UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________________ to__________________

Commission File No. 1-34155

First Savings Financial Group, Inc.

(Exact name of registrant as specified in its charter)

Indiana	37-1567871
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

501 East Lewis & Clark Parkway, Indiana 47129

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 1-812-283-0724

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):	Large Accelerated Filer ¨	Accelerated Filer ¨
	Non-accelerated Filer ¨	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s common stock as of July 31, 2013 was 2,313,237.

FIRST SAVINGS FINANCIAL GROUP, INC.

INDEX

		Page
Part I	Financial Information
	Item 1.  Financial Statements
	Consolidated Balance Sheets as of June 30, 2013  and September 30, 2012 (unaudited)	3
	Consolidated Statements of Income for the three months and   nine months ended June 30, 2013 and 2012 (unaudited)	4
	Consolidated Statements of Comprehensive Income (Loss) for the three  months and nine months ended June 30, 2013 and 2012 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the  nine months ended June 30, 2013 and 2012 (unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended June 30, 2013 and 2012 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8-43
	Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	44-56
	Item 3.  Quantitative and Qualitative Disclosures About Market Risk	57-59
	Item 4.  Controls and Procedures	60
Part II	Other Information
	Item 1.  Legal Proceedings	61
	Item 1A.  Risk Factors	61
	Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	62
	Item 3.  Defaults Upon Senior Securities	62
	Item 4.  Mine Safety Disclosures	62
	Item 5.  Other Information	63
	Item 6.  Exhibits	63
Signatures		64

-2-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			September 30,
(In thousands, except share and per share data)	2013			2012
ASSETS
Cash and due from banks	$	7,903		$	27,569
Interest-bearing deposits with banks		13,212			11,222
Total cash and cash equivalents		21,115			38,791
Trading account securities, at fair value		2,277			3,562
Securities available for sale, at fair value		165,051			152,543
Securities held to maturity		6,772			7,848
Loans held for sale		233			643
Loans, net		404,482			389,067
Federal Home Loan Bank stock, at cost		5,400			5,400
Real estate development and construction		7,228			4,538
Premises and equipment		11,324			10,907
Foreclosed real estate		671			1,481
Accrued interest receivable:
Loans		1,276			1,358
Securities		1,432			1,054
Cash surrender value of life insurance		12,834			8,548
Goodwill		7,936			7,936
Core deposit intangibles		2,155			2,413
Other assets		2,834			2,824
Total Assets	$	653,020		$	638,913
LIABILITIES
Deposits:
Noninterest-bearing	$	51,908		$	50,502
Interest-bearing		432,475			443,732
Total deposits		484,383			494,234
Repurchase agreements		1,334			1,329
Borrowings from Federal Home Loan Bank		76,365			53,062
Other long-term debt		4,962			2,132
Accrued interest payable		186			236
Advance payments by borrowers for taxes and insurance		464			622
Accrued expenses and other liabilities		3,299			4,372
Total Liabilities		570,993			555,987
STOCKHOLDERS' EQUITY
Preferred stock of $.01 par value per share Authorized 982,880 shares; none issued		-			-
Senior Non-Cumulative Perpetual Preferred Stock, Series A, $.01 par value; Authorized 17,120 shares; issued 17,120 shares; aggregate liquidation preference of $17,120		-			-
Common stock of $.01 par value per share
Authorized 20,000,000 shares; issued 2,542,042 shares; outstanding 2,313,237 and 2,329,681 shares in 2013 and 2012, respectively		25			25
Additional paid-in capital - preferred		17,120			17,120
Additional paid-in capital - common		25,375			24,901
Retained earnings - substantially restricted		41,775			39,917
Accumulated other comprehensive income		2,220			5,609
Unearned ESOP shares		(903	)		(1,198	)
Unearned stock compensation		(488	)		(682	)
Less treasury stock, at cost - 228,805 shares (212,361 shares at September 30, 2012)		(3,097	)		(2,766	)
Total Stockholders' Equity		82,027			82,926
Total Liabilities and Stockholders' Equity	$	653,020		$	638,913

See notes to consolidated financial statements.

-3-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(In thousands, except share and per share data)	2013			2012			2013		2012
INTEREST INCOME
Loans, including fees	$	5,183		$	5,083		$	15,942	$	15,217
Securities:
Taxable		1,081			1,117			3,180		2,919
Tax-exempt		367			317			1,156		862
Dividend income		48			38			151		110
Interest-bearing deposits with banks		10			4			21		10
Total interest income		6,689			6,559			20,450		19,118
INTEREST EXPENSE
Deposits		642			817			2,172		2,584
Repurchase agreements		2			2			5		64
Borrowings from Federal Home Loan Bank		255			305			814		841
Loans payable		10			-			23		-
Total interest expense		909			1,124			3,014		3,489
Net interest income		5,780			5,435			17,436		15,629
Provision for loan losses		560			308			1,562		897
Net interest income after provision for loan losses		5,220			5,127			15,874		14,732
NONINTEREST INCOME
Service charges on deposit accounts		304			289			921		864
Net gain on sales of available for sale securities		-			18			1		18
Net gain (loss) on trading account securities		(30	)		31			201		31
Unrealized gain (loss) on derivative contract		7			(13	)		6		(33	)
Net gain on sales of loans		235			41			414		114
Increase in cash surrender value of life insurance		98			72			289		221
Gain on life insurance		-			321			-		321
Commission income		77			67			225		202
Real estate lease income		86			-			190		-
Other income		258			219			713		633
Total noninterest income		1,035			1,045			2,960		2,371
NONINTEREST EXPENSE
Compensation and benefits		2,515			2,326			7,825		6,593
Occupancy and equipment		651			468			1,648		1,403
Data processing		262			452			887		1,074
Advertising		96			122			312		481
Professional fees		163			301			650		711
FDIC insurance premiums		133			83			366		266
Net loss on foreclosed real estate		76			96			173		206
Other operating expenses		777			721			2,408		2,202
Total noninterest expense		4,673			4,569			14,269		12,936
Income before income taxes		1,582			1,603			4,565		4,167
Income tax expense		441			331			1,238		1,021
Net Income	$	1,141		$	1,272		$	3,327	$	3,146
Preferred stock dividends declared		43			43			129		128
Net Income Available to Common Shareholders	$	1,098		$	1,229		$	3,198	$	3,018
Net income per common share:
Basic	$	0.51		$	0.57		$	1.48	$	1.40
Diluted	$	0.48		$	0.55		$	1.41	$	1.36
Weighted average common shares outstanding:
Basic		2,173,914			2,167,488			2,164,281		2,159,515
Diluted		2,277,824			2,237,130			2,261,821		2,223,922
Dividends per common share	$	0.10		$	-		$	0.60	$	-

See notes to consolidated financial statements.

-4-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(In thousands)	2013			2012			2013			2012
Net Income	$	1,141		$	1,272		$	3,327		$	3,146
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period		(4,900	)		1,109			(5,135	)		1,598
Income tax (expense) benefit		1,666			(377	)		1,746			(543	)
Net of tax amount		(3,234	)		732			(3,389	)		1,055
Less: reclassification adjustment for realized gains included in net income		-			(18	)		(1	)		(18	)
Income tax expense		-			6			1			6
Net of tax amount		-			(12	)		-			(12	)
Other Comprehensive Income (Loss)		(3,234	)		720			(3,389	)		1,043
Comprehensive Income (Loss)	$	(2,093	)	$	1,992		$	(62	)	$	4,189

See notes to consolidated financial statements.

-5-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

										Accumulated			Unearned
										Other			Stock
	Preferred		Common		Additional		Retained			Comprehensive			Compensation			Treasury
(In thousands, except share and per share data)	Stock		Stock		Paid-in Capital		Earnings			Income			and ESOP			Stock			Total
Balances at October 1, 2011	$	-	$	25	$	41,729	$	35,801		$	3,354		$	(2,285	)	$	(2,023	)		76,601
Net income		-		-		-		3,146			-			-			-			3,146
Other comprehensive income		-		-		-		-			1,043			-			-			1,043
Preferred stock dividends		-		-		-		(128	)		-			-			-			(128	)
Stock compensation expense		-		-		147		-			-			195			-			342
Shares released by ESOP trust		-		-		77		-			-			108			-			185
Purchase of 10,128 treasury shares		-		-		-		-			-			-			(172	)		(172	)
Balances at June 30, 2012	$	-	$	25	$	41,953	$	38,819		$	4,397		$	(1,982	)	$	(2,195	)	$	81,017
Balances at October 1, 2012	$	-	$	25	$	42,021	$	39,917		$	5,609		$	(1,880	)	$	(2,766	)	$	82,926
Net income		-		-		-		3,327			-			-			-			3,327
Other comprehensive loss		-		-		-		-			(3,389	)		-			-			(3,389	)
Preferred stock dividends		-		-		-		(129	)		-			-			-			(129	)
Common stock dividends ($0.60 per share)		-		-		-		(1,393	)		-			-			-			(1,393	)
Stock compensation expense		-		-		184		-			-			195			-			379
Shares released by ESOP trust		-		-		290		53			-			294			-			637
Purchase of 16,444 treasury shares		-		-		-		-			-			-			(331	)		(331	)
Balances at June 30, 2013	$	-	$	25	$	42,495	$	41,775		$	2,220		$	(1,391	)	$	(3,097	)	$	82,027

See notes to consolidated financial statements.

-6-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	June 30,
(In thousands)	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,327		$	3,146
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,562			897
Depreciation and amortization		861			740
Amortization of premiums and accretion of discounts on securities, net		484			256
(Increase) decrease in trading account securities		1,285			(2,131	)
Loans originated for sale		(12,168	)		(5,231	)
Proceeds on sales of loans		12,992			5,253
Net gain on sales of loans		(414	)		(114	)
Net realized and unrealized loss on foreclosed real estate		11			83
Net gain on sales of available for sale securities		(1	)		(18	)
Unrealized (gain) loss on derivative contract		(6	)		33
Gain on life insurance		-			(321	)
Increase in cash surrender value of life insurance		(289	)		(221	)
Deferred income taxes		11			17
ESOP and stock compensation expense		870			494
Increase in accrued interest receivable		(296	)		(436	)
Decrease in accrued interest payable		(50	)		(151	)
Change in other assets and liabilities, net		138			1,072
Net Cash Provided By Operating Activities		8,317			3,368
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale		(45,882	)		(69,555	)
Proceeds from sales of securities available for sale		801			518
Proceeds from maturities of securities available for sale		12,133			9,118
Proceeds from maturities of securities held to maturity		568			360
Principal collected on securities		15,215			16,912
Net increase in loans		(17,066	)		(12,276	)
Purchase of Federal Home Loan Bank stock		-			(1,000	)
Investment in cash surrender value of life insurance		(4,000	)		-
Proceeds from life insurance		606			-
Proceeds from sale of foreclosed real estate		835			160
Investment in real estate development and construction		(2,713	)		(4,112	)
Purchase of premises and equipment		(997	)		(321	)
Net Cash Used In Investing Activities		(40,500	)		(60,196	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		(9,851	)		15,373
Net increase (decrease) in repurchase agreements		5			(15,076	)
Increase in Federal Home Loan Bank line of credit		11,359			4,963
Proceeds from Federal Home Loan Bank advances		55,000			100,000
Repayment of Federal Home Loan Bank advances		(43,056	)		(60,056	)
Proceeds from other long-term debt		2,830			-
Net increase (decrease) in advance payments by borrowers for taxes and insurance		(158	)		76
Purchase of treasury stock		(331	)		(172	)
Dividends paid on preferred stock		(129	)		(201	)
Dividends paid on common stock		(1,162	)		-
Net Cash Provided By Financing Activities		14,507			44,907
Net Decrease in Cash and Cash Equivalents		(17,676	)		(11,921	)
Cash and cash equivalents at beginning of period		38,791			27,203
Cash and Cash Equivalents at End of Period	$	21,115		$	15,282

See notes to consolidated financial statements.

-7-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Presentation of Interim Information

First Savings Financial Group, Inc. (the “Company”) is the savings and loan holding company of First Savings Bank, F.S.B. (the “Bank”), a wholly-owned subsidiary. The Bank is a federally-chartered savings bank which provides a variety of banking services to individuals and business customers through fourteen locations in southern Indiana. The Bank attracts deposits primarily from the general public and uses those funds, along with other borrowings, primarily to originate residential mortgage, commercial mortgage, construction, commercial business and consumer loans, and to a lesser extent, to invest in mortgage-backed securities and other securities.

The Bank has three-wholly owned subsidiaries: First Savings Investments, Inc., a Nevada corporation that manages a securities portfolio, FFCC, Inc., which is an Indiana corporation that participates in commercial real estate development and leasing, and Southern Indiana Financial Corporation, which is currently inactive.

In the opinion of management, the unaudited consolidated financial statements include all adjustments considered necessary to present fairly the financial position as of June 30, 2013, the results of operations for the three- and nine-month periods ended June 30, 2013 and 2012, and the cash flows for the nine-month periods ended June 30, 2013 and 2012. All of these adjustments are of a normal, recurring nature. Such adjustments are the only adjustments included in the unaudited consolidated financial statements. Interim results are not necessarily indicative of results for a full year.

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements, conform to general practices within the banking industry and are presented as permitted by the instructions to Form 10-Q. Accordingly, they do not contain certain information included in the Company’s audited consolidated financial statements and related notes for the year ended September 30, 2012 included in the Company’s Annual Report on Form 10-K.

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation.

-8-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Acquisition of Branches

On July 6, 2012, the Company acquired the Indiana branch offices of Elizabethtown, Kentucky-based First Federal Savings Bank of Elizabethtown, Inc. (“First Federal”), pursuant to an Agreement to Purchase Assets and Assume Liabilities dated February 8, 2012 (the “Agreement”). Pursuant to the terms of the Agreement, the Company assumed certain deposit and other liabilities and purchased certain performing loans, real estate and other assets associated with the four First Federal banking offices. The transaction was accounted for using the purchase method of accounting.

The offices are located in Corydon, Elizabeth, Georgetown and Lanesville, Indiana. The Company has consolidated the operations of the acquired Corydon and Georgetown offices with its existing Corydon and Georgetown offices because of their close proximities. The acquisition expanded the Company’s presence in Harrison and Floyd Counties, Indiana, and the Company expects to benefit from growth in this market area as well as from expansion of the banking services provided to the existing customers of First Federal.

3. Investment Securities

Agency bonds and notes, agency mortgage-backed securities and agency collateralized mortgage obligations (“CMO”) include securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal Home Loan Bank (“FHLB”), which are U.S. government-sponsored enterprises. The Company also holds a pass-through asset-backed security guaranteed by the Small Business Administration (“SBA”) representing participating interests in pools of long-term debentures issued by state and local development companies certified by the SBA. Privately-issued CMO and asset-backed securities (“ABS”) are complex securities issued by non-government special-purpose entities that are collateralized by residential mortgage loans and residential home equity loans.

Investment securities have been classified according to management’s intent.

Trading Account Securities

On May 31, 2012, the Company invested in a managed brokerage account that invests in small and medium lot, investment grade municipal bonds. The brokerage account is managed by an investment advisory firm registered with the U.S. Securities and Exchange Commission. At June 30, 2013 and September 30, 2012, trading account securities recorded at fair value totaled $2.3 million and $3.6 million, respectively, comprised of investment grade municipal bonds. During the nine-months ended June 30, 2013, the Company reported net gains on trading account securities of $201,000, including net realized gains on the sale of securities of $242,000, partially offset by net unrealized losses on securities still held as of the balance sheet date of $41,000. During the three months ended June 30, 2013 the Company reported net losses on trading account securities of $30,000, including net realized losses on the sale of securities of $3,000 and net unrealized losses on securities still held as of the balance sheet date of $27,000. During the three and six months ended June 30, 2012 the Company reported net gains on trading account securities of $31,000, including net realized gains on the sale of securities of $22,000 and net unrealized gains on securities still held as of the balance sheet date of $9,000.

-9-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Securities Available for Sale and Held to Maturity

The amortized cost of securities available for sale and held to maturity and their approximate fair values are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
June 30, 2013:
Securities available for sale:
Agency bonds and notes	$	15,885	$	13	$	553	$	15,345
Agency mortgage-backed		42,831		346		329		42,848
Agency CMO		24,730		195		295		24,630
Privately-issued CMO		4,020		682		-		4,702
Privately-issued ABS		5,894		2,229		1		8,122
SBA certificates		2,146		16		-		2,162
Municipal obligations		65,849		2,572		1,270		67,151
Subtotal – debt securities		161,355		6,053		2,448		164,960
Equity securities		-		91		-		91
Total securities available for sale	$	161,355	$	6,144	$	2,448	$	165,051
Securities held to maturity:
Agency mortgage-backed	$	873	$	63	$	-	$	936
Municipal obligations		5,899		6		46		5,859
Total securities held to maturity	$	6,772	$	69	$	46	$	6,795

-10-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
September 30, 2012:
Securities available for sale:
Agency bonds and notes	$	15,940	$	124	$	-	$	16,064
Agency mortgage-backed		42,255		1,165		-		43,420
Agency CMO		17,186		358		3		17,541
Privately-issued CMO		4,283		1,006		-		5,289
Privately-issued ABS		5,797		1,481		51		7,227
Municipal		58,135		4,838		40		62,933
Subtotal – debt securities		143,596		8,972		94		152,474
Equity securities		-		69		-		69
Total securities available for sale	$	143,596	$	9,041	$	94	$	152,543
Securities held to maturity:
Agency mortgage-backed	$	1,342	$	118	$	-	$	1,460
Municipal obligations		6,506		348		-		6,854
Total securities held to maturity	$	7,848	$	466	$	-	$	8,314

The amortized cost and fair value of investment securities as of June 30, 2013 by contractual maturity are shown below. Expected maturities of mortgage-backed securities, CMO and ABS may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Due within one year	$	580	$	592	$	546	$	545
Due after one year through five years		5,004		5,049		2,286		2,277
Due after five years through ten years		16,908		16,951		1,759		1,743
Due after ten years		59,242		59,904		1,308		1,294
		81,734		82,496		5,899		5,859
Equity securities		-		91		-		-
CMO		28,750		29,332		-		-
ABS		5,894		8,122		-		-
SBA certificates		2,146		2,162		-		-
Mortgage-backed securities		42,831		42,848		873		936
	$	161,355	$	165,051	$	6,772	$	6,795

-11-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Information pertaining to investment securities with gross unrealized losses at June 30, 2013, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, follows:

	Number				Gross
	of Investment		Fair		Unrealized
	Positions		Value		Losses
	(Dollars in thousands)
Securities available for sale:
Continuous loss position less than twelve months:
Agency bonds and notes		6	$	13,114	$	553
Agency mortgage-backed		13		22,254		329
Agency CMO		5		13,402		295
Municipal obligations		37		21,916		1,245
Total less than twelve months		61		70,686		2,422
Continuous loss position more than twelve months:
Privately-issued ABS		1		111		1
Municipal obligations		1		225		25
Total more than twelve months		2		336		26
Total securities available for sale		63	$	71,022	$	2,448
Securities held to maturity:
Continuous loss position less than twelve months:
Municipal obligations		3	$	4,556	$	46
Total securities held to maturity		3	$	4,556	$	46

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The total investment securities in loss positions at June 30, 2013 had depreciated approximately 3.19% from the Company’s amortized cost basis and are fixed and variable rate securities with a weighted-average yield of 2.38% and a weighted-average coupon rate of 3.56% at June 30, 2013.

U.S. government agency bonds and notes, mortgage-backed securities, and CMOs, and municipal obligations in loss positions at June 30, 2013 had depreciated approximately 3.20% from the Company’s amortized cost basis as of June 30, 2013. All of the agency and municipal securities are issued by U.S. government agencies, U.S. government-sponsored enterprises and municipal governments, and are generally secured by first mortgage loans and municipal project revenues.

-12-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company evaluates the existence of a potential credit loss component related to the decline in fair value of the privately-issued CMO and ABS portfolios each quarter using an independent third party analysis. At June 30, 2013, the Company held twenty privately-issued CMO and ABS securities acquired in a 2009 bank acquisition with an aggregate carrying value of $3.0 million and fair value of $4.4 million that have been downgraded to a substandard regulatory classification due to a downgrade of the security’s credit quality rating by various rating agencies.

At June 30, 2013, the one privately-issued ABS security in a loss position had depreciated approximately 0.89% from the Company’s carrying value and was collateralized by residential mortgage loans. This security had a fair value of $111,000 and an unrealized loss of $1,000 at June 30, 2013, and was rated below investment grade by a nationally recognized statistical rating organization (“NRSRO”). Based on the independent third party analysis of the expected cash flows, management has determined that the decline in value for this security is temporary and, as a result, no other-than-temporary impairment has been recognized on the privately-issued CMO and ABS portfolios. While the Company did not recognize a credit-related impairment loss at June 30, 2013, additional deterioration in market and economic conditions may have an adverse impact on the credit quality in the future and therefore, require a credit-related impairment charge.

The unrealized losses on agency securities and municipal bonds relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities to maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

During the nine months ended June 30, 2013, the Company realized gross gains on sales of available for sale U.S. government agency notes of $1,000. During the three and nine months ended June 30, 2012, the Company realized gross gains on sales of available for sale U.S. government agency notes of $18,000.

Certain available for sale debt securities were pledged under repurchase agreements at June 30, 2013 and 2012, and may be pledged to secure federal funds borrowings and Federal Home Loan Bank (“FHLB”) borrowings.

-13-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans and Allowance for Loan Losses

Loans at June 30, 2013 and September 30, 2012 consisted of the following:

	June 30,			September 30,
	2013			2012
	(In thousands)
Real estate mortgage:
1-4 family residential	$	184,680		$	190,958
Commercial		115,546			90,290
Multifamily residential		27,148			23,879
Residential construction		11,918			10,748
Commercial construction		6,741			5,182
Land and land development		10,588			12,320
Commercial business loans		31,866			36,189
Consumer:
Home equity loans		17,179			18,294
Auto loans		6,935			8,219
Other consumer loans		3,584			4,114
Gross loans		416,185			400,193
Deferred loan origination fees and costs, net		213			382
Undisbursed portion of loans in process		(6,581	)		(6,602	)
Allowance for loan losses		(5,335	)		(4,906	)
Loans, net	$	404,482		$	389,067

During the nine-month period ended June 30, 2013, there was no significant change in the Company’s lending activities or methodology used to estimate the allowance for loan losses as disclosed in the Company’s Annual Report on Form 10-K for the year ended September 30, 2012.

-14-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the components of the recorded investment in loans for each portfolio segment as of June 30, 2013:

	Residential Real Estate		Commercial Real Estate			Multifamily			Construction			Land & Land Development			Commercial Business			Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	184,680	$	115,546		$	27,148		$	12,078		$	10,588		$	31,866		$	27,698	$	409,604
Accrued interest receivable		649		305			57			23			44			118			80		1,276
Net deferred loan origination fees and costs		448		(146	)		(41	)		(49	)		(2	)		(10	)		13		213
Recorded investment in loans	$	185,777	$	115,705		$	27,164		$	12,052		$	10,630		$	31,974		$	27,791	$	411,093
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	6,231	$	2,070		$	2,318		$	177		$	-		$	237		$	406	$	11,439
Collectively evaluated for impairment		178,908		113,635			24,846			11,875			10,630			31,737			27,351		398,982
Acquired with deteriorated credit quality		638		-			-			-			-			-			34		672
Ending balance	$	185,777	$	115,705		$	27,164		$	12,052		$	10,630		$	31,974		$	27,791	$	411,093

-15-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the components of the recorded investment in loans for each portfolio segment as of September 30, 2012:

	Residential Real Estate		Commercial Real Estate			Multifamily			Construction			Land & Land Development			Commercial Business			Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	190,958	$	90,290		$	23,879		$	9,328		$	12,320		$	36,189		$	30,627	$	393,591
Accrued interest receivable		691		305			69			21			43			128			101		1,358
Net deferred loan origination fees and costs		502		(75	)		(6	)		(41	)		(5	)		(13	)		20		382
Recorded investment in loans	$	192,151	$	90,520		$	23,942		$	9,308		$	12,358		$	36,304		$	30,748	$	395,331
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	5,210	$	1,993		$	2,356		$	174		$	-		$	80		$	333	$	10,146
Collectively evaluated for impairment		186,236		88,331			21,586			9,134			12,358			36,224			30,379		384,248
Acquired with deteriorated credit quality		705		196			-			-			-			-			36		937
Ending balance	$	192,151	$	90,520		$	23,942		$	9,308		$	12,358		$	36,304		$	30,748	$	395,331

-16-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An analysis of the allowance for loan losses as of June 30, 2013 is as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land & Land Development		Commercial Business		Consumer		Total
	(In thousands)
Ending Allowance Balance Attributable to Loans:
Individually evaluated for impairment	$	39	$	-	$	-	$	-	$	-	$	-	$	11	$	50
Collectively evaluated for impairment		777		2,204		234		99		72		1,688		211		5,285
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	816	$	2,204	$	234	$	99	$	72	$	1,688	$	222	$	5,335

An analysis of the allowance for loan losses as of September 30, 2012 is as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land & Land Development		Commercial Business		Consumer		Total
	(In thousands)
Ending Allowance Balance Attributable to Loans:
Individually evaluated for impairment	$	-	$	60	$	-	$	-	$	-	$	-	$	14	$	74
Collectively evaluated for impairment		908		2,144		389		52		2		1,084		253		4,832
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	908	$	2,204	$	389	$	52	$	2	$	1,084	$	267	$	4,906

-17-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An analysis of the changes in the allowance for loan losses for the three months ended June 30, 2013 is as follows:

	Residential Real Estate			Commercial Real Estate		Multifamily			Construction		Land & Land Development		Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	881		$	2,171	$	328		$	63	$	43	$	1,664		$	239		$	5,389
Provisions		(29	)		33		(94	)		36		29		590			(5	)		560
Charge-offs		(40	)		-		-			-		-		(606	)		(26	)		(672	)
Recoveries		4			-		-			-		-		40			14			58
Ending balance	$	816		$	2,204	$	234		$	99	$	72	$	1,688		$	222		$	5,335

An analysis of the changes in the allowance for loan losses for the nine months ended June 30, 2013 is as follows:

	Residential Real Estate			Commercial Real Estate			Multifamily			Construction		Land & Land Development		Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	908		$	2,204		$	389		$	52	$	2	$	1,084		$	267		$	4,906
Provisions		50			(14	)		(155	)		47		70		1,576			(12	)		1,562
Charge-offs		(196	)		(11	)		-			-		-		(1,013	)		(79	)		(1,299	)
Recoveries		54			25			-			-		-		41			46			166
Ending balance	$	816		$	2,204		$	234		$	99	$	72	$	1,688		$	222		$	5,335

-18-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An analysis of the changes in the allowance for loan losses for the three months ended June 30, 2012 is as follows:

	Residential Real Estate			Commercial Real Estate			Multifamily			Construction		Land & Land Development			Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	979		$	1,612		$	647		$	64	$	33		$	1,379		$	209		$	4,923
Provisions		29			547			(182	)		15		(9	)		(165	)		73			308
Charge-offs		(85	)		(178	)		-			-		-			(33	)		(61	)		(357	)
Recoveries		2			-			-			-		-			-			19			21
Ending balance	$	925		$	1,981		$	465		$	79	$	24		$	1,181		$	240		$	4,895

An analysis of the changes in the allowance for loan losses for the nine months ended June 30, 2012 is as follows:

	Residential Real Estate			Commercial Real Estate			Multifamily			Construction		Land & Land Development			Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	833		$	1,314		$	604		$	56	$	53		$	1,525		$	287		$	4,672
Provisions		359			859			(139	)		23		(29	)		(312	)		136			897
Charge-offs		(375	)		(192	)		-			-		-			(33	)		(228	)		(828	)
Recoveries		108			-			-			-		-			1			45			154
Ending balance	$	925		$	1,981		$	465		$	79	$	24		$	1,181		$	240		$	4,895

-19-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents impaired loans individually evaluated for impairment as of June 30, 2013 and for the three and nine months ended June 30, 2013 and 2012. Interest income received and recognized on impaired loans for the three and nine months ended June 30, 2013 and 2012 was immaterial.

	At June 30, 2013						Three Months Ended June 30,				Nine Months Ended June 30,
	Recorded Investment		Unpaid Principal Balance		Related Allowance		2013 Average Recorded Investment		2012 Average Recorded Investment		2013 Average Recorded Investment		2012 Average Recorded Investment
	(In thousands)
Loans with no related allowance recorded:
Residential real estate	$	4,200	$	4,503	$	-	$	4,634	$	2,303	$	4,615	$	2,927
Commercial real estate		794		829		-		766		1,316		754		1,082
Multifamily		-		-		-		-		-		-		-
Construction		177		174		-		174		174		174		174
Land and land development		-		-		-		-		340		-		340
Commercial business		218		218		-		443		82		498		41
Consumer		179		177		-		183		110		173		103
	$	5,568	$	5,901	$	-	$	6,200	$	4,325	$	6,214	$	4,667
Loans with an allowance recorded:
Residential real estate	$	135	$	133	$	39	$	136	$	150	$	174	$	156
Commercial real estate		-		-		-		147		221		141		229
Multifamily		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Land and land development		-		-		-		-		-		-		-
Commercial business		-		-		-		247		-		219		-
Consumer		73		73		11		70		176		80		128
	$	208	$	206	$	50	$	600	$	547	$	614	$	513
Total:
Residential real estate	$	4,335	$	4,636	$	39	$	4,770	$	2,453	$	4,789	$	3,083
Commercial real estate		794		829		-		913		1,537		895		1,311
Multifamily		-		-		-		-		-		-		-
Construction		177		174		-		174		174		174		174
Land and land development		-		-		-		-		340		-		340
Commercial business		218		218		-		690		82		717		41
Consumer		252		250		11		253		286		253		231
	$	5,776	$	6,107	$	50	$	6,800	$	4,872	$	6,828	$	5,180

-20-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents impaired loans individually evaluated for impairment as of September 30, 2012.

	Recorded Investment		Unpaid Principal  Balance		Related Allowance
	(In thousands)
Loans with no related allowance recorded:
Residential real estate	$	2,775	$	3,161	$	-
Commercial real estate		745		772		-
Multifamily		-		-		-
Construction		174		174		-
Land and land development		-		-		-
Commercial business		66		65		-
Consumer		97		99		-
	$	3,857	$	4,271	$	-
Loans with an allowance recorded:
Residential real estate	$	-	$	-	$	-
Commercial real estate		154		146		60
Multifamily		-		-		-
Construction		-		-		-
Land and land development		-		-		-
Commercial business		-		-		-
Consumer		78		78		14
	$	232	$	224	$	74
Total:
Residential real estate	$	2,775	$	3,161	$	-
Commercial real estate		899		918		60
Multifamily		-		-		-
Construction		174		174		-
Land and land development		-		-		-
Commercial business		66		65		-
Consumer		175		177		14
	$	4,089	$	4,495	$	74

-21-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nonperforming loans consists of nonaccrual loans and loans over 90 days past due and still accruing interest. The following table presents the recorded investment in nonperforming loans at June 30, 2013:

	Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans
	(In thousands)
Residential real estate	$	4,335	$	255	$	4,590
Commercial real estate		794		226		1,020
Multifamily		-		-		-
Construction		177		-		177
Land and land development		-		-		-
Commercial business		218		152		370
Consumer		252		24		276
Total	$	5,776	$	657	$	6,433

The following table presents the recorded investment in nonperforming loans at September 30, 2012:

	Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans
	(In thousands)
Residential real estate	$	2,775	$	1,548	$	4,323
Commercial real estate		899		3		902
Multifamily		-		-		-
Construction		174		-		174
Land and land development		-		-		-
Commercial business		66		98		164
Consumer		175		94		269
Total	$	4,089	$	1,743	$	5,832

-22-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the aging of the recorded investment in past due loans at June 30, 2013:

	30-59  Days Past Due		60-89  Days Past Due		90 + Days Past Due		Total Past Due		Current		Total Loans
	(In thousands)
Residential real estate	$	3,243	$	1,747	$	3,468	$	8,458	$	177,319	$	185,777
Commercial real estate		242		40		897		1,179		114,526		115,705
Multifamily		-		-		-		-		27,164		27,164
Construction		-		-		-		-		12,052		12,052
Land and land development		46		136		-		182		10,448		10,630
Commercial business		99		12		370		481		31,493		31,974
Consumer		202		61		192		455		27,336		27,791
Total	$	3,832	$	1,996	$	4,927	$	10,755	$	400,338	$	411,093

The following table presents the aging of the recorded investment in past due loans at September 30, 2012:

	30-59  Days Past Due		60-89  Days Past Due		90 + Days Past Due		Total Past Due		Current		Total Loans
	(In thousands)
Residential real estate	$	4,636	$	1,926	$	3,754	$	10,316	$	181,835	$	192,151
Commercial real estate		20		90		833		943		89,577		90,520
Multifamily		-		-		-		-		23,942		23,942
Construction		-		-		-		-		9,308		9,308
Land and land development		51		-		-		51		12,307		12,358
Commercial business		109		-		164		273		36,031		36,304
Consumer		286		98		174		558		30,190		30,748
Total	$	5,102	$	2,114	$	4,925	$	12,141	$	383,190	$	395,331

-23-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, public information, historical payment experience, credit documentation, and current economic trends, among other factors. The Company classifies loans based on credit risk at least quarterly. The Company uses the following regulatory definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss: Loans classified as loss are considered uncollectible and of such little value that their continuance on the Company’s books as an asset is not warranted.

-24-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of June 30, 2013, and based on the most recent analysis performed, the recorded investment in loans by risk category was as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land and Land Development		Commercial Business		Consumer		Total
	(In thousands)
Pass	$	173,082	$	108,262	$	27,164	$	12,052	$	9,800	$	29,530	$	27,102	$	386,992
Special Mention		2,810		408		-		-		830		451		80		4,579
Substandard		9,493		6,554		-		-		-		1,788		549		18,384
Doubtful		392		481		-		-		-		205		60		1,138
Loss		-		-		-		-		-		-		-		-
Total	$	185,777	$	115,705	$	27,164	$	12,052	$	10,630	$	31,974	$	27,791	$	411,093

As of September 30, 2012, the recorded investment in loans by risk category was as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land and Land Development		Commercial Business		Consumer		Total
	(In thousands)
Pass	$	175,694	$	85,439	$	21,268	$	9,308	$	11,942	$	32,687	$	29,993	$	366,331
Special Mention		4,919		2,642		318		-		416		2,158		142		10,595
Substandard		11,130		1,805		2,356		-		-		1,459		600		17,350
Doubtful		408		634		-		-		-		-		13		1,055
Loss		-		-		-		-		-		-		-		-
Total	$	192,151	$	90,520	$	23,942	$	9,308	$	12,358	$	36,304	$	30,748	$	395,331

-25-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Modification of a loan is considered to be a troubled debt restructuring (“TDR”) if the debtor is experiencing financial difficulties and the Company grants a concession to the debtor that it would not otherwise consider. By granting the concession, the Company expects to obtain more cash or other value from the debtor, or to increase the probability of receipt, than would be expected by not granting the concession. The concession may include, but is not limited to, reduction of the stated interest rate of the loan, reduction of accrued interest, extension of the maturity date or reduction of the face amount or maturity amount of the debt. A concession will be granted when, as a result of the restructuring, the Company does not expect to collect all amounts due, including interest at the original stated rate. A concession may also be granted if the debtor is not able to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. The Company’s determination of whether a loan modification is a TDR considers the individual facts and circumstances surrounding each modification.

Loans modified in a TDR may be retained in accrual status if the borrower has maintained a period of performance in which the borrower’s lending relationship was not greater than ninety days delinquent at the time of restructuring and the Company determines the future collection of principal and interest is reasonably assured. Loans modified in a TDR that are placed on nonaccrual status at the time of restructuring will continue in nonaccrual status until the Company determines the future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate a period of performance according to the restructured terms of at least six consecutive months.

The following table summarizes the Company’s recorded investment in TDRs by class of loan and accrual status at June 30, 2013 and September 30, 2012:

	Accruing		Nonaccrual		Total		Related Allowance For Loan Losses
	(In thousands)
June 30, 2013:
Residential real estate	$	2,197	$	778	$	2,975	$	-
Commercial real estate		1,276		-		1,276		-
Multifamily		2,318		-		2,318		-
Commercial business		19		13		32		-
Consumer		154		-		154		-
Total	$	5,964	$	791	$	6,755	$	-
September 30, 2012:
Residential real estate	$	2,993	$	-	$	2,993	$	-
Commercial real estate		1,290		-		1,290		-
Multifamily		2,356		-		2,356		-
Commercial business		14		-		14		-
Consumer		158		-		158		-
Total	$	6,811	$	-	$	6,811	$	-

-26-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes information in regard to TDRs that were restructured during the three- and nine-month periods ended June 30, 2013 and 2012:

	Number of Loans		Pre- Modification Principal Balance		Post- Modification Principal Balance
	(In thousands)
June 30, 2013:
Nine Months Ended June 30, 2013:
Residential real estate		2	$	143	$	143
Commercial business		1		18		20
Consumer		1		5		5
Total		4	$	166	$	168
June 30, 2012:
Three Months Ended June 30, 2012:
Residential real estate		6	$	830	$	883
Consumer		1		159		160
Total		7	$	989	$	1,043
Nine Months Ended June 30, 2012:
Residential real estate		13	$	1,620	$	1,672
Commercial real estate		1		772		506
Multifamily		1		1,797		2,313
Consumer		1		159		160
Total		16	$	4,348	$	4,651

There were no loans modified in a TDR during the three months ended June 30, 2013.

For the TDRs listed above, the terms of modification included reduction of the stated interest rate and extension of the maturity date where the debtor was unable to access funds elsewhere at a market interest rate for debt with similar risk characteristics.

The Company had not committed to lend any additional amounts as of June 30, 2013 and September 30, 2012 to customers with outstanding loans classified as TDRs.

During the nine-month period ended June 30, 2013, the Company had three TDRs totaling $218,000 that were modified within the previous twelve months for which there was a payment default (defined as more than 90 days past due or in the process of foreclosure). As of June 30, 2013, two loans totaling $143,000 were on nonaccrual status and one loan of $75,000 was accruing and performing in agreement with its modified terms. During the nine-month period ended June 30, 2012, the Company had one TDR with a balance of $262,000 that was modified within the previous twelve months for which there was a payment default. The Company recognized a net charge-off of $42,000 for this TDR during the nine-month period ended June 30, 2012.

-27-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Real Estate Development and Construction

On March 22, 2011, the Company acquired a parcel of land in New Albany, Indiana for $2.97 million. On April 5, 2012, the Bank received approval from the Office of the Comptroller of the Currency (“OCC”) to develop the land for retail purposes through its subsidiary, FFCC. On July 27, 2012, the Company transferred ownership of the property to FFCC. The retail development will include a future branch office location of the Bank, which is expected to open in August 2013. The total cost of the development is expected to be approximately $7.8 million, including the $7.2 million paid as of June 30, 2013. The development costs will be partially funded by a loan from another financial institution. The loan has a maximum commitment of $5.0 million and FFCC had borrowed $5.0 million under the loan as of June 30, 2013. The development is partially completed with five tenants that have commenced occupancy as of June 30, 2013 and it is expected to be substantially completed by July 31, 2013, with the exception of certain tenant improvements in a multi-tenant retail building for current and future lessees.

Development and construction period interest of $37,000 and $79,000 was capitalized as part of the real estate carrying value during the three and nine months ended June 30, 2013, respectively.

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FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Supplemental Disclosure for Earnings Per Share

When presented, basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Earnings per share information is presented below for the three-month and nine-month periods ended June 30, 2013 and 2012.

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(Dollars in thousands, except per share data)
Basic:
Earnings:
Net income	$	1,141		$	1,272		$	3,327		$	3,146
Less: Preferred stock dividends declared		(43	)		(43	)		(129	)		(128	)
Net income available to common shareholders	$	1,098		$	1,229		$	3,198		$	3,018
Shares:
Weighted average common shares outstanding		2,173,914			2,167,488			2,164,281			2,159,515
Net income per common share, basic	$	0.51		$	0.57		$	1.48		$	1.40
Diluted:
Earnings:
Net income	$	1,141		$	1,272		$	3,327		$	3,146
Less: Preferred stock dividends declared		(43	)		(43	)		(129	)		(128	)
Net income available to common shareholders	$	1,098		$	1,229		$	3,198		$	3,018
Shares:
Weighted average common shares outstanding		2,173,914			2,167,488			2,164,281			2,159,515
Add: Dilutive effect of outstanding options		88,106			54,523			80,677			48,783
Add: Dilutive effect of restricted stock		15,804			15,119			16,863			15,624
Weighted average common shares outstanding as adjusted		2,277,824			2,237,130			2,261,821			2,223,922
Net income per common share, diluted	$	0.48		$	0.55		$	1.41		$	1.36

Unearned ESOP and nonvested restricted Unearned ESOP and nonvested restricted stock shares are not considered as outstanding for purposes of computing weighted average common shares outstanding.

-29-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Supplemental Disclosures of Cash Flow Information

	Nine Months Ended
	June 30,
	2013		2012
	(In thousands)
Cash payments for:
Interest	$	3,489	$	3,966
Taxes		1,219		578
Transfers from loans to foreclosed real estate		691		1,306
Proceeds from sales of foreclosed real estate financed through loans		655		655

8. Fair Value Measurements and Disclosures about Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are described as follows:

Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted market price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

Level 2: Inputs to the valuation methodology include quoted market prices for similar assets or liabilities in active markets; quoted market prices for identical or similar assets or liabilities in markets that are not active; or inputs that are derived principally from or can be corroborated by observable market data by correlation or other means.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets carried at fair value or the lower of cost or fair value. The table below presents the balances of financial assets measured at fair value on a recurring and nonrecurring basis as of June 30, 2013 and September 30, 2012. The Company had no liabilities measured at fair value as of June 30, 2013 or September 30, 2012.

-30-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Carrying Value
	Level 1		Level 2		Level 3		Total
	(In thousands)
June 30, 2013:
Assets Measured - Recurring Basis:
Trading account securities	$	-	$	2,277	$	-	$	2,277
Securities available for sale:
Agency bonds and notes	$	-	$	15,345	$	-	$	15,345
Agency mortgage-backed		-		42,848		-		42,848
Agency CMO		-		24,630		-		24,630
Privately-issued CMO		-		4,702		-		4,702
Privately-issued ABS		-		8,122				8,122
SBA certificates		-		2,162				2,162
Municipal		-		67,151		-		67,151
Equity securities		91		-		-		91
Total securities available for sale	$	91	$	164,960	$	-	$	165,051
Interest rate cap contract	$	-	$	17	$	-	$	17
Assets Measured - Nonrecurring Basis:
Impaired loans:
Residential real estate	$	-	$	-	$	4,296	$	4,296
Commercial real estate		-		-		794		794
Construction		-		-		177		177
Commercial business		-		-		218		218
Consumer		-		-		241		241
Total impaired loans	$	-	$	-	$	5,726	$	5,726
Loans held for sale	$	-	$	233	$	-	$	233
Foreclosed real estate:
Residential real estate	$	-	$	-	$	323	$	323
Commercial real estate		-		-		321		321
Land and land development		-		-		27		27
Total foreclosed real estate	$	-	$	-	$	671	$	671

-31-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Carrying Value
	Level 1		Level 2		Level 3		Total
	(In thousands)
September 30, 2012:
Assets Measured - Recurring Basis:
Trading account securities	$	-	$	3,562	$	-	$	3,562
Securities available for sale:
Agency bonds and notes	$	-	$	16,064	$	-	$	16,064
Agency mortgage-backed		-		43,420		-		43,420
Agency CMO		-		17,541		-		17,541
Privately-issued CMO		-		5,289		-		5,289
Privately-issued ABS		-		7,227		-		7,227
Municipal		-		62,933		-		62,933
Equity securities		69		-		-		69
Total securities available for sale	$	69	$	152,474	$	-	$	152,543
Interest rate cap contract	$	-	$	11	$	-	$	11
Assets Measured - Nonrecurring Basis:
Impaired loans:
Residential real estate	$	-	$	-	$	2,775	$	2,775
Commercial real estate		-		-		839		839
Construction		-		-		174		174
Commercial business		-		-		66		66
Consumer		-		-		161		161
Total impaired loans	$	-	$	-	$	4,015	$	4,015
Loans held for sale	$	-	$	643	$	-	$	643
Foreclosed real estate:
Residential real estate	$	-	$	-	$	487	$	487
Commercial real estate		-		-		231		231
Multifamily		-		-		357		357
Land and land development		-		-		406		406
Total foreclosed real estate	$	-	$	-	$	1,481	$	1,481

Fair value is based upon quoted market prices where available. If quoted market prices are not available, fair value is based on internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters or a matrix pricing model that employs the Bond Market Association’s standard calculations for cash flow and price/yield analysis and observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value, or the lower of cost or fair value. These adjustments may include unobservable parameters. Any such valuation adjustments have been applied consistently over time.

-32-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. There were no changes in the valuation techniques and related inputs used for assets measured at fair value during the nine-month periods ended June 30, 2013 and 2012.

Trading Account Securities and Securities Available for Sale. Securities classified as trading and available for sale are reported at fair value on a recurring basis.  These securities are classified as Level 1 of the valuation hierarchy where quoted market prices from reputable third-party brokers are available in an active market. If quoted market prices are not available, the Company obtains fair value measurements from an independent pricing service.  These securities are reported using Level 2 inputs and the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. Changes in fair value of trading account securities are reported in noninterest income. Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect.

Derivative Financial Instruments. Derivative financial instruments consist of an interest rate cap contract. As such, significant fair value inputs can generally be verified by counterparties and do not involve significant management judgments (Level 2 inputs).

Impaired Loans. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of impaired loans is classified as Level 3 in the fair value hierarchy.

Impaired loans are measured at the present value of estimated future cash flows using the loan's effective interest rate or the fair value of the collateral if the loan is a collateral-dependent loan. Collateral may be real estate and/or business assets, including equipment, inventory and/or accounts receivable, and its fair value is generally determined based on real estate appraisals or other independent evaluations by qualified professionals. The appraisals are then discounted to reflect management’s estimate of the fair value of the collateral given the current market conditions and the condition of the collateral. At June 30, 2013, the significant unobservable inputs used in the fair value measurement of impaired loans included a discount from appraised value ranging from 0.0% to 15.0% and estimated costs to sell the collateral ranging from 0.0% to 6.0%. During the nine-month period ended June 30, 2013, the Company recognized provisions for loan losses of $416,000 for impaired loans. No provisions for loan losses were recognized for the three months ended June 30, 2013 for impaired loans.

Loans Held for Sale. Loans held for sale are carried at the lower of cost or market value. The portfolio comprised of residential real estate loans and fair value is based on specific prices of underlying contracts for sales to investors. These measurements are carried at Level 2.

-33-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Foreclosed Real Estate. Foreclosed real estate is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. Fair value of foreclosed real estate is classified as Level 3 in the fair value hierarchy.

Foreclosed real estate is reported at fair value less estimated costs to dispose of the property. The fair values are determined by real estate appraisals which are then discounted to reflect management’s estimate of the fair value of the property given current market conditions and the condition of the collateral. At June 30, 2013, the significant unobservable inputs used in the fair value measurement of foreclosed real estate included a discount from appraised value ranging from 0.0% to 15.0% and estimated costs to sell the property ranging from 0.0% to 6.0%. The Company recognized charges of $112,000 and $94,000 to write down foreclosed real estate to fair value for the nine months ended June 30, 2013 and 2012, respectively. The Company recognized changes of $41,000 and $76,000 to write down foreclosed real estate to fair value for the three months ended June 30, 2013 and 2012, respectively.

Transfers Between Categories. There were no transfers into or out of the Company's Level 3 financial assets for the nine-month periods ended June 30, 2013 and 2012. In addition, there were no transfers into or out of Levels 1 and 2 of the fair value hierarchy during the nine-month periods ended June 30, 2013 and 2012.

-34-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

GAAP requires disclosure of fair value information about financial instruments for interim reporting periods, whether or not recognized in the consolidated balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts and estimated fair values of the Company's financial instruments are as follows:

	Carrying		Fair Value Measurements Using:
June 30, 2013:	Amount		Level 1		Level 2		Level 3
	(In thousands)
Financial assets:
Cash and due from banks	$	7,903	$	7,903	$	-	$	-
Interest-bearing deposits with banks		13,212		13,212		-		-
Trading account securities		2,277		-		2,277		-
Securities available for sale		165,051		91		164,960		-
Securities held to maturity		6,772		-		6,795		-
Loans, net		404,482		-		-		410,460
Loans held for sale		233		-		233		-
Federal Home Loan Bank stock		5,400		-		5,400		-
Accrued interest receivable		2,708		-		2,708		-
Financial liabilities:
Deposits		484,383		-		-		473,590
Short-term repurchase agreements		1,334		-		1,334		-
Borrowings from Federal Home Loan Bank		76,365		-		73,843		-
Other long-term debt		4,962		-		4,962		-
Accrued interest payable		186		-		186		-
Advance payments by borrowers for taxes and insurance		464		-		464		-
Derivative financial instruments included in other assets:
Interest rate cap		17		-		17		-

-35-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Carrying		Fair Value Measurements Using:
September 30, 2012:	Amount		Level 1		Level 2		Level 3
	(In thousands)
Financial assets:
Cash and due from banks	$	27,569	$	27,569	$	-	$	-
Interest-bearing deposits with banks		11,222		11,222		-		-
Trading account securities		3,562		-		3,562		-
Securities available for sale		152,543		69		152,474		-
Securities held to maturity		7,848		-		8,314		-
Loans, net		389,067		-		-		388,790
Loans held for sale		643		-		643		-
Federal Home Loan Bank stock		5,400		-		5,400		-
Accrued interest receivable		2,412		-		2,412		-
Financial liabilities:
Deposits		494,234		-		-		492,161
Short-term repurchase agreements		1,329		-		1,329		-
Borrowings from Federal Home Loan Bank		53,062		-		53,752		-
Other long-term debt		2,132		-		2,132		-
Accrued interest payable		236		-		236		-
Advance payments by borrowers for taxes and insurance		622		-		622		-
Derivative financial instruments included in other assets:
Interest rate cap		11		-		11		-

The carrying amounts in the preceding tables are included in the consolidated balance sheets under the applicable captions. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

-36-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Cash and Cash Equivalents

For cash and short-term instruments, including cash and due from banks and interest-bearing deposits with banks, the carrying amount is a reasonable estimate of fair value.

Debt and Equity Securities

For marketable equity securities, the fair values are based on quoted market prices. For debt securities, the Company obtains fair value measurements from an independent pricing service and the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. For FHLB stock, a restricted equity security, the carrying amount is a reasonable estimate of fair value because it is not marketable.

Loans

The fair value of loans, excluding loans held for sale, is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and terms. Impaired loans are valued at the lower of their carrying value or fair value, as previously described. The carrying amount of accrued interest receivable approximates its fair value.

The fair value of loans held for sale is estimated based on specific prices of underlying contracts for sales to investors, as previously described.

Deposits

The fair value of demand and savings deposits and other transaction accounts is the amount payable on demand at the balance sheet date. The fair value of fixed-maturity time deposits is estimated by discounting the future cash flows using the rates currently offered for deposits with similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.

Borrowed Funds

Borrowed funds include borrowings from the FHLB, repurchase agreements and other long-term debt. Fair value for FHLB advances and long-term repurchase agreements is estimated by discounting the future cash flows at current interest rates for FHLB advances of similar maturities. For short-term repurchase agreements, FHLB line of credit borrowings and other debt, the carrying value is a reasonable estimate of fair value.

Derivative Financial Instruments

For derivative financial instruments, the fair values generally represent an estimate of the amount the Company would receive or pay upon termination of the agreement at the reporting date, taking into account the current interest rates, and exclusive of any accrued interest.

-37-