10-Q 1 v417312_10q.htm FORM 10-Q

 

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, 2015

 

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, Clarksville, 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 June 30, 2015 was 2,183,510.

 

 
 

 

FIRST SAVINGS FINANCIAL GROUP, INC.

 

INDEX

 

Page
Part I Financial Information  
     
  Item 1.  Financial Statements  
     
  Consolidated Balance Sheets as of June 30, 2015 and September 30, 2014 (unaudited) 3
     
  Consolidated Statements of Income for the three months and nine months ended June 30, 2015 and 2014 (unaudited) 4
     
  Consolidated Statements of Comprehensive Income for the three months and nine months ended June 30, 2015 and 2014 (unaudited) 5
     
  Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended June 30, 2015 and 2014 (unaudited) 6
     
  Consolidated Statements of Cash Flows for the nine months ended June 30, 2015 and 2014 (unaudited) 7
     
  Notes to Consolidated Financial Statements (unaudited) 8-42
     
  Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 43-54
     
  Item 3.  Quantitative and Qualitative Disclosures About Market Risk 55-57
     
  Item 4.  Controls and Procedures 58
     
Part II Other Information  
     
  Item 1.  Legal Proceedings 59
     
  Item 1A.  Risk Factors 59
     
  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 60
     
  Item 3.  Defaults Upon Senior Securities 60
     
  Item 4.  Mine Safety Disclosures 60
     
  Item 5.  Other Information 61
     
  Item 6.  Exhibits 61
     
Signatures 62

 

-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)  2015   2014 
           
ASSETS          
Cash and due from banks  $7,963   $8,853 
Interest-bearing deposits with banks   13,428    11,477 
Total cash and cash equivalents   21,391    20,330 
           
Interest-bearing time deposits   2,235    1,500 
Trading account securities, at fair value   8,770    5,319 
Securities available for sale, at fair value   180,087    184,697 
Securities held to maturity   4,941    5,419 
           
Loans held for sale   306    281 
Loans, net   447,665    433,876 
           
Federal Reserve Bank and Federal Home Loan Bank stock, at cost   6,647    6,517 
Real estate development and construction   7,129    7,202 
Premises and equipment   13,948    14,275 
Other real estate owned, held for sale   558    953 
Accrued interest receivable:          
Loans   1,263    1,276 
Securities   1,561    1,235 
Cash surrender value of life insurance   17,652    18,021 
Goodwill   7,936    7,936 
Core deposit intangibles   1,467    1,725 
Other assets   7,369    2,567 
           
Total Assets  $730,925   $713,129 
           
LIABILITIES          
Deposits:          
Noninterest-bearing  $67,479   $56,092 
Interest-bearing   461,476    477,102 
Total deposits   528,955    533,194 
           
Repurchase agreements   1,341    1,338 
Borrowings from Federal Home Loan Bank   94,626    79,548 
Other long-term debt   4,678    4,812 
Accrued interest payable   179    175 
Advance payments by borrowers for taxes and insurance   641    748 
Accrued expenses and other liabilities   8,551    6,234 
Total Liabilities   638,971    626,049 
           
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 and outstanding 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 2,183,510 shares (2,171,812 shares at September 30, 2014)   25    25 
Additional paid-in capital - preferred   17,120    17,120 
Additional paid-in capital - common   26,710    26,079 
Retained earnings - substantially restricted   51,235    47,175 
Accumulated other comprehensive income   3,460    3,853 
           
Unearned ESOP shares   (239)   (537)
           
Unearned stock compensation   -    (162)
Less treasury stock, at cost - 358,532 shares (370,230 shares at September 30, 2014)   (6,357)   (6,473)
           
Total Stockholders' Equity   91,954    87,080 
           
Total Liabilities and Stockholders' Equity  $730,925   $713,129 

 

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)  2015   2014   2015   2014 
                 
INTEREST INCOME                    
Loans, including fees  $5,284   $5,262   $16,004   $15,744 
Securities:                    
Taxable   996    1,147    3,080    3,400 
Tax-exempt   546    445    1,506    1,289 
Dividend income   77    58    223    186 
Interest-bearing deposits with banks   12    10    35    27 
Total interest income   6,915    6,922    20,848    20,646 
                     
INTEREST EXPENSE                    
Deposits   594    589    1,834    1,799 
Repurchase agreements   1    1    3    3 
Borrowings from Federal Home Loan Bank   297    233    845    726 
Loans payable   41    50    134    155 
Total interest expense   933    873    2,816    2,683 
                     
Net interest income   5,982    6,049    18,032    17,963 
Provision for loan losses   208    300    627    904 
                     
Net interest income after provision for loan losses   5,774    5,749    17,405    17,059 
                     
NONINTEREST INCOME                    
Service charges on deposit accounts   317    322    993    919 
Net gain on sales of available for sale securities   -    122    -    123 
Net gain on trading account securities   45    210    205    572 
Unrealized loss on derivative contract   -    (5)   (1)   (10)
Net gain on sales of loans   86    72    220    191 
Increase in cash surrender value of life insurance   119    133    364    364 
Gain on life insurance   831    -    831    - 
Commission income   92    77    260    217 
Real estate lease income   164    157    465    418 
Other income   283    203    789    983 
Total noninterest income   1,937    1,291    4,126    3,777 
                     
NONINTEREST EXPENSE                    
Compensation and benefits   2,989    2,742    8,627    8,451 
Occupancy and equipment   675    626    1,931    1,901 
Data processing   309    313    1,038    917 
Advertising   159    134    412    274 
Professional fees   282    310    797    942 
FDIC insurance premiums   117    112    341    334 
Net (gain) loss on other real estate owned   (38)   82    (17)   190 
Other operating expenses   704    731    2,318    2,226 
Total noninterest expense   5,197    5,050    15,447    15,235 
Income before income taxes   2,514    1,990    6,084    5,601 
Income tax expense   318    534    1,161    1,581 
Net Income  $2,196   $1,456   $4,923   $4,020 
                     
Preferred stock dividends declared   43    43    129    129 
Net Income Available to Common Shareholders  $2,153   $1,413   $4,794   $3,891 
                     
Net income per common share:                    
Basic  $1.00   $0.68   $2.25   $1.83 
Diluted  $0.95   $0.64   $2.14   $1.74 
                     
Weighted average common shares outstanding:                    
Basic   2,149,931    2,092,938    2,133,557    2,130,599 
Diluted   2,259,170    2,201,323    2,240,922    2,237,193 
                     
Dividends per common share  $0.12   $0.11   $0.35   $0.32 

 

See notes to consolidated financial statements.

 

-4-
 

 

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

   Three Months Ended   Nine Months Ended 
   June 30,   June 30, 
(In thousands)  2015   2014   2015   2014 
                 
Net Income  $2,196   $1,456   $4,923   $4,020 
                     
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX                    
Unrealized gains (losses) on securities available for sale:                    
Unrealized holding gains (losses) arising during the period   (2,767)   2,086    (599)   3,189 
Income tax (expense) benefit   976    (743)   206    (1,123)
Net of tax amount   (1,791)   1,343    (393)   2,066 
                     
Less: reclassification adjustment for realized gains included in net income   -    (122)   -    (123)
Income tax expense   -    48    -    48 
Net of tax amount   -    (74)   -    (75)
                     
Other Comprehensive Income (Loss)   (1,791)   1,269    (393)   1,991 
                     
Comprehensive Income  $405   $2,725   $4,530   $6,011 

 

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 
                                         
Nine Months Ended June 30, 2014:                                        
Balances at October 1, 2013  $-   $25   $42,584   $42,870   $1,468   $(1,287)  $(3,407)  $82,253 
                                         
Net income   -    -    -    4,020    -    -    -    4,020 
                                         
Other comprehensive income   -    -    -    -    1,991    -    -    1,991 
                                         
Preferred stock dividends   -    -    -    (129)   -    -    -    (129)
                                         
Common stock dividends ($0.32 per share)   -    -    -    (674)   -    -    -    (674)
                                         
Stock compensation expense   -    -    197    -    -    195    -    392 
                                         
Shares released by ESOP trust   -    -    366    -    -    288    -    654 
                                         
Purchase of 122,242 treasury shares   -    -    -    -    -    -    (2,844)   (2,844)
                                         
Balances at June 30, 2014  $-   $25   $43,147   $46,087   $3,459   $(804)  $(6,251)  $85,663 
                                         
Nine Months Ended June 30, 2015:                                        
Balances at October 1, 2014  $-   $25   $43,199   $47,175   $3,853   $(699)  $(6,473)  $87,080 
                                         
Net income   -    -    -    4,923    -    -    -    4,923 
                                         
Other comprehensive loss   -    -    -    -    (393)   -    -    (393)
                                         
Preferred stock dividends   -    -    -    (129)   -    -    -    (129)
                                         
Common stock dividends ($0.35 per share)   -    -    -    (734)   -    -    -    (734)
                                         
Stock compensation expense   -    -    243    -    -    162    -    405 
                                         
Shares released by ESOP trust   -    -    477    -    -    298    -    775 
                                         
Stock options exercise - 20,972 shares   -    -    (89)   -    -    -    367    278 
                                         
Purchase of 9,274 treasury shares   -    -    -    -    -    -    (251)   (251)
                                         
Balances at June 30, 2015  $-   $25   $43,830   $51,235   $3,460   $(239)  $(6,357)  $91,954 

 

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)  2015   2014 
         
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income  $4,923   $4,020 
Adjustments to reconcile net income to net cash provided by operating activities:          
Provision for loan losses   627    904 
Depreciation and amortization   1,081    1,084 
Amortization of premiums and accretion of discounts on securities, net   557    466 
Increase in trading account securities   (3,451)   (2,044)
Loans originated for sale   (7,178)   (5,517)
Proceeds on sales of loans   7,373    5,985 
Net gain on sales of loans   (220)   (191)
Net realized and unrealized gain on other real estate owned   (29)   (64)
Net gain on sales of available for sale securities   -    (123)
Unrealized loss on derivative contract   1    10 
Gain on life insurance   (831)   - 
Increase in cash surrender value of life insurance   (364)   (364)
Deferred income taxes   (284)   (118)
ESOP and stock compensation expense   980    926 
Increase in accrued interest receivable   (313)   (353)
Increase (decrease) in accrued interest payable   4    (21)
Change in other assets and liabilities, net   164    135 
Net Cash Provided By Operating Activities   3,040    4,735 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Investment in interest-bearing time deposits   (735)   - 
Purchase of securities available for sale   (19,096)   (35,809)
Proceeds from sales of securities available for sale   -    808 
Proceeds from maturities of securities available for sale   8,417    6,233 
Proceeds from maturities of securities held to maturity   367    409 
Principal collected on securities   14,243    10,158 
Net increase in loans   (14,647)   (16,705)
Purchase of Federal Reserve Bank stock   (945)   - 
Purchase of Federal Home Loan Bank stock   (461)   (175)
Proceeds from redemption of Federal Home Loan Bank stock   1,276    - 
Investment in cash surrender value of life insurance   -    (5,000)
Investment in historic tax credit entity   (417)   - 
Proceeds from sale of other real estate owned   677    513 
Investment in real estate development and construction   (73)   (216)
Purchase of premises and equipment   (350)   (299)
Net Cash Used In Investing Activities   (11,744)   (40,083)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Net increase (decrease) in deposits   (4,239)   47,469 
Net increase in repurchase agreements   3    2 
Decrease in Federal Home Loan Bank line of credit   (4,922)   (4,599)
Proceeds from Federal Home Loan Bank advances   240,000    272,000 
Repayment of Federal Home Loan Bank advances   (220,000)   (277,000)
Repayment of other long-term debt   (134)   (118)
Net decrease in advance payments by          
borrowers for taxes and insurance   (107)   (172)
Exercise of stock options   278    - 
Purchase of treasury stock   (251)   (2,861)
Dividends paid on preferred stock   (129)   (129)
Dividends paid on common stock   (734)   (674)
Net Cash Provided By Financing Activities   9,765    33,918 
           
Net Increase (Decrease) in Cash and Cash Equivalents   1,061    (1,430)
           
Cash and cash equivalents at beginning of year   20,330    20,815 
           
Cash and Cash Equivalents at End of Year  $21,391   $19,385 

 

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 a financial holding company and the parent of First Savings Bank (the “Bank”) and First Savings Insurance Risk Management, Inc. (the “Captive”).

 

The Bank, which is a wholly-owned Indiana-chartered commercial bank subsidiary of the Company, 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 commercial mortgage, residential 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.

 

The Captive, which is a wholly-owned insurance subsidiary of the Company formed during the fourth fiscal quarter of 2014, is a Nevada corporation that provides property and casualty insurance to the Company, the Bank and the Bank’s active subsidiaries. In addition, the Captive provides reinsurance to seven other third-party insurance captives for which insurance may not be currently available or economically feasible in the insurance marketplace.

 

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, 2015, the results of operations for the three- and nine-month periods ended June 30, 2015 and 2014, and the cash flows for the nine-month periods ended June 30, 2015 and 2014. 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, 2014 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 - CONTINUED

(Unaudited)

  

2.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

 

The Company invests in small and medium lot, investment grade municipal bonds through a managed brokerage account. The brokerage account is managed by an investment advisory firm registered with the U.S. Securities and Exchange Commission. At June 30, 2015 and September 30, 2014, trading account securities recorded at fair value totaled $8.8 million and $5.3 million, respectively, and were comprised of investment grade municipal bonds. During the nine-month period ended June 30, 2015, the Company reported net gains on trading account securities of $205,000, including net realized gains on the sale of securities of $194,000, and net unrealized gains on securities still held as of the balance sheet date of $11,000. During the three-month period ended June 30, 2015, the Company reported net gains on trading account securities of $45,000, including net realized gains on the sale of securities of $34,000 and net unrealized gains on securities still held as of the balance sheet date of $11,000. During the nine-month period ended June 30, 2014, the Company reported net gains on trading account securities of $572,000, including net realized gains on the sale of securities of $577,000, partially offset by net unrealized losses on securities still held as of the balance sheet date of $5,000. During the three-month period ended June 30, 2014, the Company reported net gains on trading account securities of $210,000, including net realized gains on the sale of securities of $159,000 and net unrealized gains on securities still held as of the balance sheet date of $51,000.

 

-9-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(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, 2015:                        
Securities available for sale:                                
                                 
Agency bonds and notes   $ 7,573     $ 8     $ 62     $ 7,519  
Agency mortgage-backed     48,137       739       75       48,801  
Agency CMO     21,431       98       85       21,444  
Privately-issued CMO     3,104       495       -       3,599  
Privately-issued ABS     4,994       1,448       -       6,442  
SBA certificates     1,545       13       -       1,558  
Municipal obligations     87,725       3,506       507       90,724  
                                 
Total securities available for sale   $ 174,509     $ 6,307     $ 729     $ 180,087  
                                 
Securities held to maturity:                                
                                 
Agency mortgage-backed   $ 357     $ 34     $ -     $ 391  
Municipal obligations     4,584       510       -       5,094  
                                 
Total securities held to maturity   $ 4,941     $ 544     $ -     $ 5,485  

 

 

-10-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

 

      Gross   Gross      
   Amortized   Unrealized   Unrealized   Fair 
   Cost   Gains   Losses   Value 
   (In thousands) 
September 30, 2014:                
Securities available for sale:                    
                     
Agency bonds and notes  $12,269   $12   $190   $12,091 
Agency mortgage-backed   51,845    518    108    52,255 
Agency CMO   29,648    95    259    29,484 
Privately-issued CMO   3,302    618    -    3,920 
Privately-issued ABS   5,552    1,801    -    7,353 
SBA certificates   1,753    9    -    1,762 
Municipal obligations   74,148    3,818    134    77,832 
                     
Total securities available for sale  $178,517   $6,871   $691   $184,697 
                     
Securities held to maturity:                    
                     
Agency mortgage-backed  $455   $37   $-   $492 
Municipal   4,964    393    -    5,357 
                     
Total securities held to maturity  $5,419   $430   $-   $5,849 

 

The amortized cost and fair value of investment securities as of June 30, 2015 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  $530   $532   $604   $644 
Due after one year through five years   5,745    5,992    1,785    2,010 
Due after five years through ten years   20,536    21,527    1,391    1,565 
Due after ten years   68,487    70,192    804    875 
    95,298    98,243    4,584    5,094 
                     
CMO   24,535    25,043    -    - 
ABS   4,994    6,442    -    - 
SBA certificates   1,545    1,558    -    - 
Mortgage-backed securities   48,137    48,801    357    391 
                     
   $174,509   $180,087   $4,941   $5,485 

 

-11-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

 

Information pertaining to investment securities with gross unrealized losses at June 30, 2015, 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   2   $4,467   $33 
Agency mortgage-backed   2    2,643    37 
Agency CMO   1    1,639    4 
Municipal obligations   43    25,903    456 
                
Total less than twelve months   48    34,652    530 
                
Continuous loss position more than twelve months:               
Agency bonds and notes   1    1,971    29 
Agency mortgage-backed   2    2,081    38 
Agency CMO   3    7,955    81 
Municipal obligations   2    1,232    51 
                
Total more than twelve months   8    13,239    199 
                
Total securities available for sale   56   $47,891   $729 

 

At June 30, 2015, the Company did not have any securities held to maturity with an unrealized loss.

 

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions 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 available for sale debt securities in loss positions at June 30, 2015, which consisted of U.S. government agency notes, mortgage-backed securities and CMOs, and municipal bonds, had depreciated approximately 1.50% from their amortized cost basis and are fixed and variable rate securities with a weighted-average yield of 2.47% and a weighted-average coupon rate of 3.28% at June 30, 2015. All of the agency and municipal securities are issued by 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 - CONTINUED

(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, 2015, the Company held twenty privately-issued CMO and ABS securities acquired in a 2009 bank acquisition with an aggregate carrying value of $2.7 million and fair value of $3.9 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, 2015, there were no privately-issued CMOs or ABS in loss positions. Based on the independent third party analysis of the expected cash flows, management has determined that no other-than-temporary impairment is required to be recognized on the privately-issued CMO and ABS portfolios. While the Company did not recognize a credit-related impairment loss at June 30, 2015, 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 U.S. government agency notes, mortgage-backed securities and CMOs, 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 three- and nine-month periods ended June 30, 2015, the Company did not realize any gross gains or losses on sales of available for sale securities. During the three- and nine-month periods ended June 30, 2014, the Company realized gross gains on sales of available for sale U.S. government agency notes of $122,000 and $123,000, respectively.

 

Certain available for sale debt securities were pledged under repurchase agreements and to secure FHLB borrowings at June 30, 2015 and September 30, 2014, and may be pledged to secure federal funds borrowings.

 

-13-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

  

3.Loans and Allowance for Loan Losses

 

Loans at June 30, 2015 and September 30, 2014 consisted of the following:

 

   June 30,   September 30, 
   2015    2014   
   (In thousands) 
Real estate mortgage:        
1-4 family residential  $182,454   $182,743 
Commercial   160,706    153,896 
Multifamily residential   23,026    21,286 
Residential construction   16,114    14,528 
Commercial construction   14,151    8,354 
Land and land development   11,608    11,290 
Commercial business loans   33,164    28,448 
Consumer:          
Home equity loans   18,572    17,903 
Auto loans   5,579    5,619 
Other consumer loans   2,135    2,320 
Gross loans   467,509    446,387 
Undisbursed portion of construction loans   (13,245)   (6,271)
Principal loan balance   454,264    440,116 
           
Deferred loan origination fees and costs, net   (79)   10 
Allowance for loan losses   (6,520)   (6,250)
           
Loans, net  $447,665   $433,876 

 

During the nine-month period ended June 30, 2015, 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, 2014.

 

-14-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

  

The following table provides the components of the recorded investment in loans as of June 30, 2015:

 

   Residential
Real Estate		   Commercial
Real Estate		   Multifamily   Construction   Land & Land
Development		   Commercial
Business		   Consumer   Total 
   (In thousands) 
                                 
Recorded Investment in Loans:                                        
Principal loan balance  $182,454   $160,706   $23,026   $17,020   $11,608   $33,164   $26,286   $454,264 
                                         
Accrued interest receivable   563    421    63    30    33    95    58    1,263 
                                         
Net deferred loan origination fees and costs   294    (275)   (28)   (60)   7    (15)   (2)   (79)
                                         
Recorded investment in loans  $183,311   $160,852   $23,061   $16,990   $11,648   $33,244   $26,342   $455,448 
                                         
Recorded Investment in Loans as Evaluated for Impairment:                                        
Individually evaluated for impairment  $4,916   $7,153   $-   $-   $-   $321   $318   $12,708 
                                         
Collectively evaluated for impairment   178,004    153,699    23,061    16,990    11,648    32,923    25,993    442,318 
                                         
Acquired with deteriorated credit quality   391    -    -    -    -    -    31    422 
                                         
Ending balance  $183,311   $160,852   $23,061   $16,990   $11,648   $33,244   $26,342   $455,448 

 

-15-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

 

The following table provides the components of the recorded investment in loans as of September 30, 2014:

 

   Residential
Real Estate		   Commercial
Real Estate		   Multifamily   Construction   Land & Land
Development		   Commercial
Business		   Consumer   Total 
   (In thousands) 
                                 
Recorded Investment in Loans:                                        
Principal loan balance  $182,743   $153,896   $21,286   $16,611   $11,290   $28,448   $25,842   $440,116 
                                         
Accrued interest receivable   590    384    53    44    31    111    63    1,276 
                                         
Net deferred loan origination fees and costs   337    (252)   (28)   (54)   4    (9)   12    10 
                                         
Recorded investment in loans  $183,670   $154,028   $21,311   $16,601   $11,325   $28,550   $25,917   $441,402 
                                         
Recorded Investment in Loans as Evaluated for Impairment:                                        
Individually evaluated for impairment  $4,866   $5,705   $-   $-   $-   $145   $350   $11,066 
                                         
Collectively evaluated for impairment   178,298    148,323    21,311    16,601    11,325    28,405    25,535    429,798 
                                         
Acquired with deteriorated credit quality   506    -    -    -    -    -    32    538 
                                         
Ending balance  $183,670   $154,028   $21,311   $16,601   $11,325   $28,550   $25,917   $441,402 

 

-16-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

 

An analysis of the allowance for loan losses as of June 30, 2015 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  $11   $-   $-   $-   $-   $-   $8   $19 
                                         
Collectively evaluated for impairment   604    3,855    170    549    375    841    107    6,501 
                                         
Acquired with deteriorated credit quality   -    -    -    -    -    -    -    - 
                                         
Ending balance  $615   $3,855   $170   $549   $375   $841   $115   $6,520 

 

An analysis of the allowance for loan losses as of September 30, 2014 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  $13   $-   $-   $-   $-   $-   $8   $21 
                                         
Collectively evaluated for impairment   564    3,808    146    443    302    795    171    6,229 
                                         
Acquired with deteriorated credit quality   -    -    -    -    -    -    -    - 
                                         
Ending balance  $577   $3,808   $146   $443   $302   $795   $179   $6,250 

 

-17-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

 

An analysis of the changes in the allowance for loan losses for the three months ended June 30, 2015 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  $457   $4,109   $163   $455   $316   $886   $128   $6,514 
Provisions   300    (254)   7    94    59    3    (1)   208 
Charge-offs   (156)   -    -    -    -    (48)   (30)   (234)
Recoveries   14    -    -    -    -    -    18    32 
                                         
Ending balance  $615   $3,855   $170   $549   $375   $841   $115   $6,520 

 

An analysis of the changes in the allowance for loan losses for the nine months ended June 30, 2015 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  $577   $3,808   $146   $443   $302   $795   $179   $6,250 
Provisions   298    47    24    106    73    93    (14)   627 
Charge-offs   (299)   -    -    -    -    (48)   (103)   (450)
Recoveries   39    -    -    -    -    1    53    93 
                                         
Ending balance  $615   $3,855   $170   $549   $375   $841   $115   $6,520 

 

-18-
 

 

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

 

An analysis of the changes in the allowance for loan losses for the three months ended June 30, 2014 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  $626   $3,440   $271   $222   $356   $907   $238   $6,060 
Provisions   291    (587)   (106)   29    35    622    16    300 
Charge-offs   (291)   144    -    -    -    (234)   (14)   (395)
Recoveries   15    -    -    -    -    -    12    27 
                                         
Ending balance  $641   $2,997   $165   $251   $391   $1,295   $252   $5,992 

  

An analysis of the changes in the allowance for loan losses for the nine months ended June 30, 2014 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   $ 780     $ 2,826     $ 249     $ 229     $ 299     $ 907     $ 248     $ 5,538  
Provisions     230       (48 )     (84 )     22       92       622       70       904  
Charge-offs     (388 )     -       -       -       -       (234 )     (113 )     (735 )
Recoveries     19       219       -       -       -       -       47       285  
                                                                 
Ending balance   $ 641     $ 2,997     $ 165     $ 251     $ 391     $ 1,295     $ 252     $ 5,992  

  

-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, 2015 and for the three and nine months ended June 30, 2015 and 2014.

 

   At June 30, 2015   Three Months Ended June 30,   Nine Months Ended June 30, 
               2015   2015   2014   2014   2015   2015   2014   2014 
   Recorded
Investment		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Investment		   Interest
Income
Recognized		   Average
Recorded
Investment		   Interest
Income
Recognized		   Average
Recorded
Investment		   Interest
Income
Recognized		   Average
Recorded
Investment		   Interest
Income
Recognized		 
   (In thousands) 
Loans with no related allowance recorded:    
Residential real estate  $5,083   $5,568   $-   $5,643   $36   $