology as of September 30, 2023.

 

(2) See reconciliation of GAAP and non-GAAP financial measures for additional information relating to calculation of these figures.

 

 


 

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.

 

    Three Months Ended     Fiscal Year Ended  
    September 30,     September 30,  
    2024     2023     2024     2023  
Net Income (In thousands)                        
   Net income attributable to the Company (non-GAAP)   $ 3,660     $ 2,824     $ 11,674     $ 12,731  
   Plus: Reversal of contingent liability, net of tax effect     -       -       212       -  
   Plus: Record Visa Class C shares, net of tax effect     15       -       342       -  
Plus: Decrease in loss contingency for SBA-guaranteed loans, net of tax effect     -       -       492       -  
   Plus: Adjustment to MSR valuation allowance, net of tax effect     -       -       583       -  
   Plus: Gain (loss) on premises and equipment, net of tax effect     (3 )     -       87       -  
Plus: Adjustment to previous data processing contract termination accrual, net of tax effect     -       -       117       -  
   Plus: Distribution from equity investment, net of tax effect     -       -       85       -  
   Plus: Gain from repurchase of subordinated debt, net of tax effect     -       -       -       513  
Less: Net loss on sales of available for sale securities and time deposits, net of tax effect     -       -       -       (429 )
   Less: Data processing system conversion, net of tax effect     -       (979 )     -       (1,119 )
   Less: MSR valuation allowance for intended sale, net of tax effect     -       (598 )     -       (598 )
   Less: Loss contingency for SBA-guaranteed loans, net of tax effect     -       (779 )     -       (1,160 )
   Less: Mortgage banking loss contingencies, net of tax effect     -       (296 )     -       (847 )
Less: Professional fees related to mortgage banking loss contingencies, net of tax effect     -       (919 )     -       (919 )
   Net income attributable to the Company (GAAP)   $ 3,672     $ (747 )   $ 13,592     $ 8,172  
                                 
Net Income per Share, Diluted                                
   Net income per share, diluted (non-GAAP)   $ 0.53     $ 0.41     $ 1.70     $ 1.85  
   Plus: Reversal of contingent liability, net of tax effect     -       -       0.03       -  
   Plus: Record Visa Class C shares, net of tax effect     -       -       0.05       -  
Plus: Decrease in loss contingency for SBA-guaranteed loans, net of tax effect     -       -       0.07       -  
   Plus: Adjustment to MSR valuation allowance, net of tax effect     -       -       0.09       -  
   Plus: Gain (loss) on premises and equipment, net of tax effect     -       -       0.01       -  
Plus: Adjustment to previous data processing contract termination accrual, net of tax effect     -       -       0.02       -  
   Plus: Distribution from equity investment, net of tax effect     -       -       0.01       -  
   Plus: Gain from repurchase of subordinated debt, net of tax effect     -       -       -       0.07  
Less: Net loss on sales of available for sale securities and time deposits, net of tax effect     -       -       -       (0.06 )
   Less: Data processing system conversion, net of tax effect     -       (0.14 )     -       (0.16 )
   Less: MSR valuation allowance for intended sale, net of tax effect     -       (0.09 )     -       (0.09 )
   Less: Loss contingency for SBA-guaranteed loans, net of tax effect     -       (0.11 )     -       (0.17 )
   Less: Mortgage banking loss contingencies, net of tax effect     -       (0.05 )     -       (0.12 )
Less: Professional fees related to mortgage banking loss contingencies, net of tax effect     -       (0.13 )     -       (0.13 )
   Net income per share, diluted (GAAP)   $ 0.53     $ (0.11 )   $ 1.98     $ 1.19  
                                 
Core Banking Net Income (In thousands)                                
   Net income attributable to the Core Bank (non-GAAP)   $ 4,081     $ 5,046     $ 15,449     $ 18,338  
   Plus: Reversal of contingent liability, net of tax effect     -       -       212       -  
   Plus: Record Visa Class C shares, net of tax effect     15       -       342       -  
   Plus: Adjustment to MSR valuation allowance, net of tax effect     -       -       583       -  
   Plus: Gain (loss) on premises and equipment, net of tax effect     (3 )     -       87       -  
Plus: Adjustment to previous data processing contract termination accrual, net of tax effect     -       -       117       -  
   Plus: Distribution from equity investment, net of tax effect     -       -       85       -  
   Plus: Gain from repurchase of subordinated debt, net of tax effect     -       -       -       513  
Less: Net loss on sales of available for sale securities and time deposits, net of tax effect     -       -       -       (429 )
   Less: Data processing system conversion, net of tax effect     -       (979 )     -       (1,119 )
   Less: MSR valuation allowance for intended sale, net of tax effect     -       (598 )     -       (598 )
   Less: Mortgage banking loss contingencies, net of tax effect     -       (296 )     -       (847 )
Less: Professional fees related to mortgage banking loss contingencies, net of tax effect     -       (919 )     -       (919 )
   Net income (loss) attributable to the Core Bank (GAAP)   $ 4,093     $ 2,254     $ 16,875     $ 14,939  
                                 
Core Bank Net Income per Share, Diluted                                
   Core Bank net income per share, diluted (non-GAAP)   $ 0.60     $ 0.74     $ 2.26     $ 2.67  
   Plus: Reversal of contingent liability, net of tax effect     -       -       0.03       -  
   Plus: Record Visa Class C shares, net of tax effect     -       -       0.05       -  
   Plus: Adjustment to MSR valuation allowance, net of tax effect     -       -       0.09       -  
   Plus: Gain (loss) on premises and equipment, net of tax effect     -       -       0.01       -  
Plus: Adjustment to previous data processing contract termination accrual, net of tax effect     -       -       0.02       -  
   Plus: Distribution from equity investment, net of tax effect     -       -       0.01       -  
   Plus: Gain from repurchase of subordinated debt, net of tax effect     -       -       -       0.07  
Less: Net loss on sales of available for sale securities and time deposits, net of tax effect     -       -       -       (0.06 )
   Less: Data processing system conversion, net of tax effect     -       (0.14 )     -       (0.16 )
   Less: MSR valuation allowance for intended sale, net of tax effect     -       (0.09 )     -       (0.09 )
   Less: Mortgage banking loss contingencies, net of tax effect     -       (0.05 )     -       (0.12 )
Less: Professional fees related to mortgage banking loss contingencies, net of tax effect     -       (0.13 )     -       (0.13 )
   Core Bank net income per share, diluted (GAAP)   $ 0.60     $ 0.33     $ 2.47     $ 2.18  

 

 


 

RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES (UNAUDITED) (CONTINUED):

 

Efficiency Ratio (In thousands)                        
   Net interest income (GAAP)   $ 15,077     $ 15,536     $ 58,062     $ 61,574  
                                 
   Noninterest income (GAAP)     2,842       5,442       12,530       25,342  
                                 
   Noninterest expense (GAAP)     12,646       21,647       52,890       76,122  
                                 
   Efficiency ratio (GAAP)     70.55 %     103.19 %     74.92 %     87.58 %
                                 
   Noninterest income (GAAP)   $ 2,842     $ 5,442     $ 12,530     $ 25,342  
   Plus: Record Visa Class C shares     20       -       456       -  
   Plus: Adjustment to MSR valuation allowance     -       -       777       -  
   Plus: Gain (loss) on premises and equipment     (4 )     -       116       -  
   Plus: Distribution from equity investment     -       -       113       -  
   Plus: Gain from repurchase of subordinated debt     -       -       -       684  
Less: Net loss on sales of available for sale securities and time deposits     -       -       -       (572 )
   Less: MSR valuation allowance for intended sale     -       (797 )     -       (797 )
   Noninterest income (Non-GAAP)     2,858       4,645       13,992       24,657  
                                 
   Noninterest expense (GAAP)   $ 12,642     $ 21,647     $ 52,890     $ 76,122  
   Plus: Reversal of contingent liability     -       -       283       -  
   Plus: Decrease in loss contingency for SBA-guaranteed loans     -       -       656       -  
Plus: Adjustment to previous data processing contract termination accrual     -       -       156       -  
   Less: Data processing system conversion     -       (1,305 )     -       (1,492 )
   Less: Loss contingency for SBA-guaranteed loans     -       (1,039 )     -       (1,547 )
   Less: Mortgage banking loss contingencies     -       (395 )     -       (1,129 )
   Less: Professional fees related to mortgage banking loss contingencies     -       (1,225 )     -       (1,225 )
   Noninterest expense (Non-GAAP)     12,642       17,683       53,985       70,729  
                                 
   Efficiency ratio (excluding nonrecurring items) (non-GAAP)     70.49 %     87.62 %     74.92 %     82.02 %

 

 

Tangible Book Value Per Share   September 30,     June 30,     Increase     September 30,     Increase  
(In thousands, except share and per share data)   2024     2024     (Decrease)     2023     (Decrease)  
Stockholders' equity, net of noncontrolling interests (GAAP)   $ 177,115     $ 168,000     $ 9,115     $ 150,981     $ 26,134  
    Less:  goodwill and core deposit intangibles     (10,246 )     (10,286 )     40       (10,409 )     163  
    Tangible equity (non-GAAP)   $ 166,869     $ 157,714     $ 9,155     $ 140,572       26,297  
                                         
    Outstanding common shares     6,887,106       6,883,656     $ 3,450       6,867,121       19,985  
                                         
Tangible book value per share (non-GAAP)   $ 24.23     $ 22.91     $ 1.32     $ 20.47     $ 3.76  
                                         
Book value per share (GAAP)   $ 25.72     $ 24.41     $ 1.31     $ 21.99     $ 3.73  

 

 


 

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED):

 

    As of  
Summarized Consolidated Balance Sheets   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands, except per share data)   2024     2024     2023     2023     2023  
Total cash and cash equivalents   $ 52,142     $ 42,423     $ 62,969     $ 33,366     $ 30,845  
Total investment securities     249,719       238,785       240,142       246,801       229,039  
Total loans held for sale     25,716       125,859       19,108       22,866       45,855  
Total loans, net of allowance for credit losses     1,963,852       1,826,980       1,882,458       1,841,953       1,770,243  
Loan servicing rights     2,754       2,860       3,028       3,711       62,819  
Total assets     2,450,368       2,393,491       2,364,983       2,308,092       2,288,854  
                                         
   Customer deposits   $ 1,371,724     $ 1,312,997     $ 1,239,271     $ 1,180,951     $ 1,243,475  
   Brokered deposits     509,157       399,151       548,175       502,895       438,319  
Total deposits     1,880,881       1,712,148       1,787,446       1,683,846       1,681,794  
Federal Home Loan Bank borrowings     301,640       425,000       315,000       356,699       363,183  
                                         
   Common stock and additional paid-in capital   $ 27,725     $ 27,592     $ 27,475     $ 27,397     $ 27,064  
   Retained earnings - substantially restricted     173,337       170,688       167,648       163,753       166,306  
   Accumulated other comprehensive income (loss)     (11,195 )     (17,415 )     (17,144 )     (13,606 )     (29,587 )
   Unearned stock compensation     (901 )     (999 )     (1,096 )     (1,194 )     (1,015 )
   Less treasury stock, at cost     (11,851 )     (11,866 )     (11,827 )     (11,827 )     (11,787 )
Total stockholders' equity     177,115       168,000       165,056       164,523       150,981  
                                         
Outstanding common shares     6,887,106       6,883,656       6,883,160       6,883,160       6,867,121  

 

    Three Months Ended  
Summarized Consolidated Statements of Income   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands, except per share data)   2024     2024     2023     2023     2023  
Total interest income   $ 32,223     $ 31,094     $ 30,016     $ 28,655     $ 28,137  
Total interest expense     17,146       16,560       15,678       14,542       12,601  
Net interest income     15,077       14,534       14,338       14,113       15,536  
Provision for credit losses - loans     1,808       501       713       412       815  
Provision (credit) for unfunded lending commitments     (262 )     158       (259 )     -       -  
Provision (credit) for credit losses - securities     (86 )     84       23       -       -  
Net interest income after provision for credit losses     13,617       13,791       13,861       13,701       14,721  
                                         
Total noninterest income     2,842       3,196       3,710       2,782       5,442  
Total noninterest expense     12,642       12,431       11,778       16,039       21,647  
Income (loss) before income taxes     3,817       4,556       5,793       444       (1,484 )
Income tax expense (benefit)     145       483       866       (476 )     (737 )
Net income (loss)   $ 3,672     $ 4,073     $ 4,927     $ 920     $ (747 )
                                         
Net income (loss) per share, basic   $ 0.54     $ 0.60     $ 0.72     $ 0.13     $ (0.11 )
Weighted average shares outstanding, basic     6,833,376       6,832,452       6,832,130       6,823,948       6,817,365  
                                         
Net income (loss) per share, diluted   $ 0.53     $ 0.60     $ 0.72     $ 0.13     $ (0.11 )
Weighted average shares outstanding, diluted     6,877,518       6,842,336       6,859,611       6,839,704       6,837,919  

 

 


 

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

 

    Three Months Ended  
Noninterest Income Detail   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands)   2024     2024     2023     2023     2023  
  Service charges on deposit accounts   $ 552     $ 538     $ 387     $ 473     $ 479  
  ATM and interchange fees     642       593       585       449       816  
  Net loss on sales of available for sale securities     -       -       -       -       (11 )
  Net unrealized gain on equity securities     28       419       6       38       11  
Net gain on sales of loans, Small Business Administration     647       581       951       834       538  
  Mortgage banking income     6       49       53       89       3,018  
  Increase in cash surrender value of life insurance     363       353       333       329       311  
  Commission income     294       220       220       222       182  
  Real estate lease income     122       154       115       115       116  
  Net gain on premises and equipment     (4 )     -       120       -       20  
  Other income     192       289       940       233       (38 )
      Total noninterest income   $ 2,842     $ 3,196     $ 3,710     $ 2,782     $ 5,442  

 

    Three Months Ended  
    September 30,     June 30,     March 31,     December 31,     September 30,  
Consolidated Performance Ratios (Annualized)   2024     2024     2023     2023     2023  
   Return on average assets     0.61 %     0.69 %     0.92 %     0.16 %     (0.13 )%
   Return on average equity     8.52 %     9.86 %     13.06 %     2.42 %     (1.82 )%
   Return on average common stockholders' equity     8.52 %     9.86 %     13.06 %     2.42 %     (1.82 )%
   Net interest margin (tax equivalent basis)     2.72 %     2.67 %     2.66 %     2.69 %     3.03 %
   Efficiency ratio     70.55 %     70.11 %     65.26 %     94.93 %     103.19 %

 

    As of or for the Three Months Ended  
    September 30,     June 30,     March 31,     December 31,     September 30,  
Consolidated Asset Quality Ratios   2024     2024     2023     2023     2023  
Nonperforming loans as a percentage of total loans     0.85 %     0.91 %     0.82 %     0.83 %     0.78 %
Nonperforming assets as a percentage of total assets     0.71 %     0.72 %     0.68 %     0.69 %     0.69 %
Allowance for credit losses as a percentage of total loans     1.07 %     1.07 %     1.02 %     1.01 %     0.95 %
Allowance for credit losses as a percentage of nonperforming loans     125.69 %     118.12 %     124.01 %     121.16 %     121.16 %
Net charge-offs to average outstanding loans     0.02 %     0.01 %     0.01 %     0.00 %     0.04 %

 

 


 

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

  Three Months Ended  
Segmented Statements of Income Information   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands)   2024     2024     2023     2023     2023  
Core Banking Segment:                                        
Net interest income   $ 14,083     $ 13,590     $ 13,469     $ 13,113     $ 14,167  
Provision (credit) for credit losses - loans     1,339       320       909       (49 )     1,266  
Provision (credit) for unfunded lending commitments     78       64       (259 )     -       -  
Provision (credit) for credit losses - securities     (86 )     84       23       -       -  
Net interest income after provision for credit losses     12,752       13,122       12,796       13,162       12,901  
Noninterest income     2,042       2,474       2,537       1,679       2,136  
Noninterest expense     10,400       10,192       10,093       10,252       13,559  
Income before income taxes     4,394       5,404       5,240       4,589       1,478  
Income tax expense     301       689       729       541       3  
Net income   $ 4,093     $ 4,715     $ 4,511     $ 4,048     $ 1,475  
                                         
SBA Lending Segment (Q2 Business Capital, LLC):                                        
Net interest income   $ 994     $ 944     $ 869     $ 1,003     $ 990  
Provision (credit) for credit losses - loans     469       181       (196 )     461       (451 )
Provision (credit) for unfunded lending commitments     (340 )     94       -       -       -  
Net interest income after provision for credit losses     865       669       1,065       542       1,441  
Noninterest income     800       722       1,173       1,003       367  
Noninterest expense     2,242       2,239       1,685       2,146       2,907  
Income (loss) before income taxes     (577 )     (848 )     553       (601 )     (1,099 )
Income tax expense (benefit)     (156 )     (206 )     137       (131 )     (273 )
Net income (loss)   $ (421 )   $ (642 )   $ 416     $ (470 )   $ (826 )
                                         
Mortgage Banking Segment: (3)                                        
Net interest income (loss)   $ -     $ -     $ -     $ (3 )   $ 379  
Provision for credit losses - loans     -       -       -       -       -  
Provision for unfunded lending commitments     -       -       -       -       -  
Net interest income (loss) after provision for credit losses     -       -       -       (3 )     379  
Noninterest income     -       -       -       100       2,939  
Noninterest expense     -       -       -       3,641       5,181  
Loss before income taxes     -       -       -       (3,544 )     (1,863 )
Income tax benefit     -       -       -       (886 )     (467 )
Net loss   $ -     $ -     $ -     $ (2,658 )   $ (1,396 )

 

 

(3) National mortgage banking operations were ceased in the quarter ended December 31, 2023 and subsequent immaterial mortgage lending activity is reported within the Core Banking segment.

 

 


 

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

    Three Months Ended  
Segmented Statements of Income Information   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands, except percentage data)   2024     2024     2023     2023     2023  
Net Income (Loss) Per Share by Segment                                        
Net income per share, basic - Core Banking   $ 0.60     $ 0.69     $ 0.66     $ 0.59     $ 0.22  
Net income (loss) per share, basic - SBA Lending (Q2 Business Capital, LLC)     (0.06 )     (0.09 )     0.06       (0.07 )     (0.12 )
Net income (loss) per share, basic - Mortgage Banking     0.00       0.00       0.00       (0.40 )     (0.21 )
  Total net income (loss) per share, basic   $ 0.54     $ 0.60     $ 0.72     $ 0.12     $ (0.11 )
                                         
Net Income (Loss) Per Diluted Share by Segment                                        
Net income per share, diluted - Core Banking   $ 0.60     $ 0.69     $ 0.66     $ 0.59     $ 0.22  
Net income (loss) per share, diluted - SBA Lending (Q2 Business Capital, LLC)     (0.06 )     (0.09 )     0.06       (0.07 )     (0.12 )
Net loss per share, diluted - Mortgage Banking     0.00       0.00       0.00       (0.40 )     (0.21 )
  Total net income (loss) per share, diluted   $ 0.54     $ 0.60     $ 0.72     $ 0.12     $ (0.11 )
                                         
Return on Average Assets by Segment (annualized) (4)                                        
Core Banking     0.71 %     0.83 %     0.80 %     0.73 %     0.28 %
SBA Lending     (1.71 )%     (2.91 )%     1.81 %     (2.11 )%     (3.81 )%
                                         
Efficiency Ratio by Segment (annualized) (4)                                        
Core Banking     64.50 %     63.45 %     63.06 %     69.31 %     83.17 %
SBA Lending     124.97 %     134.39 %     82.52 %     106.98 %     214.22 %

 

    Three Months Ended  
Noninterest Expense Detail by Segment   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands)   2024     2024     2023     2023     2023  
Core Banking Segment:                                        
Compensation   $ 5,400     $ 5,587     $ 5,656     $ 5,691     $ 6,528  
Occupancy     1,554       1,573       1,615       1,481       1,418  
Advertising     399       253       205       189       404  
Other     3,047       2,779       2,617       2,891       5,209  
Total Noninterest Expense   $ 10,400     $ 10,192     $ 10,093     $ 10,252     $ 13,559  
                                         
SBA Lending Segment (Q2 Business Capital, LLC):                                        
Compensation   $ 1,854     $ 1,893     $ 1,933     $ 1,826     $ 1,533  
Occupancy     55       51       58       91       68  
Advertising     17       12       7       10       10  
Other     316       283       (313 )     219       1,296  
Total Noninterest Expense   $ 2,242     $ 2,239     $ 1,685     $ 2,146     $ 2,907  
                                         
Mortgage Banking Segment: (4)                                        
Compensation   $ -     $ -     $ -     $ 2,146     $ 3,647  
Occupancy     -       -       -       469       395  
Advertising     -       -       -       119       129  
Other     -       -       -       907       1,010  
Total Noninterest Expense   $ -     $ -     $ -     $ 3,641     $ 5,181  

 

 

(4) Ratios for Mortgage Banking Segment are not considered meaningful due to cessation of national mortgage banking operations in the quarter ended December 31, 2023.

 

 


 

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

    Three Months Ended  
SBA Lending (Q2 Business Capital, LLC) Data   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands, except percentage data)   2024     2024     2023     2023     2023  
Final funded loans guaranteed portion sold, SBA   $ 10,880     $ 7,515     $ 15,144     $ 14,098     $ 8,431  
                                         
Gross gain on sales of loans, SBA   $ 1,029     $ 811     $ 1,443     $ 1,303     $ 809  
Weighted average gross gain on sales of loans, SBA     9.46 %     10.79 %     9.53 %     9.24 %     9.60 %
                                         
Net gain on sales of loans, SBA (5)   $ 647     $ 581     $ 951     $ 834     $ 538  
Weighted average net gain on sales of loans, SBA     5.95 %     7.73 %     6.28 %     5.92 %     6.38 %

 

 

(5) Inclusive of gains on servicing assets and net of commissions, referral fees, SBA repair fees and discounts on unguaranteed portions held-for-investment.

 

 


 

SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):

 

    Three Months Ended  
Summarized Consolidated Average Balance Sheets   September 30,     June 30,     March 31,     December 31,     September 30,  
(In thousands)   2024     2024     2023     2023     2023  
Interest-earning assets                                        
Average balances:                                        
   Interest-bearing deposits with banks   $ 16,841     $ 26,100     $ 24,587     $ 20,350     $ 21,631  
   Loans     1,988,997       1,943,716       1,914,609       1,857,654       1,796,749  
   Investment securities - taxable     99,834       101,350       102,699       103,728       105,393  
   Investment securities - nontaxable     158,917       157,991       157,960       159,907       160,829  
   FRB and FHLB stock     24,986       24,986       24,986       24,968       24,939  
     Total interest-earning assets   $ 2,289,575     $ 2,254,143     $ 2,224,841     $ 2,166,607     $ 2,109,541  
                                         
Interest income (tax equivalent basis):                                        
   Interest-bearing deposits with banks   $ 209     $ 324     $ 261     $ 249     $ 266  
   Loans     29,450       28,155       27,133       26,155       25,214  
   Investment securities - taxable     910       918       923       942       969  
   Investment securities - nontaxable     1,685       1,665       1,662       1,687       1,695  
   FRB and FHLB stock     471       519       499       74       428  
     Total interest income (tax equivalent basis)   $ 32,725     $ 31,581     $ 30,478     $ 29,107     $ 28,572  
                                         
Weighted average yield (tax equivalent basis, annualized):                                        
   Interest-bearing deposits with banks     4.96 %     4.97 %     4.25 %     4.89 %     4.92 %
   Loans     5.92 %     5.79 %     5.67 %     5.63 %     5.61 %
   Investment securities - taxable     3.65 %     3.62 %     3.59 %     3.63 %     3.68 %
   Investment securities - nontaxable     4.24 %     4.22 %     4.21 %     4.22 %     4.22 %
   FRB and FHLB stock     7.54 %     8.31 %     7.99 %     1.19 %     6.86 %
     Total interest-earning assets     5.72 %     5.60 %     5.48 %     5.37 %     5.42 %
                                         
Interest-bearing liabilities                                        
   Interest-bearing deposits   $ 1,563,258     $ 1,572,871     $ 1,549,012     $ 1,389,384     $ 1,385,994  
   Fed funds purchased     -       -       -       -       76  
   Federal Home Loan Bank borrowings     378,956       351,227       333,275       440,786       353,890  
   Subordinated debt and other borrowings     48,576       48,537       48,497       48,458       48,406  
     Total interest-bearing liabilities   $ 1,990,790     $ 1,972,635     $ 1,930,784     $ 1,878,628     $ 1,788,366  
                                         
Interest expense:                                        
   Interest-bearing deposits   $ 12,825     $ 12,740     $ 12,546     $ 9,989     $ 9,457  
   Fed funds purchased     -       -       -       -       1  
   Federal Home Loan Bank borrowings     3,521       3,021       2,298       3,769       2,459  
   Subordinated debt and other borrowings     800       799       833       784       684  
     Total interest expense   $ 17,146     $ 16,560     $ 15,677     $ 14,542     $ 12,601  
                                         
Weighted average cost (annualized):                                        
   Interest-bearing deposits     3.28 %     3.24 %     3.24 %     2.88 %     2.73 %
   Fed funds purchased     0.00 %     0.00 %     0.00 %     0.00 %     5.26 %
   Federal Home Loan Bank borrowings     3.72 %     3.44 %     2.76 %     3.42 %     2.78 %
   Subordinated debt and other borrowings     6.59 %     6.58 %     6.87 %     6.47 %     5.65 %
     Total interest-bearing liabilities     3.45 %     3.36 %     3.25 %     3.10 %     2.82 %
                                         
Net interest income (taxable equivalent basis)   $ 15,579     $ 15,021     $ 14,801     $ 14,565     $ 15,971  
Less: taxable equivalent adjustment     (502 )     (487 )     (463 )     (452 )     (435 )
Net interest income   $ 15,077     $ 14,534     $ 14,338     $ 14,113     $ 15,536  
                                         
Interest rate spread (tax equivalent basis, annualized)     2.27 %     2.24 %     2.23 %     2.27 %     2.60 %
                                         
Net interest margin (tax equivalent basis, annualized)     2.72 %     2.67 %     2.66 %     2.69 %     3.03 %