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First Savings Financial Group, Inc.

FSFG
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Business Summary

First Savings Financial Group, Inc. (FSFG) operates as a community-oriented financial institution, primarily offering traditional financial services to consumers and businesses within its core market area of Clark, Floyd, Harrison, Crawford, Washington, and Daviess counties in Indiana, and surrounding regions. The company attracts deposits from the general public and utilizes these funds to originate various loan types, with a focus on residential and commercial mortgage loans. FSFG also engages in commercial business loans, residential and commercial construction loans, multi-family loans, land and land development loans, and consumer loans. The company's business model is centered on relationship banking, serving individuals and small businesses, and it also participates in the secondary market for certain loan types, such as 25-year and 30-year fixed-rate residential mortgage loans and the guaranteed portions of U.S. Small Business Administration (SBA) 7(a) program loans.

FSFG faces significant competition for both deposits and loan originations from various financial institutions, including other banks, credit unions, and non-depository financial service companies. As of June 30, 2025, FSFG held approximately 22.78% , 22.65% , 4.16% , 25.20% , 100.00% , and 40.70% of the FDIC-insured deposits in Clark, Daviess, Floyd, Harrison, Crawford, and Washington Counties, Indiana, respectively. The company acknowledges that some competitors are larger and possess greater resources. Technological advancements and consolidation within the financial services industry are expected to intensify competition.

The core business model of First Savings Financial Group revolves around generating net interest income from its loan and investment portfolios, supplemented by noninterest income from various fees and gains. The company's revenue streams include interest income from loans and investments, service charges on deposit accounts, ATM and interchange fees, increases in the cash surrender value of life insurance, gains from the sale of residential mortgage and SBA loans, commissions on securities and insurance products, and real estate lease income. Expenses primarily consist of salaries and employee benefits, occupancy, data processing, professional service fees, federal deposit insurance premiums, advertising, and net losses on foreclosed real estate. The company's strategy involves emphasizing residential lending, particularly owner-occupied properties, while also expanding consumer/retail banking and commercial banking services for small businesses.

FSFG's lending activities are diverse, with the largest segments being single tenant net lease and residential real estate mortgage loans, followed by commercial real estate and commercial business loans. At September 30, 2025, residential mortgage loans totaled $605.9 million , representing 31.8% of total loans, a decrease from $670.0 million or 33.8% at September 30, 2024, primarily due to an $87.2 million sale of first-lien home equity line of credit loans. Commercial real estate loans, including in-market, single tenant net lease, and SBA commercial real estate loans, amounted to $1.02 billion , or 53.8% of total loans, up from $1.01 billion or 51.0% at September 30, 2024. Single tenant net lease loans increased by $14.8 million during the year ended September 30, 2025. Multi-family real estate loans were $38.9 million (2.0% of total loans), residential construction loans were $25.3 million (1.3% of total loans), commercial construction loans were $14.6 million (0.8% of total loans), and land and land development loans were $16.1 million (0.9% of total loans). Commercial business loans, including SBA commercial business loans, totaled $140.5 million (7.4% of total loans), and consumer loans were $40.0 million (2.1% of total loans).

For the fiscal year ended September 30, 2025, FSFG reported total assets of $2,399,532 thousand , cash and cash equivalents of $31,851 thousand , and loans, net, of $1,886,818 thousand . Deposits totaled $1,709,882 thousand , borrowings from FHLB were $435,000 thousand , and other borrowings (subordinated debt) were $28,762 thousand . Stockholders' equity stood at $193,479 thousand . The company generated net interest income of $65,308 thousand , total noninterest income of $18,842 thousand , and incurred total noninterest expense of $56,962 thousand . Income before income taxes was $26,863 thousand , leading to a net income of $23,161 thousand . Diluted EPS was $3.32 . The allowance for credit losses on loans was $20,289 thousand , representing 1.06% of total loans.

Comparing fiscal year 2025 to 2024, net income increased from $13,592 thousand to $23,161 thousand . This improvement was driven by a $7,246 thousand increase in net interest income and a $6,312 thousand increase in noninterest income, coupled with a $2,767 thousand decrease in total provision for credit losses. However, noninterest expense increased by $4,072 thousand . The interest rate spread expanded from 2.26% in 2024 to 2.55% in 2025. Total loans, net, decreased by $77,034 thousand from $1,963,852 thousand in 2024 to $1,886,818 thousand in 2025. Deposits decreased by $171,000 thousand from $1,880,881 thousand to $1,709,882 thousand .

During the fiscal year ended September 30, 2025, FSFG completed the wind-down of its national residential mortgage banking operations, which was announced in October 2023 and finalized during the quarter ended December 31, 2023. This resulted in no outstanding one-to-four family residential real estate loans within this platform at September 30, 2025. The company also repaid a $20.0 million subordinated note during 2025. A significant operational development was the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), on October 1, 2023, which changed the methodology for calculating the allowance for credit losses to the current expected credit loss (CECL) methodology, resulting in a net of tax decrease to retained earnings of $2.5 million as of the adoption date.

Business Outlook

The filing indicates that First Savings Financial Group entered into a definitive merger agreement with First Merchants Corporation on September 24, 2025. This transaction is expected to close during the first calendar quarter of 2026, subject to regulatory and shareholder approvals, which will result in FSFG merging into First Merchants Corporation and First Savings Bank merging into First Merchants Bank.

The company intends to continue emphasizing residential lending, primarily secured by owner-occupied properties, and will also continue to focus on expanding its consumer/retail banking capabilities and commercial banking services, with a particular focus on serving small businesses and emphasizing relationship banking in its primary market area. The SBA lending platform, which originates SBA 7(a) program loans primarily outside the primary market area and sells the guaranteed portions in the secondary market, is expected to continue growing through the hiring of additional business development officers and supporting staff. This platform is designed to diversify the company's geographic and interest rate risk profile.

Management's strategy for managing interest rate risk emphasizes adjusting the maturities of borrowings, adjusting the investment portfolio mix and duration, and generally selling substantially all newly originated, fixed-rate one-to-four family residential real estate loans in the secondary market. The company does not currently participate in hedging programs, interest rate swaps, or other activities involving derivative financial instruments. The company's simulation modeling projects that an immediate and sustained increase in interest rates of 1.00% would decrease net interest income by $3.6 million or 4.95% over a one-year horizon, while a 2.00% and 3.00% increase would lead to decreases of 8.70% and 12.40% , respectively. Conversely, a 1.00% and 2.00% decrease in rates would increase net interest income by $3.8 million and $7.7 million , or 5.23% and 10.56% , respectively, over a one-year horizon.

The company plans for capital allocation include maintaining its "well capitalized" status under regulatory guidelines. The company's ability to pay dividends is subject to regulatory guidelines and the need to maintain sufficient consolidated capital. The company currently intends to maintain a policy of paying regular quarterly cash dividends, though it cannot guarantee future dividend payments or levels.

Risk Factors

First Savings Financial Group faces several material risks. Credit risk is heightened by the emphasis on commercial real estate and commercial business lending, which constituted 63.9% of the loan portfolio at September 30, 2025, as these loans generally involve larger balances and depend on the successful operation of the underlying properties or businesses, leading to greater risk of non-payment and loss. Construction and land development loans, comprising 2.9% of the loan portfolio at September 30, 2025, also carry higher risks due to reliance on property completion or sale and potential cost overruns. Non-owner occupied residential real estate loans, representing 4.1% of the residential mortgage loan portfolio and 1.3% of the total loan portfolio, expose the company to increased credit risk as repayment depends on tenant rental income or the property owner's ability to repay without it. The allowance for credit losses, which was $20.3 million at September 30, 2025, may not be adequate to cover actual losses, and future provisions could adversely affect earnings. The SBA lending program is dependent on the federal government, and changes to the program or loss of Preferred Lender status could harm business and earnings, particularly if the SBA seeks recovery for technical deficiencies in loan origination or servicing. The company also faces the risk of being required to repurchase mortgage loans or indemnify buyers due to breaches of representations and warranties. Recessionary conditions could increase nonperforming loans and reduce demand for services, leading to lower revenue and higher loan losses. The subjective nature of residential mortgage loan servicing rights and SBA loan servicing rights valuations means they are vulnerable to inaccuracies or external factors, potentially impacting the balance sheet. Operational risks, including fraud, processing errors, technology failures, and cyber-attacks, are significant given the high volume of transactions in the financial services business, and such disruptions could lead to financial losses, regulatory action, and reputational damage. The pending merger with First Merchants Corporation introduces risks of substantial expenses without realizing expected benefits if the merger is not completed, and business uncertainties and contractual restrictions during the pending period could impair the ability to attract and retain key personnel and maintain customer relationships. If goodwill, which totaled $9.8 million at September 30, 2025, becomes impaired, it could negatively impact profitability. The highly regulated environment means changes in laws and regulations, such as the Dodd-Frank Act, could adversely affect operations through increased regulatory burden and compliance costs. Reliance on the management team means the unexpected loss of key personnel could adversely affect operations, and the ability to attract and retain skilled personnel is crucial for future growth.

Management Priorities

Management's message to shareholders emphasizes a commitment to attracting, retaining, and motivating leaders who are dedicated to executing the company's business strategies, acting in the best interests of stakeholders, and creating long-term shareholder value. The executive compensation program is designed with fixed and variable pay elements, including base salaries, annual cash incentives and bonuses, and long-term equity incentives, along with retirement benefits, to achieve these objectives. The compensation philosophy involves establishing lower base salaries for executive officers, generally around the 50th to 75th percentile of the peer group, while offering opportunities for higher incentive compensation. For the 2025 fiscal year, there was a 24.2% base salary increase for NEOs, moving their compensation from the 50th percentile to the 75th percentile of the peer group. The Management Incentive Bonus (MIB) plan requires a performance trigger of at least 0.60% Return on Average Assets (ROAA) to activate, with increasing marginal incentive tiers correlated to rising ROAA tiers. The All-Employee Bonus (AEB) plan also uses increasing marginal incentive tiers correlated to increasing marginal ROAA tiers. The Compensation Committee retains discretion to modify or adjust these plans and awards based on various factors, including the business environment, market conditions, company health, strategic initiatives, and regulatory considerations. The company currently intends to maintain a policy of paying regular quarterly cash dividends, though it cannot guarantee that it will pay dividends or that if paid, it will not reduce or eliminate dividends in the future.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Competition
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  3. [3] Item 1, Business — Competition
  4. [4] Item 1, Business — Competition
  5. [5] Item 1, Business — Competition
  6. [6] Item 1, Business — Competition
  7. [7] Item 7, MD&A — Balance Sheet Analysis
  8. [8] Item 7, MD&A — Balance Sheet Analysis
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  29. [29] Item 7, MD&A — Selected Financial Data
  30. [30] Item 7, MD&A — Selected Financial Data
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  40. [40] Item 7, MD&A — Selected Financial Data
  41. [41] Item 7, MD&A — Selected Financial Data
  42. [42] Item 7, MD&A — Analysis of Nonperforming and Classified Assets
  43. [43] Item 7, MD&A — Asset Quality Ratios
  44. [44] Item 7, MD&A — Selected Financial Data
  45. [45] Item 7, MD&A — Results of Operations for the Years Ended September 30, 2025, 2024 and 2023
  46. [46] Item 7, MD&A — Results of Operations for the Years Ended September 30, 2025, 2024 and 2023
  47. [47] Item 7, MD&A — Results of Operations for the Years Ended September 30, 2025, 2024 and 2023
  48. [48] Item 7, MD&A — Results of Operations for the Years Ended September 30, 2025, 2024 and 2023
  49. [49] Item 7, MD&A — Performance Ratios
  50. [50] Item 7, MD&A — Performance Ratios
  51. [51] Item 7, MD&A — Balance Sheet Analysis
  52. [52] Item 7, MD&A — Selected Financial Data
  53. [53] Item 7, MD&A — Balance Sheet Analysis
  54. [54] Item 7, MD&A — Selected Financial Data
  55. [55] Item 7, MD&A — Other Borrowings
  56. [56] Item 1, Note 1 — Recent Accounting Pronouncements
  57. [57] Item 7, MD&A — Market Risk Analysis
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  70. [70] Item 1A, Risk Factors — Our emphasis on commercial real estate lending and commercial business lending may expose us to increased lending risks.
  71. [71] Item 1A, Risk Factors — Our construction loan and land and land development loan portfolios may expose us to increased credit risk.
  72. [72] Item 1A, Risk Factors — Our concentration in non-owner occupied residential real estate loans may expose us to increased credit risk.
  73. [73] Item 1A, Risk Factors — Our concentration in non-owner occupied residential real estate loans may expose us to increased credit risk.
  74. [74] Item 1A, Risk Factors — Our allowance for credit losses may not be adequate to cover actual losses.
  75. [75] Item 1A, Risk Factors — If the goodwill that we recorded in connection with a business acquisition becomes impaired, it could have a significant negative impact on our profitability.
  76. [76] Item 11, Executive Compensation — Base Salary
  77. [77] Item 11, Executive Compensation — Cash Incentive Bonus Plans

Analysis on 5/22/2026