Bay Street News

First Savings Financial Group, Inc. Reports Financial Results for The Second Fiscal Quarter Ended March 31, 2024

JEFFERSONVILLE, Ind., April 25, 2024 (GLOBE NEWSWIRE) — First Savings Financial Group, Inc. (NASDAQ: FSFG – news) (the “Company”), the holding company for First Savings Bank (the “Bank”), today reported net income of $4.9 million, or $0.72 per diluted share, for the quarter ended March 31, 2024 compared to net income of $3.7 million, or $0.54 per diluted share, for the quarter ended March 31, 2023. Excluding nonrecurring items, the Company reported net income of $3.6 million (non-GAAP measure)(1) and net income per diluted share of $0.52 (non-GAAP measure)(1) for the quarter ended March 31, 2024. The core banking segment reported net income of $4.5 million, or $0.66 per diluted share for the quarter ended March 31, 2024. Excluding nonrecurring items, the core banking segment reported net income of $3.6 million, or $0.53 per diluted share for the quarter ended March 31, 2024 (non-GAAP measure)(1).

Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated, “We continue to focus on reducing balance sheet and operating inefficiencies; strong asset quality; selective high-quality lending; deposit growth; and improvement of liquidity, capital and interest rate sensitivity positions. We’ve been successful in executing these strategies and we continue to move on the right trajectory, which we believe will deliver increasing financial results and shareholder value.”

(1) Non-GAAP net income and net income per diluted share exclude certain nonrecurring items. A reconciliation to GAAP and discussion of the use of non-GAAP measures is included in the table at the end of this release.

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Net interest income decreased $574,000, or 3.9%, to $14.3 million for the three months ended March 31, 2024 as compared to the same period 2023. The decrease in net interest income was due to a $5.8 million increase in interest expense, partially offset by a $5.2 million increase in interest income. Interest income increased due to an increase in the average balance of interest-earning assets of $199.9 million, from $2.02 billion for 2023 to $2.22 billion for 2024, and an increase in the weighted-average tax-equivalent yield, from 5.01% for 2023 to 5.48% for 2024. The increase in the average balance of interest-earning assets was due primarily to a $293.5 million increase in the average balance of loans, partially offset by a decrease in the average balance of investment securities of $92.2 million. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $254.8 million, from $1.68 billion for 2023 to $1.93 billion for 2024, and an increase in the average cost of interest-bearing liabilities, from 2.36% for 2023 to 3.25% for 2024. The increase in the average cost of interest-bearing liabilities for 2024 was due primarily to higher rates for borrowings and brokered deposits as a result of increased market interest rates due to competition and higher U.S. Treasury rates, and migration of deposits from lower-yielding transaction and savings accounts to higher-yielding money market accounts and certificates of deposits.

The Company recognized a provision for credit losses for loans of $454,000 and a provision for credit losses for securities of $23,000 for the three months ended March 31, 2024, compared to a provision for loan losses of $372,000 for the same period in 2023. The Company recognized net charge-offs of $110,000 for the three months ended March 31, 2024, of which $42,000 was related to unguaranteed portions of SBA loans, compared to net recoveries of $6,000 in 2023.

Noninterest income decreased $3.8 million for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to a $4.1 million decrease in mortgage banking income due to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.

Noninterest expense decreased $6.2 million for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to decreases in compensation and benefits expense of $2.8 million and other operating expense of $2.4 million. The decrease in compensation and benefits expense was due primarily to a reduction in staffing related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023. The decrease in other operating expense was due primarily to a decrease in loss contingency for SBA-guaranteed loans of $656,000 in 2024 compared to an increase of $490,000 in 2023, and an adjustment to the valuation allowance related to sale of residential mortgage servicing rights of $247,000 in 2024 with no corresponding amounts in 2023.

The Company recognized income tax expense of $866,000 for the three months ended March 31, 2024 compared to $333,000 for the same period in 2023. The effective tax rate for 2024 was 14.9%, which was an increase from the effective tax rate of 8.2% in 2023. The increase was due to higher pre-tax income in 2024 as compared to 2023.

Results of Operations for the Six Months Ended March 31, 2024 and 2023

The Company reported net income of $5.8 million, or $0.85 per diluted share, for the six months ended March 31, 2024 compared to net income of $6.6 million, or $0.95 per diluted share, for the six months ended March 31, 2023. Excluding nonrecurring items, the Company reported net income of $4.5 million (non-GAAP measure)(1) and net income per diluted share of $0.65 (non-GAAP measure)(1) for the six months ended March 31, 2024. The core banking segment reported net income of $8.6 million, or $1.25 per diluted share for the six months ended March 31, 2024. Excluding nonrecurring items, the core banking segment reported net income of $7.7 million, or $1.12 per diluted share for the six months ended March 31, 2024 (non-GAAP measure)(1).

Net interest income decreased $2.7 million, or 8.7%, to $28.5 million for the six months ended March 31, 2024 as compared to the same period 2023. The decrease in net interest income was due to a $13.1 million increase in interest expense, partially offset by a $10.4 million increase in interest income. Interest income increased due to an increase in the average balance of interest-earning assets of $195.3 million, from $2.00 billion for 2023 to $2.20 billion for 2024, and an increase in the weighted-average tax-equivalent yield, from 4.94% for 2023 to 5.43% for 2024. The increase in the average balance of interest-earning assets was due primarily to a $284.0 million increase in the average balance of loans, partially offset by a decrease in the average balance of investment securities of $91.0 million. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $260.5 million, from $1.64 billion for 2023 to $1.90 billion for 2024, and an increase in the average cost of interest-bearing liabilities, from 2.08% for 2023 to 3.17% for 2024. The increase in the average cost of interest-bearing liabilities for 2024 was due primarily to higher rates for borrowings and brokered deposits as a result of increased market interest rates due to competition and higher U.S. Treasury rates, and migration of deposits from lower-yielding transaction and savings accounts to higher-yielding money market accounts and certificates of deposits.

The Company recognized a provision for credit losses for loans of $866,000 and a provision for credit losses for securities of $23,000 for the six months ended March 31, 2024, compared to a provision for loan losses of $1.4 million for the same period in 2023. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $1.7 million from $13.9 million at September 30, 2023 to $15.6 million at March 31, 2024. The Company recognized net charge-offs of $119,000 for the six months ended March 31, 2024, of which $22,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $258,000 in 2023, of which $238,000 was related to unguaranteed portions of SBA loans.

Noninterest income decreased $6.2 million for the six months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to a $6.5 million decrease in mortgage banking income due to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.

Noninterest expense decreased $7.7 million for the six months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to decreases in compensation and benefits expense of $3.8 million and other operating expense of $3.4 million. The decrease in compensation and benefits expense was due primarily to a reduction in staffing related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023. The decrease in other operating expense was due primarily to a decrease in loss contingency for SBA-guaranteed loans of $721,000 in 2024 compared to an increase of $490,000 in 2023, and a decrease in loss contingency for restitution to mortgage borrowers of $17,000 in 2024 compared to an increase of $609,000 in 2023.

The Company recognized income tax expense of $390,000 for the six months ended March 31, 2024 compared to tax expense of $416,000 for the same period in 2023. The effective tax rate for 2024 was 6.3%, which was an increase from the effective tax rate of 5.9% in 2023.

Comparison of Financial Condition at March 31, 2024 and September 30, 2023

Total assets increased $76.1 million, from $2.29 billion at September 30, 2023 to $2.36 billion at March 31, 2024. Net loans held for investment increased $112.2 million during the six months ended March 31, 2024 due primarily to growth in residential construction and mortgage loans. Residential mortgage loan servicing rights decreased $59.8 million during the six months ended March 31, 2024, due to the sale of the entire residential mortgage loan servicing rights portfolio during the period.

Total liabilities increased $62.1 million due primarily to increases in total deposits of $105.7 million, partially offset by a decrease in FHLB borrowings of $48.2 million. As of March 31, 2024, deposits exceeding the FDIC insurance limit of $250,000 per insured account were 27.1% of total deposits and 13.1% of total deposits when excluding public funds insured by the Indiana Public Deposit Insurance Fund.

Common stockholders’ equity increased $14.1 million, from $151.0 million at September 30, 2023 to $165.1 million at March 31, 2024, due primarily to a $12.4 million decrease in accumulated other comprehensive loss and an increase in retained net income of $1.3 million. The decrease in accumulated other comprehensive loss was due primarily to decreasing long term market interest rates during the six months ended March 31, 2024, which resulted in an increase in the fair value of securities available for sale. At March 31, 2024 and September 30, 2023, the Bank was considered “well-capitalized” under applicable regulatory capital guidelines.

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

This release may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather, they are statements based on the Company’s current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company’s actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions; changes in market interest rates; changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company’s filings with the Securities and Exchange Commission.

Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on its behalf. Except as may be required by applicable law or regulation, the Company assumes no obligation to update any forward-looking statements.

FIRST SAVINGS FINANCIAL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
                   
                   
  Three Months Ended   Six Months Ended    
OPERATING DATA: March 31,   March 31,    
(In thousands, except share and per share data)   2024       2023       2024       2023      
                   
Total interest income $ 30,016     $ 24,811     $ 58,671     $ 48,294      
Total interest expense   15,678       9,899       30,220       17,121      
                   
Net interest income   14,338       14,912       28,451       31,173      
                   
Provision for credit losses – loans   454       372       866       1,356      
Provision for credit losses – securities   23             23            
                   
Net interest income after provision for credit losses   13,861       14,540       27,562       29,817      
                   
Total noninterest income   3,710       7,516       6,492       12,704      
Total noninterest expense   11,778       17,999       27,817       35,510      
                   
Income before income taxes   5,793       4,057       6,237       7,011      
Income tax expense   866       333       390       416      
                   
Net income $ 4,927     $ 3,724     $ 5,847     $ 6,595      
                   
Net income per share, basic $ 0.72     $ 0.54     $ 0.86     $ 0.96      
Weighted average shares outstanding, basic   6,832,130       6,842,897       6,828,017       6,879,805      
                   
Net income per share, diluted $ 0.72     $ 0.54     $ 0.85     $ 0.95      
Weighted average shares outstanding, diluted   6,859,611       6,881,496       6,849,928       6,926,277      
                   
                   
Performance ratios (annualized)                  
Return on average assets   0.92 %     0.68 %     0.58 %     0.61 %    
Return on average equity   13.06 %     9.15 %     8.48 %     8.36 %    
Return on average common stockholders’ equity   13.06 %     9.15 %     8.48 %     8.36 %    
Net interest margin (tax equivalent basis)   2.66 %     3.06 %     2.68 %     3.23 %    
Efficiency ratio   65.26 %     80.25 %     79.61 %     80.93 %    
                   
                   
          QTD       FYTD
FINANCIAL CONDITION DATA: March 31,   December 31,   Increase   September 30,   Increase
(In thousands, except per share data)   2024       2023     (Decrease)     2023     (Decrease)
                   
Total assets $ 2,364,983     $ 2,308,092     $ 56,891     $ 2,288,854     $ 76,129  
Cash and cash equivalents   62,969       33,366       29,603       30,845       32,124  
Investment securities   240,142       246,801       (6,659 )     229,039       11,103  
Loans held for sale   19,108       22,866       (3,758 )     45,855       (26,747 )
Gross loans   1,901,850       1,860,742       41,108       1,787,143       114,707  
Allowance for credit losses (1)   19,392       18,789       603       16,900       2,492  
Interest earning assets   2,214,039       2,152,941       61,098       2,083,397       130,642  
Goodwill   9,848       9,848             9,848        
Core deposit intangibles   479       520       (41 )     561       (82 )
Loan servicing rights   3,028       3,711       (683 )     62,819       (59,791 )
Noninterest-bearing deposits   196,239       202,769       (6,530 )     242,237       (45,998 )
Interest-bearing deposits (customer)   1,043,032       978,182       64,850       1,001,238       41,794  
Interest-bearing deposits (brokered)   548,175       502,895       45,280       438,319       109,856  
Federal Home Loan Bank borrowings   315,000       356,699       (41,699 )     363,183       (48,183 )
Subordinated debt and other borrowings   48,523       48,484       39       48,444       79  
Total liabilities   2,199,927       2,143,569       56,358       2,137,873       62,054  
Accumulated other comprehensive loss   (17,144 )     (13,606 )     (3,538 )     (29,587 )     12,443  
Stockholders’ equity   165,056       164,523       533       150,981       14,075  
                   
Book value per share $ 23.98     $ 23.90       0.08     $ 21.99     $ 1.99  
Tangible book value per share – Non-GAAP (2)   22.48       22.40       0.08       20.47       2.01  
                   
Non-performing assets:                  
Nonaccrual loans – SBA guaranteed $ 5,053     $ 5,066     $ (13 )   $ 5,091     $ (38 )
Nonaccrual loans   10,585       10,442       143       8,857       1,728  
Total nonaccrual loans $ 15,638     $ 15,508     $ 130     $ 13,948     $ 1,690  
Accruing loans past due 90 days                            
Total non-performing loans   15,638       15,508       130       13,948       1,690  
Foreclosed real estate   444       444             474       (30 )
Troubled debt restructurings classified as performing loans                     1,266       (1,266 )
Total non-performing assets $ 16,082     $ 15,952     $ 130     $ 15,688     $ 394  
                   
Asset quality ratios:                  
Allowance for credit losses as a percent of total gross loans   1.02 %     1.01 %     0.01 %     0.95 %     0.07 %
Allowance for credit losses as a percent of nonperforming loans   124.01 %     121.16 %     2.85 %     121.16 %     2.84 %
Nonperforming loans as a percent of total gross loans   0.82 %     0.83 %     (0.01 %)     0.78 %     0.04 %
Nonperforming assets as a percent of total assets   0.68 %     0.69 %     (0.01 %)     0.69 %     (0.01 %)
                   
(1) The Company adopted ASU 2016-13 Topic 326 on October 1, 2023. Allowance was determined using expected loss methodology (CECL) as of March 31, 2024 and December 31, 2024. Allowance was determined using the previous incurred loss methodology as of September 30, 2023.
                   
(2) See reconciliation of GAAP and non-GAAP financial measures for additional information relating to calculation of these figures.
                   
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES (UNAUDITED):                  
The following non-GAAP financial measures used by the Company provide information useful to investors in understanding the Company’s performance. The Company believes the financial measures presented below are important because of their widespread use by investors as a means to evaluate capital adequacy and earnings. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company’s consolidated financial statements and reconciles those non-GAAP financial measures with the comparable GAAP financial measures.    
                   
  Three Months Ended   Fiscal Year Ended    
Net Income March 31,   March 31,    
(In thousands)   2024       2023       2024       2023      
                   
Net income attributable to the Company (non-GAAP) $ 3,561     $ 3,724     $ 4,481     $ 6,595      
Plus: Decrease in loss contingency for SBA-guaranteed loans, net of tax effect   492             492            
Plus: Adjustment to MSR valuation allowance related to sale, net of tax effect   583             583            
Plus: Gain on sale of premises, net of tax effect   90             90            
Plus: Adjustment to previous data processing contract termination accrual, net of tax effect   117             117            
Plus: Distribution from equity investment, net of tax   85             85            
Net income attributable to the Company (GAAP) $ 4,927     $ 3,724     $ 5,847     $ 6,595      
                   
                   
  Three Months Ended   Fiscal Year Ended    
Net Income per Share, Diluted March 31,   March 31,    
    2024       2023       2024       2023      
                   
Net income per share, diluted (non-GAAP) $ 0.52     $ 0.54     $ 0.65     $ 0.95      
Plus: Decrease in loss contingency for SBA-guaranteed loans   0.07             0.07            
Plus: Adjustment to MSR valuation allowance related to sale   0.08             0.08            
Plus: Gain on sale of premises   0.01             0.01            
Plus: Adjustment to previous data processing contract termination accrual   0.02             0.02            
Plus: Distribution from equity investment   0.02             0.02            
Net income per share, diluted (GAAP) $ 0.72     $ 0.54     $ 0.85     $ 0.95      
                   
                   
  Three Months Ended   Fiscal Year Ended    
Efficiency Ratio March 31,   March 31,    
(In thousands)   2024       2023       2024       2023      
                   
Net interest income (GAAP) $ 14,338     $ 14,912     $ 28,451     $ 31,173      
                   
Noninterest income (GAAP)   3,710       7,516       6,492       12,704      
                   
Noninterest expense (GAAP)   11,778       17,999       27,817       35,510      
                   
Efficiency ratio (GAAP)   65.26 %     80.25 %     79.61 %     80.93 %    
                   
Noninterest income (GAAP)   3,710       7,516       6,492       12,704      
Less: Adjustment to MSR valuation allowance related to sale   (530 )           (530 )          
Less: Gain on sale of premises   (120 )           (120 )          
Less: Distribution from equity investment   (113 )           (113 )          
Noninterest income (Non-GAAP)   2,947       7,516       5,729       12,704      
                   
Noninterest expense (GAAP)   11,778       17,999       27,817       35,510      
Plus: Adjustment to MSR valuation allowance related to sale   247             247            
Plus: Decrease in loss contingency for SBA-guaranteed loans   656             656            
Plus: Adjustment to previous data processing contract termination accrual   156             156            
Noninterest expense (non-GAAP) $ 12,837     $ 17,999     $ 28,876     $ 35,510      
                   
Efficiency ratio (excluding nonrecurring items) (non-GAAP)   74.27 %     80.25 %     84.48 %     80.93 %    
                   
                   
          QTD       FYTD
Tangible Book Value Per Share March 31,   December 31,   Increase   September 30,   Increase
(In thousands, except share and per share data)   2024       2023     (Decrease)     2023     (Decrease)
                   
Stockholders’ equity, net of noncontrolling interests (GAAP) $ 165,056     $ 164,523     $ 533     $ 150,981     $ 14,075  
Less: goodwill and core deposit intangibles   (10,327 )     (10,368 )     41       (10,409 )     82  
Tangible equity (non-GAAP) $ 154,729     $ 154,155     $ 574     $ 140,572       14,157  
                   
Outstanding common shares   6,883,160       6,883,160     $       6,867,121       16,039  
                   
Tangible book value per share (non-GAAP) $ 22.48     $ 22.40     $ 0.08     $ 20.47     $ 2.01  
                   
Book value per share (GAAP) $ 23.98     $ 23.90     $ 0.08     $ 21.99     $ 1.99  
                   
                   
SUMMARIZED FINANCIAL INFORMATION (UNAUDITED): As of
Summarized Consolidated Balance Sheets March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands, except per share data)   2024       2023       2023       2023       2023  
                   
Total cash and cash equivalents $ 62,969     $ 33,366     $ 30,845     $ 42,475     $ 41,810  
Total investment securities   240,142       246,801       229,039       249,788       336,317  
Total loans held for sale   19,108       22,866       45,855       63,142       48,783  
Total loans, net of allowance for credit losses   1,882,458       1,841,953       1,770,243       1,691,289       1,598,440  
Loan servicing rights   3,028       3,711       62,819       64,139       65,045  
Total assets   2,364,983       2,308,092       2,288,854       2,260,421       2,239,606  
                   
Customer deposits $ 1,239,271     $ 1,180,951     $ 1,243,475     $ 1,245,534     $ 1,206,154  
Brokered deposits   548,175       502,895       438,319       414,231       336,728  
Total deposits   1,787,446       1,683,846       1,681,794       1,659,765       1,542,882  
Federal Home Loan Bank borrowings   315,000       356,699       363,183       345,000       437,795  
                   
Common stock and additional paid-in capital $ 27,475     $ 27,397     $ 27,064     $ 27,518     $ 27,443  
Retained earnings – substantially restricted   167,648       163,753       166,306       168,015       166,652  
Accumulated other comprehensive income (loss)   (17,144 )     (13,606 )     (29,587 )     (17,565 )     (14,199 )
Unearned stock compensation   (1,096 )     (1,194 )     (1,015 )     (1,113 )     (1,211 )
Less treasury stock, at cost   (11,827 )     (11,827 )     (11,787 )     (11,787 )     (11,787 )
Total stockholders’ equity   165,056       164,523       150,981       165,068       166,898  
                   
Outstanding common shares   6,883,160       6,883,160       6,867,121       6,865,921       6,865,921  
                   
                   
  Three Months Ended
Summarized Consolidated Statements of Income March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands, except per share data)   2024       2023       2023       2023       2023  
                   
Total interest income $ 30,016     $ 28,655     $ 28,137     $ 26,798     $ 24,811  
Total interest expense   15,678       14,542       12,601       11,933       9,899  
Net interest income   14,338       14,113       15,536       14,865       14,912  
Provision for credit losses – loans   454       412       815       441       372  
Provision for credit losses – securities   23                          
Net interest income after provision for credit losses   13,861       13,701       14,721       14,424       14,540  
                   
Total noninterest income   3,710       2,782       5,442       7,196       7,516  
Total noninterest expense   11,778       16,039       21,647       18,965       17,999  
Income (loss) before income taxes   5,793       444       (1,484 )     2,655       4,057  
Income tax expense (benefit)   866       (476 )     (737 )     331       333  
Net income (loss) $ 4,927     $ 920     $ (747 )   $ 2,324     $ 3,724  
                   
                   
Net income (loss) per share, basic $ 0.72     $ 0.13     $ (0.11 )   $ 0.34     $ 0.54  
Weighted average shares outstanding, basic   6,832,130       6,823,948       6,817,365       6,816,608       6,842,897  
                   
Net income (loss) per share, diluted $ 0.72     $ 0.13     $ (0.11 )   $ 0.34     $ 0.54  
Weighted average shares outstanding, diluted   6,859,611       6,839,704       6,837,919       6,819,748       6,881,496  
                   
                   
SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended
Noninterest Income Detail March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands)   2024       2023       2023       2023       2023  
                   
Service charges on deposit accounts $ 387     $ 473     $ 479     $ 509     $ 471  
ATM and interchange fees   585       449       816       615       586  
Net loss on sales of available for sale securities               (11 )     (540 )      
Net unrealized gain on equity securities   6       38       11       11       21  
Net gain on sales of loans, Small Business Administration   951       834       538       497       907  
Mortgage banking income   53       89       3,018       4,668       4,149  
Increase in cash surrender value of life insurance   333       329       311       279       266  
Commission income   220       222       182       247       189  
Real estate lease income   115       115       116       119       117  
Net gain on premises and equipment   120             20             29  
Gain from repurchase of subordinated debt                     660        
Other income   940       233       (38 )     131       781  
Total noninterest income $ 3,710     $ 2,782     $ 5,442     $ 7,196     $ 7,516  
                   
                   
  Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
Consolidated Performance Ratios (Annualized)   2024       2023       2023       2023       2023  
                   
Return on average assets   0.92 %     0.16 %     (0.13 %)     0.41 %     0.68 %
Return on average equity   13.06 %     2.42 %     (1.82 %)     5.60 %     9.15 %
Return on average common stockholders’ equity   13.06 %     2.42 %     (1.82 %)     5.60 %     9.15 %
Net interest margin (tax equivalent basis)   2.66 %     2.69 %     3.03 %     2.94 %     3.06 %
Efficiency ratio   65.26 %     94.93 %     103.19 %     85.97 %     80.25 %
                   
                   
  As of or for the Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
Consolidated Asset Quality Ratios   2024       2023       2023       2023       2023  
                   
Nonperforming loans as a percentage of total loans   0.82 %     0.83 %     0.78 %     0.69 %     0.77 %
Nonperforming assets as a percentage of total assets   0.68 %     0.69 %     0.69 %     0.62 %     0.67 %
Allowance for credit losses as a percentage of total loans   1.02 %     1.01 %     0.95 %     0.99 %     1.02 %
Allowance for credit losses as a percentage of nonperforming loans   124.01 %     121.16 %     121.16 %     143.83 %     132.20 %
Net charge-offs to average outstanding loans   0.01 %     0.00 %     0.04 %     0.00 %     -0.00 %
                   
                   
SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended
Segmented Statements of Income Information March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands)   2024       2023       2023       2023       2023  
                   
Core Banking Segment:                  
Net interest income $ 13,469     $ 13,113     $ 14,167     $ 13,407     $ 13,632  
Provision (credit) for credit losses – loans   650       (49 )     1,266       880       422  
Provision for credit losses – securities   23                          
Net interest income after provision for credit losses   12,796       13,162       12,901       12,527       13,210  
Noninterest income   2,537       1,679       2,136       1,965       1,733  
Noninterest expense   10,093       10,252       13,559       11,010       10,651  
Income before income taxes   5,240       4,589       1,478       3,482       4,292  
Income tax expense   729       541       3       561       401  
Net income $ 4,511     $ 4,048     $ 1,475     $ 2,921     $ 3,891  
                   
SBA Lending Segment (Q2 Business Capital, LLC):                  
Net interest income $ 869     $ 1,003     $ 990     $ 1,098     $ 1,093  
Provision (credit) for credit losses – loans   (196 )     461       (451 )     (439 )     (50 )
Provision for credit losses – securities                            
Net interest income after provision for credit losses   1,065       542       1,441       1,537       1,143  
Noninterest income   1,173       1,003       367       580       1,636  
Noninterest expense   1,685       2,146       2,907       2,107       2,662  
Income (loss) before income taxes   553       (601 )     (1,099 )     10       117  
Income tax expense (benefit)   137       (131 )     (273 )     (21 )     20  
Net income (loss) $ 416     $ (470 )   $ (826 )   $ 31     $ 97  
                   
Mortgage Banking Segment: (3)                  
Net interest income (loss) $       (3 )   $ 379     $ 360     $ 187  
Provision for credit losses – loans                            
Provision for credit losses – securities                            
Net interest income (loss) after provision for credit losses         (3 )     379       360       187  
Noninterest income         100       2,939       4,651       4,147  
Noninterest expense         3,641       5,181       5,848       4,686  
Loss before income taxes         (3,544 )     (1,863 )     (837 )     (352 )
Income tax benefit         (886 )     (467 )     (209 )     (88 )
Net loss $     $ (2,658 )   $ (1,396 )   $ (628 )   $ (264 )
                   
(3) National mortgage banking operations were ceased in the quarter ended December 31, 2023 and subsequent immaterial mortgage lending activity is reported within the Core Banking segment.
                   
                   
SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended
Segmented Statements of Income Information March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands, except percentage data)   2024       2023       2023       2023       2023  
                   
Net Income (Loss) Per Share by Segment                  
Net income per share, basic – Core Banking $ 0.66     $ 0.59     $ 0.22     $ 0.43     $ 0.57  
Net income (loss) per share, basic – SBA Lending (Q2 Business Capital, LLC)   0.06       (0.07 )     (0.12 )           0.01  
Net income (loss) per share, basic – Mortgage Banking   0.00       (0.40 )     (0.21 )     (0.09 )     (0.04 )
Total net income (loss) per share, basic $ 0.72     $ 0.12     $ (0.11 )   $ 0.34     $ 0.54  
                   
Net Income (Loss) Per Diluted Share by Segment                  
Net income per share, diluted – Core Banking $ 0.66     $ 0.59     $ 0.22     $ 0.43     $ 0.57  
Net income (loss) per share, diluted – SBA Lending (Q2 Business Capital, LLC)   0.06       (0.07 )     (0.12 )           0.01  
Net loss per share, diluted – Mortgage Banking   0.00       (0.40 )     (0.21 )     (0.09 )     (0.04 )
Total net income (loss) per share, diluted $ 0.72     $ 0.12     $ (0.11 )   $ 0.34     $ 0.54  
                   
Return on Average Assets by Segment (annualized) (4)                  
Core Banking   0.80 %     0.73 %     0.28 %     0.61 %     0.85 %
SBA Lending   1.81 %     (2.11 %)     (3.81 %)     0.15 %     0.42 %
                   
Efficiency Ratio by Segment (annualized) (4)                  
Core Banking   63.06 %     69.31 %     83.17 %     71.62 %     69.32 %
SBA Lending   82.52 %     106.98 %     214.22 %     125.57 %     97.54 %
                   
                   
  Three Months Ended
Noninterest Expense Detail by Segment March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands)   2024       2023       2023       2023       2023  
                   
Core Banking Segment:                  
Compensation $ 5,656     $ 5,691     $ 6,528     $ 4,978     $ 5,578  
Occupancy   1,615       1,481       1,418       1,738       1,401  
Advertising   205       189       404       334       298  
Other   2,617       2,891       5,209       3,960       3,374  
Total Noninterest Expense $ 10,093     $ 10,252     $ 13,559     $ 11,010     $ 10,651  
                   
SBA Lending Segment (Q2 Business Capital, LLC):                  
Compensation $ 1,933     $ 1,826     $ 1,533     $ 1,803     $ 1,800  
Occupancy   58       91       68       70       70  
Advertising   7       10       10       11       8  
Other   (313 )     219       1,296       223       784  
Total Noninterest Expense $ 1,685     $ 2,146     $ 2,907     $ 2,107     $ 2,662  
                   
Mortgage Banking Segment: (3) (5)                  
Compensation $     $ 2,146     $ 3,647     $ 4,357     $ 3,029  
Occupancy         469       395       469       449  
Advertising         119       129       191       213  
Other         907       1,010       831       995  
Total Noninterest Expense $     $ 3,641     $ 5,181     $ 5,848     $ 4,686  
                   
(4) Ratios for Mortgage Banking Segment are not considered meaningful due to cessation of national mortgage banking operations in the quarter ended December 31, 2023.
                   
(5) Compensation includes increases for the Core Banking segment and corresponding decreases for the Mortgage Banking segment that represent intersegment allocations for loans originated by the Mortgage Banking segment to be held for investment in the Core Banking loan portfolio of: $     $ 1,403     $ 1,516     $ 1,440     $ 1,328  
                   
                   
SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED):  
  Three Months Ended
SBA Lending (Q2 Business Capital, LLC) Data March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands, except percentage data)   2024       2023       2023       2023       2023  
                   
Final funded loans guaranteed portion sold, SBA $ 15,144     $ 14,098     $ 8,431     $ 7,721     $ 15,337  
                   
Gross gain on sales of loans, SBA $ 1,443     $ 1,303     $ 809     $ 780     $ 1,293  
Weighted average gross gain on sales of loans, SBA   9.53 %     9.24 %     9.60 %     10.10 %     8.43 %
                   
Net gain on sales of loans, SBA (6) $ 951     $ 834     $ 538     $ 497     $ 907  
Weighted average net gain on sales of loans, SBA   6.28 %     5.92 %     6.38 %     6.44 %     5.91 %
                   
(6) Inclusive of gains on servicing assets and net of commissions, referral fees, SBA repair fees and discounts on unguaranteed portions held-for-investment.
                   
                   
SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended
Summarized Consolidated Average Balance Sheets March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands)   2024       2023       2023       2023       2023  
Interest-earning assets                  
Average balances:                  
Interest-bearing deposits with banks $ 24,587     $ 20,350     $ 21,631     $ 20,661     $ 27,649  
Loans   1,914,609       1,857,654       1,796,749       1,719,733       1,621,147  
Investment securities – taxable   102,699       103,728       105,393       109,319       110,373  
Investment securities – nontaxable   157,960       159,907       160,829       234,118       242,530  
FRB and FHLB stock   24,986       24,968       24,939       24,509       23,289  
Total interest-earning assets $ 2,224,841     $ 2,166,607     $ 2,109,541     $ 2,108,340     $ 2,024,988  
                   
Interest income (tax equivalent basis):                  
Interest-bearing deposits with banks $ 261     $ 249     $ 266     $ 267     $ 192  
Loans   27,133       26,155       25,214       23,279       21,339  
Investment securities – taxable   923       942       969       984       957  
Investment securities – nontaxable   1,662       1,687       1,695       2,456       2,533  
FRB and FHLB stock   499       74       428       423       364  
Total interest income (tax equivalent basis) $ 30,478     $ 29,107     $ 28,572     $ 27,409     $ 25,385  
                   
Weighted average yield (tax equivalent basis, annualized):                  
Interest-bearing deposits with banks   4.25 %     4.89 %     4.92 %     5.17 %     2.78 %
Loans   5.67 %     5.63 %     5.61 %     5.41 %     5.27 %
Investment securities – taxable   3.59 %     3.63 %     3.68 %     3.60 %     3.47 %
Investment securities – nontaxable   4.21 %     4.22 %     4.22 %     4.20 %     4.18 %
FRB and FHLB stock   7.99 %     1.19 %     6.86 %     6.90 %     6.25 %
Total interest-earning assets   5.48 %     5.37 %     5.42 %     5.20 %     5.01 %
                   
Interest-bearing liabilities                  
Interest-bearing deposits $ 1,549,012     $ 1,389,384     $ 1,385,994     $ 1,278,776     $ 1,251,080  
Fed funds purchased               76       11        
Federal Home Loan Bank borrowings   333,275       440,786       353,890       434,182       374,593  
Subordinated debt and other borrowings   48,497       48,458       48,406       49,339       50,293  
Total interest-bearing liabilities $ 1,930,784     $ 1,878,628     $ 1,788,366     $ 1,762,308     $ 1,675,966  
                   
Interest expense:                  
Interest-bearing deposits $ 12,546     $ 9,989     $ 9,457     $ 7,791     $ 6,265  
Fed funds purchased               1              
Federal Home Loan Bank borrowings   2,298       3,769       2,459       3,446       2,915  
Subordinated debt and other borrowings   833       784       684       696       719  
Total interest expense $ 15,677     $ 14,542     $ 12,601     $ 11,933     $ 9,899  
                   
Weighted average cost (annualized):                  
Interest-bearing deposits   3.24 %     2.88 %     2.73 %     2.44 %     2.00 %
Fed funds purchased   0.00 %     0.00 %     5.26 %     0.00 %     0.00 %
Federal Home Loan Bank borrowings   2.76 %     3.42 %     2.78 %     3.17 %     3.11 %
Subordinated debt and other borrowings   6.87 %     6.47 %     5.65 %     5.64 %     5.72 %
Total interest-bearing liabilities   3.25 %     3.10 %     2.82 %     2.71 %     2.36 %
                   
Net interest income (taxable equivalent basis) $ 14,801     $ 14,565     $ 15,971     $ 15,476     $ 15,486  
Less: taxable equivalent adjustment   (463 )     (452 )     (435 )     (611 )     (574 )
Net interest income $ 14,338     $ 14,113     $ 15,536     $ 14,865     $ 14,912  
                   
Interest rate spread (tax equivalent basis, annualized)   2.23 %     2.27 %     2.60 %     2.49 %     2.65 %
                   
Net interest margin (tax equivalent basis, annualized)   2.66 %     2.69 %     3.03 %     2.94 %     3.06 %
                   


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